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Winner Medical Group Reports First Quarter Fiscal 2007 Results

2007-02-14 15:21 1100

SHENZHEN, China, Feb. 14 /Xinhua-PRNewswire/ -- Winner Medical Group Inc. (OTC Bulletin Board: WMDG), today reported financial results for the first quarter of fiscal year 2007, ending December 31, 2006.

Consolidated sales for the first fiscal quarter were $15.9 million compared to $16.2 million reported in the first quarter of fiscal 2006, a decrease of 2%. Consolidated gross profit for the first quarter of fiscal year 2007 was $3.9 million, or 25% of net sales, compared to $4.4 million, or 27% reported for the first quarter of fiscal year 2006. The decrease in gross profit as a percentage of net sales was mainly due to the appreciation of Renminbi or “RMB” against the U.S. dollar and the increased cost of raw materials, labor and energy.

Net income for the first quarter was approximately $1.5 million, or $0.03 per basic and diluted share, compared to net income of approximately $1.6 million, or $0.04 per basic and diluted share, reported in the first quarter of last fiscal year.

Jianquan Li, Winner Medical’s chairman and chief executive officer, commented, “The decrease in revenue in the first quarter is primarily attributable our decision to terminate the production of some lower margin products and to transfer the production of lower margin products from the new, high-tech facility in Shenzhen to our facility in Chongyang and other facilities in the Hubei province. These production changes are consistent with our strategy to shift the product mix to higher margin, technology-driven products.

“Winner Medical remained profitable in the first quarter despite these changes in production and the termination of some small clients that were unprofitable or represented bad debt,” Mr. Li continued. “We believe these decisions along with our continued investment in the development of higher margin products provide the cornerstone for Winner Medical to continue to grow over the longer term. We remain focused on our long-term goals of capturing market share and penetrating existing and new markets through the introduction of groundbreaking products, such as the new PurCotton(TM) products and the cohesive (self-adhering) bandages. We believe this course of action, in addition to the current pipeline of opportunities, will enable Winner Medical to deliver revenue growth in the range of 10-15% for the full fiscal year 2007.”

The following table illustrates the sales revenues generated in the first quarter of fiscal year 2007 in the major geographic areas in which Winner Medical sells its products. The table also provides the percentage of total revenues generated in each region.

Sales by Region

(Sales in U.S. Dollars, in millions)

First Percentage First Percentage

Quarter of Total Quarter of Total

FY 2007 Revenues FY 2006 Revenues

Europe $6.08 38.27% $5.59 34.43%

Japan $4.69 29.53% $4.61 28.38%

North America $1.37 8.65% $2.01 12.38%

China $2.26 14.22% $1.91 11.82%

Other $1.48 9.33% $2.11 12.99%

TOTAL $15.88 100.00% $16.23 100.00%

As of December 31, 2006, Winner Medical had cash and cash equivalents of $2.1 million. As of the first quarter of this fiscal year, Winner Medical had working capital of $12.8 million and stockholders’ equity improved to approximately $54.5 million.

About Winner Medical

Winner Medical is a holding company comprised of eight wholly owned manufacturing and distribution facilities, two joint venture factories and one trading company. Winner Medical is primarily engaged in the development, manufacturing and distribution of high-quality cotton disposable medical dressings and disposable products. Winner Medical’s products include surgical dressings, dressing packs, wound care dressings, protective products, medical instruments, dental products and hygiene products for the institutional and home care markets. Winner Medical products are manufactured in China and sold domestically and abroad, in countries and areas such as Japan, Germany, Italy, the Netherlands, Australia, France, the United States, South America, Africa and the Middle East. Winner Medical is one of few Chinese companies licensed by the U.S. Food and Drug Administration to ship finished, sterilized products directly to the U.S. market. To learn more about Winner Medical, visit Winner Medical’s web site http://www.winnermedical.com .

Forward-Looking Statements

This press release contains certain statements that may include "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding Winner Medical and its subsidiary companies’ business strategy, plans and objective and statements of non-historical information. These forward looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although Winner Medical believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Winner Medical’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in Winner Medical’s periodic reports that are filed with and available from the Securities and Exchange Commission. All forward-looking statements attributable to Winner Medical or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, Winner Medical does not assume a duty to update these forward-looking statements.

