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Jianquan Li, Chairman and Chief Executive Officer of Winner Medical,commented, "We were pleased with our results despite a challenging globalenvironment, as we were able to grow our business and enhance our productionefficiencies while implementing stringent cost controls, thus enabling us toimprove our margins and profitability. We were able to meet our revenue goalsthrough strong organic growth in the Chinese market and the successful launchof PurCotton(R), as well as maintaining market share for our traditionalexport products."
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"For fiscal 2010, we have established four strategic priorities to driverevenue and earnings growth while sustaining our balance sheet. First, we willfurther expand PurCotton(R)'s production capacity, while developing our ownline of finished PurCotton(R) products, including medical and consumerproducts, such as operating room towels, sponges and surgical gowns, wipes,baby products, feminine products and other hygiene products. Second, byleveraging the China Medical Reform, we plan to penetrate into the domesticmarket through hospitals, local distributors, and over-the-counter drugstorechains. Third, we will deepen our relationships with our major US, Europeanand Japanese customers while rationalizing our product portfolio to maintainstable order growth. Fourth, we will implement further stringent cost controlmeasures to optimize production efficiency and reduce controllable expenses,"Mr. Li concluded.
Fourth Quarter 2009 Unaudited Financial Results
Revenue: For the fourth quarter of fiscal 2009, Winner Medical reportednet sales revenue of $27.7 million, an increase of 9.7% compared to the sameperiod last year. Healthy revenue growth was mainly due to the increasedvolume of sales from Japan, North and South American customers, the rapidsales to customers in China and sales of PurCotton(R) products. Sales toJapanese customers increased by 40.0% to $5.3 million for the fiscal yearended September 30, 2009, from $3.8 million in fiscal 2008. Net sales to Northand South American customers were $5.3 million for the fourth quarter offiscal 2009, an increase of 32.2% compared to the same period last year. Netsales to customers in China were $5.1 million for the fourth quarter of fiscal2009, an increase of 123.4% compared to the same period last year. Sale ofPurCotton(R) products was approximately $2.3 million for the fourth quarter offiscal 2009, an increase of 339.3% compared to the same period last year.
Gross Profit: For the fourth quarter of fiscal 2009, gross profit was $8.4million, an increase of 24.9% over $6.7 million in the same period of fiscal2008. Gross margin was 30.2%, versus 26.5% achieved in the fourth quarter offiscal 2008. The increase in gross margin was mainly due to the improvement ofthe Company's cost controls, including technical equipment improvements andlean production that increased production efficiency and reduced productionwaste.
Operating Expenses: Selling, general and administrative expenses increasedby 28.4% to $4.9 million in the fourth quarter of fiscal 2009, from $3.9million in the fourth quarter of fiscal 2008. During this quarter, theincrease in the operating expenses was mainly due to increased sales from theChinese market, higher transportation fees, increase in salary for themanagement and administrative staff and consulting expenses for brand buildingprojects.
Operating Income: During the fourth quarter of fiscal 2009, operatingincome was $3.9 million, an increase of 80.2%, compared with $2.1 million ofsame quarter of 2008.
Income Taxes: The income tax provision for the three months endedSeptember 30, 2009 was $0.9 million, compared to 0.5 million for the sameperiod in 2008. The increase in tax provision was mainly due to the new taxlaw amendment for dividend policy in the fourth quarter of fiscal 2009.
Net income: Net income increased by 84.4% to $3.0 million, or $0.13 perbasic and diluted share, compared to net income of $1.6 million, or $0.07 perbasic and diluted share, for the fourth quarter of last fiscal year. Thisincrease can be attributed to the PurCotton(R) made profit in the fourthquarter of fiscal 2009, the robust sales derived from the increased sales ofthe Chinese market, as well as the conducting of lean production to reducemanufacturing costs and improve production efficiency.
Full Year Ended September 30, 2009 Audited Financial Results
Revenue: Winner Medical reported net sales revenue increased by 15.1% to$98.4 million in the fiscal year 2009, from $85.5 million in fiscal 2008. Thisincrease was mainly attributable to increased volume of large sales ordersfrom North and South American customers, Chinese customers, as well asincreased sales of PurCotton(R) products.
Gross Profit: Gross profit increased by 30.5% to $27.9 million for thefiscal year ended September 30, 2009, from $21.4 million in fiscal 2008. Grossmargins were 28.4%, an increase of 330 basis points from 25.1% in the sameperiod of fiscal 2008. The gross margin increase was mainly due to improvedproduction management and unit product cost decreases.
Operating Expenses: Selling, general and administrative expenses increasedby 16.9% to $16.9 million in the fiscal year 2009, from $14.4 million infiscal 2008. The increase of operating expenses was primarily due toadministrative expenses, which increased to $10.7 million, or 31.7%, for theyear ended September 30, 2009, largely a result of increase in salary for themanagement and administrative staff, and implementation of SOX 404 complianceproject expenses and consulting expenses for brand building projects.
