Winner Medical Reports First Quarter Fiscal 2008 Results

2008-02-13 16:10 778

SHENZHEN, China, Feb. 13 /Xinhua-PRNewswire/ -- Winner Medical Group Inc. (OTC Bulletin Board: WMDG; “Winner Medical”), reported today the consolidated financial results for the first quarter of fiscal year 2008, ended December 31, 2007. The Company’s results are detailed in its form 10-Q, filed today with the United States Securities and Exchange Commission.

First Quarter 2008 Highlights

-- Consolidated net sales of $19.33 million, a 21.73% year-on-year


-- Gross profit increased by 21.83% over the first quarter fiscal 2007 to

$4.80 million

-- Net income decreased 22.15% year-on-year to $1.16 million

-- Net income per share for the first quarter 2008 was $0.03 per basic

and diluted share, compared to $0.03 per basic and diluted share for

the first quarter fiscal 2007

-- Ramp-up of production and launch initiatives for higher-margin

PurCotton(TM) Products

-- Revenue driven by increased orders from large European customers

-- Margin benefits from successfully executed price initiatives adversely

impacted by currency exchange rates

Jianquan Li, Chairman and Chief Executive Officer of Winner Medical, remarked, “In the first quarter, we executed strong sales orders for our traditional products in Europe, the United States and China. We intend to continue our focus on fulfilling our larger clients’ requests for increasingly customized and higher-margin products. Given healthy customer acceptance of our successfully initiated pricing changes, our gross margin remained relatively stable in the first quarter compared with the same period last year, despite adverse reporting effects of the RMB appreciation against USD. Our net income from traditional products in the first quarter of 2008 increased by over 10% compared to the same period last year.”

Chairman Li continued, “Winner Medical plans to continue to leverage our innovative technology and introduce new PurCotton(TM) Products into the market. Now that the construction of our production facility is complete, we will focus on marketing the PurCotton(TM) Products in Japan, the U.S., Australia and China. After more than six months of marketing, promotion, and customer sampling, most of our initial customer targets are in the product confirmation and feedback stages. We expect customers in Japan to be among the first to place large orders for the PurCotton(TM) Products, and we are looking forward to seeing increased sales orders in this coming year.”

First Quarter 2008 Unaudited Financial Results

Revenue: Winner Medical reported first quarter fiscal 2008 consolidated net sales of $19.33 million, a 21.73% increase over the first quarter of fiscal 2007. First quarter fiscal 2008 consolidated gross profits increased by 21.83% over the first quarter of fiscal 2007 to $4.80 million. Strong revenue performance was driven by broad-based sales in all regions, particularly in Europe, and an increase in both the number and size of orders due to a strong demand environment and a 5% to 10% price increase across the majority of our product lines. Sales revenue from European customers was $8.91 million for the three months ended December 31, 2007, an increase of 46.55% compared to the same period last year. North America saw a 75.91% increase in sales revenue to $2.41 million. Europe and North America now account for 46.12% and 12.48% of total revenues, respectively.

Gross Profit: Gross profit increased by 21.83% to $4.80 million for the first quarter of fiscal 2008, from $3.94 million in the same period in fiscal 2007. Gross margin was 24.84% in the first quarter of fiscal 2008, a slight increase from 24.79% in the first quarter fiscal 2007. The gross margin remained stable due to unit price increases offsetting the impact of currency exchange rates.

Operating Expenses: Selling, general and administrative expenses increased by 43.26%, from $2.50 million in the first quarter of fiscal 2007 to $3.58 million in the first quarter fiscal 2008. During this first quarter, Winner Medical made an incremental investment of approximately $0.32 million for sales and marketing initiatives for PurCotton(TM) Products and for research and development for the PurCotton(TM) finished products. The Company’s transportation expenses, for both domestic transport of goods between production facilities and for the shipment of goods outside of China, increased due to increased oil costs.

Net income: For the first quarter of fiscal 2008, net income decreased by 22.15% to $1.16 million, or $0.03 per basic and diluted share, compared to net income of $1.49 million, or $0.03 per basic and diluted share, for the first quarter last fiscal year. The net income decrease is mainly attributable to the fixed expenses related to the commencement of trial production in a subsidiary’s new factory in Winner Huanggang, including depreciation, employee salaries and training, resulting in a net loss of approximately $0.23 million for the three months ended December 31, 2007. In the same period last year, when the Winner Huanggang factory was being constructed, the net loss was approximately $0.05 million. There was an approximately $0.32 million in aforementioned incremental investments in the PurCotton(TM) launch activities and further R&D investments for PurCotton(TM) finished products. In addition, the Company granted 1 million shares of restricted stock to its management and employees pursuant to the Company’s stock incentive plan on October 7, 2007; the apportion of expenses for the three months ended December 31, 2007 was approximately $0.13 million.

