Attached files
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| 8-K - WINNER MEDICAL GROUP INC | v210720_8k.htm |
Winner
Medical Reports First Quarter Fiscal 2011 Results
—Revenue
increased by 19.4% over Q4 FY 2010 and 13.2% over Q1 FY2010 to $33.7
million
—Sales to North and
South America increased 50.2% YOY
—Reiterates
FY 2011 revenue guidance of $138-150 million, representing 20%-30% YOY
Growth
SHENZHEN,
China, February 10, 2011 /PRNewswire-Asia/ — Winner Medical Group Inc. (Nasdaq:
WWIN; “Winner Medical”), a leading manufacturer of medical dressings, medical
disposables and non-woven fabric made from 100% natural PurCotton® products in
China, today reported consolidated financial results for the first quarter ended
December 31, 2010.
Fiscal
First Quarter 2011 Results (in millions of USD, except per share
data)
|
Q1 FY2011
|
Q4 FY2010
|
% Change
|
Q1 FY2010
|
% Change
|
||||||||||||||||
|
Net
Sales
|
$ | 33.7 | $ | 28.2 | 19.35 | % | $ | 29.8 | 13.2 | % | ||||||||||
|
Cost
of Sales
|
$ | 24.2 | $ | 19.4 | 24.74 | % | $ | 20.4 | 19.0 | % | ||||||||||
|
Gross
Profit
|
$ | 9.5 | $ | 8.8 | 7.3 | % | $ | 9.4 | 0.5 | % | ||||||||||
|
Gross
Margin
|
28.1 | % | 31.3 | % | (10.1 | )% | 31.7 | % | (11.2 | )% | ||||||||||
|
Net
Income Attributable to Winner Medical Group Inc.
|
$ | 3.3 | $ | 3.1 | 6.7 | % | $ | 3.9 | (15.1 | )% | ||||||||||
|
EPS
(Diluted)
|
$ | 0.14 | $ | 0.13 | 7.7 | % | $ | 0.17 | (17.6 | )% | ||||||||||
Mr.
Jianquan Li, Chairman and Chief Executive Officer of Winner Medical, commented,
“During the first quarter of fiscal year 2011, cotton prices continued to
increase and these raw material price increases were shifted to our customers.
Early in the quarter, some customers chose to delay purchases and reduced their
inventory while monitoring cotton price trends. Starting in November, having
depleted the majority of their inventory, our customers increased their
purchases again, resulting in December sales being one of the strongest months
that Winner Medical has recorded in recent years. I believe the medical
dressings and medical disposables markets have now largely accepted the cotton
price increases from last year and we expect positive margin and sales growth
for the remainder of 2011.”
First
Quarter 2011 Unaudited Financial Results
Winner
Medical reported net sales of $33.7 million, an increase of 13.2% compared to
the same period last year. The
increase was mainly attributable to higher average sales prices and increased
sales orders from Chinese, North American and South American customers. Export
sales to North and South America remained robust, increasing 50.2% year over
year, driven by increased orders from American and Brazilian clients who
recognized Winner Medical’s high quality products and timely delivery
capabilities. Orders in Europe remained stable year-over-year as customers in
Sweden increased purchases while clients in Greece and Spain postponed orders as
a result of the debt crisis. Sales were up 1.0% in China, with steady
improvements in November and December. Strong sales of medical dressings and
disposables were offset by lower sales of protective gowns and face masks, which
were unusually strong in the first quarter of 2010 due to the H1N1 virus
outbreak.
Cost of
goods sold increased 19.0% to $24.2 million in the first quarter of fiscal 2011,
from $20.4 million in the first quarter of fiscal 2010. Cost of goods sold as a
percentage of net revenues were 71.9% and 68.3% for the first quarter in fiscal
2011 and 2010, respectively. This increase was mainly attributable to increased
raw material prices. To minimize the impacts brought by increased cotton prices,
the Company increased its selling price progressively and purchased cotton
futures contracts to hedge against the volatility of cotton prices.
Gross
profit increased 0.5% to $9.5 million compared to the first quarter of fiscal
2010. Gross margin decreased to 28.1% as compared to 31.7% in the first quarter
of fiscal 2010. The decrease in gross margin was mainly attributable to time lag
for customers to accept higher selling prices, especially in the months of
October and earlier November 2010, as well as lower sales of protective gowns
and face masks, which were unusually strong in the first quarter of 2010 due to
the H1N1 virus outbreak.
