SHENZHEN, China, May 11, 2011 /PRNewswire-Asia/ -- Winner Medical Group Inc. (Nasdaq: WWIN; “Winner Medical” or the “Company”), 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 second quarter ended March 31, 2011.
Second Quarter Fiscal 2011 Highlights
- Revenue increased by 27% over Q2 FY 2010 to $33.2 million
- Adjusted net income increased 31% YOY to $3.8 million
- Adjusted basic EPS increased 23% YOY to $0.16
- Domestic China sales increased 61% YOY to 8.5 million
- Sales to North and South America increased 47% YOY to 7.5 million
- Reiterates FY 2011 revenue guidance of $138-150 million, representing 20%-30% YOY Growth
Fiscal Second Quarter and Half Year 2011 Results (in millions of USD, except per share data)
Q2 | Q2 | % | Six Months | Six Months | % | ||
Net Sales | $33.2 | $26.1 | 27 % | $66.9 | $55.9 | 20% | |
Cost of Sales | $23.9 | $18.7 | 28% | $48.1 | $39.1 | 23% | |
Gross Profit | $9.4 | $7.4 | 27% | $18.8 | $16.8 | 12% | |
Gross Margin | 28.2% | 28.2% | - | 28.1% | 30.1% | (6)% | |
Net Income Attributable to Winner Medical Group Inc. | $2.2 | $2.7 | (16)% | $5.6 | $6.6 | (16)% | |
Adjusted Net Income (non-GAAP)* | $3.8 | $2.9 | 31% | $7.6 | $7.1 | 6% | |
EPS (Diluted) | $0.09 | $0.12 | (25)% | $0.23 | $0.29 | (21)% | |
Adjusted EPS (Basic, non-GAAP)* | $0.16 | $0.13 | 23% | $0.31 | $0.32 | (3)% | |
*Excludes non-cash share-based compensation expenses of $0.2 million and $0.2 million and realized loss on commodity financial instruments of $1.3million and $Nil, respectively, for the presentation of figures for the three months ended March 31, 2011 and March 31, 2010. Similarly, for the presentation of figures for the six months ended March 31, 2011 and March 31, 2010, the measures exclude non-cash share-based compensation expenses of $0.5 million and $0.5million and realized loss on commodity financial instruments of $1.5 million and $Nil, respectively. Please see the “Non-GAAP Financial Measures” section below for information on how non-GAAP measures should be viewed in comparison to GAAP measures. | |||||||
Mr. Jianquan Li, Chairman and Chief Executive Officer of Winner Medical, commented: “During the second quarter of fiscal year 2011, sales of our medical products and PurCotton® products in China rapidly increased, signifying robust demand and gains in market share by Winner Medical as we continue to have success penetrating new sales and distribution channels in China and as more Chinese consumers become aware of and accept our products. In addition, the strong sales increase in North and South America reflects local manufacturers continuing to outsource production to China. The Company expects these favorable trends will continue for the near future and support growth in Winner’s sales and earnings.”
Mr. Li continued, “Despite rising cotton prices, appreciation of the renminbi, high inflation and higher labor costs in China, the Company still managed to grow gross profit dollars while keeping gross margins flat. We will continue to adjust our business portfolio to carry higher gross margin products and reduce costs where appropriate to offset renminbi appreciation, inflation and rising commodity and labor costs.”
Second Quarter Fiscal 2011 Unaudited Financial Results
Winner Medical reported net sales of $33.2 million, an increase of 27% compared to the same period last year due to higher pricing and strong reorders of medical and PurCotton products. Sales increased 61% year-over-year in China to $8.5 million, with sales increases in medical products and PurCotton products. Export sales to North and South America remained robust, increasing 47% year-over-year to $7.5 million, driven by increased orders from American and Brazilian clients who recognized Winner Medical’s high quality products and timely delivery capabilities. Sales to Japan grew 29% as a result of increased selling prices and volumes. Orders in Europe remained stable year-over-year at $10.6 million, as customers in Britain and Sweden increased purchases while rejected orders from those customers about whom the Company had liquidity concerns as a result of the debt crisis.
Cost of sales increased 28% to $23.9 million in the second quarter of fiscal 2011, from $18.7 million in the second quarter of fiscal 2010. Cost of sales as a percentage of net revenues were 71.9%, unchanged from the same period last year. To minimize the impact of rising cotton prices, the Company increased its selling prices progressively, implemented lean production methods and purchased cotton futures contracts to hedge against the volatility of cotton prices.
