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China Medical Technologies 6-K 2011

Documents found in this filing:

  1. 6-K
  2. Graphic
  3. Graphic
Form 6-K
Table of Contents

 

 

FORM 6-K

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

 

REPORT OF FOREIGN ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of June, 2011

 

 

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

 

 

 


Table of Contents

CHINA MEDICAL TECHNOLOGIES, INC.

Form 6-K

TABLE OF CONTENTS

 

     Page  

Signature

     3   

Exhibit 99.1 – Press Release

     4   


Table of Contents

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 3, 2011

 

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Exhibit 99.1

   LOGO

China Medical Technologies Reports Fourth Fiscal Quarter and Full Fiscal Year Financial Results

Beijing, China, June 1, 2011 - China Medical Technologies, Inc. (the “Company”) (Nasdaq: CMED), a leading China-based advanced in-vitro diagnostic (“IVD”) company, announced its unaudited financial results for the fourth fiscal quarter (“4Q FY2010”) and the full fiscal year ended March 31, 2011 (“FY2010”) today.

4Q FY2010 Highlights

 

     For the Three Months Ended         
     March 31, 2010      March 31, 2011      March 31, 2011         
     RMB      RMB      US$      % change  
     (in thousands except for per ADS information)         

Net revenues

     175,728         230,414         35,187         31.1

Net income

     4,820         16,095         2,458         233.9

Diluted earnings per ADS*

     0.19         0.61         0.09         221.1

Non-GAAP net income

     51,476         75,002         11,454         45.7

Non-GAAP diluted earnings per ADS*

     1.98         2.84         0.43         43.4

Adjusted EBITDA

     99,591         140,244         21,417         40.8

FY2010 Highlights

 

     For the Year Ended         
     March 31, 2010     March 31, 2011      March 31, 2011         
     RMB     RMB      US$      % change  
     (in thousands except for per ADS information)         

Net revenues

     723,071        842,366         128,639         16.5

Net income (loss)

     (69,582     82,619         12,617         —     

Diluted earnings (loss) per ADS*

     (2.65     3.14         0.48         —     

Non-GAAP net income

     187,295        273,056         41,699         45.8

Non-GAAP diluted earnings per ADS*

     7.13        10.39         1.59         45.7

Adjusted EBITDA

     387,580        493,254         75,326         27.3

Outlook for first fiscal quarter ending June 30, 2011

 

 

Target net revenues are expected to range from RMB232.0 million (US$35.4 million) to RMB234.0 million (US$35.7 million), representing a year-over-year increase of 24.6% - 25.7%.

 

 

Target non-GAAP net income is expected to range from RMB73.0 million (US$11.1 million) to RMB74.0 million (US$11.3 million), representing a year-over-year increase of 28.0% - 29.8%.

 

 

Target non-GAAP diluted earnings per ADS* is expected to range from RMB2.75 (US$0.42) to RMB2.79 (US$0.43), representing a year-over-year increase of 26.1% - 28.0%.

Outlook for full fiscal year ending March 31, 2012

 

 

Target net revenues are expected to range from RMB970.0 million (US$148.1 million) to RMB995.0 million (US$151.9 million), representing a year-over-year increase of 15.2% - 18.1%.

 

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Target non-GAAP net income is expected to range from RMB310.0 million (US$47.3 million) to RMB318.0 million (US$48.6 million), representing a year-over-year increase of 13.5% - 16.5%. The slightly lower growth rate in non-GAAP net income is primarily due to the full year impact of additional interest expense arising from new convertible notes issued in December 2010.

 

 

Target non-GAAP diluted earnings per ADS* is expected to range from RMB11.70 (US$1.79) to RMB12.00 (US$1.83), representing a year-over-year increase of 12.6% - 15.5%.

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

 

* 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 are pleased with the quarterly results, in particular, the continued growth of our molecular diagnostic business during the seasonally weak quarter. We expect our FISH business and HPV-DNA chip business to drive our growth in the following quarters,” commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. “We will continue to expand our product offering in FISH probes and PCR assays as well as develop a new SPR analyzer through investment in research and development. We will leverage our established sales networks to introduce our new products to our hospital customers. In addition, we are working on several initiatives to support our sustainable growth including discussion with a leading independent laboratory testing service group in China for a potential collaboration to promote the use of molecular diagnostic tests to the group’s hospital customers.”

