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China Medical Technologies 6-K 2010

Documents found in this filing:

  1. 6-K
  2. Graphic
  3. Graphic
Form 6-K

 

 

FORM 6-K

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

For the month of June 2010

Commission File Number: 000-51440

 

 

CHINA MEDICAL TECHNOLOGIES, INC.

(Translation of registrant’s name into English)

 

 

No. 24 Yong Chang North Road

Beijing Economic-Technological Development Area

Beijing 100176

People’s Republic of China

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F      X            Form 40-F              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):                     

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):                     

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes                       No      X    

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-    N/A    

 

 

 


CHINA MEDICAL TECHNOLOGIES, INC.

Form 6-K

TABLE OF CONTENTS

 

     Page

Signature

   3

Exhibit 99.1 - Press Release

   4

 

2


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CHINA MEDICAL TECHNOLOGIES, INC.
By:  

/s/ Takyung (Sam) Tsang

Name:   Takyung (Sam) Tsang
Title:   Chief Financial Officer

Date: June 7, 2010

 

3


Exhibit 99.1

LOGO

China Medical Technologies Reports Financial Results for Fourth Fiscal Quarter and Full Year ended March 31, 2010

Beijing, China, June 4, 2010 - China Medical Technologies, Inc. (the “Company”) (Nasdaq: CMED), a leading China-based advanced in-vitro diagnostic (“IVD”) company, today announced its unaudited financial results for the fourth fiscal quarter (“4Q FY2009”) and the full fiscal year ended March 31, 2010 (“FY2009”).

4Q FY2009 Highlights

 

 

Revenues decreased by 29.3% year-over-year to RMB175.7 million (US$25.7 million) but increased by 2.0% sequentially.

 

 

Income from continuing operations and net income was RMB9.1 million (US$1.3 million).

 

 

Non-GAAP income from continuing operations, as defined below, decreased by 57.2% year-over-year to RMB51.5 million (US$7.5 million) but increased by 12.8% sequentially.

 

 

Diluted earnings from continuing operations per ADS* was RMB0.35 (US$0.05).

 

 

Non-GAAP diluted earnings from continuing operations per ADS*, as defined below, decreased by 56.7% year-over-year to RMB1.98 (US$0.29) but increased by 13.8% sequentially.

 

 

Net cash generated from operations was RMB59.8 million (US$8.8 million).

 

 

Approximately 110,000 ADSs* were repurchased under the Company’s share repurchase program.

 

 

Approximately RMB76.8 million (US$11.2 million) 4% convertible notes were purchased and cancelled by the Company. Approximately 192,000 ADSs* were returned to the Company under the share lending agreement in connection with the issuance of 4% convertible notes in August 2008.

FY2009 Highlights

 

 

Revenues decreased by 12.9% year-over-year to RMB723.1 million (US$105.9 million).

 

 

Loss from continuing operations and net loss was RMB57.0 million (US$8.4 million).

 

 

Non-GAAP income from continuing operations, as defined below, decreased by 55.5% year-over-year to RMB187.3 million (US$27.4 million).

 

 

Diluted loss from continuing operations per ADS* was RMB2.17 (US$0.32).

 

 

Non-GAAP diluted earnings from continuing operations per ADS*, as defined below, decreased by 55.5% year-over-year to RMB7.13 (US$1.04).

Targets for 1Q FY2010

 

 

Target revenues are expected to be not less than RMB185.0 million (US$27.1 million).

 

 

Target non-GAAP income from continuing operations is expected to be not less than RMB56.0 million (US$8.2 million).

 

 

Target non-GAAP diluted earnings from continuing operations per ADS* is expected to be not less than RMB2.14 (US$0.31).


Targets for FY2010

 

 

Target quarterly revenues are expected to increase in a range of 5% - 7% on a quarter-over-quarter basis during FY2010.

 

 

Target quarterly non-GAAP income from continuing operations and target quarterly non-GAAP diluted earnings from continuing operations per ADS* are expected to increase at a rate higher than that of target quarterly revenues.

