WINNER MEDICAL GROUP REPORTS FOURTH QUARTER AND
YEAR END FISCAL 2006 RESULTS
Shenzhen City, China - December 19, 2006 - Winner Medical Group Inc. (OTCBB: 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 2006 | | Percentage of Total Revenues | | Fiscal Year 2005 | | Percentage of 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™ 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™ 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.
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.
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 |
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 |
- Financial Tables Follow -
WINNER MEDICAL GROUP INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(U.S. Dollars, except per share amounts)
| | | Three months ended September 30 (UNAUDITED) | | Fiscal year ended September 30 (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 | |
