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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 August, 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: August 17, 2011


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Exhibit 99.1

LOGO

China Medical Technologies Reports First Fiscal Quarter Financial Results

Beijing, China, August 16, 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 first fiscal quarter ended June 30, 2011 (“1Q FY2011”) today.

1Q FY2011 Highlights

 

     For the Three Months Ended         
     June 30, 2010      June 30, 2011      June 30, 2011         
     RMB      RMB      US$      % change  
     (in thousands except for per ADS information)         

Net revenues

     186,170         237,111         36,685         27.4

Net income

     33,678         35,728         5,528         6.1

Diluted earnings per ADS*

     1.29         1.35         0.21         4.7

Non-GAAP net income

     57,011         90,452         13,995         58.7

Non-GAAP diluted earnings per ADS*

     2.18         3.42         0.53         56.9

Adjusted EBITDA

     105,152         154,289         23,871         46.7
     For the Three Months Ended         
     March 31, 2011      June 30, 2011      June 30, 2011         
     RMB      RMB      US$      % change  
     (in thousands)         

Net cash provided by operating activities

     37,339         62,243         9,630         66.7
     As of         
     March 31, 2011      June 30, 2011      June 30, 2011         
     RMB      RMB      US$      % change  
     (in thousands)         

Cash and cash equivalents

     1,123,818         1,239,458         191,763         10.3

Trade accounts receivable, net

     481,096         565,061         87,422         17.5

Convertible notes

     2,752,304         2,669,914         413,076         (3.0 )% 

Outlook for second fiscal quarter ending September 30, 2011

 

     For the Three Months Ending September 30, 2011      Year over Year  
     RMB      US$      % change  
     (in millions except for per ADS information)         

Target net revenues

     238.0 – 240.0         36.8 – 37.1         17.9 – 18.9

Target non-GAAP net income

     82.0 – 84.0         12.7 – 13.0         25.4 – 28.4

Target non-GAAP diluted earnings per ADS*

     3.07 – 3.15         0.47 – 0.49         22.8 – 26.0


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Outlook for the full fiscal year ending March 31, 2012

 

     For the Fiscal Year Ending March 31, 2012      Year over Year  
     RMB      US$      % change  
     (in millions except for per ADS information)         

Target net revenues

     970.0 – 995.0         150.1 – 153.9         15.2 – 18.1

Target non-GAAP net income

     315.0 – 325.0         48.7 – 50.3         15.4 – 19.0

Target non-GAAP diluted earnings per ADS*

     11.75 – 12.13         1.82 – 1.88         13.1 – 16.7

The above targets are based on the Company’s current views on 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 have recently implemented the first steps of two new initiatives which will support our long term growth,” commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. “We have established a collaboration with Da An Health for our domestic market as well as a collaboration with Leica Microsystems for both the domestic and the international markets. Da An Health is a fast growing independent laboratory service network serving mainly small and mid-size hospitals in China. We believe this collaboration will help us penetrate over time a new and big customer group for our molecular diagnostic products in a cost effective way. The collaboration with Leica Microsystems is to implement our strategy to enter the international market for our products through partnerships with leading global players. The partnership with Leica Microsystems substantially reduces our business risks and costs associated with entering the international market considering the complicated regulatory approval processes, medical reimbursement conditions and distribution channels in different countries and regions. The joint research and development with Leica Microsystems to automate our FISH probes on Leica’s BOND system is important for the high volume users such as independent laboratory service networks in major global markets as well as existing and potential high volume hospital users in China. We are working closely with our new partners to realize the value of these collaborations for all of us. Meanwhile, we are also in discussion with a number of leading global players for different types of collaborations for our other molecular diagnostic products.”

“Our DSO increased in recent quarters due to slower payment from some of our ECLIA distributors and the change in our sales mix,” commented Mr. Sam Tsang, Chief Financial Officer of the Company. “ECLIA distributors normally pay in about 3 months but some of them took longer time to pay in the past few quarters. Slower payments from distributors indicate a possible risk of bad debt, and we have recently taken measures to control this risk including lowering credit limit for certain slow paying distributors and control over the order fulfillment for these distributors according to their payments. Meanwhile, we are adding new distributors to diversify the risk. The change in sales mix relates to the increasing portion of our revenues from our molecular diagnostic products which we sell to hospitals directly. These hospitals normally pay us in 6 to 12 months and the bigger the hospital, the longer the payment cycle. However, we consider the risk of bad debt from these hospitals to be very low considering that they are tier 1 hospitals, have a strong financial position and are government-owned. Recently, we have increased compensation of our direct sales personnel based on collection from hospitals to increase incentive for collection. On the other hand, despite the increase in DSO in the past few quarters, we still generated sizeable cash flows from operations. We expect our DSO to become stable and decline in the coming quarters.”

