SHENZHEN, China, Aug. 4, 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, today announced its financial results for the second quarter and first six months of fiscal 2008.
Li Xia Wang, Chief Executive Officer of New Dragon Asia Corp. said, "Our revenue growth in the first six months of the year was driven by both our traditional products, namely flour, and our newer soybean products. In fact, with the strong growth of our soybean powder business, we have recently decided to add soybean milk into our product line. We believe that soybean milk can generate higher margins than the food business, and creates a new avenue of growth for the Company. The production and sale of soybean milk will likely commence during the first quarter of 2009. We continue to explore ways to leverage our current strengths to uncover new opportunities for growth."
Peter Mak, Chief Financial Officer of New Dragon Asia Corp. stated, "The second quarter of 2008 was our 15th consecutive quarter of year-on-year, top-line growth and our 7th consecutive profitable quarter. Considering the input cost increases that our industry has seen thus far this year, we believe that our cost of goods sold has been kept at a reasonable level, and we are committed to keeping our costs as low as possible to maintain stable margins. Although the bottom line was impacted by non-cash items on our income statement, we continue to grow and the health of our business remains intact. Demand for our high quality products is strong, and we are well-positioned for continued growth during the remainder of fiscal 2008."
Second Quarter 2008 financial highlights
Net revenue for the three months ended June 25, 2008 was $14.5 million, an 11% increase compared to $13.0 million in the same period in 2007. The rise in revenues was driven mainly by an increase in demand for New Dragon Asia's flour products.
Gross profit was flat at $2.6 million in the second quarter of 2008. Gross margin decreased to 17.5% in the second quarter of 2008 as compared to 19.6% in the second quarter of 2007, primarily as a result of higher raw materials costs, year on year.
Income from operations was $1.4 million for the three months ended June 25, 2008 as compared to $1.5 million for the three months ended June 25, 2007. The decrease was primarily due to the decrease in gross profit.
Net income for the second quarter of 2008 was $1.76 million compared to net income of $4.81 million in the corresponding period in 2007. This decrease was due to the fact that the non-cash gain derived from changes in the fair value of derivative instruments was considerably less in the second quarter of 2008 compared to the second quarter of 2007.
Earnings per Class A common share was $0.02 basic and fully diluted for the second quarter of 2008, compared to earnings of $0.08 basic and fully diluted in the corresponding period last year. This was also due to the decrease in the non-cash gain derived from changes in the fair value of derivative instruments.
First Half 2008 financial highlights
Net revenue for the six months ended June 25, 2008 was $26.2 million, an 8% increase compared to $24.2 million in the same period last year driven by growth in demand, principally for the Company's flour and soybean products during the first half of the year.
Gross profit rose to $4.7 million for the first half of 2008 compared to $4.5 million in the first half of 2007. Gross margin as a percentage of revenue decreased slightly to 17.9% in the first half of 2008 as compared to 18.5% in the first half of 2007 as a result of increases in raw materials costs.
New Dragon Asia Corp. reported income from operations for the six months ended June 25, 2008 of $2.9 million compared to $2.7 million for the first six months of 2007, which is in line with the increase in gross profit arising from the growth of business.
Net income for the first half of 2008 was $3.7 million compared to $8.3 million in the first half of 2007. This decrease was due to the fact that the non-cash gain derived from changes in the fair value of derivative instruments was considerably less in the first half of 2008 compared to the first half of 2007.
Earnings per Class A common share was $0.05 basic and fully diluted for the first six months of 2008, compared to earnings of $0.13 basic and fully diluted in the corresponding period last year. This was also due to the considerable decrease in the non-cash gain derived from changes in the fair value of derivative instruments.
Balance Sheet and Cash Flow Information
New Dragon Asia's cash and cash equivalents as of June 25, 2008 were $9.5 million, compared with $3.6 million at December 25, 2007. Working capital increased by $8.4 million to $44.6 million at June 25, 2008 as compared to $36.2 million at December 25, 2007. This was primarily due to the growth and profitability of the business and the gradual reduction of prepayments to suppliers.
