Winner Medical Reports First Quarter 2010 Results

2010-02-11 00:33 773

-- Q1 2010 Revenue Increased 15.8% to $29.8 Million, Gross margins

increased 600 basis points to 31.7%

-- Net Income Increased 165% to $3.9 Million and Diluted EPS Increased

142% to $0.17

-- Sales to the Domestic Chinese Market Increased 212% to $8.1 Million

-- Sales of PurCotton(R) Products were a Record $2.5 Million, an 199%

Increase YOY

SHENZHEN, China, Feb. 11 /PRNewswire-Asia/ -- Winner Medical Group Inc. (NYSE Amex: WWIN; "Winner Medical"), a manufacturer of medical dressings, medical disposables and non-woven PurCotton(R) materials for the medical and consumer products industries, today reported that fiscal first quarter 2010 revenue increased 15.8% to $29.8 million and diluted earnings per share increased 142.9% to $0.17.

First Quarter 2010 Summary

Q1 FY2010 Q1 FY2009 Y/Y

(In million) (In million)

Sales Revenue $29.8 $25.7 15.8%

Cost of Sales $20.4 $19.1 6.4%

Gross Profit $9.4 $6.6 42.8%

Operating Income $4.5 $1.7 159.4%

Net Income Attributable to

Winner Medical Group Inc. $3.9 $1.5 165.8%

Diluted EPS $0.17 $0.07 142.9%

"Winner Medical delivered strong first-quarter results as our operating numbers were enhanced by accelerating growth in the Chinese market for our Winner(R) brand and finished medical products, which were further supported by sequential increases by PurCotton(R) jumbo roll sales," said Jianquan Li, chairman and Chief Executive Officer of Winner Medical. "Our business is performing well and our domestic and PurCotton(R) business is on track for strong profit growth this quarter."

"Looking forward, we will continue to reshape and strengthen our portfolio, by expanding medical products sales into the Chinese marketplace through direct sales to hospitals, distributors and chain drugstores, and launching PurCotton(R) brand products and opening more PurCotton(R) trial stores. We expect that these products and sales to the Chinese marketplace will fuel our growth in an increasingly competitive marketplace. We also expect to drive growth this year through key strategic investments funded by our continued strong cash flow," Mr. Li said.

First Quarter 2010 Highlights

Sales Revenue

Winner Medical reported net revenues of $29.8 million for the first quarter of 2010, a 15.8% increase from $25.7 million in the first quarter of 2009. Net revenues generated from traditional products in the first quarter of 2010 increased approximately 9.5% to $27.3 million from $24.9 million in the first quarter of 2009, primarily driven by increased sales to North and South American customers and Chinese customers. As a component, PurCotton(R) products sales in the first quarter of 2010 increased approximately 199.2% to $2.5 million from $0.8 million in the first quarter of 2009. The strong revenue was also driven by a large quantity of sales from face masks and protective products as a result of H1N1 both in the Chinese and global markets.

Gross Profit

Gross profit in the first quarter of 2010 increased to $9.4 million. First quarter 2010 gross margins were 31.7%, a 600 basis point improvement from 25.7% reported in the first quarter of 2009, which resulted from the Company's strategy of targeting the Chinese medical market combined with high margin sales of PurCottton(R) products, as well as from benefits derived from our lean production management and favorable foreign exchange rates.

Operating Expenses

In the first quarter of 2010, the Company reported Selling, General and Administrative expenses of $5.3 million, versus $4.5 million in the first quarter of 2009. This increase was mainly due to increases in transportation expenses for the domestic and export markets, increases in salaries for management and administrative staff and consulting expenses for brand building projects, as well as an increase in the provision for bad debts.

Operating Income

Operating income increased by 159.4% to $4.5 million in the first quarter of 2010, from $1.7 million in the first quarter of 2009.

Income taxes

The Company's effective tax rate for the first quarter of 2010 was 13.1%, compared to 15.9% in the first quarter of 2009. The lower income tax rate is mainly due to the Company's subsidiary, Winner Industries (Shenzhen), obtaining the High and New Technology Enterprise Certificate which reduced its income tax rate from 18% to 15% and also due to the fact that another subsidiary, Winner Industries (Huanggang), was entitled to a two-year full exemption from enterprise income tax, and it experienced high sales revenue growth in the first quarter of 2010.

Net Income Attributable to Winner Medical Group Inc.