Mr. Sam Tsang, Chief Financial Officer of the Company commented, “We issued new convertible notes in December 2010 to extend our debt maturity profile. We have been focusing to improve our leverage profile and have reduced our net debt to adjusted EBITDA ratio from 5.1 times to 3.3 times. However, we believe that we are still maintaining relatively high leverage, and the continued improvement in our leverage to the level of 2 times or below is our priority. We have been very cautious in making capital expenditures and did not consider new acquisition and will continue to do so. Meanwhile, we will maintain our investment in product research and development which will support our future growth. We will also continue to invest in our direct sales network to attract and retain tier one hospitals which are major consumers in China’s healthcare industry.”

4Q FY2010 Unaudited Financial Results

The Company reported net revenues of RMB230.4 million (US$35.2 million) for 4Q FY2010, representing a 31.1% increase from the corresponding period of 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 SPR products while the immunodiagnostic system segment consists of ECLIA products. The customers of the molecular diagnostic system segment, that is, Tier 1 hospitals in China, are being served by the Company’s direct sales personnel.

Molecular diagnostic system sales for 4Q FY2010 were RMB146.6 million (US$22.4 million), representing a 45.3% increase from the corresponding period of FY2009. The year-over-year increase was primarily due to the increase in usage of the Company’s FISH probes by existing and new hospital customers as well as the sales of SPR-based HPV-DNA chips of RMB11.9 million (US$1.8 million) to hospitals during 4Q FY2010.

Immunodiagnostic system sales for 4Q FY2010 were RMB83.8 million (US$12.8 million), representing a 12.0% increase from the corresponding period of FY2009. The year-over-year increase was primarily due to the increase in sales of the Company’s ECLIA reagent kits to existing and new distributors.

 

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Gross margin was 61.4% for 4Q FY2010 which decreased year-over-year from 64.9% for the corresponding period of FY2009. The year-over-year decrease was primarily due to the classification of amortization of SPR intangible assets from operating expenses to cost of revenues after the commencement of sales of HPV-DNA chips in 2Q FY2010 which offset the positive impact on more contribution from the sales of FISH probes which generate higher gross margin. Non-GAAP gross margin was 82.4% for 4Q FY2010 which increased year-over-year from 77.7% for the corresponding period of FY2009. The year-over-year increase in non-GAAP gross margin was primarily due to more contribution from the sales of FISH probes which generate higher gross margin.

Research and development expenses were RMB12.6 million (US$1.9 million) for 4Q FY2010, representing a 21.8% year-over-year increase. Non-GAAP research and development expenses were RMB11.4 million (US$1.7 million) for 4Q FY2010, representing a 28.0% year-over-year increase. The year-over-year increase was primarily due to product research and development for SPR analyzers and PCR assays.

Sales and marketing expenses were RMB24.0 million (US$3.7 million) for 4Q FY2010, representing a 43.9% year-over-year increase. Non-GAAP sales and marketing expenses were RMB23.8 million (US$3.6 million) for 4Q FY2010, representing a 42.7% year-over-year increase. The year-over-year increase was primarily due to an increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB25.4 million (US$3.9 million) for 4Q FY2010, representing a 5.1% year-over-year decrease. Non-GAAP general and administrative expenses were RMB18.4 million (US$2.8 million) for 4Q FY2010, representing a 5.0% year-over-year increase.

Interest expense on convertible notes was RMB34.6 million (US$5.3 million) for 4Q FY2010. Non-GAAP interest expense on convertible notes was RMB33.2 million (US$5.1 million) for 4Q FY2010. As of March 31, 2011, the Company’s outstanding convertible notes of US$22.7 million, US$248.0 million and US$150.0 million bear interest at 3.5%, 4% and 6.25% per annum, respectively, and will mature in November 2011, August 2013 and December 2016, respectively.

Interest expense related to amortization of convertible notes issuance costs was RMB4.2 million (US$0.6 million) for 4Q FY2010.

Interest expense related to amortization of share lending costs was RMB2.4 million (US$0.4 million) for 4Q FY2010.

Income tax expense was RMB28.1 million (US$4.3 million) for 4Q FY2010. The high effective tax rate was due to 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 was required to accrue for withholding income tax on distributable earnings generated in China.

Net income was RMB16.1 million (US$2.5 million) for 4Q FY2010, which improved significantly from RMB4.8 million for the corresponding period of FY2009. Non-GAAP net income was RMB75.0 million (US$11.5 million) for 4Q FY2010, representing a 45.7% increase from the corresponding period of FY2009. The significant year-over-year increase was primarily due to the increase in both molecular diagnostic system sales and immunodiagnostic system sales.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was RMB133.3 million (US$20.4 million) for 4Q FY2010, representing an 18.0% increase from the corresponding period of FY2009. The year-over-year increase in EBITDA was primarily due to the increase in both molecular diagnostic system sales and immunodiagnostic system sales.