Net cash provided by operating activities for the six months ended June 25, 2008 was $2.3 million, as compared to $6.7 million used for operating activities in the six months ended June 25, 2007.
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; 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 Six months ended
June 25, June 25,
------------------- -------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net revenue $ 14,515 $ 13,035 $ 26,214 $ 24,195
Cost of goods sold (11,970) (10,479) (21,527) (19,717)
-------- -------- -------- --------
Gross profit 2,545 2,556 4,687 4,478
Selling and distribution
expenses (369) (284) (590) (523)
General and administrative
expenses (741) (757) (1,246) (1,294)
-------- -------- -------- --------
Income from operations 1,435 1,515 2,851 2,661
Other income (expense):
Interest income -- 9 2 15
Other income (expense) 27 120 215 128
Gain on fair value
adjustments to embedded
derivatives 738 3,101 1,428 5,638
VAT refund 28 488 28 540
-------- -------- -------- --------
Income (loss) before income
taxes and minority interests 2,228 5,233 4,524 8,982
Provision for income taxes (472) (420) (786) (720)
-------- -------- -------- --------
Income (loss) before minority
interests 1,756 4,813 3,738 8,262
Minority interests -- -- -- --
-------- -------- -------- --------
Net income (loss) $ 1,756 $ 4,813 $ 3,738 $ 8,262
======== ======== ======== ========
Accretion of Redeemable
Preferred Stock (301) (378) (660) (756)
Preferred Stock Dividends (140) (178) (293) (356)
-------- -------- -------- --------
Income (loss) available to
common stockholders $ 1,315 $ 4,257 $ 2,785 $ 7,150
======== ======== ======== ========
Earnings per common share
Basic $ 0.02 $ 0.08 $ 0.05 $ 0.13
-------- -------- -------- --------
Diluted $ 0.02 $ 0.08 $ 0.05 $ 0.13
-------- -------- -------- --------
Weighted average number of
common shares outstanding
Basic 57,165 53,810 56,615 53,750
-------- -------- -------- --------
Diluted 57,165 62,266 56,615 54,838
-------- -------- -------- --------
NEW DRAGON ASIA CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
June 25, December 25,
2008 2007
------- -------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,503 $ 3,646
Accounts receivable, net 9,605 9,223
Deposits and prepayments, net 12,076 12,183
Inventories, net 25,205 22,050
Due from related companies 976 913
------- -------
Total current assets 57,365 48,015
Property, machinery and equipment, net 27,615 25,986
Land use rights, net 7,735 7,294
Goodwill 125 125
------- -------
Total assets $92,840 $81,420
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,649 $ 2,982
Other payables and accruals 2,830 2,765
Taxes payable 4,308 3,530
Embedded derivatives, at fair value 958 2,493
Due to related companies -- 36
------- -------
Total current liabilities 12,745 11,806
Due to New Dragon Asia Food Limited 2,399 1,405
Due to joint venture partners 635 272
------- -------
Total liabilities 15,779 13,483
------- -------
Minority interests 314 294
------- -------
Series A and B Redeemable Convertible
Preferred Stock, $0.0001 par value:
Authorized shares - 5,000,000
Issued and outstanding - 8,005 shares
and 9,434 shares at June 25, 2008 and
December 25, 2007 5,105 5,321
Commitments
Stockholders' equity: Class A Common
Stock, $0.0001 par value:
Authorized shares - 102,000,000
Issued and outstanding - 57,230,174 at
June 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 31,207 29,982
Retained earnings 27,353 24,568
Accumulated other comprehensive income 13,076 7,767
------- -------
Total stockholders' equity 71,642 62,322
------- -------
Total liabilities and stockholders' equity $92,840 $81,420
======= =======