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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

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

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

SECURITIES EXCHANGE ACT OF 1934

For the month of February, 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

 

 

 


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CHINA MEDICAL TECHNOLOGIES, INC.

Form 6-K

TABLE OF CONTENTS

 

     Page  

Signature

     3   

Exhibit 99.1 – Press Release

     4   


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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: February 18, 2011


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Exhibit 99.1

LOGO

China Medical Technologies Reports Third Fiscal Quarter Financial Results

Beijing, China, February 18, 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 third fiscal quarter ended December 31, 2010 (“3Q FY2010”) today.

3Q FY2010 Highlights

 

     For the Three Months Ended         
     December 31,
2009
     December 31,
2010
     December 31,
2010
        
     RMB      RMB      US$      % change  
     (in thousands except for per ADS information)         

Revenues, net

     172,320         223,948         33,932         30.0   

Adjusted EBITDA

     92,133         131,544         19,931         42.8   

Non-GAAP net income

     45,618         75,642         11,461         65.8   

Non-GAAP diluted earnings per ADS*

     1.74         2.87         0.43         64.9   

Nine Months FY2010 Highlights

 

     For the Nine Months Ended         
     December 31,
2009
     December 31,
2010
     December 31,
2010
        
     RMB      RMB      US$      % change  
     (in thousands except for per ADS information)         

Revenues, net

     547,343         611,952         92,720         11.8   

Adjusted EBITDA

     287,989         353,010         53,486         22.6   

Non-GAAP net income

     135,819         198,054         30,008         45.8   

Non-GAAP diluted earnings per ADS*

     5.15         7.55         1.14         46.6   

Outlook for 4Q FY2010

 

 

Target revenues are expected to be approximately RMB234.0 million (US$35.5 million), representing a year-over-year increase of 33.2%.

 

 

Target non-GAAP net income is expected to be approximately RMB71.0 million (US$10.8 million), representing a year-over-year increase of 37.9%. The Company has taken into account the impact of incremental cash interest arising from the issuance of 2016 Convertible Notes in December 2010 to refinance its 2011 Convertible Notes.

 

 

Target non-GAAP diluted earnings per ADS* is expected to be approximately RMB2.69 (US$0.41), representing a year-over-year increase of 35.9%.

Outlook for FY2010

 

 

Target revenues are expected to be approximately RMB846.0 million (US$128.2 million), representing a year-over-year increase of 17.0%.

 

 

Target non-GAAP net income is expected to be approximately RMB269.1 million (US$40.8 million), representing a year-over-year increase of 43.7%.


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Target non-GAAP diluted earnings per ADS* is expected to be approximately RMB10.24 (US$1.55), representing a year-over-year increase of 43.6%.

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 results of our 3Q FY2010,” commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. “The business of HPV-DNA chips started to contribute increasing revenue to our molecular diagnostic division. We expect our molecular diagnostic revenues to keep driving the growth of the Company.”

3Q FY2010 Unaudited Financial Results

The Company reported revenues of RMB223.9 million (US$33.9 million) for 3Q FY2010, representing a 30.0% 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 3Q FY2010 were RMB135.1 million (US$20.5 million), representing a 40.5% 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 RMB9.2 million (US$1.4 million) to hospitals during 3Q FY2010.

Immunodiagnostic system sales for 3Q FY2010 were RMB88.9 million (US$13.5 million), representing a 16.7% 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.

Gross margin was 58.1% for 3Q FY2010 which decreased year-over-year from 63.4% 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. Non-GAAP gross margin was 79.9% for 3Q FY2010 which increased year-over-year from 76.4% 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 RMB12.3 million (US$1.9 million) for 3Q FY2010, representing a 15.0% year-over-year increase. Non-GAAP research and development expenses were RMB11.2 million (US$1.7 million) for 3Q FY2010, representing a 22.2% year-over-year increase. The year-over-year increase was primarily due to product research and development for FISH probes and SPR chips.

Sales and marketing expenses were RMB24.4 million (US$3.7 million) for 3Q FY2010, representing a 28.2% year-over-year increase. Non-GAAP sales and marketing expenses were RMB24.2 million (US$3.7 million) for 3Q FY2010, representing a 27.2% year-over-year increase. The year-over-year increase was primarily due to an increase in direct sales efforts for molecular diagnostic systems.


