SHENZHEN, China, March 13, 2008 (PRIME NEWSWIRE) -- New Dragon Asia Corp. (AMEX:NWD), one of China's leading producers of instant noodles, flour-related products and soybean-derived products and a manufacturer and distributor of ginger powder, today announced its financial results for the fiscal year ended December 25, 2007.
Li Xia Wang, Chief Executive Officer of New Dragon Asia Corp., said, "We continued our steady sales growth this past year, generating $55.7 million in sales in fiscal 2007. Perhaps even more importantly, in the face of rising raw materials costs, we were able to control expenses to maintain our gross margin at 18.5%. We recorded net income of $14.1 million or $0.21 per diluted share, as we were able to pass the minimal cost increases we did incur along to our customers."
"We are off to a strong start in fiscal 2008, and recently announced orders from two new soybean product customers, Hunan Taizinai Group and Jilin Gold Wing Egg Co., Ltd. We continue to export our products to Europe and Asia, and we are pleased to report that we recently exported our first products to Africa. In January 2008, we received an initial order for 60 tons of our noodle seasoning from a customer in Nigeria, and have since begun product shipment. Our export business remains a key component of our growth strategy, and we are pleased to have expanded our geographic reach," Wang concluded
Peter Mak, Chief Financial Officer of New Dragon Asia Corp., added, "Careful control of operating costs has always been one of our primary objectives. Therefore, in order to combat future pricing pressure resulting from increasing raw materials costs, we made significant down payments in 2007 to our raw materials suppliers to secure a steady supply at reasonable prices in 2008. Although this has impacted our cash balance, the long-term benefits far outweigh the short-term drawbacks. In fact, production in the first quarter of 2008 has progressed smoothly, and we have been able to keep our average cost of production significantly lower than if we had not secured raw materials in advance."
Fiscal Year 2007 financial highlights
Net revenue for the fiscal year ended December 25, 2007 was $55.7 million, an increase of $2.3 million, or approximately 4.3%, as compared to $53.4 million for the prior fiscal year. The increase was due primarily to growth in market demand for soybean products, sales of which increased from $7.4 million in fiscal 2006 to $9.6 million in fiscal 2007.
Cost of goods sold for the fiscal year ended December 25, 2007 was $45.4 million, an increase of $2.0 million, or 4.7%, as compared to $43.4 million for the prior year. The increase was primarily due to the growth of the Company's soybean business and the slight increase in the cost of raw materials in fiscal year 2007 as compared to the previous year.
General and administrative expenses decreased to $2.6 million for the fiscal year ended December 25, 2007, as compared to $10.9 million for the prior year. The decrease was primarily due to the fact that there were no stock-based compensation expenses in 2007. General and administrative expenses in fiscal 2007 returned to normal levels for the Company in the absence of these extra charges.
Net income for the year ended December 25, 2007 was $14.1 million, or $0.22 per basic share, $0.21 diluted. This represents an increase of $16.7 million, as compared to a net loss of $2.6 million for fiscal 2006. As a percentage of revenue, net income was 25.3% for the year ended December 25, 2007 as compared to the net loss of 4.87% for that of the prior fiscal year. The increase was primarily due to the fact that there were no stock-based compensation charges in fiscal 2007, and that the Company recorded a gain on fair value adjustments to embedded derivatives of $8.4 million for the year ended December 25, 2007.
Fiscal Year 2007 Balance Sheet Information
New Dragon Asia Corp.'s cash and cash equivalents as of December 25, 2007 were $3.6 million, as compared to $10.3 million at the end of fiscal 2006. The decrease was due to additional deposits and pre-payments of $5.6 million to suppliers for wheat and soybeans in order to secure lower-priced supplies, and an increase in inventories of $10.4 million in anticipation of price increases for raw materials.
The Company's working capital increased by $18.65 million to $36.21 million at December 25, 2007 as compared to $17.56 million at December 25, 2006. The increase was primarily due to increased inventory and the change in the fair value of derivative instruments. The Company believes that it has adequate sources of liquidity to finance its business operations for the foreseeable future.
Net cash used by operating activities for fiscal 2007 was $8.94 million, as compared to $2.49 million net cash provided for the year ended December 25, 2006. This change was primarily due to the aforementioned deposits and prepayments and the increase in inventories in anticipation of price increases. Net cash used by financing activities was $0.90 million for fiscal 2007.
Fourth quarter 2007 highlights
For the fourth quarter of fiscal 2007, NWD reported net sales of $17.6 million, relatively flat compared to the same period of fiscal 2006. Gross profit was $3.0 million in the fourth quarter of 2007, compared to $3.5 million in the same period of 2006. Net income was $2.6 million or $0.04 per share in the fourth quarter of 2007 compared to a loss of $8.6 million or ($0.17) per share in the same period of 2006. The net income figure for the fourth quarter of 2006 accounts for a non-cash stock-based compensation charge of $5.8 million, and a loss on fair value adjustments to embedded derivatives of $4.63M incurred during that period.