 

 

* One American Depositary Share (“ADS”) = 10 ordinary shares

See “Non-GAAP Measure Disclosures” below, where the impact of certain items on reported results is discussed.

“We continued to achieve organic growth in the past quarter despite the impact of two important public holidays in China,” commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. “Our business turnaround is demonstrated by the solid progress we made on every line of business, as well as imminent cost synergies we expect to come as we broaden our product offering. While the first half of FY2009 proved to be eventful for us, we executed well in the past quarter on our three strategic imperatives including formal launch of our SPR analyzer, expansion in product portfolio and investment in research and development for future growth. Our initial SPR launch has resulted in penetrating a number of our top tier hospital customers and we will start to generate revenue from sales of HPV DNA chips this quarter. Turning to our FISH business, we continue to see significant uptake in a number of applications including prenatal, urology, gynecology and hematological malignancies. We also saw momentum in companion diagnostic tests for targeted cancer drugs such as our HER-2 gene test for the use of Herceptin in breast cancer patients and stomach cancer patients as well as our EGFR gene test for the use of Iressa and Tarceva in non-small cell lung cancer patients. Our direct sales force has been focusing on these high growth areas with our existing top tier hospital customers. As for our ECLIA business, we received SFDA approval for our fully-automated analyzer in April, 2010. Our major target end users will be top tier hospitals as well as high volume users among mid size hospitals of our ECLIA existing users, which we expect to be another growth driver for our relatively maturing ECLIA business starting in 2011. Finally, we continue to invest in research and development and anticipate additional SFDA approvals in the coming quarters, most notably our HPV DNA chip in the near term. With more extensive product offering and broader coverage of top tier hospitals, we believe that we are well positioned for a phase of accelerated growth starting this quarter.”

Mr. Sam Tsang, Chief Financial Officer of the Company commented, “To address certain concerns raised by some of our shareholders and potential investors regarding our high level of leverage, we have taken various measures during the past few months including the purchases of our 3.5% tranche as well as 4% tranche of convertibles notes from the open market at significant discounts on the face value of the convertible notes, the termination of our share repurchase program and the suspension of our annual dividend. We intend to continue to reduce our leverage by accumulating cash generated from our operations. When we reduce our leverage to an appropriate level, we will resume our annual dividend. Nevertheless, we will not reduce our investment in the expansion of our direct sales network serving top tier hospitals and the internal product development on our three technology platforms which will sustain our growth in the mid to long term.”

4Q FY2009 Unaudited Financial Results

The Company reported revenues of RMB175.7 million (US$25.7 million) for 4Q FY2009, representing a 29.3% decrease from the corresponding period of FY2008 but a 2.0% increase from 3Q FY2009.

The Company’s revenues are currently generated from two segments, molecular diagnostic systems and immunodiagnostic systems. The molecular diagnostic system segment includes FISH products and is expected to include SPR products in 1Q FY2010 while the immunodiagnostic system segment consists of ECLIA products.


Molecular diagnostic system sales for 4Q FY2009 were RMB100.9 million (US$14.8 million), representing an 8.0% decrease from the corresponding period of FY2008 but a 4.9% increase from 3Q FY2009. The year-over-year decrease was primarily due to the sales of remaining inventory of fluorescent microscopes during 4Q FY2008 while there were no such sales since 1Q FY2009.

Immunodiagnostic system sales for 4Q FY2009 were RMB74.8 million (US$11.0 million), representing a 46.2% decrease from the corresponding period of FY2008 and a 1.7% decrease from 3Q FY2009. The year-over-year decrease was primarily due to the price reduction for ECLIA reagent kits in September 2009.

Gross margin was 64.9% for 4Q FY2009 which decreased year-over-year from 75.1% for the corresponding period of FY2008 but improved sequentially from 63.4% for 3Q FY2009. The year-over-year decrease in gross margin was primarily due to the impact of the price reduction for ECLIA reagent kits. The sequential increase in gross margin was primarily due to the purchase price reduction for major raw materials used in the production of ECLIA reagent kits from January 2010.