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General and administrative expenses were RMB21.0 million (US$3.2 million) for 3Q FY2010, representing an 18.8% year-over-year decrease. Non-GAAP general and administrative expenses were RMB13.7 million (US$2.1 million) for 3Q FY2010, representing a 20.6% year-over-year decrease. The year-over-year decrease was primarily due to decrease in professional fees and traveling expenses for 3Q FY2010.

Interest expense on convertible notes was RMB32.8 million (US$5.0 million) for 3Q FY2010. Non-GAAP interest expense on convertible notes was RMB26.7 million (US$4.0 million) for 3Q FY2010. As of December 31, 2010, the Company’s outstanding convertible notes of US$29.1 million, US$248 million and US$150 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 on amortization of convertible notes issuance costs was RMB3.9 million (US$0.6 million) for 3Q FY2010.

Interest expense on amortization of share lending costs was RMB2.4 million (US$0.4 million) for 3Q FY2010.

Other income, net for 3Q FY2010 was RMB22.4 million (US$3.4 million), primarily due to a gain on repurchase of 2011 Convertible Notes. Non-GAAP other expense, net was RMB3.7 million (US$0.6 million) for 3Q FY2010.

Income tax expense was RMB25.2 million (US$3.8 million) for 3Q FY2010. 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 was required to accrue for withholding income tax on distributable earnings generated in China during 3Q FY2010.

Net income was RMB35.8 million (US$5.4 million) for 3Q FY2010, which improved significantly from the net loss of RMB24.7 million for the corresponding period of FY2009. Non-GAAP net income was RMB75.6 million (US$11.5 million) for 3Q FY2010, representing a 65.8% 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 RMB148.9 million (US$22.6 million) for 3Q FY2010, representing an 81.8% increase from the corresponding period of FY2009. The significant year-over-year increase in EBITDA was primarily due to the increase in both molecular diagnostic system sales and immunodiagnostic system sales as well as a gain on repurchase of 2011 Convertible Notes.

Adjusted EBITDA was RMB131.5 million (US$19.9 million) for 3Q FY2010, representing a 42.8% increase from the corresponding period of FY2009. The reason for the increase is also due to increased sales in 3Q FY2010.

Stock compensation expense for 3Q FY2010 was RMB8.8 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 RMB7.3 million to general and administrative expenses.

Amortization of acquired intangible assets for 3Q FY2010 was RMB48.7 million (US$7.4 million) which was all allocated to cost of revenues.

As of December 31, 2010, the Company’s cash and cash equivalents were RMB1,119.4 million (US$169.6 million). Net cash generated from operating activities for 3Q FY2010 was RMB49.7 million (US$7.5 million). Net cash generated from investing activities for 3Q FY2010 was RMB77.9 million (US$11.8 million). Net cash generated from financing activities for 3Q FY2010 was RMB190.5 million (US$28.9 million).


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As of December 31, 2010, the Company’s net accounts receivable was RMB397.7 million (US$60.3 million), representing an increase of 19.4% from the balance at September 30, 2010. The increase in net accounts receivable was primarily due to the increase in molecular diagnostic system sales to hospital customers.

Issuance of 2016 Convertible Notes

In December 2010, the Company issued US$150 million 6.25% convertible senior notes due December 2016 (“2016 Convertible Notes”). The Company used a large portion of the net proceeds from the 2016 Convertible Notes to repurchase US$105.9 million aggregate principal amount of its outstanding convertible notes due November 2011 (“2011 Convertible Notes”) and recorded a gain of approximately US$4.8 million and a reduction of additional paid-in capital of approximately US$8.6 million. The remaining balance of 2011 Convertible Notes was US$29.1 million in principal amount on December 31, 2010. The Company will continue to look for opportunities to repurchase the remaining 2011 Convertible Notes before maturity in November 2011. Approximately 900,000 ADSs were returned to the Company as treasury stock following the repurchase of 2011 Convertible Notes under the prepaid forward arrangement in connection with the issuance of 2011 Convertible Notes. Upon the issuance of 2016 Convertible Notes, the Company expensed off the costs of approximately US$0.8 million in connection with the suspended high yield note offering in December 2010.

Nine Months FY2010 Unaudited Financial Results

Revenues were RMB612.0 million (US$92.7 million) for the nine months ended December 31, 2010, representing an 11.8% increase from the corresponding period of FY2009. The year-over-year increase in revenues was primarily due to the increase in molecular diagnostic system sales.

Gross margin was 59.8% for the nine months ended December 31, 2010 which decreased year-over-year from 67.9% 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. Non-GAAP gross margin was 79.6% for the nine months ended December 31, 2010 which decreased year-over-year from 80.2% for the corresponding period of FY2009. The year-over-year decrease in non-GAAP gross margin was primarily due to the impact of the price reduction for ECLIA reagent kits.