“We are confident in handling our convertible debts before maturity,” further commented Mr. Sam Tsang. “The nearest maturity of convertible debts is approximately US$17 million in November this year which is a small amount considering our cash position of approximately US$192 million. The next maturity of approximately US$247 million of convertible debts will be in August 2013. We believe that our current cash position, our future free cash flows and our access to other sources of funds such as commercial banks in China will provide sufficient liquidity to pay off the debts before maturity. We have noticed that the debts have been trading at a substantial discount which is favorable to us.”


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1Q FY2011 Unaudited Financial Results

The Company reported net revenues of RMB237.1 million (US$36.7 million) for 1Q FY2011, representing a 27.4% increase from the corresponding period of FY2010.

The Company’s revenues are currently generated from two segments, molecular diagnostic systems and immunodiagnostic systems. The molecular diagnostic system segment mainly includes FISH products and SPR products while the immunodiagnostic system segment consists of ECLIA products.

Molecular diagnostic system sales for 1Q FY2011 were RMB156.1 million (US$24.2 million), representing a 44.5% increase from the corresponding period of FY2010. The year-over-year increase was primarily due to the increase in usage of the Company’s FISH probes by hospitals as well as the significant increase in sales of SPR-based HPV-DNA chips to hospitals during 1Q FY2011.

Immunodiagnostic system sales for 1Q FY2011 were RMB81.0 million (US$12.5 million), representing a 3.7% increase from the corresponding period of FY2010.

Gross margin was 62.9% for 1Q FY2011 which decreased year-over-year from 67.0% for the corresponding period of FY2010. The year-over-year decrease was primarily due to the reclassification 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. Such factor was partially offset by the positive impact of more contribution from the sales of FISH probes and HPV-DNA chips which generate higher gross margin and a decrease in the number of free ECLIA analyzers provided to distributors and free SPR analyzers provided to hospitals. Non-GAAP gross margin was 83.1% for 1Q FY2011 which increased year-over-year from 79.1% for the corresponding period of FY2010. The year-over-year increase in non-GAAP gross margin was primarily due to more contribution from the sales of FISH probes and HPV-DNA chips and the decrease in free ECLIA analyzers and SPR analyzers as noted above.

Research and development expenses were RMB10.8 million (US$1.7 million) for 1Q FY2011, representing a 1.1% year-over-year increase. The year-over-year increase was primarily due to an increase in salaries of research personnel offset by a decrease in stock compensation expense. Non-GAAP research and development expenses were RMB9.7 million (US$1.5 million) for 1Q FY2011, representing a 5.3% year-over-year increase. The year-over-year increase was primarily due to the increase in salaries of research personnel.

Sales and marketing expenses were RMB23.3 million (US$3.6 million) for 1Q FY2011, representing a 27.4% year-over-year increase. Non-GAAP sales and marketing expenses were RMB23.0 million (US$3.6 million) for 1Q FY2011, representing a 26.5% year-over-year increase. The year-over-year increases were primarily due to an increase in direct sales efforts for molecular diagnostic systems.

General and administrative expenses were RMB22.6 million (US$3.5 million) for 1Q FY2011, representing a 10.1% year-over-year decrease. The year-over-year decrease was primarily due to a decrease in stock compensation expense. Non-GAAP general and administrative expenses were RMB16.3 million (US$2.5 million) for 1Q FY2011, representing a 1.4% year-over-year increase.

Interest expense on convertible notes was RMB33.3 million (US$5.2 million) for 1Q FY2011. Non-GAAP interest expense on convertible notes was RMB32.4 million (US$5.0 million) for 1Q FY2011. As of June 30, 2011, the Company’s outstanding convertible notes of US$16.7 million, US$246.5 million and US$150.0 million in principal value bear interest at 3.5%, 4% and 6.25% per annum, respectively, and will mature in November 2011, August 2013 and December 2016, respectively.