 

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Adjusted EBITDA was RMB140.2 million (US$21.4 million) for 4Q FY2010, representing a 40.8% increase from the corresponding period of FY2009. The reason for the increase is also due to increased sales in 4Q FY2010.

Stock compensation expense for 4Q FY2010 was RMB8.5 million (US$1.3 million), of which RMB0.1 million was allocated to cost of revenues, RMB1.2 million to research and development expenses, RMB0.2 million to sales and marketing expenses and RMB7.0 million to general and administrative expenses.

Amortization of acquired intangible assets for 4Q FY2010 was RMB48.2 million (US$7.4 million) which was all allocated to cost of revenues.

As of March 31, 2011, the Company’s cash and cash equivalents were RMB1,123.8 million (US$171.6 million). Net cash generated from operating activities for 4Q FY2010 was RMB37.3 million (US$5.7 million). Net cash generated from investing activities for 4Q FY2010 was RMB18.8 million (US$2.9 million). Net cash used in financing activities for 4Q FY2010 was RMB48.9 million (US$7.5 million).

As of March 31, 2011, the Company’s net accounts receivable was RMB481.1 million (US$73.5 million), representing an increase of 21.0% from the balance at December 31, 2010. The increase in net accounts receivable was primarily due to the increase in molecular diagnostic system sales to hospital customers.

FY2010 Unaudited Financial Results

Net revenues were RMB842.4 million (US$128.6 million) for FY2010, representing a 16.5% year-over-year increase. The year-over-year increase in revenues was primarily due to the increase in molecular diagnostic system sales.

Gross margin was 60.3% for FY2010 which decreased year-over-year from 67.1% for FY2009. The year-over-year decrease was primarily due to the classification of amortization of SPR intangible assets from operating expenses to cost of revenues after the commencement of sales of HPV-DNA chips in 2Q FY2010 which offset the positive impact on more contribution from the sales of FISH probes which generate higher gross margin. Non-GAAP gross margin was 80.3% for FY2010 which increased year-over-year from 79.6% for FY2009. The year-over-year increase in non-GAAP gross margin was primarily due to more contribution from the sales of FISH probes which generate higher gross margin.

Research and development expenses were RMB46.5 million (US$7.1 million) for FY2010, representing a 9.9% year-over-year increase. Non-GAAP research and development expenses were RMB41.5 million (US$6.3 million) for FY2010, representing a 15.5% year-over-year increase. The year-over-year increase was primarily due to product research and development for FISH probes, SPR analyzers and PCR assays.

Sales and marketing expenses were RMB88.2 million (US$13.5 million) for FY2010, representing a 37.7% year-over-year increase. Non-GAAP sales and marketing expenses were RMB87.5 million (US$13.4 million) for FY2010, representing a 36.6% year-over-year increase. The year-over-year increase was primarily due to an increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB96.6 million (US$14.7 million) for FY2010, representing a 33.3% year-over-year decrease. Non-GAAP general and administrative expenses were RMB65.4 million (US$10.0 million) for FY2010, representing a 40.8% year-over-year decrease. The year-over-year decrease was primarily because the Company incurred costs for the independent internal investigation in FY2009 which did not recur in FY2010.

 

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Net income was RMB82.6 million (US$12.6 million) for FY2010, which improved significantly from net loss of RMB69.6 million for FY2009. Non-GAAP net income was RMB273.1 million (US$41.7 million) for FY2010, representing a 45.8% year-over-year increase from FY2009.

EBITDA was RMB531.2 million (US$81.1 million) for FY2010, representing a 43.1% year-over-year increase from FY2009.

Adjusted EBITDA was RMB493.3 million (US$75.3 million) for FY2010, representing a 27.3% year-over-year increase from FY2009.

Stock compensation expense for FY2010 was RMB37.2 million (US$5.7 million), of which RMB0.4 million was allocated to cost of revenues, RMB4.9 million to research and development expenses, RMB0.7 million to sales and marketing expenses and RMB31.2 million to general and administrative expenses.

Amortization of acquired intangible assets for FY2010 was RMB196.0 million (US$29.9 million), of which RMB168.7 million was allocated to cost of revenues and RMB27.3 million to operating expenses.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.5483 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 Thursday, March 31, 2011. 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, 2011 or at any other dates.