Research and development expenses were RMB10.4 million (US$1.5 million) for 4Q FY2009, representing a 3.0% year-over-year decrease and a 3.6% sequential decrease.

Sales and marketing expenses were RMB16.7 million (US$2.4 million) for 4Q FY2009, representing a 39.6% year-over-year increase but a 12.4% sequential decrease. The year-over-year increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB26.7 million (US$3.9 million) for 4Q FY2009, representing a 30.2% year-over-year increase and a 3.5% sequential increase. The year-over-year increase was primarily due to the increase in staff expenses.

Amortization of SPR intangible assets was RMB27.3 million (US$4.0 million) for 4Q FY2009.

Interest expense on convertible notes was RMB34.8 million (US$5.1 million) for 4Q FY2009. As of March 31, 2010, the Company’s outstanding convertible notes of US$150.0 million and US$264.8 million bear interest at 3.5% and 4.0% per annum, respectively and will mature in November 2011 and August 2013, respectively. Due to the adoption of new authoritative guidance governing the accounting for convertible instruments that can be settled in cash or partially in cash upon conversion effective on April 1, 2009, the Company recorded additional non-cash interest expense of RMB7.6 million (US$1.1 million) for the US$150.0 million 3.5% convertible notes in 4Q FY2009. The Company also made an adjustment related to these convertible notes for the corresponding period of FY2008 by increasing non-cash interest expense by RMB7.2 million to adopt this guidance retrospectively. This new guidance is not applicable to the US$264.8 million 4% convertible notes.

Interest expense on amortization of convertible notes issuance costs was RMB4.3 million (US$0.6 million) for 4Q FY2009.

Other income was RMB26.3 million (US$3.8 million) for 4Q FY2009. The significant year-over-year increase was primarily due to the gain from the purchase of the Company’s convertible notes on the open market.

Income tax expense was RMB15.2 million (US$2.2 million) for 4Q FY2009.

Income from continuing operations and net income was RMB9.1 million (US$1.3 million) for 4Q FY2009.


Non-GAAP income from continuing operations excluding stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion and gain on purchase of its convertible notes was RMB51.5 million (US$7.5 million) for 4Q FY2009, representing a 57.2% decrease from the corresponding period of FY2008 but a 12.8% increase from 3Q FY2009.

Stock compensation expense for 4Q FY2009 was RMB10.7 million (US$1.6 million), of which RMB1.4 million was allocated to research and development expenses and RMB9.3 million to general and administrative expenses.

Amortization of acquired intangible assets for 4Q FY2009 was RMB49.8 million (US$7.3 million), of which RMB22.4 million was allocated to cost of revenues and RMB27.4 million to operating expenses.

As of March 31, 2010, the Company’s cash and cash equivalents was RMB815.5 million (US$119.5 million). Net cash generated from operating activities for 4Q FY2009 was RMB59.8 million (US$8.8 million).

As of March 31, 2010, the Company’s net accounts receivable was RMB303.4 million (US$44.4 million), representing an increase of 0.8% from the balance at December 31, 2009.

FY2009 Unaudited Financial Results

Revenues were RMB723.1 million (US$105.9 million) for FY2009, representing a 12.9% year-over-year decrease.

Molecular diagnostic system sales for FY2009 were RMB384.8 million (US$56.4 million), representing an 18.3% year-over-year increase. Immunodiagnostic system sales for FY2009 were RMB338.3 million (US$49.5 million), representing a 33.0% year-over-year decrease. The year-over-year increase in molecular diagnostic system sales was primarily due to the increase in usage of the Company’s FISH probes by existing and new hospital customers served by the Company’s direct sales personnel. The year-over-year decrease in immunodiagnostic system sales was primarily due to the price reduction of ECLIA reagent kits from September 2009.

Gross margin decreased to 67.1% for FY2009 as compared to 72.0% for FY2008 primarily due to the price reduction of ECLIA reagent kits.