Research and development expenses were RMB33.9 million (US$5.1 million) for the nine months ended December 31, 2010, representing a 6.0% year-over-year increase. Non-GAAP research and development expenses were RMB30.1 million (US$4.6 million) for the nine months ended December 31, 2010, representing an 11.4% year-over-year increase. The year-over-year increase was primarily due to product research and development for FISH probes and SPR chips.

Sales and marketing expenses were RMB64.2 million (US$9.7 million) for the nine months ended December 31, 2010, representing a 35.5% year-over-year increase. Non-GAAP sales and marketing expenses were RMB63.7 million (US$9.6 million) for the nine months ended December 31, 2010, representing a 34.5% 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 RMB71.2 million (US$10.8 million) for the nine months ended December 31, 2010, representing a 39.6% year-over-year decrease. Non-GAAP general and administrative expenses were RMB47.0 million (US$7.1 million) for the nine months ended December 31, 2010, representing a 49.5% year-over-year decrease. The year-over-year decrease was primarily because the Company incurred costs for the independent internal investigation during the nine-month period ended December 31, 2009 which did not recur in 2010 and lower allowance for doubtful accounts.


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Net income was RMB66.5 million (US$10.1 million) for the nine months ended December 31, 2010, which improved significantly from the net loss of RMB74.4 million for the corresponding period of FY2009. Non-GAAP net income was RMB198.1 million (US$30.0 million) for the nine months ended December 31, 2010, representing a 45.8% increase from the corresponding period of FY2009.

EBITDA was RMB397.9 million (US$60.3 million) for the nine months ended December 31, 2010, representing a 54.1% increase from the corresponding period of FY2009.

Adjusted EBITDA was RMB353.0 million (US$53.5 million) for 3Q FY2010, representing a 22.6% increase from the corresponding period of FY2009.

Stock compensation expense for the nine months ended December 31, 2010 was RMB28.6 million (US$4.3 million), of which RMB0.3 million was allocated to cost of revenues, RMB3.7 million to research and development expenses, RMB0.5 million to sales and marketing expenses and RMB24.1 million to general and administrative expenses.

Amortization of acquired intangible assets for the nine months ended December 31, 2010 was RMB147.8 million (US$22.4 million), of which RMB120.5 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 RMB6.6000 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, December 30, 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 December 30, 2010 or at any other dates.

Update on Receivable from Chengxuan

As of December 31, 2010, the remaining amount of receivable due December 31, 2010 from Chengxuan, one of the Company’s major shareholders and owned by Mr. Xiaodong Wu, was reduced from US$30 million to US$18 million. This receivable relates to the sale of the Company’s HIFU business to Chengxuan. Chengxuan made two payments to the Company in the amount of US$8 million and US$4 million during 3Q FY2010. Subsequently, Chengxuan made another payment of US$3 million to the Company in January 2011. Chengxuan indicated to the Company that payments will be made to the Company to pay off the remaining balance together with interest thereon 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 nine months ended December 31, 2009 and 2010, respectively. The Company also presented non-GAAP information, which included EBITDA and adjusted EBITDA, for the three months and nine months ended December 31, 2009 and 2010, respectively. The non-GAAP measures are defined below:

 

 

Non-GAAP gross profit represents gross profit reported in accordance with GAAP, adjusted for 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, adjusted for the effects of stock compensation expense.

 

 

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

 

 

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

 

 

Non-GAAP operating income represents operating income reported in accordance with GAAP, adjusted for 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, adjusted for the effects of non-cash interest expense of convertible notes.

 

 

Non-GAAP other income (expense), net represents other income and expense, net reported in accordance with GAAP, adjusted for 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, adjusted for the effects of stock compensation expense, amortization of acquired intangible assets, non-cash interest expense of convertible notes, non-cash 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.

 

 

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

 

 

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

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.


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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 February 18, 2011 (or 9:00 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 1-866-783-2141

 

 

International Dial-in Number 1-857-350-1600

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 February 19, 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: 46276526

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.

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 4Q FY2010 and full year 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.


