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Winner Medical Group Reports Fourth Quarter and Year End Fiscal 2006 Results

2006-12-20 14:38 912

SHENZHEN CITY, China, Dec. 20 /Xinhua-PRNewswire/ -- Winner Medical Group

Inc. (OTC Bulletin Board: WMDG), today reported financial results for the

fourth quarter and fiscal year ended September 30, 2006.

Revenues for the fourth fiscal quarter were $16.64 million compared to

$18.56 million reported in the fourth quarter of fiscal 2005, a decrease of

approximately 10%. Net income for the fourth quarter was $1.29 million, or

$0.03 per basic and diluted share, compared to net income of $2.41 million, or

$0.06 per basic and diluted share, reported in the fourth fiscal quarter last

year.

The decrease in revenue in the fourth quarter is primarily attributable to

increased competition for our traditional products, particularly in the North

American and the European markets. The decrease in net income was attributable

to the increased investments in R&D, increases in the cost of labor,

electricity, freight and fuel and expenses of approximately $0.3 million

associated with maintaining the Company's U.S. public reporting company

status.

Revenues for fiscal year 2006 were $63.87 million compared to $58.36

million reported in fiscal year 2005, an increase of approximately 9%. Net

income for the full fiscal year 2006 was $5.83 million, or $0.14 per basic and

diluted share, compared to net income of $7.89 million, or $0.21 per basic and

diluted share, reported for the full fiscal year 2005.

The following table illustrates the sales revenues generated in fiscal

year 2006 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)

Fiscal Year Percentage of Fiscal Year Percentage of

2006 Total Revenues 2005 Total Revenues

Europe $25.01 39.16 % $22.39 38.37 %

Japan $16.65 26.06 % $15.12 25.91 %

North America $7.62 11.93 % $7.50 12.85 %

China $7.78 12.18 % $6.94 11.89 %

Other $6.81 10.67 % $6.41 10.98 %

TOTAL $63.87 100.00 % $58.36 100.00 %

As of September 30, 2006, Winner Medical had cash and cash equivalents of

$4.3 million compared to $2.7 million reported in fiscal year 2005. As of the

fiscal year end, Winner Medical had working capital of $15.1 million and

stockholders' equity improved to $52.3 million.

Jianquan Li, Winner Medical's chairman and chief executive officer,

commented, "Winner Medical continued to grow its business in fiscal 2006.

Existing products produced solid sales throughout the year; however, we

experienced intense competition for these products in the latter half of the

year, particularly in North America and Europe. Our new products, including

our technology driven self-adhesive bandage, were well received and we

continue to see increased demand for them in all markets. Our product mix

continues to shift to higher margin products, with sterilized products now

representing approximately 40% of total revenues. We also continued to report

positive bottom line results, despite a significant investment in R&D, higher

overall operational costs and added expenses associated with our listing in

the U.S. capital markets.

"Looking forward to fiscal year 2007, Winner Medical plans to continue to

leverage its innovative technology to introduce new products into the market.

Our first new product introduction will be the new PurCotton(TM) line of

products, which are expected to officially enter the market after the first of

the year. This product line has similar advantages as cotton gauze products --

absorbent, non-allergenic and biodegradable, but does not have the

disadvantages -- microorganism attachment, fiber loss, shredding, and raw

edges, etc. We are very excited about the PurCotton(TM) line of products, and

believe it has the potential to be a true 'category killer'.

"In fiscal year 2007, we also plan to leverage several programs, including

the implementation of our SAP ERP system, to optimize our operations and

internal systems to maximize our efficiency and profitability. Another goal is

to expand new business opportunities in North America and considerably

increase the revenue contribution from that region," concluded Mr. Li.

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 very 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 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.