Research and development expenses were RMB42.3 million (US$6.2 million) for FY2009, representing a 34.5% year-over-year increase. The increase was primarily due to the development of FISH probes, SPR-based chips, ECLIA reagent kits as well as fully-automated ECLIA analyzers.

Sales and marketing expenses were RMB64.1 million (US$9.4 million) for FY2009, representing a 49.9% year-over-year increase. This increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB144.7 million (US$21.2 million) for FY2009, representing a 48.2% year-over-year increase. The increase was primarily due to the costs for the independent internal investigation as well as provision for bad debts related to certain ECLIA customers.

Interest expense on convertible notes was RMB141.1 million (US$20.7 million) for FY2009, representing a 26.2% year-over-year increase. The increase was primarily due to the issuance of US$276.0 million 4% convertible notes in August 2008.


Interest expense on amortization of convertible notes issuance costs was RMB17.4 million (US$2.5 million) for FY2009, representing a 30.6% year-over-year increase. The increase was primarily due to the issuance of US$276.0 million 4% convertible notes in August 2008.

Other income was RMB26.5 million (US$3.9 million) for FY2009. The significant year-over-year increase was primarily due to the gain from the purchase of the Company’s convertible notes on the open market.

Income tax expense was RMB63.6 million (US$9.3 million) for FY2009. The significant income tax expense was primarily because certain expenses of the Company such as stock compensation expense, amortization of acquired intangible assets and interest expense of convertible notes were not deductible for income tax purpose. In addition, the Company is required to accrue for withholding income tax on distributable earnings generated in China during the year.

Loss from continuing operations and net loss was RMB57.0 million (US$8.4 million) for FY2009.

Non-GAAP income from continuing operations excluding stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion and gain on purchase of its convertible notes was RMB187.3 million (US$27.4 million) for FY2009, representing a 55.5% year-over-year decrease.

Stock compensation expense for FY2009 was RMB40.4 million (US$5.9 million), of which RMB6.3 million was allocated to research and development expenses and RMB34.1 million to general and administrative expenses. The Company approved the grant of 3,250,000 restricted stock, equivalent to 325,000 ADSs to certain directors, officers and employees on May 21, 2010 which was approximately 1.0% of the Company’s issued shares. The restricted stock vests at the end of a three-year period.

Amortization of acquired intangible assets for FY2009 was RMB199.1 million (US$29.2 million), of which RMB89.7 million was allocated to cost of revenues and RMB109.4 million to operating expenses.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.8258 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as of Wednesday, March 31, 2010. No representation is made that the RMB amounts could have been or could be converted into U.S. dollars at that rate or at any other rate on March 31, 2010 or at any other dates.

Share Repurchase Program

In September 2009, the Company’s board of directors authorized a share repurchase program, under which the Company may repurchase up to US$30 million worth of its outstanding ADSs from the open market or in block trades for a period of one year, commencing on October 1, 2009. As of March 31, 2010, the Company repurchased a total of 500,000 ADSs at a cost of approximately US$6.4 million (including transaction costs). The Company has terminated the program.

Convertible Notes

The Company purchased 4% convertible notes with principal amount of about RMB76.8 million (US$11.2 million) for a total consideration of RMB50.5 million (US$7.4 million) during 4Q FY2009. As of March 31, 2010, the Company had US$264.8 million 4% convertible notes and US$150 million 3.5% convertible notes outstanding. The Company purchased additional 3.5% and 4% convertible notes subsequent to March 31, 2010.


Outlook for 1Q FY2010

The Company expects the molecular diagnostic system segment to continue its growth momentum and the immunodiagnostic system segment to rebound from its low level in 1Q FY2010.

The Company estimates the target revenues for 1Q FY2010 to be not less than RMB185.0 million (US$27.1 million).

The Company estimates the target non-GAAP income from continuing operations for 1Q FY2010 to be not less than RMB56.0 million (US$8.2 million).