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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  
     September 30, 2010     December 31, 2010  
     RMB     RMB     US$  
     (in thousands)  

Assets

      
Current assets       

Cash and cash equivalents

     805,901        1,119,384        169,604   

Trade accounts receivable, net

     333,123        397,739        60,264   

Inventories

     21,351        16,640        2,521   

Prepayments and other receivables

     19,093        9,503        1,439   

Convertible notes issuance costs

     —          1,018        154   

Due from a related party

     200,715        118,800        18,000   
                        

Total current assets

     1,380,183        1,663,084        251,982   

Property, plant and equipment, net

     147,355        144,251        21,857   

Land use rights

     6,954        6,906        1,046   

Goodwill

     8,654        8,654        1,311   

Intangible assets, net

     3,128,820        3,042,474        460,981   

Convertible notes issuance costs

     34,782        60,163        9,116   

Share lending costs

     27,905        25,133        3,808   
                        

Total assets

     4,734,653        4,950,665        750,101   
                        

Liabilities

      
Current liabilities       

Trade accounts payable

     43,958        44,477        6,739   

Accrued liabilities and other payables

     173,693        174,978        26,512   

Convertible notes

     —          186,763        28,297   

Income taxes payable

     59,334        63,859        9,676   
                        

Total current liabilities

     276,985        470,077        71,224   

Convertible notes

     2,528,848        2,626,800        398,000   

Deferred income taxes

     78,408        84,936        12,869   
                        

Total liabilities

     2,884,241        3,181,813        482,093   
                        

Shareholders’ equity

      

Ordinary shares US$0.1 par value: 500,000,000 authorized; 322,680,001 issued and outstanding as of September 30, 2010 and December 31, 2010

     258,840        258,840        39,218   

Additional paid-in capital

     830,016        869,439        131,733   

Treasury stock

     (47,108     (201,362     (30,509

Accumulated other comprehensive loss

     (74,412     (76,923     (11,655

Retained earnings

     883,076        918,858        139,221   
                        

Total shareholders’ equity

     1,850,412        1,768,852        268,008   
                        

Total liabilities and shareholders’ equity

     4,734,653        4,950,665        750,101   
                        


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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  
     December 31, 2009     December 31, 2010  
     GAAP     Adjustments      Non-GAAP     GAAP     Adjustments     Non-GAAP  
    

RMB

As adjusted (9)

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

Revenues, net (1)

     172,320        —           172,320        223,948        —          223,948        33,932   

Cost of revenues (2)

     (62,996     22,412         (40,584     (93,903     48,786        (45,117     (6,836
                                                         

Gross profit

     109,324        22,412         131,736        130,045        48,786        178,831        27,096   

Operating expenses

               

Research and development (3)

     (10,738     1,592         (9,146     (12,348     1,175        (11,173     (1,693

Sales and marketing (3)

     (19,058     —           (19,058     (24,426     185        (24,241     (3,673

General and administrative (3)

     (25,844     8,642         (17,202     (20,989     7,339        (13,650     (2,068

Amortization of SPR intangible assets (4)

     (27,343     27,343         —          —          —          —          —     
                                                         

Total operating expenses

     (82,983     37,577         (45,406     (57,763     8,699        (49,064     (7,434
                                                         

Operating income

     26,341        59,989         86,330        72,282        57,485        129,767        19,662   

Interest income

     4,332        —           4,332        5,387        —          5,387        816   

Interest expense – convertible notes (5)

     (35,421     7,618         (27,803     (32,782     6,104        (26,678     (4,042

Interest expense – amortization of convertible notes issuance costs

     (4,378     —           (4,378     (3,941     —          (3,941     (597

Interest expense – amortization of share lending costs (6)

     (2,756     2,756         —          (2,414     2,414        —          —     

Other income (expense) , net (7)

     225        —           225        22,449        (26,143     (3,694     (560
                                                         

Income (loss) before income tax

     (11,657     70,363         58,706        60,981        39,860        100,841        15,279   

Income tax expense

     (13,088     —           (13,088     (25,199     —          (25,199     (3,818
                                                         

Net income (loss)

     (24,745     70,363         45,618        35,782        39,860        75,642        11,461   
                                                         

Earnings (loss) per ADS

               

- basic (8)

     (0.94     2.68         1.74        1.37        1.52        2.89        0.44   
                                                         

- diluted (8)

     (0.94     2.68         1.74        1.36        1.51        2.87        0.43   
                                                         

Weighted average number of ADS

               

- basic (8)

     26,262,471        —           26,262,471        26,151,808        —          26,151,808        26,151,808   
                                                         

- diluted (8)

     26,262,471        —           26,262,471        26,377,378        —          26,377,378        26,377,378   
                                                         


Table of Contents

Notes:

 

     For the Three Months Ended  
     December 31, 2009      December 31, 2010  
     RMB’000      RMB’000      US$’000  