First Quarter 2008 Operational Highlights

Traditional products: Sales revenue and gross profit from traditional products increased by 21.73% and 21.83%, respectively, due to strong demand. The company successfully implemented a price increase ranging from 5% to 10% across the majority of our product lines, offsetting the impact of raising RMB values on operating costs.

PurCotton(TM): Customers from the US, Japan, and Europe are undergoing factory and production system verification, and product quality testing. The Company has sent finished jumbleroll products, operation room towels and lap sponges, to hospitals for testing and validation.

Production Facilities / Distribution: Winner Medical’s subsidiary factory, Winner Huanggang, began trial production of PurCotton(TM) Products in the first fiscal quarter of 2008.

Customer Update: Winner Medical reported an increased proportion of sales originating Europe and the U.S.; this shift can be attributed to an increase of large-scale customized orders of the traditional line of products and successful marketing initiatives promoting the Winner Medical line as a complete procurement solution provider for customers in those regions. Sales to China, Japan and other regions remained stable.

2008 Guidance

The Company estimates that its revenue in fiscal year 2008 will range from $83 million to $85.8 million, an increase of 18% to 22% compared to fiscal year of 2007.

About Winner Medical

Winner Medical is a holding company comprised of eight wholly-owned operating subsidiaries and three joint venture factories. 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 medical care products, wound care products, home care products and PurCotton products, a nonwoven fabric made from 100% natural cotton. 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 .

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.

Winner Medical Group Inc.

Consolidated Statements of Income and Comprehensive Income

Three months ended

December 31

2007 2006

(Unaudited) (Unaudited)


Net sales 19,325,599 15,880,770

Cost of sales (14,526,018) (11,944,126)

Gross profit 4,799,581 3,936,644

Other operating income, net 51,551 103,639

Selling, general and administrative

expenses (3,583,820) (2,501,626)

Income from operations 1,267,312 1,538,657

Interest income 10,478 5,662

Interest expense (100,659) (72,259)

Share of undistributed earnings in an

equity investee 24,529 56,546

Income before income taxes and minority

interests 1,201,660 1,528,606

Income taxes (64,857) (28,399)

Income before minority interests 1,136,803 1,500,207

Minority interests 25,273 (5,637)

Net income 1,162,076 1,494,570

Other comprehensive income

Foreign currency translation difference 1,671,875 723,440

Comprehensive income 2,833,951 2,218,010

Net income per share

-- basic 0.03 0.03

-- diluted 0.03 0.03

Weighted average common stock


-- basic 44,727,171 44,677,171

-- diluted 44,852,550 44,685,504

Winner Medical Group Inc.

Consolidated Balance Sheets

December 31 September 30

2007 2007

(Unaudited) (Audited)



Current assets:

Cash and cash equivalents 3,142,685 6,377,488

Accounts receivable, less allowances

for doubtful accounts of US$41,988 and

US$36,832 at December 31, 2007 and

September 30, 2007, respectively 11,712,848 11,279,810

Amounts due from affiliated companies 468,164 405,919

Inventories 14,368,961 11,483,442

Prepaid expenses and other current assets 7,604,673 6,631,492

Income taxes recoverable 122,789 94,698

Deferred tax asset 197,510 192,088

Total current assets 37,617,630 36,464,937

Property, plant and equipment, net 49,173,346 46,827,013

Investment in an equity investee 1,450,079 1,425,550

Intangible assets, net 130,083 130,513

Prepaid expenses and deposits 255,894 246,578

Deferred tax assets 27,500 26,744

Total assets 88,654,532 85,121,335


Current liabilities:

Short-term bank loans 14,105,224 12,781,595

Accounts payable 5,560,520 7,305,581

Accrued payroll and employee benefits 1,615,069 1,299,342

Customer deposits 370,820 362,900

Other accrued liabilities 2,257,280 1,990,871

Amount due to a stockholder 201,626 41,809

Income taxes payable 361,318 303,592

Total current liabilities 24,471,857 24,085,690

Deferred tax liabilities 23,502 22,857

Total liabilities 24,495,359 24,108,547

Commitments and contingencies

Minority interests 172,315 191,131

Stockholders’ equity:

Common stock, par value $0.001 per share;

authorized 495,000,000 stock, stock issued

and outstanding December 31, 2007 -

44,727,171 shares; September 30, 2007 -

44,677,171 shares 44,727 44,677

Additional paid-in capital 30,591,747 30,260,547

Retained earnings 25,278,130 24,116,054

Statutory reserves 1,914,344 1,914,344

Accumulated other comprehensive income 6,157,910 4,486,035

Total stockholders’ equity 63,986,858 60,821,657

Total liabilities and

stockholders’ equity 88,654,532 85,121,335

For more information, please contact:

Investor Relations Contacts:

Company - China

Peng Zhai

Investor Relations Specialist

Tel: +86-755-2806-6858


Hong Kong

Ruby Yim

Taylor Rafferty

Tel: +852-3196-3712


United States

Delia Cannan

Taylor Rafferty

Tel: +1-212-889-4350


Source: Winner Medical Group Inc.
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