Product Development Plan

The Company plans to focus on the following product development activities with respect to its molecular diagnostic products:

FISH

 

 

to develop more applications in the areas of prenatal diagnosis, cancer detection and companion diagnostics for cancer targeted drugs through internal research and development.

SPR

 

 

to develop a new automated analyzer for hospitals and independent laboratories to conduct HPV tests using our DNA chips through internal research and development.

PCR

 

 

to develop more assays in the area of companion diagnostics for cancer targeted drugs through internal research and development.

Update on Receivable from Chengxuan

As of March 31, 2011, the remaining amount of the receivable from Chengxuan, a company which is one of the Company’s major shareholders and is owned by Mr. Xiaodong Wu, was reduced from US$18 million to US$15 million. This receivable relates to the sale of the Company’s HIFU business to Chengxuan. Subsequently, Chengxuan paid US$8 million to the Company and indicated that the remaining balance of US$7 million together with interest thereon will be paid in full before June 30, 2011.

 

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Non-GAAP Measure Disclosures

The Company reported its operating results in accordance with U.S. generally accepted accounting principles (“GAAP”) for the three months and the year ended March 31, 2010 and 2011, respectively. The Company also presented non-GAAP information, which included EBITDA and adjusted EBITDA, for the three months and the year ended March 31, 2010 and 2011, respectively. The non-GAAP measures are defined below:

 

 

Non-GAAP gross profit represents gross profit reported in accordance with GAAP, excluding the effects of stock compensation expense and amortization of acquired intangible assets.

 

 

Non-GAAP gross margin represents non-GAAP gross profit divided by net revenues.

 

 

Non-GAAP research and development expenses represent research and development expenses reported in accordance with GAAP, excluding the effects of stock compensation expense.

 

 

Non-GAAP sales and marketing expenses represent sales and marketing expenses reported in accordance with GAAP, excluding the effects of stock compensation expense.

 

 

Non-GAAP general and administrative expenses represent general and administrative expenses reported in accordance with GAAP, excluding the effects of stock compensation expense.

 

 

Non-GAAP operating income represents operating income reported in accordance with GAAP, excluding the effects of stock compensation expense and amortization of acquired intangible assets.

 

 

Non-GAAP interest expense on convertible notes represents interest expense on convertible notes reported in accordance with GAAP, excluding the effects of non-cash interest expense of convertible notes.

 

 

Non-GAAP interest expense on amortization of share lending costs represents the exclusion of interest expense on amortization of share lending costs reported in accordance with GAAP, as this item is non-cash.

 

 

Non-GAAP other income (expense), net represents other income and expense, net reported in accordance with GAAP, excluding the effects of gain on repurchase of convertible notes as well as high yield note offering expenses.

 

 

Non-GAAP net income represents net income reported in accordance with GAAP, excluding the effects of stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes, interest expense for amortization of share lending costs, gain on repurchase of convertible notes as well as high yield note offering expenses.

 

 

Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.

 

 

EBIT represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense and income tax expense.

 

 

EBITDA represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense, income tax expense, depreciation and amortization.

 

 

Adjusted EBITDA represents EBITDA excluding the effects of stock compensation expense, gain on repurchase of convertible notes as well as high yield note offering expenses.

 

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Non-GAAP financial measures are used by the Company in its 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 8:00 a.m. U.S. Eastern Time on June 2, 2011 (or 8:00 p.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 1-800-215-2410

 

 

International Dial-in Number 1-617-597-5410

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 10:00 a.m. U.S. Eastern Time on June 3, 2011.

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: 61583099

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 personnel and ECLIA reagent kits to small and mid-size hospitals through distributors. For more information, please visit http://www.chinameditech.com.

 

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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 “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the quotations from management in this press release, as well as its outlook for the first fiscal quarter ending June 30, 2011 and full fiscal year ending March 31, 2012, 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

 

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China Medical Technologies, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

     As of  
     December 31, 2010     March 31, 2011  
     RMB     RMB     US$  
     (in thousands)  

Assets

      

Current assets

      