The Company estimates the target non-GAAP diluted earnings from continuing operations per ADS for 1Q FY2010 to be not less than RMB2.14 (US$0.31).

The above targets are based on the Company’s current views on the operating and market conditions, which are subject to change.

Outlook for FY2010

The Company expects the sales of HPV DNA chips used with its SPR analyzers to increase rapidly in later quarters of FY2010 following the increasing number of SPR analyzers placed with its hospital customers during the fiscal year. The Company also expects a higher non-GAAP net margin for FY2010 compared with that of FY2009 primarily due to increasing revenue contribution from sales of FISH probes and HPV DNA chips which generate higher non-GAAP gross margin among the Company’s products.

The Company estimates the target quarterly revenues to increase in a range of 5% - 7% on a quarter-over-quarter basis during FY2010.

The Company estimates the target quarterly non-GAAP income from continuing operations and target quarterly non-GAAP diluted earnings from continuing operations per ADS to increase at a rate higher than that of target quarterly revenues.

The above targets are based on the Company’s current views on the operating and market conditions, which are subject to change.

Non-GAAP Measure Disclosures

To supplement its consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”), the Company uses non-GAAP measures of gross profit, operating income, income from continuing operations and earnings from continuing operations per ADS, which are adjusted from the results based on GAAP to exclude the impact of stock compensation expense, amortization of acquired intangible assets, acquired in-process research and development, non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion and gain on purchase of its convertible notes. Non-GAAP financial measures are used by the Company in their financial and operating decision-making because management believes they reflect the Company’s ongoing business in a manner that allows meaningful period-to-period comparison. The Company’s management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company’s current operating performance and future prospects in the same manner as management does, if they so choose.

The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the financial information included with this earnings announcement.


Conference Call

The Company’s senior management team will host an earnings conference call at 8:00a.m. U.S. Eastern Time on June 4, 2010 (or 8:00p.m. Beijing/Hong Kong time on the same date) to discuss the results following this earnings announcement.

The dial-in details for the live conference call are as follows:

 

- U.S. Toll Free Number 1-866-543-6403

 

- International Dial-in Number 1-617-213-8896

Passcode: CMEDCALL

A live webcast of the conference call will be available on http://ir.chinameditech.com.

A replay of this webcast will be available for one month on this website.

A telephone replay of the call will be available after the conclusion of the conference call through 10:00a.m. U.S. Eastern Time on June 5, 2010.

The dial-in details for the replay are as follows:

 

- U.S. Toll Free Number 1-888-286-8010

 

- International Dial-in Number 1-617-801-6888

Passcode: 63341451

About China Medical Technologies, Inc.

China Medical Technologies, Inc. is a leading China-based advanced IVD company using molecular diagnostic technologies including Fluorescent in situ Hybridization (FISH) and Surface Plasmon Resonance (SPR) and an immunodiagnostic technology, Enhanced Chemiluminescence Immunoassay (ECLIA), to develop, manufacture and distribute diagnostic products used for the detection of various cancers, diseases and disorders as well as companion diagnostic tests for targeted cancer drugs. The Company generates all of its revenues in China through the sale of diagnostic consumables including FISH probes, SPR-based DNA chips and ECLIA reagent kits to hospitals which are recurring users of the consumables for their patients. The Company sells FISH probes and SPR chips to large hospitals through its direct sales force and ECLIA reagent kits to small and mid-size hospitals through distributors. For more information, please visit http://www.chinameditech.com.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute “forward-looking” statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the quotations from management in this press release, the Company’s strategic operational plans, as well as its outlook for 1Q FY2010 and FY2010, contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company’s filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Contacts

Sam Tsang and Winnie Yam

Tel: 852-2511-9808

Email: IR@chinameditech.com


China Medical Technologies, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

     As of  
     March 31, 2009     March 31, 2010  
     RMB     RMB     US$  
     (in thousands)  

Assets

      

Current assets

      