Selling,
general and administrative expenses increased by 13.8% to $6.1 million in the
first quarter of fiscal 2011, from $5.3 million in the first quarter of fiscal
2010. Adjusted selling, general and administrative expenses (non- GAAP), which
exclude share-based compensation expenses, for the first quarter of fiscal 2011
were $5.8 million, versus $5.0 million for the same period of 2010. The increase
was primarily due toincreased of salary and leasing expenses compared to the
same period of last year.
The
income tax provision for the first quarter of fiscal 2011 was $0.4 million,
compared to $0.6 million for the same period in 2010. This decrease was
primarily due to a tax deduction accrued in the reporting quarter for the 150%
tax deductible preferential policy applicable to Winner Medical’s Research and
Development expenses while such an accrual was not made in the same period last
fiscal year.
Net
income attributable to Winner Medical decreased by 15.1% to $3.3 million, or
$0.14 per basic and diluted share, compared to net income of $3.9 million, or
$0.18 per basic share and $0.17 per diluted share, for the first quarter of
fiscal 2010. The weighted average diluted shares outstanding were 24.1 million,
up 7.8% year-over-year. Adjusted net income attributable to Winner Medical Group
Inc. (non-GAAP), which excludes non-cash share-based compensation expenses, was
$3.6 million for the first quarter of fiscal 2011, a decrease of 14.54% from the
same period of 2010. Excluding non-cash share-based compensation expenses,
adjusted basic earnings per share (non-GAAP) was $0.15 for the three months
ended December 31, 2010, versus $0.19 per share for the comparable period last
year, a decrease of 20.75%. The decrease was mainly driven by our customers’
delayed acceptance of increased selling prices and lower high-margin protective
products sales, which were unusually strong in the first quarter of 2010 due to
the H1N1 virus outbreak.
Balance
Sheet
Cash and
cash equivalents were $10.9 million as at December 31, 2010 compared to $14.8
million as at September 30, 2010. The Company's working capital as of December
31, 2010 was $45.6 million. Total assets were approximately $132.6 million
compared to $119.0 million as of September 30, 2010, while total shareholder’s
equity was $110.8 million and $105.9 million in the respective
periods.
First
Quarter 2011 Operational Highlights
PurCotton®
Business Update:
PurCotton®
sales increased 78.08% during the first quarter of 2011 to $4.5 million as a
result of steady wholesale sales of jumbo roll to foreign customers and robust
growth of our domestic retail business, which distribution channels include
chain stores, online sales and wholesales to large customers in China. Revenue
generated from PurCotton jumbo rolls and retail sales were $3.6 million and $0.9
million in the first quarter of 2011, respectively.
Gross
profit of Winner Medical’s PurCotton retail business for the first quarter of
fiscal 2011 was $0.48 million. Net loss for the retail segment was $0.5million
in the first quarter of 2011 due to start up expenditures, including market
research expenses, product development expenses, leasing fees, salary expenses,
and expenditures relative to the Company’s own B2C website development, expenses
which were not incurred in the same period of fiscal 2010. PurCotton retail
business losses combined with net income from the PurCotton wholesale business
results in a net loss of $0.2 million for all PurCotton® product sales. We
consider that the loss from PurCotton retail business was caused by the
necessary cost of investment in building our retail business and our PurCotton
brand.
As of
February 10, 2011, the Company owns and operates 29 PurCotton chain stores in
first-tier cities all over China, including four in Beijing, the capital of
China, four in Shanghai and 21 stores in Guangdong province where the Company’s
headquarters is located. Four stores were closed because the Company eliminated
those with unsatisfactory performance. During the first quarter of 2011, seven
new chain stores were opened, which had limited revenue contribution but did
generate start-up expenses for the three months ended December 31,
2010.
In July
2010, the Company opened its first online PurCotton® store at http://purcotton.mall.taobao.com,
featuring its entire array of products on Taobao.com, the largest online trading
platform in China. In September 2010, the Company also built its own B2C trading
website, www.purcotton.com,
which is co-branded through its retail stores. The Company will continue to
leverage and expand its online platform to drive incremental sales of PurCotton®
retail products.
Fiscal
Year 2011 Guidance
Winner
Medical reaffirms its total revenues in fiscal year 2011 to be in the range of
$138 million to $150 million, representing a 20-30% year-over-year
increase.
