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Jianquan Li, Chairman and Chief Executive Officer of Winner Medical,commented, "During the third quarter, we experienced a robust growth inprofits while maintaining a solid increase in revenue. The huge improvement ingross margin and net margin is the result of our implementation of costcontrol measures, such as lean production and equipment technical improvementswhich optimize production efficiency and reduce unit production cost."
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Mr. Li continued, "Another factor that drives the increase in our overallgross and net profit margin is that the PurCotton products reached thebreak-even point and started making profit during the month of June. Therecognition of top-tier clients of the premium quality of our PurCottonproducts led to the increased sales volume. We are confident that this newproduct will be the growth driver over the mid- to long-term."
Third Quarter 2009 Unaudited Financial Results
Revenue: Winner Medical reported net sales revenue of $24.36 million, a5.56% increase over the third quarter of fiscal 2008. Healthy revenue growthwas mainly due to strong demand from China as a result of the medical reformin China, and the Company's effort to develop the China market; and theincreased sales of PurCotton products to China, the United States, Europe andJapan.
Gross Profit: For the third quarter of fiscal 2009, gross profit was $7.18million, an increase of 20.12% over $5.98 million in the same period of fiscal2008. Gross margin was 29.49%, versus 25.91% achieved in the third quarter offiscal 2008. The increase in gross margin was mainly due to improvement of theCompany's cost control, equipment technical improvement and lean productionmanagement that increased production efficiency and reduced production waste;the tax rebate rate for exports from China increased by two percent; and thePurCotton products started making profit during the month of June 2009compared to losses from these products during the same period last year.
Operating Expenses: Selling, general and administrative expenses decreasedby 1.53% to $3.60 million in the third quarter of fiscal 2009, from $3.66million in the third quarter of fiscal 2008. During this quarter, the decreasein operating expenses was mainly due to the decreased transportation expensefor export sales compared with the same period last year as a result of thedecline of unit transportation fee.
Operating Income: During the period, operating income was $3.72 million,an increase of 72.93% compared with $2.15 million in the same quarter of 2008.The increase was mainly attributed to decreased export transportation fees,and improved production management to reduce manufacture cost.
Income Taxes: The income tax provision for the third quarter of fiscal2009 was $695,000, up from -$271,000 for the same period in fiscal 2008. Theincrease in tax provision was mainly due to a change in tax rate for theCompany's subsidiaries in China as a result of the Chinese income tax reformthat came into effect on January 1, 2008, and the cancellation of tax returnpolicy for purchasing domestic machinery.
Net income: Net income increased by 76.40% to $3.06 million, or $0.07 perbasic and diluted share, compared to net income of $1.74 million, or $0.04 perbasic and diluted share, for the third quarter of the last fiscal year. Thisincrease can be attributed to improved production management to reducemanufacture unit cost and improve production efficiency, relatively stable RMBagainst foreign currency exchange rate, and the decrease in transportationexpenses.
Nine Months Ended June 30, 2009 Unaudited Financial Results
Revenue: Winner Medical reported net sales revenue of $70.72 million, a17.30% increase over the nine months ended June 30, 2009. Healthy revenuegrowth was mainly due to strong demand, particularly in North and SouthAmerica and China; the net sales to North and South American customers was$13.55 million for the nine months ended June 30, 2009, an increase of 61.06%compared to the same period last year. The net sales to Chinese customers were$11.5 million for the nine months ended June 30, 2009, an increase of 32.49%,compared to the same period last year.
Gross Profit: For the nine months ended June 30, 2009, gross profit was$19.59 million, an increase of 32.96% over $14.73 million in the same periodof fiscal 2008. Gross margin was 27.70%, versus 24.43% achieved in the ninemonths ended June 30, 2008. The increase in gross margin was mainly due toimprovement of the Company's cost control, equipment technical improvement andlean production management that increased production efficiency and reducedproduction waste; the tax rebate rate for exports from China increased by twopercent; and the PurCotton products started making profit during the month ofJune 2009, compared to losses from these products during the same period lastyear.
Operating Expenses: Selling, general and administrative expenses increasedby 12.69% to $11.92 million during the nine months ended June 30, 2009, from$10.58 million during the nine months ended June 30, 2008. The increase inoperating expenses was mainly due to the increase in research and developmentexpenses, increase in salary and welfare for the management and administrativestaff, and increase in related administrative expenses, such as depreciationand amortization for Winner Medical (Huanggang) Co., Ltd.
Operating Income: During the period, operating income was $7.57 million,an increase of 95% compared with $3.88 million of the same period of 2008. Theincrease was mainly attributed to decreased export transportation fees, andimproved production management to reduce manufacture cost.
Income Taxes: The income tax provision for the nine months ended June 30,2009 was $1,414,000, up from $113,000 for the same period in fiscal 2008. Theincrease in tax provision was mainly due to a change in tax rate for theCompany's subsidiaries in China as a result of the Chinese Income Tax reformthat came into effect on January 1, 2008, and the cancellation of tax returnpolicy for purchasing domestic machinery.
Net income: Net income increased by 78.24% to $6.18 million, or $0.14 perbasic and diluted share, compared to net income of $3.47 million, or $0.08 perbasic and diluted share, for the same period of the last fiscal year. Thisincrease can be attributed to improved production management to reducemanufacture unit cost and improve production efficiency, relatively stable RMBagainst foreign currency exchange rate, and the decrease in transportationexpenses.
