SHENZHEN, China, Nov. 7, 2008 (GLOBE 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, 2008.
Li Xia Wang, Chief Executive Officer of New Dragon Asia Corp. said, "Our results for the third quarter reflect the stability and sustainability of our business, even in relatively difficult economic conditions. We recorded another quarter of sequential and year-on-year sales growth, and demand for our products remains strong. I am confident that the quality of our products and strong distribution network will enable us to continue to perform well in the face of an economic downturn. In light of recent product safety issues that have affected other food and beverage producers in China, I would like to reiterate that our safety measures are stringent, our products continue to be of the highest quality and our customers remain satisfied."
Peter Mak, Chief Financial Officer of New Dragon Asia Corp. stated, "We are pleased to have continued our trend of top line growth in the third quarter. Our balance sheet remains healthy and due to our growth and profitability, we are well funded. Our working capital balance has increased by $10.9 million year to date to $47.1 million. As anticipated, the price of raw materials continued to increase, however we maintain strong supplier relationships and were able to mitigate the impact of rising costs by securing advantageous prices. Although we expect raw materials costs to remain high, we should be able to pass a substantial portion of these costs on to customers, resulting in anticipated margins in the 17-18% range for the full year 2008."
Third Quarter 2008 financial highlights
Net revenue for the three months ended September 25, 2008 was $14.9 million, a 7% increase as compared to approximately $14.0 million for the same period last year. The increase in revenue was driven primarily by the increase in average selling price for the Company's flour products. Total sales of flour products increased from $7.8 million in the third quarter of 2007 to $8.8 million in the third quarter of 2008.
Gross profit was $2.5 million for the third quarter of 2008 compared to $2.8 million for the third quarter of 2007. The decrease in gross profit is attributable to the increase in the price of raw materials used in the Company's products, principally wheat. Gross margin as a percentage of sales was 17% for the quarter.
New Dragon Asia Corp. reported income from operations for the third quarter of 2008 of approximately $1.5 million as compared to $1.8 million for the third quarter of 2007. The decrease was primarily due to the decrease in gross profit of approximately $0.3 million.
Net income for the third quarter of 2008 was approximately $1.5 million as compared to net income of approximately $3.2 million for the same period in 2007. This decrease was primarily due to a smaller gain derived from the changes in the fair value of derivative instruments.
Earnings per common share were $0.02 basic and fully diluted for the third quarter of 2008, as compared to $0.05 basic and fully diluted for the same period in 2007.
First Nine Months 2008 financial highlights
Net revenue for the nine months ended September 25, 2008 was approximately $41.2 million, an 8% increase as compared to approximately $38.2 million for the corresponding period in 2007. This was driven primarily by the increase in the average selling price for the Company's flour products, as total revenue from flour sales amounted to $23.1 million versus $20.8 million in the prior year period.
Gross profit was down slightly to approximately $7.2 million for the nine months ended September 25, 2008 as compared to approximately $7.3 million for the corresponding period in 2007. Gross margin decreased to 17% for the nine months ended September 25, 2008 compared to 19% for the first nine months of 2007 as a result of the increase in raw material prices in 2008, principally wheat.
New Dragon Asia Corp. reported income from operations for the nine months ended September 25, 2008 of approximately $4.4 million, essentially level compared to the nine months ended September 25, 2007 due to the increase in wheat prices.
Net income for the nine months ended September 25, 2008 was approximately $5.2 million as compared to net income of $11.5 million for the same period in 2007. This decrease is attributable to the fluctuation in the gain derived from a change in the fair value of derivative instruments.
Earnings per common share were $0.07 basic and fully diluted for the nine months ended September 25, 2008, as compared to earnings of $0.18 basic and fully diluted for the corresponding period in 2007.
Select Balance Sheet and Cash Flow Information
New Dragon Asia Corp.'s cash and cash equivalents as of September 25, 2008 were $5.3 million compared to $3.6 million at December 25, 2007.
New Dragon Asia Corp.'s working capital increased to $47.1 million at September 25, 2008 from $36.2 million at December 25, 2007. This increase was primarily due to the growth and profitability of the business.
Net cash used for operating activities for the nine months ended September 25, 2008 was $2.3 million, as compared to $7.5 million used for operating activities in the nine months ended September 25, 2007.