Conference
Call
Winner
Medical's senior management will host a conference call to discuss its first
quarter fiscal year 2011 results and recent business developments.
Date of
the conference call: Thursday, February 10, 2011
Time:
08:30 a.m. EST
|
Dial-in
Number:
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+1-800-659-1966
(US)
|
|
10-800-130-0399
(South China)
10-800-852-1490
(North China)
###-##-####
(Hong Kong)
+1-617-614-2711
(International)
|
Pass
code: 19641990
A
telephone replay will be available shortly after the conclusion of the call and
will be accessible through February 17, 2010 by calling +1-888-286-8010 (US) or
+1-617-801-6888 (International); Pass code: 69835750.
About
Winner Medical:
Winner
Medical is a leading medical disposable products manufacturer in China, with
business operations consisting of manufacturing, researching, developing and
marketing cotton-based medical dressings and medical disposables, as well as
consumer products. The Company has ten wholly-owned operating subsidiaries and
three joint ventures, which manufacture tailored medical disposables and
dressings, as well as non-woven fabric made from 100% natural cotton. With
a vertically integrated supply chain ranging from spinning fabric to finished
goods, the Company provides its customers with a wide range of products, from
surgical and wound care to consumer. The Company sells and markets its medical
products and 100% natural cotton non-woven jumbo rolls in China and abroad. For
nine consecutive years, the Company has been ranked as one of the top medical
dressing exporters in China, with the United States, Europe, China and Japan
being its most important markets. In addition, the Company distributes finished
cotton non-woven consumer products under its own “PurCotton” brand name in
China. With more than 20 years of international experience in the medical
dressings and disposables field, the Company has a deep market understanding.
This provides Winner Medical with a solid foundation, upon which it plans
to expand by growing its medical grade 100% cotton retail business. To learn
more about Winner Medical, please visit Winner Medical's web site at: http://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 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.
Non-GAAP
Financial Measures
To
supplement Winner Medical’s consolidated financial results presented in
accordance with U.S. GAAP, Winner Medical uses the following non-GAAP measures:
adjusted net income attributable to Winner Medical Group Inc., adjusted earnings
per share, adjusted income from operations and adjusted selling, general and
administrative expenses. These measures represent net income attributable to
Winner Medical Group Inc., earnings per share, income from operations and
selling, general and administrative expenses, respectively, as adjusted to
exclude share-based compensation expense.
Winner
Medical believes that, in conjunction with GAAP financial measures, these
non-GAAP measures provide meaningful supplemental information regarding its
performance and liquidity and both management and investors benefit from
referring to these non-GAAP measures in assessing the Company’s performance and
when planning and forecasting future periods. The calculation of these non-GAAP
measures allows the Company to compare its operating results with those of other
companies without giving effect to expenses related to share-based compensation,
which may vary for different companies for reasons unrelated to the overall
operating performance of a company’s business.
These
non-GAAP measures are not measures of performance under accounting principles
generally accepted in the United States (U.S. GAAP). The Company includes them
in this press release in order to:
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•
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improve
transparency for investors;
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•
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assist
investors in their assessment of the Company’s operating
performance;
|
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•
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facilitate
comparisons to historical
performance;
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•
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ensure
that these measures are fully understood in light of how the Company
evaluates its operating results;
and
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•
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properly
define the metrics used and confirm their
calculation.
|
These
non-GAAP measures are not meant to be considered in isolation or as a substitute
for items appearing on the Company’s financial statements prepared in accordance
with U.S. GAAP. Rather, the non-GAAP measures should be used as a supplement to
U.S. GAAP results to assist the reader in better understanding the operational
performance of the Company. The Company recognizes that the usefulness of these
non-GAAP measures has certain limitations, including:
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•
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These
non-GAAP measures do not include share-based compensation expense. Because
the Company periodically has granted, and expects to continue to grant,
options and restricted share awards to its employees, share-based
compensation expense is a necessary element of the Company’s costs and
ability to generate profits and cash flows. Therefore, any measure that
excludes share-based compensation expense may have material
limitations.
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•
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The
manner in which the Company calculates these non-GAAP measures may differ
from that of other companies, which limits their usefulness as comparative
measures.