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Interest expense related to amortization of convertible notes issuance costs was RMB4.0 million (US$0.6 million) for 1Q FY2011.

Interest expense related to amortization of share lending costs was RMB2.3 million (US$0.4 million) for 1Q FY2011.

Other income was RMB4.8 million (US$0.7 million) for 1Q FY2011, representing a 88.9% year-over-year decrease. The significant year-over-year decrease was primarily due to a decrease in gain on repurchase of convertible notes.

Income tax expense was RMB29.3 million (US$4.5 million) for 1Q FY2011. The high effective tax rate was due to the fact that 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 which the Company does not intend to permanently reinvest in China.

Net income was RMB35.7 million (US$5.5 million) for 1Q FY2011, representing a 6.1% increase from the corresponding period of FY2010. The year-over-year increase was primarily due to the increase in molecular diagnostic system sales offset by the decrease in gain on repurchase of convertible notes. Non-GAAP net income was RMB90.5 million (US$14.0 million) for 1Q FY2011, representing a 58.7% increase from the corresponding period of FY2010. The year-over-year increase was primarily due to the increase in molecular diagnostic system sales and other reasons mentioned above.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) was RMB150.6 million (US$23.3 million) for 1Q FY2011, representing a 6.1% increase from the corresponding period of FY2010. The year-over-year increase was primarily due to the increase in molecular diagnostic system sales offset by the decrease in gain on repurchase of convertible notes.

Adjusted EBITDA was RMB154.3 million (US$23.9 million) for 1Q FY2011, representing a 46.7% increase from the corresponding period of FY2010. The increase was primarily due to increased sales in 1Q FY2011.

Stock compensation expense for 1Q FY2011 was RMB7.8 million (US$1.2 million), of which RMB0.2 million was allocated to cost of revenues, RMB1.0 million to research and development expenses, RMB0.3 million to sales and marketing expenses and RMB6.3 million to general and administrative expenses.

Amortization of acquired intangible assets for 1Q FY2011 was RMB47.7 million (US$7.4 million) which was all allocated to cost of revenues.

As of June 30, 2011, the Company’s cash and cash equivalents were RMB1,239.5 million (US$191.8 million). Net cash generated from operating activities for 1Q FY2011 was RMB62.2 million (US$9.6 million). Net cash generated from investing activities for 1Q FY2011 was RMB96.7 million (US$15.0 million). Net cash used in financing activities for 1Q FY2011 was RMB41.6 million (US$6.4 million).

As of June 30, 2011, the Company’s net accounts receivable was RMB565.1 million (US$87.4 million), representing an increase of 17.5% from the balance at March 31, 2011. The increase in net accounts receivable was primarily due to the increase in molecular diagnostic system sales to hospital customers which normally pay in 6 to 12 months and the slower payments from certain distributors of immunodiagnostic systems.


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The Company evaluates the collectability of its accounts receivable based on the aging of account balances, collection history, credit quality of the customer and current economic conditions that may affect a customer’s ability to pay. The Company has recognized an allowance for doubtful accounts in its consolidated financial statements. The allowance for doubtful accounts increased by RMB2.4 million (US$0.4 million) to RMB28.8 million (US$4.4 million) as of June 30, 2011 from RMB26.4 million as of March 31, 2011.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.4635 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, June 30, 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 June 30, 2011 or at any other dates.


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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 ended June 30, 2010 and 2011. The Company also presented non-GAAP information, which included EBITDA and adjusted EBITDA, for the three months ended June 30, 2010 and 2011. 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.

 

 

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 as well as gain on repurchase of convertible notes.

 

 

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 as well as gain on repurchase of convertible notes.