Operating Income: Operating income for the fiscal year of 2009 was $11.4million, an increase of 89.8% from $6.0 million in the same period of fiscalyear 2008. Operating margins were 11.6% for fiscal 2009 compared to 7.0% infiscal 2008.
Income Taxes: The income tax provision for the fiscal year 2009 was $2.4million compared to ($591,000) in the same period in 2008, due to a change inthe tax rate on the Company's subsidiaries in China and the cancellation ofthe tax return policy for purchasing Chinese machinery.
Net income: For the fiscal year ended September 30, 2009, net incomeincreased by 80.2% to $9.1 million, or $0.41 per basic and diluted share,compared to net income of $5.1 million, or $0.23 per basic and diluted share,for the fiscal year 2008. The increase was driven by accelerating PurCotton(R)sales which became profitable during June, 2009 compared to losses in the yearago period. The Company's improved production management effectively reducedmanufacturing costs and improved production efficiencies. The relativelystable RMB against foreign currency exchange rate since calendar year 2009also benefited profitability.
Balance Sheet
Cash and cash equivalents as of September 30, 2009 were approximately $9.5million; compared with $6.5 million as of September 30, 2008. The Company'sworking capital as of September 30, 2009 was $23 million compared with $12.3million of last year. Net operating cash flow for the fiscal year endedSeptember 30, 2009 was $14.7 million, an increase of 52.3% from the lastfiscal year.
China Medical Market Business Update:
For the fourth quarter of fiscal 2009, sales revenue from customers inChina was $5.1 million, representing a 123.4% increase from the same periodlast year. The Company has been intently focused on building its own brand inChina, which is gaining market acceptance among customers and end users, whiledriving growth. In April 2009, "Winner" was recognized by the Chinese StateAdministration for Industry and Commerce as a well-known trademark. Revenuesalso benefitted from increased demand for face masks and protective gowns as aresult of H1N1 flu in China.
The Company's sales channels in China include: hospitals, localdistributors, and over-the-counter drugstore chains. Winner has sold productsto 7 out of the top 10 drugstore chains in China, which have a combinednetwork of approximately 2,000 stores across the country, and represent animportant customer segment.
PurCotton(R):
In the fourth quarter of fiscal 2009, the Company's PurCotton(R) salesgrew 91.3% to $2.3 million as compared with the same period last year.PurCotton(R) jumbo rolls were sold to customers in China, the U.S., Europe andJapan who produce consumer products, including sanitary and incontinenceproducts. The Company is also processing orders of PurCotton(R) finishedmedical products, such as operating room towels and sponges, for customers inNorth America and Europe. PurCotton(R) addresses an established worldwidemarket of disposable products which collectively amount to $4 billion inannual revenues.
We generated $5.5 million of PurCotton(R) sales during fiscal 2009compared to $1.4 million in fiscal 2008. We will further expand our productioncapabilities by adding two production lines during the next four months whilestrengthening our marketing efforts for PurCotton(R) and believe this flagshipproduct will be a significant growth driver and complement to our productportfolio.
Conference Call
Winner Medical's senior management will host a conference call to discussits 2008/09 full year results and recent business developments.
A telephone replay will be available shortly after the conclusion of thecall and will be accessible through December 15, 2009 by calling 888-286-8010(US) or +1-617-801-6888 (International); Passcode: 76372948.
About Winner Medical:
Winner Medical is a leading manufacturer and the largest exporter byvolume in the medical dressing industry in China. Headquartered in Shenzhen,the Company has seven wholly-owned operating subsidiaries and four jointventures 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 UnitedStates and Japan serving as the top three markets. The Company currently holdsmore than sixty 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, please visit Winner Medical's web site athttp://ir.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.Fourth Quarter 2009 Highlights -- Revenue increased by 9.7% over the Q4 FY08 to $27.7 million -- Gross profit increased by 24.9% over Q4 FY08 to $8.4 million -- Operating income increased by 80.2% over Q4 FY08 to $3.9 million -- Net income increased by 84.4% over Q4 FY08 to $3.0 million -- Net income per diluted share of $0.13 vs. $0.07 in Q4 of fiscal 2008, representing an 85.7% increase Full Fiscal Year 2009 Highlights -- Revenue increased by 15.1% year-over-year to $98.4 million -- Gross profit increased 30.5% YOY to $27.94 million -- Operating income increased 89.8% YOY to $11.4 million -- Net income increased 80.2% YOY to $9.1 million -- Net income per diluted share was $0.41 vs. $0.23 in 2008
SOURCE Winner Medical Group Inc.