Contacts

United States

Company Investor Relations

Richard Thomas Kathy Price / Dixon Chen

Vice President The Global Consulting Group

Tel: +1(843)682-5001 Tel: +1(646)284-9430 / +1(646)284-9400

Email: rthomas@winnermedical.com Email: kprice@hfgcg.com /

dchen@hfgcg.com

Hong Kong

Company Investor Relations

Annie Chen Henry Chow

Secretary of the Board Citigate Dewe Rogerson - Hong Kong

Email: annie.chen@winnermedical.com Tel: +852 2533 4639

WINNER MEDICAL GROUP INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(U.S. Dollars, except per share amounts)

Three months ended Fiscal year ended

September 30 September 30

(UNAUDITED) (AUDITED)

2006 2005 2006 2005

Net sales $16,636,783 $18,556,176 $63,873,058 $58,357,129

Cost of sales (11,341,625) (12,905,708) (46,335,354) (42,059,663)

Gross profit 5,295,158 5,650,468 17,537,704 16,297,466

Other operating income,

net 82,183 25,436 283,337 296,117

Selling, general and

administrative

expenses (3,973,494) (3,149,002) (11,335,006) (8,830,775)

Income from operations 1,403,847 2,526,902 6,486,035 7,762,808

Gain on disposal of a

subsidiary - - - 1,049,239

Interest income 27,858 9,951 54,772 12,009

Interest expense (51,631) (132,726) (266,934) (470,776)

Share of undistributed

earnings in an equity

investee 42,199 (1,750) 52,817 9,108

Income before income

taxes and minority

interests 1,422,273 2,402,376 6,326,690 8,362,388

Income taxes (135,453) (2,706) (516,635) (446,146)

Income before minority

interests 1,286,820 2,399,670 5,810,055 7,916,242

Minority interests 2,658 7,559 19,239 (23,572)

Net income $1,289,478 $2,407,229 $5,829,294 $7,892,670

Other comprehensive

income

Foreign currency

translation difference 530,980 720,741 857,313 720,741

Comprehensive income 1,820,458 3,127,970 6,686,607 8,613,411

Net income per stock

- basic $0.03 $0.06 $0.14 $0.21

- diluted $0.03 $0.06 $0.14 $0.21

Weighted average common stock

outstanding

- basic 44,677,171 36,991,105 43,053,212 36,991,105

- diluted 44,677,171 36,991,105 43,061,546 36,991,105

WINNER MEDICAL GROUP INC.

CONSOLIDATED BALANCE SHEETS

(U.S. Dollars)

September 30 September 30

2006 2005

(Audited) (Audited)

ASSETS

Current assets:

Cash and cash equivalents $4,319,579 $2,650,867

Accounts receivable, less allowances

for doubtful accounts of US$20,347 and

US$12,643 at September 30, 2006 and

2005, respectively 7,513,013 8,257,923

Amounts due from affiliated companies 480,900 116,804

Inventories 11,329,520 10,476,534

Prepaid expenses and other current

assets 6,182,472 4,268,072

Income taxes recoverable 7,533 57,649

Total current assets 29,833,017 25,827,849

Property, plant and equipment, net 35,800,530 26,834,824

Investment in an equity investee 1,062,135 1,009,318

Intangible assets, net 38,731 38,288

Prepaid expenses 224,391 219,125

Deferred tax assets 195,610 294,021

Total assets $67,154,414 $54,223,425

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term bank loans 5,437,050 8,773,881

Accounts payable 4,196,874 3,490,047

Accrued payroll and employee benefits 1,184,779 1,150,036

Customer deposits 269,965 99,994

Other accrued liabilities 2,379,849 2,279,845

Amount due to a stockholder 1,556 168,817

Amounts due to affiliated companies 203,999 255,611

Dividend payable 504,317 1,872,750

Income taxes payable 556,647 576,157

Total current liabilities 14,735,036 18,667,138

Deferred tax liabilities 4,410 37,271

Total liabilities $14,739,446 $18,704,409

Commitments and contingencies

Minority interests 149,496 1,164,186

Stockholders' equity:

Common stock, par value $0.001 per

share; authorized 495,000,000 stock,

stock issued and outstanding September 30,

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

2005- 36,991,105 shares 44,677 36,991

Additional paid-in capital 30,237,197 19,020,848

Retained earnings 19,182,866 14,104,400

Statutory reserves 1,222,678 471,850

Accumulated other comprehensive income 1,578,054 720,741

Total stockholders'

equity $52,265,472 $34,354,830

Total liabilities and

stockholders' equity $67,154,414 $54,223,425

Source: Winner Medical Group Inc.
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