Management Share Purchases
During the course of the third quarter of 2008, Chairman Heng Jing Lu purchased a total of 114,000 shares of New Dragon Asia Class A common stock on the open market.
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.
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; the global financial crisis of 2008, 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 STATEMENT OF OPERATIONS
(Amounts in thousands, except share data; unaudited)
Three months ended Nine months ended
September 25, September 25,
------------------ ------------------
2008 2007 2008 2007
Net revenue $ 14,942 $ 13,955 $ 41,156 $ 38,150
Cost of goods sold (12,439) (11,148) (33,966) (30,865)
-------- -------- -------- --------
Gross profit 2,503 2,807 7,190 7,285
Selling and distribution
expenses (387) (302) (977) (825)
General and administrative
expenses (569) (731) (1,815) (2,025)
-------- -------- -------- --------
Income from operations 1,547 1,774 4,398 4,435
Other income (expense):
Interest income 4 3 6 18
Other income (expense) 32 15 247 143
Gain on fair value
adjustments to embedded
derivatives 362 1,903 1,790 7,541
VAT refund 32 -- 60 540
-------- -------- -------- --------
Income (loss) before income
taxes and minority interests 1,977 3,695 6,501 12,677
Provision for income taxes (470) (491) (1,256) (1,211)
-------- -------- -------- --------
Income (loss) before minority
interests 1,507 3,204 5,245 11,466
Minority interests -- -- -- --
-------- -------- -------- --------
Net income (loss) $ 1,507 $ 3,204 $ 5,245 $ 11,466
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Accretion of Redeemable
Preferred Stock (282) (377) (942) (1,133)
Preferred Stock Dividends (127) (178) (420) (534)
-------- -------- -------- --------
Income (loss) available to
common stockholders $ 1,098 $ 2,649 $ 3,883 $ 9,799
======== ======== ======== ========
Earnings per common share
Basic $ 0.02 $ 0.05 $ 0.07 $ 0.18
-------- -------- -------- --------
Diluted $ 0.02 $ 0.05 $ 0.07 $ 0.18
-------- -------- -------- --------
Weighted average number of
common shares outstanding
Basic 58,625 54,073 57,263 53,858
-------- -------- -------- --------
Diluted 58,625 54,950 57,263 54,735
-------- -------- -------- --------
NEW DRAGON ASIA CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Amounts in thousands, except share data)
Sept. 25, Dec. 25,
2008 2007
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 5,298 $ 3,646
Accounts receivable, net 9,567 9,223
Deposits and prepayments, net 14,082 12,183
Inventories, net 25,730 22,050
Due from related companies 1,022 913
-------- --------
Total current assets 55,699 48,015
Property, machinery and equipment, net 27,807 25,986
Land use rights, net 7,737 7,294
Goodwill 125 125
-------- --------
Total assets $ 91,368 $ 81,420
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,555 $ 2,982
Other payables and accruals 2,772 2,765
Taxes payable 689 3,530
Embedded derivatives, at fair value 566 2,493
Due to related companies -- 36
-------- --------
Total current liabilities 8,582 11,806
Due to New Dragon Asia Food Limited 2,648 1,405
Due to joint venture partners 870 272
-------- --------
Total liabilities 12,100 13,483
-------- --------
Minority interests 316 294
-------- --------
Series A and B Redeemable Convertible
Preferred Stock, $0.0001 par value:
Authorized shares - 5,000,000
Issued and outstanding - 7,253 shares and
9,434 shares at September 25, 2008 and
December 25, 2007 4,904 5,321
Commitments
Stockholders' equity:
Class A Common Stock, $0.0001 par value:
Authorized shares - 102,000,000
Issued and outstanding - 58,758,275 at
September 25, 2008 and 55,195,385 at
December 25, 2007 6 5
Class B Common Stock, $0.0001 par value:
Authorized shares - 2,000,000
Issued and outstanding - none -- --
Additional paid-in capital 31,860 29,982
Retained earnings 28,451 24,568
Accumulated other comprehensive income 13,731 7,767
-------- --------
Total stockholders' equity 74,048 62,322
-------- --------
Total liabilities and stockholders' equity $ 91,368 $ 81,420
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