Cash and cash equivalents

   1,456,410      815,453      119,466   

Trade accounts receivable, net

   343,037      303,368      44,444   

Inventories

   16,932      24,889      3,646   

Prepayments and other receivables

   20,425      21,508      3,151   

Due from a related party

   204,987      204,774      30,000   
                  

Total current assets

   2,041,791      1,369,992      200,707   

Property, plant and equipment, net

   169,422      155,825      22,829   

Land use rights

   7,239      7,049      1,033   

Goodwill

   8,654      8,654      1,268   

Intangible assets, net

   3,487,474      3,285,190      481,290   

Convertible notes issuance costs

   65,816      46,681      6,839   
                  

Total assets

   5,780,396      4,873,391      713,966   
                  

Liabilities

      

Current liabilities

      

Trade accounts payable

   27,863      20,126      2,948   

Accrued liabilities and other payables

   892,905      183,498      26,883   

Income taxes payable

   77,112      57,529      8,428   
                  

Total current liabilities

   997,880      261,153      38,259   

Convertible notes

   2,826,348      2,777,086      406,851   

Deferred income taxes

   29,898      67,134      9,836   
                  

Total liabilities

   3,854,126      3,105,373      454,946   
                  

Shareholders’ equity

      

Ordinary shares US$0.1 par value:
500,000,000 authorized; 321,066,661 issued and outstanding as of March 31, 2009 and 322,680,001 issued and outstanding as of March 31, 2010

   257,738      258,840      37,921   

Additional paid-in capital

   709,949      752,862      110,297   

Treasury stock

   —        (45,143   (6,614

Accumulated other comprehensive loss

   (69,957   (70,316   (10,302

Retained earnings

   1,028,540      871,775      127,718   
                  

Total shareholders’ equity

   1,926,270      1,768,018      259,020   
                  

Total liabilities and shareholders’ equity

   5,780,396      4,873,391      713,966   
                  


China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income

 

    For the Three Months Ended     For the Year Ended  
    March 31, 2009     December 31, 2009     March 31, 2010     March 31, 2009     March 31, 2010  
    RMB     RMB     RMB     US$     RMB     RMB     US$  
    As adjusted (5)                       As adjusted (5)              
    (in thousands except for per ADS information)  

Revenues, net (1)

  248,635      172,320      175,728      25,745      829,950      723,071      105,932   

Cost of revenues (2)

  (61,834   (62,996   (61,624   (9,028   (232,571   (237,550   (34,801
                                         

Gross profit

  186,801      109,324      114,104      16,717      597,379      485,521      71,131   

Operating expenses:

             

Research and development (2) (3)

  (10,670   (10,738   (10,352   (1,517   (31,450   (42,293   (6,196

Acquired in-process research and development

  —        —        —        —        (244,872   —        —     

Sales and marketing (2)

  (11,963   (19,058   (16,695   (2,446   (42,722   (64,055   (9,384

General and administrative (2) (3)

  (20,538   (25,844   (26,743   (3,918   (97,596   (144,671   (21,195

Amortization of SPR intangible assets (2)

  (27,379   (27,343   (27,343   (4,006   (36,511   (109,395   (16,027
                                         

Total operating expenses

  (70,550   (82,983   (81,133   (11,887   (453,151   (360,414   (52,802
                                         

Operating income

  116,251      26,341      32,971      4,830      144,228      125,107      18,329   

Interest income

  5,608      4,332      4,155      609      32,354      13,456      1,971   

Interest expense – convertible notes (5)

  (34,993   (35,421   (34,831   (5,103   (111,852   (141,123   (20,675

Interest expense – amortization of convertible notes issuance costs (5)

  (4,383   (4,378   (4,263   (624   (13,323   (17,402   (2,549

Interest expense – other

  (785   —        —        —        (4,240   —        —     

Other income/ (expense), net

  (168   225      26,267      3,848      (3,732   26,477      3,879   
                                         

Income/ (loss) before income tax

  81,530      (8,901   24,299      3,560      43,435      6,515      955   

Income tax expense

  (32,143   (13,088   (15,206   (2,228   (73,042   (63,556   (9,311
                                         

Income/ (loss) from continuing operations

  49,387      (21,989   9,093      1,332      (29,607   (57,041   (8,356

Income from discontinued operation (2)