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Management
compensates for these limitations by using these non-GAAP measures as
comparative tools, together with U.S. GAAP measurements, to assist in the
evaluation of its operating performance. Please refer to the non-GAAP
reconciliation tables at the end of this press release for a reconciliation of
adjusted net income attributable to Winner Medical Group Inc., adjusted earnings
per share, adjusted income from operations and adjusted selling, general and
administrative expenses to net income attributable to Winner Medical Group Inc.,
earnings per share, income from operations and selling, general and
administrative expenses, respectively, which are the most directly comparable
U.S. GAAP financial measures.
For
more information, please contact:
Company:
Ms.
Huixuan Chen (Fiona)
Investor
Relations Manager
Winner
Medical Group Inc.
Tel: +86-755-2806-6858
+86-755-2813-8888
x691
Email:
investors@winnermedical.com
Web: http://ir.winnermedical.com
Investors:
Mr.
Scott Powell
HC
International, Inc.
Tel: +1-917-721-9480
Email:
scott.powell@hcinternational.net
Web: http://www.hcinternational.net
Winner
Medical Group Inc.
Consolidated
Statements of Income and Comprehensive Income
|
Three
months ended
December
31
|
||||||||
|
2010
|
2009
|
|||||||
|
(Unaudited)
|
(Unaudited)
|
|||||||
|
US$
|
US$
|
|||||||
|
Net
sales
|
33,706,318 | 29,786,805 | ||||||
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Cost
of sales
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(24,225,307 | ) | (20,354,958 | ) | ||||
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Gross
profit
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9,481,011 | 9,431,847 | ||||||
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Other
operating income, net
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336,784 | 440,463 | ||||||
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Exchange
difference, net
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(117,785 | ) | (24,380 | ) | ||||
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Selling,
general and administrative expenses
|
(6,056,065 | ) | (5,323,719 | ) | ||||
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|
|
|||||||
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Income
from operations
|
3,643,945 | 4,524,211 | ||||||
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Interest
income
|
34,540 | 17,872 | ||||||
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Interest
expense
|
(45,287 | ) | (53,846 | ) | ||||
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Equity
in earnings of 50 percent or less owned entities
|
81,285 | (30,322 | ) | |||||
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Income
before income taxes
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3,714,483 | 4,457,915 | ||||||
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Income
taxes
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(373,686 | ) | (581,887 | ) | ||||
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Net
income
|
3,340,797 | 3,876,028 | ||||||
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Net
loss attributable to non-controlling interests
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(12,553 | ) | 44,684 | |||||
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Net
income attributable to Winner
Medical Group Inc.
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3,328,244 | 3,920,712 | ||||||
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Comprehensive
income:
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||||||||
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Net
income
|
3,340,797 | 3,876,028 | ||||||
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Foreign
currency translation difference
|
1,254,669 | (172,924 | ) | |||||
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Comprehensive
income attributable to non-controlling
interests
|
(12,988 | ) | 44,735 | |||||
|
Comprehensive
income attributable to Winner
Medical Group Inc.
|
4,582,478 | 3,747,839 | ||||||
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Net
income attributable to Winner Medical Group Inc. per share
|
||||||||
|
-
basic
|
0.14 | 0.18 | ||||||
|
-
diluted
|
0.14 | 0.17 | ||||||
|
Weighted
average common stock outstanding
|
||||||||
|
-
basic
|
24,116,281 | 22,363,675 | ||||||
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-
diluted
|
24,498,551 | 22,473,167 | ||||||
Winner
Medical Group Inc.