Net income increased by 165.8% to $3.9 million in the first quarter of 2010, as compared to approximately $1.5 million in the first quarter of 2009. Diluted earnings per share were $0.17 in the first quarter, versus $0.07 per share in the comparable quarter last year. This increase was primarily driven by high demand of PurCotton(R) products, rapid sales of traditional medical products to Chinese customers and North and South American customers, lean production management and favorable foreign exchange rates.

Other Select Data

Average accounts receivable days outstanding were 40 days in the first quarter of 2010 compared to 45 days in the fourth quarter of 2009.

As of December 31, 2009, the Company had $7.5 million in cash and cash equivalents, compared to $9.5 million as of September 30, 2009. Net cash provided by operating activities and net cash used in investing activities during the first quarter of 2010 were $3.2 million and $2.1 million, respectively. Working capital as of December 31, 2009 was $26.2 million compared to $23.0 million as of September 30, 2009.

2010 First Quarter Operational Highlights

China Medical Market Business Update

Net sales to customers in China totaled $8.1 million in the first quarter of 2010 compared to $2.6 million in the comparable quarter last year, an increase of 212.7%. This significant quarterly sales gain resulted from the Company's strategy of launching its own brand name Winner(R) products and selling products through hospitals, distributors, and chain drugstores. The Company has established sales distribution channels in major cities such as Beijing, Shanghai, Guangzhou, Shenzhen, Wuhan, and Fuzhou and has cooperated with 7 out of the top 10 chain drugstores in China which have a combined network of approximately 20,000 locations in almost all major cities. Winner(R), as a well-known trademark, was recognized by the Trademark Office of the Chinese State Administration for Industry and is well accepted by the Company's clients and end customers. The increase of sales within China is also due to orders related to H1N1 protective products. The Company expects to strengthen its sales continuously to the Chinese marketplace, and expects domestic demand to be driven by Chinese medical reforms and increasing demand for high quality medical disposable products.

PurCotton(R) Business Update

PurCotton(R) product sales of $2.5 million in the first quarter of 2010 represented a 199.2% increase versus the $0.8 million of sales in the first quarter of the 2009. Sales in the first quarter of 2010 benefited from an increase in PurCotton(R) raw materials sales (jumbo rolls) to customers in China and Japan who produce consumer products, including sanitary and incontinence products, as well as from the processing of orders for PurCotton(R) finished medical products, such as operating room towels and sponges for customers in China, Europe, and the United States.

As of December 31, 2009, the first two PurCotton(R) manufacturing lines were producing at full capacity, with a total production capacity of 200 tons per month. The third and fourth production lines are expected to start production in March and May 2010, respectively. In order to build and market the PurCotton(R) brand name in China, the Company has set up a wholly-owned subsidiary, Shenzhen PurCotton Technology Co., Ltd., which focuses on selling its PurCotton(R) branded products through Company owned chain stores. On December 31, 2009, the Company opened its first three PurCotton(R) pilot chain stores and another two stores were opened on February 8, 2010 in Shenzhen, Guangdong province. Each store sells four lines of PurCotton(R) branded personal products and healthcare supplies, including PurCotton(R) baby personal products, feminine personal products, daily home care products and medical care products. The total projected average cost to open each pilot store is approximately $60,000 to $80,000, which includes the lease take-out, a cash deposit, build-out, instruments, inventory stocking and one month salary for sales persons. This is a trial step as the Company enters the retail consumer personal products and healthcare suppliers markets in China. The Company will open more stores depending on the growth of market demand for PurCotton(R) products. The Company believes that this flagship product will be a significant growth driver and complement to its product portfolio.

Conference Call

Winner Medical's senior management will host a conference call to discuss its first quarter 2010 results and recent business developments.

Date of the conference call: Wednesday, February 10, 2010 (EST)

Time: 1:30pm (Pacific Standard Time) / 4:30pm (Eastern Standard Time) /

February 11, 2010 at 5:30am (Shenzhen/Hong Kong Time)

Dial-in Number: 866-700-6293 (US)

10-800-130-0399 (South China)

10-800-152-1490 (North China)

800-96-3844 (HK)

+1-617-213-8835 (International)

Passcode: 33425805.

A telephone replay will be available shortly after the conclusion of the call and will be accessible through February 17, 2010 by calling 888-286-8010 (US) or +1-617-801-6888 (International); Passcode: 30554778.