(1) Revenues, net

        

- Molecular diagnostic systems

     96,166         135,088         20,468   

- Immunodiagnostic systems

     76,154         88,860         13,464   
                          
     172,320         223,948         33,932   
                          

Molecular diagnostic systems

        

- HPV-DNA chips

     —           9,186         1,392   
                          

 

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

 

     For the Three Months Ended  
     December 31, 2009      December 31, 2010  
     RMB’000      RMB’000      US$’000  

Stock compensation expense

     —           106         16   

Amortization of acquired intangible assets

     22,412         48,680         7,376   
                          
     22,412         48,786         7,392   
                          

 

(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 non-cash 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 Three Months Ended  
     December 31, 2009      December 31, 2010  
     RMB’000      RMB’000     US$’000  

Gain on repurchase of convertible notes

     —           (31,379     (4,754

High yield note offering expenses

     —           5,236        793   
                         
     —           (26,143     (3,961
                         

 

(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 December 31, 2009 retrospectively in accordance with GAAP.


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income and

Reconciliations of GAAP Measures to Non-GAAP Measures

 

     For the Nine Months Ended     For the Nine Months Ended  
     December 31, 2009     December 31, 2010  
     GAAP     Adjustments      Non-GAAP     GAAP     Adjustments     Non-GAAP  
    

RMB

As adjusted (9)

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

Revenues, net (1)

     547,343        —           547,343        611,952        —          611,952        92,720   

Cost of revenues (2)

     (175,926     67,297         (108,629     (245,734     120,791        (124,943     (18,931
                                                         

Gross profit

     371,417        67,297         438,714        366,218        120,791        487,009        73,789   

Operating expenses

               

Research and development (3)

     (31,941     4,895         (27,046     (33,857     3,738        (30,119     (4,563

Sales and marketing (3)

     (47,360     —           (47,360     (64,165     480        (63,685     (9,649

General and administrative (3)

     (117,928     24,850         (93,078     (71,186     24,142        (47,044     (7,128

Amortization of SPR intangible assets (4)

     (82,052     82,052         —          (27,329     27,329        —          —     
                                                         

Total operating expenses

     (279,281     111,797         (167,484     (196,537     55,689        (140,848     (21,340
                                                         

Operating income

     92,136        179,094         271,230        169,681        176,480        346,161        52,449   

Interest income

     9,301        —           9,301        15,103        —          15,103        2,288   

Interest expense – convertible notes (5)

     (106,292     22,859         (83,433     (97,306     21,241        (76,065     (11,525

Interest expense – amortization of convertible notes issuance costs

     (13,139     —           (13,139     (11,859     —          (11,859     (1,797

Interest expense – amortization of share lending costs (6)

     (8,268     8,268         —          (7,345     7,345        —          —     

Other income (expense) , net (7)

     210        —           210        63,942        (73,536     (9,594     (1,454
                                                         

Income (loss) before income tax

     (26,052     210,221         184,169        132,216        131,530        263,746        39,961   

Income tax expense

     (48,350     —           (48,350     (65,692     —          (65,692     (9,953
                                                         

Net income (loss)

     (74,402     210,221         135,819        66,524        131,530        198,054        30,008   
                                                         

Earnings (loss) per ADS

               

- basic (8)

     (2.82     7.97         5.15        2.55        5.04        7.59        1.15   
                                                         

- diluted (8)

     (2.82     7.97         5.15        2.54        5.01        7.55        1.14   
                                                         

Weighted average number of ADS

               

- basic (8)

     26,353,485        —           26,353,485        26,092,009        —          26,092,009        26,092,009   
                                                         

- diluted (8)

     26,353,485        —           26,353,485        26,229,552        —          26,229,552        26,229,552   
                                                         


Table of Contents

Notes:

 

     For the Nine Months Ended  
     December 31, 2009      December 31, 2010  
     RMB’000      RMB’000      US$’000  

(1) Revenues, net

        

- Molecular diagnostic systems

     283,865         361,527         54,777   

- Immunodiagnostic systems

     263,478         250,425         37,943   
                          
     547,343         611,952         92,720   
                          

Molecular diagnostic systems

        

- HPV-DNA chips

     —           13,006         1,971   
                          

 

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

 

     For the Nine Months Ended  
     December 31, 2009      December 31, 2010  
     RMB’000      RMB’000      US$’000  

Stock compensation expense

     —           275         42   

Amortization of acquired intangible assets

     67,297         120,516         18,260   
                          
     67,297         120,791         18,302   
                          

 

(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 non-cash 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 Nine Months Ended  
     December 31, 2009      December 31, 2010  
     RMB’000      RMB’000     US$’000  

Gain on repurchase of convertible notes

     —           (78,772     (11,935

High yield note offering expenses

     —           5,236        793   
                         
     —           (73,536     (11,142
                         

 

(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 nine months ended December 31, 2009 retrospectively in accordance with GAAP.