Gross profit increased 27 % to $9.4 million compared to the second quarter of fiscal 2010. Gross margin was flat at 28.2%. The Company continues to adjust its business portfolio by developing and marketing advanced medical products as well as PurCotton® jumbo rolls and retail products, which carry higher gross margins.
Selling, general and administrative expenses increased by 40% to $5.8 million in the second quarter of fiscal 2011, from $4.1 million in the same quarter of fiscal 2010. Adjusted selling, general and administrative expenses (non-GAAP), which exclude share-based compensation expenses, were $5.6 million versus $3.9 million for the same period of 2010. The increase was primarily due to higher salary and leasing expenses for the PurCotton retail business.
The income tax provision for the second quarter of fiscal 2011 was $0.3 million, compared to $0.6 million for the same period in 2010, representing an effective tax rate of 13.4% for this reporting period, versus 19.1% in the same period last year. This decrease was primarily due to the deferred tax asset recognized by the Company for total losses generated by Shanghai Winner Medical Apparatus Co., Ltd.
Net income attributable to Winner Medical decreased by 16% to $2.2 million, or $0.09 per basic share, compared to net income of $2.7 million, or $0.12 per basic share, for the second quarter of fiscal 2010. This decrease in net income was due to commodity hedging losses. The weighted average diluted shares outstanding were 24.5 million, up 8% year-over-year.
Excluding the non-cash share-based compensation expenses and realized loss on commodity financial instruments, adjusted net income (non-GAAP) was $3.8 million for the second quarter of fiscal 2011, an increase of 31% from $2.9 million in the same period of 2010. The adjusted basic earnings per share (non-GAAP) was $0.16 for the three months ended March 31, 2011 versus $0.13 per share for the comparable period last year, an increase of 23%.
Six Months Fiscal 2011 Unaudited Financial Results
Net sales were $66.9 million, an increase of 20% compared to the same period last year. The increase was mainly attributable to higher average sales prices and increased sales orders from customers in North and South America and from consumers of medical products and PurCotton® products in China.
Cost of sales increased 23% to $48.1 million, compared to $39.1 million in the same period in fiscal 2010. Cost of sales as a percentage of net revenues were 71.9% and 70.0% for the six months ended March 31 in fiscal 2011 and 2010, respectively. This increase was mainly attributable to increased raw material prices.
Gross profit increased 12% to $18.8 million compared to the same period in fiscal 2010. Gross margin decreased to 28.1% as compared to 30.1% in the first half of fiscal 2010. The decrease in gross margin was attributable to the increased cost of cotton, the core raw material for the Company, and lower sales of high margin protective medical products, which benefited from the outbreak of H1N1 in the same period last year.
Selling, general and administrative expenses increased by 25% to $11.9 million during the six months ended March 31, 2011, compared to $9.5 million in the same period of fiscal 2010. Adjusted selling, general and administrative expenses (non- GAAP), which exclude share-based compensation expenses, for this reporting period were $11.3 million, versus $8.9 million for the same period of 2010. The increase was primarily due to higher salary and leasing expenses for PurCotton retail business compared to the same period last year.
The income tax provision for the six months ended March 31, 2011 was $0.7 million, compared to $1.2 million for the same period in 2010, representing an effective tax rate of 11.4% for this reporting period, versus 15.6% in the same period last year. This decrease was primarily due to the deferred tax asset recognized by the Company for total losses generated by Shanghai Winner Medical Apparatus Co., Ltd.
Net income attributable to Winner Medical decreased by 16% to $5.6 million, or $0.23 per basic share, compared to net income of $6.6 million, or $0.29 per basic share, for the six months ended March 31, 2010. This decrease in net income during the reporting quarter was mainly due to the realized loss on commodity hedging. The weighted average diluted shares outstanding were 24.5 million, up 8% year-over-year.
Excluding non-cash share-based compensation expenses and realized loss on commodity financial instruments, adjusted net income (non-GAAP) was $7.6 million for the six months ended March 31, 2011, an increase of 6% from $7.1 million in the same period of 2010. Adjusted basic earnings per share (non-GAAP) was $0.31 for the six m