About Winner Medical:

Winner Medical is a leading manufacturer and the largest exporter by volume in the medical dressing industry in China. Headquartered in Shenzhen, the Company has eight wholly-owned operating subsidiaries and four joint ventures with over 5,000 employees. The Company engages in the manufacturing, sale, research, and development of medical care products, wound care products, home care products and PurCotton(R) products, a nonwoven fabric made from 100% natural cotton. The products are sold worldwide, with Europe, the United States and Japan serving as the top three markets. The Company currently holds more than sixty patents and patent applications for various products and manufacturing processes and is one of the few Chinese companies licensed by the U.S. Food and Drug Administration (FDA) to ship finished, sterilized products directly to the United States market. To learn more about Winner Medical, please visit Winner Medical's web site at: .

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.

For more information, please contact:


Peng Zhai

Investor Relations Manager

Winner Medical Group Inc.

Tel: +86-755-2806-6858

+86-755-2813-8888 x691




Scott Powell HC International, Inc.

Tel: +1-917-721-9480



Winner Medical Group Inc.

Consolidated Statements of Income and Comprehensive Income

Three months ended

December 31,

2009 2008

(Unaudited) (Unaudited)


Net sales 29,786,805 25,730,274

Cost of sales (20,354,958) (19,126,878)

Gross profit 9,431,847 6,603,396

Other operating income, net 440,463 484,964

Exchange difference, net (24,380) (885,012)

Selling, general and administrative

expenses (5,323,719) (4,458,526)

Income from operations 4,524,211 1,744,822

Interest income 17,872 12,516

Interest expense (53,846) (208,409)

Equity in earnings of 50 percent

or less owned persons (30,322) 89,876

Income before income taxes 4,457,915 1,638,805

Income taxes (581,887) (260,128)

Net income 3,876,028 1,378,677

Net loss attributable to

non-controlling interests 44,684 96,207

Net income attributable to

Winner Medical Group Inc. 3,920,712 1,474,884

Comprehensive income:

Net income 3,876,028 1,378,677

Foreign currency translation

difference (172,924) (167,682)

Comprehensive income attributable

to non-controlling interests 44,735 96,207

Comprehensive income attributable

to Winner Medical Group Inc. 3,747,839 1,307,202

Net income attributable to Winner

Medical Group Inc. per share

- basic 0.18 0.07

- diluted 0.17 0.07

Weighted average common stock


- basic 22,363,675 22,363,675

- diluted 22,473,167 22,417,239

Winner Medical Group Inc.

Consolidated Balance Sheets

December 31, September 30,

2009 2009

(Unaudited) (Unaudited)



Current assets:

Cash and cash equivalents 7,476,616 9,493,026

Restricted bank deposits 133,929 123,868

Accounts receivable, less

allowances for doubtful

accounts of US$578,831 and

US$244,401 at December 31,

2009 and September 30, 2009,

respectively 13,401,545 13,148,462

Amount due from an affiliated

company 26,491 --

Inventories 14,974,014 14,932,740

Prepaid expenses and other

receivables 5,976,808 3,614,567

Income taxes recoverable 31,638 30,910

Deferred tax assets 462,878 359,151

Total current assets 42,483,919 41,702,724

Property, plant and equipment,

net 56,036,622 55,770,870

Investment in equity investees 1,893,677 1,923,956

Intangible assets, net 140,565 147,008

Non-current restricted bank

deposits 34,904 34,917

Prepaid expenses and other

receivables 1,780,298 1,104,344

Deferred tax assets 104,075 252,190

Total assets 102,474,060 100,936,009


Current liabilities:

Short-term bank loans 3,661,287 6,589,545

Accounts payable 5,412,730 4,843,404

Accrued payroll and employee

benefits 2,300,876 2,072,892

Customer deposits 493,168 603,824

Other accrued liabilities 3,085,505 2,574,736

Amounts due to affiliated

companies 21,137 56,349

Income taxes payable 1,237,027 1,938,941

Total current liabilities 16,211,730 18,679,691

Deferred tax liabilities 41,904 41,899

Total liabilities 16,253,634 18,721,590

Commitments and contingencies

Stockholders' equity:

Common stock, par value $0.001

per share; authorized 247,500,000,

issued and outstanding December

31, 2009 - 22,363,675 shares;

September 30, 2009 - 22,363,675

shares 22,364 22,364

Additional paid-in capital 31,469,026 31,166,123

Retained earnings 40,802,138 36,797,172

Statutory reserves 3,343,841 3,428,095

Accumulated other comprehensive

income 10,544,977 10,717,850

Total Winner Medical Group Inc

stockholders' equity 86,182,346 82,131,604

Non-controlling interests 38,080 82,815

Total equity 86,220,426 82,214,419

Total liabilities and equity 102,474,060 100,936,009

Source: Winner Medical Group Inc.
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