-- Financial Tables Follow --

Winner Medical Group Inc.

Condensed Consolidated Statements of Income and Comprehensive Income

(U.S. Dollars except per share amounts)

Three months ended

December 31

2006 2005

(Unaudited) (Unaudited)

Net sales $ 15,880,770 $ 16,234,128

Cost of sales (11,944,126) (11,834,833)

Gross profit 3,936,644 4,399,295

Other operating income, net 103,639 62,502

Selling, general and administrative

expenses (2,501,626) (2,574,895)

Income from operations 1,538,657 1,886,902

Interest income 5,662 4,454

Interest expense (72,259) (146,506)

Share of undistributed earnings in an

equity investee 56,546 10,422

Income before income taxes and

minority interests 1,528,606 1,755,272

Income taxes (28,399) (165,396)

Income before minority interests 1,500,207 1,589,876

Minority interests (5,637) 22,431

Net income $ 1,494,570 $ 1,612,307

Other comprehensive income

Foreign currency translation

difference 723,440 99,676

Comprehensive income 2,218,010 1,711,983

Net income per stock

- basic $ 0.03 $ 0.04

- diluted $ 0.03 $ 0.04

Weighted average number of shares

outstanding

- basic 44,677,171 38,237,615

- diluted 44,685,505 38,237,615

Winner Medical Group Inc.

Condensed Consolidated Balance Sheets

(U.S. Dollars)

December 31 September 30

2006 2006

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents 2,101,989 4,319,579

Accounts receivable, less

allowances for doubtful

accounts of US$14,976 and

US$20,347 at December 31,

2006 and September 30,

2006, respectively 8,531,138 7,513,013

Amounts due from affiliated

companies 318,597 480,900

Inventories 13,541,930 11,329,520

Prepaid expenses and other current

assets 4,588,794 6,182,472

Income taxes recoverable 33,627 7,533

Total current assets $ 29,116,075 $ 29,833,017

Property, plant and equipment, net 40,228,311 35,800,530

Investment in an equity investee 1,119,213 1,062,135

Intangible assets, net 37,896 38,731

Prepaid expenses and deposits 229,880 224,391

Deferred tax assets 198,148 195,610

Total assets $70,929,523 $ 67,154,414

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Short-term bank loans 7,044,599 5,437,050

Accounts payable 4,910,697 4,196,874

Accrued payroll and employee

benefits 1,345,034 1,184,779

Customer deposits 363,822 269,965

Other accrued liabilities 1,720,522 2,379,849

Amount due to a stockholder -- 1,556

Amounts due to affiliated companies 180,703 203,999

Dividend payable 194,679 504,317

Income taxes payable 536,808 556,647

Total current

liabilities $ 16,296,894 $ 14,735,036

Deferred tax liabilities 4,467 4,410

Total liabilities $ 16,301,361 $ 14,739,446

Commitments and contingencies 144,680 149,496

Minority interests

Stockholders’ equity:

Common stock, par value $0.01 per

share; authorized 495,000,000 stock,

stock issued and outstanding

December 31, 2006 - 44,677,171 shares;

September 30, 2006 - 44,677,171 shares 44,677 44,677

Additional paid-in capital 30,237,197 30,237,197

Retained earnings 20,059,287 19,182,866

Statutory reserves 1,840,827 1,222,678

Accumulated other comprehensive

income 2,301,494 1,578,054

Total stockholders’

equity $ 54,483,482 $ 52,265,472

Total liabilities and

stockholders’ equity $ 70,929,523 $ 67,154,414

For more information, please contact:

Company - China

Annie Chen

Secretary of the Board

Tel: +86-755-2806-6858

Email: annie.chen@winnermedical.com

U.S. Investor Relations

Kathy Price / Dixon Chen

The Global Consulting Group

Tel: +1-646-284-9400

Email: kprice@hfgcg.com / dchen@hfgcg.com

Source: Winner Medical Group Inc.
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