Cash and cash equivalents

     1,119,384        1,123,818        171,620   

Trade accounts receivable, net

     397,739        481,096        73,469   

Inventories

     16,640        19,273        2,943   

Prepayments and other receivables

     10,521        18,952        2,894   

Due from a related party

     118,800        98,225        15,000   
                        

Total current assets

     1,663,084        1,741,364        265,926   

Property, plant and equipment, net

     144,251        139,448        21,295   

Land use rights

     6,906        6,859        1,047   

Goodwill

     8,654        8,654        1,322   

Intangible assets, net

     3,042,474        2,973,358        454,066   

Convertible notes issuance costs

     60,163        55,817        8,524   

Share lending costs

     25,133        22,562        3,445   
                        

Total assets

     4,950,665        4,948,062        755,625   
                        

Liabilities

      

Current liabilities

      

Trade accounts payable

     44,477        44,502        6,796   

Accrued liabilities and other payables

     174,978        191,120        29,186   

Convertible notes

     186,763        146,081        22,308   

Income taxes payable

     63,859        77,954        11,904   
                        

Total current liabilities

     470,077        459,657        70,194   

Convertible notes

     2,626,800        2,606,223        398,000   

Deferred income taxes

     84,936        91,596        13,988   
                        

Total liabilities

     3,181,813        3,157,476        482,182   
                        

Shareholders’ equity

      

Ordinary shares US$0.1 par value:
500,000,000 authorized; 322,680,001 issued and outstanding as of December 31, 2010 and March 31, 2011

     258,840        258,840        39,528   

Additional paid-in capital

     869,439        875,448        133,691   

Treasury stock

     (201,362     (201,362     (30,750

Accumulated other comprehensive loss

     (76,923     (77,293     (11,804

Retained earnings

     918,858        934,953        142,778   
                        

Total shareholders’ equity

     1,768,852        1,790,586        273,443   
                        

Total liabilities and shareholders’ equity

     4,950,665        4,948,062        755,625   
                        

 

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China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income and

Reconciliations of GAAP Measures to Non-GAAP Measures

 

     For the Three Months Ended     For the Three Months Ended  
     March 31, 2010     March 31, 2011  
    

GAAP

RMB

   

Adjustments

RMB

   

Non-GAAP

RMB

   

GAAP

RMB

   

Adjustments

RMB

   

Non-GAAP

RMB

 
     As adjusted (9)                                
     (in thousands except for per ADS information)  

Net revenues (1)

     175,728        —          175,728        230,414        —          230,414   

Cost of revenues (2)

     (61,624     22,423        (39,201     (88,948     48,295        (40,653
                                                

Gross profit

     114,104        22,423        136,527        141,466        48,295        189,761   

Operating expenses

            

Research and development (3)

     (10,352     1,440        (8,912     (12,612     1,208        (11,404

Sales and marketing (3)

     (16,695     —          (16,695     (24,017     192        (23,825

General and administrative (3)

     (26,743     9,252        (17,491     (25,381     7,009        (18,372

Amortization of SPR intangible assets (4)

     (27,343     27,343        —          —          —          —     
                                                

Total operating expenses

     (81,133     38,035        (43,098     (62,010     8,409        (53,601
                                                

Operating income

     32,971        60,458        93,429        79,456        56,704        136,160   

Interest income

     4,155        —          4,155        5,779        —          5,779   

Interest expense – convertible notes (5)

     (34,831     7,618        (27,213     (34,612     1,387        (33,225

Interest expense – amortization of convertible notes issuance costs

     (4,263     —          (4,263     (4,150     —          (4,150

Interest expense – amortization of share lending costs (6)

     (2,644     2,644        —          (2,386     2,386        —     

Other income (expense), net (7)

     24,638        (24,064     574        144        (1,570     (1,426
                                                

Income before income tax

     20,026        46,656        66,682        44,231        58,907        103,138   

Income tax expense

     (15,206     —          (15,206     (28,136     —          (28,136
                                                

Net income

     4,820        46,656        51,476        16,095        58,907        75,002   
                                                

Earnings per ADS

            

- basic (8)

     0.19        1.79        1.98        0.61        2.25        2.86   
                                                

- diluted (8)

     0.19        1.79        1.98        0.61        2.23        2.84   
                                                

Weighted average number of ADS

            

- basic (8)

     25,993,349        —          25,993,349        26,184,308        —          26,184,308   
                                                

- diluted (8)

     26,050,599        —          26,050,599        26,448,663        —          26,448,663   
                                                

 

13


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income and

Reconciliations of GAAP Measures to Non-GAAP Measures

Convenience Translation for Reference Only

 

     For the Three Months Ended  
     March 31, 2011  
    

GAAP

US$

   

Adjustments

US$

   

Non-GAAP

US$

 
     (in thousands except for per ADS information)  

Net revenues (1)

     35,187        —          35,187   

Cost of revenues (2)