Conference Call
Mr. Peter Mak, Chief Financial Officer, will host a conference call on Thursday, March 13, 2008 at 8:30 AM (New York)/12:30 PM (London)/8:30 PM (China) to review the results. The conference call will also be available via listen-only webcast at www.newdragonasia.com and will be archived on the Company's website for one year from the date of broadcast.
The dial-in information for the conference call is as follows:
In North America: Dial-in: +1 480 629 9031 Replay: +1 303 590 3030 Passcode: 38545345 In Europe: Dial-in: + 44 207 190 1595 Replay: + 44 207 154 2833 Passcode: 38545345 In Asia: Dial-in: + 852 3009 5027 Replay: + 852 2287 4304 Passcode: 095110#
The replay will be available for one week following the conclusion of the live call.
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, instant noodles, soybean-derived products and ginger powder, 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.
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 For the years ended December 25, ------------------------------- 2007 2006 2005 Net revenue $55,738 $53,439 $44,180 Cost of goods sold (45,427) (43,404) (36,151) ------- ------- ------- Gross profit 10,311 10,035 8,029 ------- ------- ------- Operating expenses: Selling and distribution expenses (1,279) (1,045) (721) General and administrative expenses (2,606) (10,908) (2,358) ------- ------- ------- Income/(loss) from operations 6,426 (1,918) 4,950 Other income (expense): Other income 252 144 186 Interest income 41 67 10 Gain (loss) on fair value adjustments to embedded derivatives 8,412 (1,434) (4,064) VAT refund 952 2,328 2,158 ------- ------- ------- Income/(loss) before income taxes and minority interests 16,083 (813) 3,240 Provision for income taxes (1,968) (1,657) (1,487) ------- ------- ------- Income/(loss) before minority interests 14,115 (2,470) 1,753 Minority interests -- (134) (6) ------- ------- ------- Net income/(loss) $14,115 $(2,604) $ 1,747 ======= ======= ======= Accretion of redeemable preferred stock (1,512) (1,882) (454) Preferred stock dividends (703) (875) (187) ------- ------- ------- Income (loss) available to common stockholders $11,900 $(5,361) $ 1,106 ======= ======= ======= Earnings per common share Basic $ 0.22 $ (0.10) $ 0.02 ------- ------- ------- Diluted $ 0.21 $ (0.10) $ 0.02 ------- ------- ------- Weighted average number of common shares outstanding Basic 54,109 51,485 46,051 ------- ------- ------- Diluted 55,519 51,485 46,949 ------- ------- ------- NEW DRAGON ASIA CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Amounts in thousands, except share data) Dec. 25, Dec. 25, 2007 2006 --------- -------- ASSETS Current assets: Cash and cash equivalents $ 3,646 $ 10,276 Accounts receivable, net 9,223 8,835 Deposits and prepayments, net 12,183 6,586 Inventories, net 22,050 11,598 Due from related companies 913 857 --------- -------- Total current assets 48,015 38,152 Property, machinery and equipment, net 25,986 24,248 Land use rights, net 7,294 6,983 Goodwill 125 125 --------- -------- Total assets $ 81,420 $ 69,508 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,982 $ 2,723 Other payables and accruals 2,765 3,255 Taxes payable 3,530 3,453 Due to related companies 36 28 Embedded derivatives at fair value 2,493 11,138 --------- -------- Total current liabilities 11,806 20,597 Due to New Dragon Asia Food Limited 1,405 317 Due to joint venture partners 272 102 --------- -------- Total liabilities 13,483 21,016 --------- -------- Minority interests 294 276 --------- -------- Series A & B Redeemable Convertible Preferred Stock, $0.0001 par value: Authorized shares - 5,000,000 Issued and outstanding - 9,434 shares and 10,162 shares at December 25, 2007 and 2006, respectively 5,321 4,204 --------- -------- Commitments Stockholders' equity: Class A Common Stock, $0.0001 par value: Authorized shares - 102,000,000 Issued and outstanding - 55,195,385 in 2007 and 53,614,723 in 2006 5 5 Class B Common Stock, $0.0001 par value: Authorized shares - 2,000,000 - none issued and outstanding -- -- Additional paid-in capital 29,982 28,411 Retained earnings 24,568 12,668 Accumulated other comprehensive income 7,767 2,928 --------- -------- Total stockholders' equity 62,322 44,012 --------- -------- Total liabilities and stockholders' equity $ 81,420 $ 69,508 ========= ========