SHENZHEN, China, May 4, 2006 (PRIMEZONE) -- 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 first quarter of fiscal 2006.
Li Xia Wang, Chief Executive Officer of New Dragon Asia Corp., said, "Our Company delivered strong operational results this quarter. Revenues were up 34% compared to the first quarter of 2005 as a result of strong demand and successful brand marketing efforts. Operating income rose 49%, after excluding the effect of a non-cash charge for stock-based compensation taken in the quarter, and our profit margins held up well. Our soybean operation which was acquired last year also contributed to growth, driven by sales to industrial customers and multi-national companies. In the first quarter of 2006 we have continued to make acquisitions and investments to strengthen our regional presence and increase the benefits of vertical integration."
First Quarter 2006 financial highlights
Net revenue for the quarter ended March 25, 2006 was $11.1 million, a 34% increase compared to $8.3 million in the same period last year. The increase was primarily due to the growth in market demand for our flour and instant noodle products as well as the sales contribution from our soybean products business acquired in 2005.
Gross profit rose 24% to $1.9 million for the first quarter of 2006 compared to $1.5 million in the first quarter of 2005. Gross margin as a percentage of revenue decreased slightly from 18% in the comparable period last year to 17% in the first quarter of 2006, primarily as a result of increases in raw materials costs.
New Dragon Asia Corp. reported a loss from operations for the first quarter 2006 of $1.1 million compared to income from operations of $0.8 million in Q1 2005. The loss this quarter is attributable to a non-cash accounting charge in the amount of $2.3 million relating to stock-based compensation.
Excluding this charge, income from operations would be $1.2 million, an increase of 49% compared to Q1 2005, representing an operating margin of 10.7%. This strong operational performance was driven by the increased gross profit and a 24% reduction in general and administrative expense as a result of cost controls and productivity enhancements; the reduction in general and administrative costs was slightly offset by higher selling and distribution costs in line with the growth of the business.
Net loss for the first quarter 2006 was $2.5 million compared to net income of $0.6 million in the same period last year. The loss this quarter is attributable to the effect of the aforementioned non-cash charge of $2.3 million and in a $0.9 million non-cash charge arising from the amortization of the fair value of warrants and beneficial conversion feature and deferred financing costs relating to preferred stock issuances in the private placements closed during the 2005 fiscal year. Excluding the effects of these charges, net income for the first quarter of 2006 would have been $0.7 million, an increase of 24% compared to the first quarter of 2005. Loss per common share was $(0.05) basic and diluted, compared to earnings of $0.01 basic and diluted in the same period last year.
First Quarter 2006 strategic developments
Our strategy is to capitalize on our strong brand name and pursue strategic partnerships and acquisitions offering synergistic potential and other investments to enhance growth. In February 2006, the Company acquired a 90% interest in a noodle manufacturing facility in Chengdu, Sichuan Province, for $3.3 million in cash. Management believes that the Chengdu plant will strengthen New Dragon Asia Corp.'s market position in western China. The Company also established New Dragon Asia (Long Kou) Packing Materials Company Limited with registered capital of $3.6 million. New Dragon Asia (Long Kou) Packing Materials Company Limited is planned to be the second phase of the development of our existing 55% indirectly-owned Longkou City Longyuan Packing Materials Company Limited. Management plans to acquire the remaining 45% interest from the Chinese joint venture partner at net book value and believes that New Dragon Asia Corp. will receive the added benefit of new income tax relief. The acquisition of this business, which is principally engaged in the manufacture and sale of packing materials, is in line with the Company's vertical integration business model.
Derivation of Adjusted Net Income (in thousands)
March 25, 2006
Net loss $ (2,516)
Add: Amortization of the fair value of
warrants, beneficial conversion feature and
preferred stock issuance costs 924
Add: Non-cash stock-based compensation 2,320
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Adjusted net income $ 728
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Conference Call
Peter Mak, Chief Financial Officer, will host a conference call on Friday, May 05 at 10:00 AM (New York) / 3:00 PM (London) / 10:00 PM (China) to review the results. The conference call will also be available via webcast at: http://www.irconnect.com/nwd/pages/news.html , and will be archived on the Company's website.
The dial-in information for the call is as follows:
In North America: Dial-in: +1 718 354 1152 Replay: +1 718 354 1112 Passcode: 8439298# In Europe: Dial-in: +44 (0)207 365 1843 Replay: +44 (0)20 7806 1970 Passcode: 8439298# In Asia: Dial-in: +81 (0)3 3570 8231 Replay: +81 (0)3 3570 8212 Passcode: 8439298#
The replay will be available for one week following the conclusion of the live call.
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 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 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'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 the comparable GAAP financial measures contained in its consolidated financial statements, New Dragon Asia provides detailed reconciliations that permit investors to determine how such non-GAAP financial measures 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 BALANCE SHEETS
(Amounts in thousands, except share data)
March 25, Dec. 25,
2006 2005
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ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $14,889 $14,332
Accounts receivable, net 7,306 6,515
Deposits and prepayments, net 4,877 4,970
Inventories, net 7,270 7,630
Due from related companies 834 679
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Total current assets 35,176 34,126
Deposit for property, machinery and
equipment -- 1,000
Property, machinery and equipment, net 20,253 18,315
Land use rights, net 5,082 3,980
Deferred financing cost, net 1,665 1,713
Goodwill 125 --
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Total assets $62,301 $59,134
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,990 $ 2,696
Other payables and accruals 2,124 2,298
Taxes payable 2,545 1,854
Due to related companies 717 598
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Total current liabilities 8,376 7,446
Due to New Dragon Asia Food Limited 65 137
Due to joint venture partners 125 54
Mandatorily redeemable convertible
preferred stock, net of discount of
$7,822 5,435 4,945
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Total liabilities 14,001 12,582
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Minority interests 436 91
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Commitments
Stockholders' equity:
Preferred Stock, $0.0001 par value:
Authorized shares - 5,000,000
Issued and outstanding - 13,257 in
2006 and 13,600 in 2005 -- --
Class A Common Stock, $0.0001 par value:
Authorized shares - 102,000,000
Issued and outstanding - 50,501,988
in 2006 and 49,322,291 in 2005 5 5
Class B Common Stock, $0.0001 par value:
Authorized shares - 2,000,000 - none
issued and outstanding -- --
Additional paid-in capital 28,616 24,790
Receivable from stockholder (49) (49)
Retained earnings 18,401 20,917
Accumulated other comprehensive income 891 798
------- -------
Total stockholders' equity 47,864 46,461
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Total liabilities and stockholders'
equity $62,301 $59,134
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NEW DRAGON ASIA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data; unaudited)
Three months ended
March 25,
2006 2005
------- -------
Net revenue $11,096 $ 8,282
Cost of goods sold (9,242) (6,790)
Gross profit 1,854 1,492
Selling and distribution expenses (230) (121)
General and administrative expenses
(Including stock-based compensation
of $2,320) (2,757) (573)
------- -------
Income (loss) from operations (1,133) 798
Other income (expense):
Interest expense (1,171) --
Interest income 16 --
Other income 5 2
VAT refund 101 --
------- -------
Income (loss) before income taxes and
minority interests (2,182) 800
Provision for income taxes (258) (253)
------- -------
Income (loss) before minority interests (2,440) 547
Minority interests (76) 41
------- -------
Net income (loss) $(2,516) $ 588
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Earnings (loss) per common share
Basic $ (0.05) $ 0.01
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Diluted $ (0.05) $ 0.01
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Weighted average number of common
shares outstanding
Basic 49,750 45,061
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Diluted 49,750 45,061
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