     (13,583     7,375        (6,208
                        

Gross profit

     21,604        7,375        28,979   

Operating expenses

      

Research and development (3)

     (1,926     185        (1,741

Sales and marketing (3)

     (3,668     30        (3,638

General and administrative (3)

     (3,876     1,070        (2,806

Amortization of SPR intangible assets (4)

     —          —          —     
                        

Total operating expenses

     (9,470     1,285        (8,185
                        

Operating income

     12,134        8,660        20,794   

Interest income

     883        —          883   

Interest expense – convertible notes (5)

     (5,286     212        (5,074

Interest expense – amortization of convertible notes issuance costs

     (634     —          (634

Interest expense – amortization of share lending costs (6)

     (364     364        —     

Other income (expense), net (7)

     22        (240     (218
                        

Income before income tax

     6,755        8,996        15,751   

Income tax expense

     (4,297     —          (4,297
                        

Net income

     2,458        8,996        11,454   
                        

Earnings per ADS

      

- basic (8)

     0.09        0.35        0.44   
                        

- diluted (8)

     0.09        0.34        0.43   
                        

Weighted average number of ADS

      

- basic (8)

     26,184,308        —          26,184,308   
                        

- diluted (8)

     26,448,663        —          26,448,663   
                        

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.5483 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 Thursday, March 31, 2011. 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, 2011 or at any other dates.

 

14


Table of Contents

Notes:

 

          For the Three Months Ended  
          March 31, 2010      March 31, 2011  
          RMB’000      RMB’000      US$’000  

(1)

  

Net revenues

        
  

- Molecular diagnostic systems

     100,897         146,635         22,393   
  

- Immunodiagnostic systems

     74,831         83,779         12,794   
                             
        175,728         230,414         35,187   
                             
  

Molecular diagnostic systems

        
  

- HPV-DNA chips

     —           11,922         1,821   
                             

 

(2) Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.

 

     For the Three Months Ended  
     March 31, 2010      March 31, 2011  
     RMB’000      RMB’000      US$’000  

Stock compensation expense

     —           110         17   

Amortization of acquired intangible assets

     22,423         48,185         7,358   
                          
     22,423         48,295         7,375   
                          

 

(3) Non-GAAP numbers exclude stock compensation expense.
(4) Non-GAAP numbers exclude amortization of acquired intangible assets.
(5) Non-GAAP numbers exclude non-cash interest expense of convertible notes.
(6) Non-GAAP numbers exclude interest expense for amortization of share lending costs.
(7) Non-GAAP numbers exclude gain on repurchase of convertible notes.

 

     For the Three Months Ended  
     March 31, 2010      March 31, 2011  
     RMB’000      RMB’000      US$’000  

Gain on repurchase of convertible notes

     24,064         1,570         240   
                          

 

(8) Interest expense and amortization in connection with convertible notes were not added back in computing GAAP diluted earnings per ADS because they were anti-dilutive. Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.
(9) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing, effective on April 1, 2010, the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the three months ended March 31, 2010 retrospectively in accordance with GAAP.

 

15


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income and

Reconciliations of GAAP Measures to Non-GAAP Measures

 

     For the Year Ended     For the Year Ended  
     March 31, 2010     March 31, 2011  
    

GAAP

RMB

As adjusted (9)

    Adjustments
RMB
    Non-GAAP
RMB
   

GAAP

RMB

    Adjustments
RMB
    Non-GAAP
RMB
 
     (in thousands except for per ADS information)  

Net revenues (1)

     723,071        —          723,071        842,366        —          842,366   

Cost of revenues (2)

     (237,550     89,720        (147,830     (334,682     169,086        (165,596
                                                

Gross profit

     485,521        89,720        575,241        507,684        169,086        676,770   

Operating expenses

            

Research and development (3)

     (42,293     6,335        (35,958     (46,469     4,946        (41,523

Sales and marketing (3)

     (64,055     —          (64,055     (88,182     672        (87,510

General and administrative (3)

     (144,671     34,102        (110,569     (96,567     31,151        (65,416

Amortization of SPR intangible assets (4)

     (109,395     109,395        —          (27,329     27,329        —     
                                                

Total operating expenses

     (360,414     149,832        (210,582     (258,547     64,098        (194,449
                                                

Operating income

     125,107        239,552        364,659        249,137        233,184        482,321   

Interest income

     13,456        —          13,456        20,882        —          20,882   

Interest expense – convertible notes (5)