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

     For the Three Months Ended  
     December 31, 2009     December 31, 2010  
     RMB     RMB     US$  
     (in thousands)  

Net cash provided by operating activities

     80,362        49,687        7,528   

Net cash provided by (used in) investing activities

     (354,927     77,913        11,805   

Net cash provided by (used in) financing activities

     (132,476     190,458        28,858   

Effect of foreign currency exchange rate change on cash

     232        (4,575     (693
                        

Net increase (decrease) in cash and cash equivalents

     (406,809     313,483        47,498   

Cash and cash equivalents:

      

At beginning of period

     1,236,696        805,901        122,106   
                        

At end of period

     829,887        1,119,384        169,604   
                        
     For the Nine Months Ended  
     December 31, 2009     December 31, 2010  
     RMB     RMB     US$  
     (in thousands)  

Net cash provided by operating activities

     220,119        186,837        28,309   

Net cash provided by (used in) investing activities

     (714,913     75,380        11,421   

Net cash provided by (used in) financing activities

     (131,465     45,921        6,958   

Effect of foreign currency exchange rate change on cash

     (264     (4,207     (637
                        

Net increase (decrease) in cash and cash equivalents

     (626,523     303,931        46,051   

Cash and cash equivalents:

      

At beginning of period

     1,456,410        815,453        123,553   
                        

At end of period

     829,887        1,119,384        169,604   
                        


Table of Contents

China Medical Technologies, Inc.

EBITDA and Adjusted EBITDA Measures

 

     For the Three Months Ended  
     December 31, 2009     December 31, 2010  
     RMB     RMB     US$  
     As adjusted (1)              
     (in thousands)  

Net income (loss)

     (24,745     35,782        5,421   

Adjustments:

      

Interest income

     (4,332     (5,387     (816

Interest expense – convertible notes

     35,421        32,782        4,967   

Interest expense – amortization of convertible notes issuance costs

     4,378        3,941        597   

Interest expense – amortization of share lending costs

     2,756        2,414        366   

Income tax expense

     13,088        25,199        3,818   

Depreciation

     5,578        5,471        829   

Amortization

     49,755        48,680        7,376   
                        

EBITDA (2)

     81,899        148,882        22,558   
                        

EBITDA (2)

     81,899        148,882        22,558   

Adjustments:

      

Stock compensation expense

     10,234        8,805        1,334   

Gain on repurchase of convertible notes

     —          (31,379     (4,754

High yield note offering expenses

     —          5,236        793   
                        

Adjusted EBITDA (3)

     92,133        131,544        19,931   
                        
     For the Nine Months Ended  
     December 31, 2009     December 31, 2010  
     RMB     RMB     US$  
     As adjusted (1)              
     (in thousands)  

Net income (loss)

     (74,402     66,524        10,079   

Adjustments:

      

Interest income

     (9,301     (15,103     (2,288

Interest expense – convertible notes

     106,292        97,306        14,743   

Interest expense – amortization of convertible notes issuance costs

     13,139        11,859        1,797   

Interest expense – amortization of share lending costs

     8,268        7,345        1,113   

Income tax expense

     48,350        65,692        9,953   

Depreciation

     16,549        16,443        2,491   

Amortization

     149,349        147,845        22,401   
                        

EBITDA (2)

     258,244        397,911        60,289   
                        

EBITDA (2)

     258,244        397,911        60,289   

Adjustments:

      

Stock compensation expense

     29,745        28,635        4,339   

Gain on repurchase of convertible notes

     —          (78,772     (11,935

High yield note offering expenses

     —          5,236        793   
                        

Adjusted EBITDA (3)

     287,989        353,010        53,486   
                        

 

(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 nine months ended December 31, 2009 retrospectively in accordance with GAAP.
(2) EBITDA represents net income reported in accordance with GAAP, adjusted for the effects of interest income, interest expenses, income tax expense, depreciation and amortization.
(3) Adjusted EBITDA represents EBITDA adjusted for the effects of stock compensation expense, gain on repurchase of convertible notes as well as high yield note offering expenses.
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