  —        —        —        —        364,409      —        —     
                                         

Net income/ (loss)

  49,387      (21,989   9,093      1,332      334,802      (57,041   (8,356
                                         

Earnings/ (loss) from continuing operations per ADS

             

- basic

  1.88      (0.84   0.35      0.05      (1.13   (2.17   (0.32
                                         

- diluted

  1.87      (0.84   0.35      0.05      (1.13   (2.17   (0.32
                                         

Earnings from discontinued operations per ADS

             

- basic

  N/A      N/A      N/A      N/A      13.87      N/A      N/A   
                                         

- diluted

  N/A      N/A      N/A      N/A      13.87      N/A      N/A   
                                         

Weighted average number of ADS

             

- basic

  26,287,974      26,262,471      25,993,349      25,993,349      26,277,629      26,254,639      26,254,639   
                                         

- diluted

  26,347,906      26,262,471      26,050,599      26,050,599      26,277,629      26,254,639      26,254,639   
                                         


Notes:

 

      RMB’000    RMB’000    RMB’000    US$’000    RMB’000    RMB’000    US$’000

(1)      Revenues, net

                    

- Molecular diagnostic systems

   109,640    96,166    100,897    14,782    325,294    384,762    56,369

- Immunodiagnostic systems

   138,995    76,154    74,831    10,963    504,656    338,309    49,563
                                  
   248,635    172,320    175,728    25,745    829,950    723,071    105,932
                                  

 

      RMB’000    RMB’000    RMB’000    US$’000    RMB’000    RMB’000    US$’000

(2)      Depreciation and amortization

                    

- Cost of revenues

   25,328    25,862    25,881    3,792    99,678    102,801    15,060

- Research and development

   421    845    857    126    1,204    3,833    562

- Sales and marketing

   32    39    116    17    139    255    37

- General and administrative

   1,322    1,244    1,157    170    5,253    4,968    728

- Amortization of SPR intangible assets

   27,379    27,343    27,343    4,006    36,511    109,395    16,027

- Income from discontinued operation

   —      —      —      —      3,953    —      —  
                                  
   54,482    55,333    55,354    8,111    146,738    221,252    32,414
                                  
      RMB’000    RMB’000    RMB’000    US$’000    RMB’000    RMB’000    US$’000

(3)      Stock compensation expense

                    

- Research and development

   2,338    1,592    1,440    211    8,190    6,335    928

- General and administrative

   11,581    8,642    9,252    1,355    41,989    34,102    4,996
                                  
   13,919    10,234    10,692    1,566    50,179    40,437    5,924
                                  

 

(4) In computing diluted earnings from continuing operations per ADS, interest expense and amortization in connection with convertible notes were not added back in computing diluted earnings from continuing operations per ADS because they were anti-dilutive.
(5) As a result of the adoption of new authoritative guidance changing the accounting for convertible instruments that can be settled in cash or partially in cash upon conversion, the Company adjusted relevant numbers in the condensed consolidated statement of income for the three months ended and the year ended March 31, 2009 retrospectively in accordance with GAAP.


China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

     For the Year Ended  
     March 31, 2009     March 31, 2010  
     RMB     RMB     US$  
     (in thousands)  

Net cash provided by operating activities

   490,758      279,877      41,003   

Net cash used in investing activities

   (1,467,195   (715,522   (104,826

Net cash provided by/ (used in) financing activities

   1,751,297      (205,061   (30,042

Effect of foreign currency exchange rate change on cash

   (1,129   (251   (37
                  

Net increase/ (decrease) in cash and cash equivalents

   773,731      (640,957   (93,902

Cash and cash equivalents:

      

At beginning of year

   682,679      1,456,410      213,368   
                  

At end of year

   1,456,410      815,453      119,466   
                  


China Medical Technologies, Inc.