     (141,123     30,477        (110,646     (131,918     22,628        (109,290

Interest expense – amortization of convertible notes issuance costs

     (17,402     —          (17,402     (16,009     —          (16,009

Interest expense – amortization of share lending costs (6)

     (10,912     10,912        —          (9,731     9,731        —     

Other income (expense), net (7)

     24,848        (24,064     784        64,086        (75,106     (11,020
                                                

Income (loss) before income tax

     (6,026     256,877        250,851        176,447        190,437        366,884   

Income tax expense

     (63,556     —          (63,556     (93,828     —          (93,828
                                                

Net income (loss)

     (69,582     256,877        187,295        82,619        190,437        273,056   
                                                

Earnings (loss) per ADS

            

- basic (8)

     (2.65     9.78        7.13        3.16        7.30        10.46   
                                                

- diluted (8)

     (2.65     9.78        7.13        3.14        7.25        10.39   
                                                

Weighted average number of ADS

            

- basic (8)

     26,254,639        —          26,254,639        26,114,768        —          26,114,768   
                                                

- diluted (8)

     26,254,639        —          26,254,639        26,280,000        —          26,280,000   
                                                

 

16


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income and

Reconciliations of GAAP Measures to Non-GAAP Measures

Convenience Translation for Reference only

 

     For the Year Ended  
     March 31, 2011  
    

GAAP

US$

    Adjustments
US$
    Non-GAAP
US$
 
     (in thousands except for per ADS information)  

Net revenues (1)

     128,639        —          128,639   

Cost of revenues (2)

     (51,110     25,822        (25,288
                        

Gross profit

     77,529        25,822        103,351   

Operating expenses

      

Research and development (3)

     (7,096     755        (6,341

Sales and marketing (3)

     (13,466     103        (13,363

General and administrative (3)

     (14,747     4,757        (9,990

Amortization of SPR intangible assets (4)

     (4,173     4,173        —     
                        

Total operating expenses

     (39,482     9,788        (29,694
                        

Operating income

     38,047        35,610        73,657   

Interest income

     3,189        —          3,189   

Interest expense – convertible notes (5)

     (20,145     3,455        (16,690

Interest expense – amortization of

convertible notes issuance costs

     (2,445     —          (2,445

Interest expense – amortization of share lending costs (6)

     (1,486     1,486        —     

Other income (expense), net (7)

     9,786        (11,469     (1,683
                        

Income before income tax

     26,946        29,082        56,028   

Income tax expense

     (14,329     —          (14,329
                        

Net income

     12,617        29,082        41,699   
                        

Earnings per ADS

      

- basic (8)

     0.48        1.12        1.60   
                        

- diluted (8)

     0.48        1.11        1.59   
                        

Weighted average number of ADS

      

- basic (8)

     26,114,768        —          26,114,768   
                        

- diluted (8)

     26,280,000        —          26,280,000   
                        

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.5483 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 Thursday, March 31, 2011. 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, 2011 or at any other dates.

 

17


Table of Contents

Notes:

 

          For the Year Ended  
          March 31, 2010      March 31, 2011  
          RMB’000      RMB’000      US$’000  

(1)

   Net revenues         
  

- Molecular diagnostic systems

     384,762         508,162         77,602   
  

- Immunodiagnostic systems

     338,309         334,204         51,037   
                             
        723,071         842,366         128,639   
                             
  

Molecular diagnostic systems

        
  

- HPV-DNA chips

     —           24,928         3,807   
                             

 

(2) Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.

 

     For the Year Ended  
     March 31, 2010      March 31, 2011  
     RMB’000      RMB’000      US$’000  

Stock compensation expense

     —           385         59   

Amortization of acquired intangible assets

     89,720         168,701         25,763   
                          
     89,720         169,086         25,822   
                          

 

(3) Non-GAAP numbers exclude stock compensation expense.
(4) Non-GAAP numbers exclude amortization of acquired intangible assets.
(5) Non-GAAP numbers exclude non-cash interest expense of convertible notes.
(6) Non-GAAP numbers exclude interest expense for amortization of share lending costs.
(7) Non-GAAP numbers exclude gain on repurchase of convertible notes as well as high yield note offering expenses.

 

     For the Year Ended  
     March 31, 2010      March 31, 2011  
     RMB’000      RMB’000     US$’000  

Gain on repurchase of convertible notes

     24,064         80,342        12,269   

High yield note offering expenses

     —           (5,236     (800
                         
     24,064         75,106        11,469   
                         

 

(8) Interest expense and amortization in connection with convertible notes were not added back in computing GAAP diluted earnings per ADS because they were anti-dilutive. Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.
(9) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing, effective on April 1, 2010, the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the year ended March 31, 2010 retrospectively in accordance with GAAP.