Consolidated
Balance Sheets
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December 31
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September 30
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|||||||
|
2010
|
2010
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|||||||
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(Unaudited)
|
(Unaudited)
|
|||||||
|
US$
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US$
|
|||||||
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ASSETS
|
||||||||
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Current
assets:
|
||||||||
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Cash
and cash equivalents
|
10,896,741 | 14,818,179 | ||||||
|
Restricted
bank deposits
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102,738 | 285,119 | ||||||
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Restricted
broker margin account
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2,837,655 | - | ||||||
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Held-to-maturity
investments
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1,518,770 | 1,497,607 | ||||||
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Accounts
receivable, less allowances for doubtful accounts of US$194,240 and
US$230,200 at December 31, 2010 and September 30, 2010,
respectively
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19,171,843 | 15,672,446 | ||||||
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Amounts
due from affiliated companies
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2,529 | 999 | ||||||
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Inventories
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21,884,067 | 15,945,101 | ||||||
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Prepaid
expenses and other receivables
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10,640,347 | 6,929,066 | ||||||
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Income
taxes recoverable
|
- | 33,974 | ||||||
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Deferred
tax assets
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393,421 | 428,741 | ||||||
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Total
current assets
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67,448,111 | 55,611,232 | ||||||
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Property,
plant and equipment, net
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60,934,103 | 60,110,367 | ||||||
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Investment
in equity investees
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2,241,068 | 2,159,784 | ||||||
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Intangible
assets, net
|
121,760 | 125,079 | ||||||
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Prepaid
expenses and other receivables
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1,373,149 | 637,748 | ||||||
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Deferred
tax assets
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523,735 | 331,785 | ||||||
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Total
assets
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132,641,926 | 118,975,995 | ||||||
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LIABILITIES
AND STOCKHOLDERS’ EQUITY
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||||||||
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Current
liabilities:
|
||||||||
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Short-term
bank loans
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6,009,912 | - | ||||||
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Accounts
payable
|
7,219,825 | 5,362,155 | ||||||
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Accrued
payroll and employee benefits
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2,807,179 | 2,393,700 | ||||||
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Customer
deposits
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881,656 | 687,275 | ||||||
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Accrued
and other liabilities
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3,142,479 | 3,057,445 | ||||||
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Amounts
due to affiliated companies
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50,153 | 58,338 | ||||||
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Income
taxes payable
|
1,713,575 | 1,477,212 | ||||||
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Total
current liabilities
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21,824,779 | 13,036,125 | ||||||
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Deferred
tax liabilities
|
43,204 | 42,699 | ||||||
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Total
liabilities
|
21,867,983 | 13,078,824 | ||||||
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Commitments
and contingencies
|
- | - | ||||||
|
Stockholders’
equity:
|
||||||||
|
Common
stock, par value $0.001 per share; authorized 247,500,000, issued and
outstanding December 31, 2010 –24,130,247 shares; September 30, 2010
–23,950,740
shares
|
24,131 | 23,951 | ||||||
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Additional
paid-in capital
|
40,435,620 | 40,154,494 | ||||||
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Retained
earnings
|
52,058,278 | 48,730,034 | ||||||
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Statutory
reserves
|
4,585,731 | 4,585,731 | ||||||
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Accumulated
other comprehensive income
|
13,556,996 | 12,302,762 | ||||||
|
Total
Winner Medical Group Inc stockholders’ equity
|
110,660,756 | 105,796,972 | ||||||
|
Non-controlling
interests
|
113,187 | 100,199 | ||||||
|
Total
equity
|
110,773,943 | 105,897,171 | ||||||
|
Total
liabilities and equity
|
132,641,926 | 118,975,995 | ||||||
Winner
Medical Group Inc.
Non-GAAP
Reconciliation
|
December
31,
|
||||||||
|
2010
|
2009
|
|||||||
|
US$
|
US$
|
|||||||
|
Net
income attributable to Winner Medical Group Inc. (GAAP)
|
3,328,244 | 3,920,711 | ||||||
|
Share-based
compensation
|
281,306 | 302,903 | ||||||
|
Adjusted
net income attributable to Winner Medical Group Inc.
(Non-GAAP)
|
3,609,550 | 4,223,614 | ||||||
|
Earnings
per share (GAAP)
|
||||||||
|
- Basic
|
0.14 | 0.18 | ||||||
|
-
Diluted
|
0.14 | 0.17 | ||||||
|
Adjusted
earnings per share (Non-GAAP)
|
||||||||
|
-
Basic
|
0.15 | 0.19 | ||||||
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-
Diluted
|
0.15 | 0.19 | ||||||
|
Weighted
average ordinary shares outstanding
|
||||||||
|
-
Basic
|
24,116,281 | 22,363,740 | ||||||
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-
Diluted
|
24,498,551 | 22,473,167 | ||||||
|
December
31
|
||||||||
|
2010
|
2009
|
|||||||
|
US$
|
US$
|
|||||||
|
Selling,
general and administrative expenses (GAAP)
|
6,056,065 | 5,323,721 | ||||||
|
Share-based
compensation
|
281,306 | 302,903 | ||||||
|
Adjusted
selling, general and administrative expenses (Non-GAAP)
|
5,774,760 | 5,020,818 | ||||||