Reconciliations of GAAP measures to Non-GAAP measures

 

     For the Three Months Ended     For the Year Ended  
     March 31, 2009     December 31, 2009     March 31, 2010     March 31, 2009     March 31, 2010  
    

RMB

As adjusted (2)

    RMB     RMB     US$    

RMB

As adjusted (2)

    RMB     US$  
     (in thousands except for per ADS information)  

Gross profit

   186,801      109,324      114,104      16,717      597,379      485,521      71,131   

Adjustment:

              

Amortization of acquired intangible assets

   22,444      22,412      22,423      3,285      90,077      89,720      13,144   
                                          

Non-GAAP gross profit

   209,245      131,736      136,527      20,002      687,456      575,241      84,275   
                                          

Gross margin

   75.1   63.4   64.9   64.9   72.0   67.1   67.1
                                          

Non-GAAP gross margin

   84.2   76.4   77.7   77.7   82.8   79.6   79.6
                                          

Operating income

   116,251      26,341      32,971      4,830      144,228      125,107      18,329   

Adjustment:

              

Stock compensation expense

   13,919      10,234      10,692      1,566      50,179      40,437      5,924   

Amortization of acquired intangible assets

   49,823      49,755      49,766      7,291      126,588      199,115      29,171   

Acquired in-process research and development

   —        —        —        —        244,872      —        —     
                                          

Non-GAAP operating income

   179,993      86,330      93,429      13,687      565,867      364,659      53,424   
                                          

Operating margin

   46.8   15.3   18.8   18.8   17.4   17.3   17.3
                                          

Non-GAAP operating margin

   72.4   50.1   53.2   53.2   68.2   50.4   50.4
                                          

Income/(loss) from continuing operations

   49,387      (21,989   9,093      1,332      (29,607   (57,041   (8,356

Adjustment:

              

Stock compensation expense

   13,919      10,234      10,692      1,566      50,179      40,437      5,924   

Amortization of acquired intangible assets

   49,823      49,755      49,766      7,291      126,588      199,115      29,171   

Acquired in-process research and development

   —        —        —        —        244,872      —        —     

Non-cash interest expense of convertible notes arising from the adoption of new guidance

   7,153      7,618      7,618      1,116      28,614      30,477      4,465   

Gain on purchase of convertible notes

   —        —        (25,693   (3,764   —        (25,693   (3,764
                                          

Non-GAAP income from continuing operations

   120,282      45,618      51,476      7,541      420,646      187,295      27,440   
                                          

GAAP net margin

   19.9   —        5.2   5.2   —        —        —     
                                          

Non-GAAP net margin

   48.4   26.5   29.3   29.3   50.7   25.9   25.9
                                          

Earnings/ (loss) from continuing operations per ADS

              

- basic

   1.88      (0.84   0.35      0.05      (1.13   (2.17   (0.32
                                          

- diluted

   1.87      (0.84   0.35      0.05      (1.13   (2.17   (0.32
                                          

Non-GAAP earnings from continuing operations per ADS

              

- basic

   4.58      1.74      1.98      0.29      16.01      7.13      1.04   
                                          

- diluted (1)

   4.57      1.74      1.98      0.29      16.01      7.13      1.04   
                                          

Weighted average number of ADS

              

- basic

   26,287,974      26,262,471      25,993,349      25,993,349      26,277,629      26,254,639      26,254,639   
                                          

- diluted (1)

   26,347,906      26,262,471      26,050,599      26,050,599      26,277,629      26,254,639      26,254,639   
                                          

 

Notes:

 

(1) Interest expense and amortization in connection with convertible notes were not added back in computing non-GAAP diluted earnings from continuing operations per ADS because they were anti-dilutive.
(2) As a result of the adoption of new authoritative guidance changing the accounting for convertible instruments that can be settled in cash or partially in cash upon conversion, the Company adjusted relevant numbers for the three months ended and the year ended March 31, 2009 retrospectively in accordance with GAAP.
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