 

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Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

     For the Three Months Ended  
     March 31, 2010     March 31, 2011  
     RMB     RMB     US$  
     (in thousands)  

Net cash provided by operating activities

     59,758        37,339        5,702   

Net cash provided by (used in) investing activities

     (609     18,789        2,869   

Net cash used in financing activities

     (73,596     (48,921     (7,471

Effect of foreign currency exchange rate change on cash and cash equivalents

     13        (2,773     (423
                        

Net increase (decrease) in cash and cash equivalents

     (14,434     4,434        677   

Cash and cash equivalents:

      

At beginning of period

     829,887        1,119,384        170,943   
                        

At end of period

     815,453        1,123,818        171,620   
                        
     For the Year Ended  
     March 31, 2010     March 31, 2011  
     RMB     RMB     US$  
     (in thousands)  

Net cash provided by operating activities

     279,877        224,176        34,234   

Net cash provided by (used in) investing activities

     (715,522     94,169        14,381   

Net cash used in financing activities

     (205,061     (3,000     (458

Effect of foreign currency exchange rate change on cash and cash equivalents

     (251     (6,980     (1,066
                        

Net increase (decrease) in cash and cash equivalents

     (640,957     308,365        47,091   

Cash and cash equivalents:

      

At beginning of period

     1,456,410        815,453        124,529   
                        

At end of period

     815,453        1,123,818        171,620   
                        

 

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Table of Contents

China Medical Technologies, Inc.

EBITDA and Adjusted EBITDA Measures

 

     For the Three Months Ended  
     March 31, 2010     March 31, 2011  
     RMB     RMB     US$  
     As adjusted (1)              
     (in thousands)  

Net income

     4,820        16,095        2,458   

Adjustments:

      

Interest income

     (4,155     (5,779     (883

Interest expense – convertible notes

     34,831        34,612        5,286   

Interest expense – amortization of convertible notes issuance costs

     4,263        4,150        634   

Interest expense – amortization of share lending costs

     2,644        2,386        364   

Income tax expense

     15,206        28,136        4,297   
                        

EBIT (2)

     57,609        79,600        12,156   

Adjustments:

      

Depreciation

     5,588        5,510        842   

Amortization

     49,766        48,185        7,358   
                        

EBITDA (3)

     112,963        133,295        20,356   
                        

EBITDA (3)

     112,963        133,295        20,356   

Adjustments:

      

Stock compensation expense

     10,692        8,519        1,301   

Gain on repurchase of convertible notes

     (24,064     (1,570     (240
                        

Adjusted EBITDA (4)

     99,591        140,244        21,417   
                        
     For the Year Ended  
     March 31, 2010     March 31, 2011  
     RMB     RMB     US$  
     As adjusted (1)              
     (in thousands)  

Net income (loss)

     (69,582     82,619        12,617   

Adjustments:

      

Interest income

     (13,456     (20,882     (3,189

Interest expense – convertible notes

     141,123        131,918        20,145   

Interest expense – amortization of convertible notes issuance costs

     17,402        16,009        2,445   

Interest expense – amortization of share lending costs

     10,912        9,731        1,486   

Income tax expense

     63,556        93,828        14,329   
                        

EBIT (2)

     149,955        313,223        47,833   

Adjustments:

      

Depreciation

     22,137        21,953        3,352   

Amortization

     199,115        196,030        29,936   
                        

EBITDA (3)

     371,207        531,206        81,121   
                        

EBITDA (3)

     371,207        531,206        81,121   

Adjustments:

      

Stock compensation expense

     40,437        37,154        5,674   

Gain on repurchase of convertible notes

     (24,064     (80,342     (12,269

High yield note offering expenses

     —          5,236        800   
                        

Adjusted EBITDA (4)

     387,580        493,254        75,326   
                        

 

20


Table of Contents

Notes:

 

(1) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing effective on April 1, 2010, the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the three months and the year ended March 31, 2010 retrospectively in accordance with GAAP.
(2) EBIT represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense and income tax expense.
(3) EBITDA represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense, income tax expense, depreciation and amortization.
(4) Adjusted EBITDA represents EBITDA excluding the effects of stock compensation expense, gain on repurchase of convertible notes as well as high yield note offering expenses.

 

21

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