Balance Sheet
Cash and cash equivalents as of June 30, 2009 was approximately $7.84million, compared with $6.46 million as of September 30, 2008. The Company'sworking capital as of June 30, 2009 was $20.78 million compared with $12.37million as of September 30, 2008. Net operating cash flow during the ninemonths ended June 30, 2008 was $9.94 million, an increase of $6.07 millioncompared with the same period in fiscal 2008.
Third Quarter 2009 Operational Highlights
Medical care, Wound care and Home care products in China
Winner Medical develops China market through distributors, drugstorechains, and hospitals. As a result, sales revenue from China was $5.02million for the three months ended June 30, 2009, against $3.34 million in thesame period last year, an increase of 50.57%. As a percentage of net revenues,the sales revenue from China increased 20.62% for the three months endedJune 30, 2009 from 14.46% for the three months ended June 30, 2008.
PurCotton:
In the third quarter of fiscal 2009, the Company's PurCotton sales grewsteadily. The Company has $1,207,000 in raw material sales in the thirdquarter of fiscal 2009, compared with $1,108,000 sales during the last quarter.Net loss from PurCotton products during three month ended June 30, 2009 wasapproximately $5,000, as compared with a net loss of $487,000 in the sameperiod last year. The PurCotton sales were mainly to customers in China, Japan,and the United States. At the same time, the Company is in the stage ofprocessing trial orders of PurCotton finished medical products, such asoperation room towels and sponges, with customers in North America and Europe.
Winner Medical believes that revenue from PurCotton will grow rapidly inthe future. In July 2009, Winner Medical signed an agreement with a leadingconsumer products company in China to provide PurCotton rolls, which will beprocessed into feminine products and then distributed throughout China by theconsumer products company. Including this deal, Winner Medical's PurCottonsales to customers in China, Japan, the United States, and other countries areexpected to reach approximately $700,000 per month or approximately 150 tonnesper month. As a result of the continuous sales expansion, the sale ofPurCotton products reached the break-even point, and started to make a profitduring the month of June 2009.
2009 Guidance
The Company maintains its estimate that revenue in fiscal year 2009 willrange from $98.33 million to $100.90 million, an increase of 15% to 18%compared to fiscal year of 2008.
Conference Call
Winner Medical's senior management will host a conference call at 5am(Pacific)/ 8am (Eastern)/ 8pm (Shenzhen/ Hong Kong) on Wednesday, August 12,2009 to discuss its 2008/09 third quarter results and recent businessdevelopments. The conference call can be accessed by calling 866-510-0705(US), 10-800-130-0399 (South China), 10-800-152-1490 (North China), or800-96-3844 (HK); Passcode: 24788174. A telephone replay will be availableshortly after the conclusion of the call and will be accessible throughAugust 19, 2009 by calling 888-286-8010 (US) or +1-617-801-6888(International); Passcode: 19154413.
About Winner Medical
Winner Medical is a leading manufacturer in the medical dressing industry(medical and wound care products) in China. Headquartered in Shenzhen, theCompany has seven wholly owned manufacturing and distribution facilities, fourjoint-venture factories and over 5,000 employees. The Company engages in themanufacture, sale, research, and development of medical care products, woundcare products, home care products and PurCotton products, a nonwoven fabricmade from 100% natural cotton. The products are sold worldwide, with Europe,the United States and Japan serving as the top three markets. The Companycurrently holds 50 patents and patent applications for various products andmanufacturing processes and is one of the few Chinese companies licensed bythe U.S. Food and Drug Administration (FDA) to ship finished, sterilizedproducts directly to the United States market. To learn more about WinnerMedical, 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 theSecurities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct of 1934, as amended. All statements, other than statements of historicalfact included herein are "forward-looking statements" including statementsregarding Winner Medical and its subsidiary companies' business strategy,plans and objective and statements of non-historical information. Theseforward looking statements are often identified by the use of forward-lookingterminology such as "believes," "expects" or similar expressions, involveknown and unknown risks and uncertainties. Although Winner Medical believesthat the expectations reflected in these forward-looking statements arereasonable, they do involve assumptions, risks and uncertainties, and theseexpectations may prove to be incorrect. You should not place undue reliance onthese forward-looking statements, which speak only as of the date of thispress release. Winner Medical's actual results could differ materially fromthose anticipated in these forward-looking statements as a result of a varietyof factors, including those discussed in Winner Medical's periodic reportsthat are filed with and available from the Securities and Exchange Commission.All forward-looking statements attributable to Winner Medical or personsacting on its behalf are expressly qualified in their entirety by thesefactors. Other than as required under the securities laws, Winner Medical doesnot assume a duty to update these forward-looking statements.Third Quarter 2009 Highlights -- Total net sales revenue increased by 5.56% over the third quarter of fiscal 2008 to $24.36 million -- Gross profit increased by 20.12% over the third quarter of fiscal 2008 to $7.18 million -- Operating income increased by 72.93% over the third quarter of fiscal 2008 to $3.72 million -- Net income increased by 76.40% over the third quarter of fiscal 2008 to $3.06 million -- Net income per share for the third quarter of 2009 was $0.07 per basic and diluted share, compared to $0.03 per basic and diluted share for the third quarter of fiscal 2008
SOURCE Winner Medical Group Inc.