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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 August 16, 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 1-866-783-2141

 

 

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 August 17, 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: 67816623

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 second fiscal quarter ending September 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  
         March 31, 2011     June 30, 2011  
         RMB     RMB     US$  
         (in thousands)  

Assets

      

Current assets

      

Cash and cash equivalents

     1,123,818        1,239,458        191,763   

Trade accounts receivable, net (1)

     481,096        565,061        87,422   

Inventories

     19,273        20,315        3,143   

Prepayments and other receivables

     18,952        12,833        1,986   

Due from a related party

     98,225        —          —     
    

 

 

   

 

 

   

 

 

 
 

Total current assets

     1,741,364        1,837,667        284,314   

Property, plant and equipment, net

     139,448        134,562        20,819   

Land use rights

     6,859        6,811        1,054   

Goodwill

     8,654        8,654        1,339   

Intangible assets, net

     2,973,358        2,891,353        447,335   

Convertible notes issuance costs

     55,817        51,148        7,913   

Share lending costs

     22,562        19,804        3,064   
    

 

 

   

 

 

   

 

 

 
 

Total assets

     4,948,062        4,949,999        765,838   
    

 

 

   

 

 

   

 

 

 

Liabilities

      

Current liabilities

      

Trade accounts payable

     44,502        51,575        7,979   

Accrued liabilities and other payables

     191,120        206,260        31,912   

Convertible notes

     146,081        107,136        16,576   

Income taxes payable

     77,954        91,939        14,224   
    

 

 

   

 

 

   

 

 

 
 

Total current liabilities

     459,657        456,910        70,691   

Convertible notes

     2,606,223        2,562,778        396,500   

Deferred income taxes

     91,596        98,985        15,314   
    

 

 

   

 

 

   

 

 

 
 

Total liabilities

     3,157,476        3,118,673        482,505   
    

 

 

   

 

 

   

 

 

 

Shareholders’ equity

      

Ordinary shares US$0.1 par value: 500,000,000 authorized; 322,680,001 issued and outstanding as of March 31, 2011 and June 30, 2011

     258,840        258,840        40,046   

Additional paid-in capital

     875,448        881,287        136,348   

Treasury stock

     (201,362     (201,362     (31,154

Accumulated other comprehensive loss

     (77,293     (78,120     (12,086

Retained earnings

     934,953        970,681        150,179   
    

 

 

   

 

 

   

 

 

 
 

Total shareholders’ equity

     1,790,586        1,831,326        283,333   
    

 

 

   

 

 

   

 

 

 
 

Total liabilities and shareholders’ equity

     4,948,062        4,949,999        765,838   
    

 

 

   

 

 

   

 

 

 
Note:       
         As of  
         March 31, 2011     June 30, 2011  
         RMB’000     RMB’000     US$’000  
(1)  

Trade accounts receivable

     507,482        593,814        91,871   
 

Allowance for doubtful accounts

     (26,386     (28,753     (4,449
    

 

 

   

 

 

   

 

 

 
 

Trade accounts receivable, net

     481,096        565,061        87,422   
    

 

 

   

 

 

   

 

 

 


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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  
     June 30, 2010     June 30, 2011  
     GAAP     Adjustments     Non-GAAP     GAAP     Adjustments     Non-GAAP  
     RMB     RMB     RMB     RMB     RMB     RMB  
     (in thousands except for per ADS information)  

Net revenues (1)

     186,170        —          186,170        237,111        —          237,111   

Cost of revenues (2)

     (61,354     22,466        (38,888     (87,880     47,920        (39,960
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     124,816        22,466        147,282        149,231        47,920        197,151   

Operating expenses

            

Research and development (3)

     (10,632     1,418        (9,214     (10,752     1,048        (9,704

Sales and marketing (3)

     (18,266     91        (18,175     (23,263     265        (22,998

General and administrative (3)

     (25,149     9,031        (16,118     (22,613     6,270        (16,343

Amortization of SPR intangible assets (4)

     (27,329     27,329        —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     (81,376     37,869        (43,507     (56,628     7,583        (49,045
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     43,440        60,335        103,775        92,603        55,503        148,106   

Interest income

     4,597        —          4,597        7,336        —          7,336   

Interest expense – convertible notes (5)

     (32,505     7,916        (24,589     (33,347     990        (32,357

Interest expense – amortization of convertible notes issuance costs

     (4,012     —          (4,012     (4,007     —          (4,007

Interest expense – amortization of share lending costs (6)

     (2,475     2,475        —          (2,343     2,343        —     

Other income (expense), net (7)

     43,295        (47,393     (4,098     4,794        (4,112     682   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax

     52,340        23,333        75,673        65,036        54,724        119,760   

Income tax expense

     (18,662     —          (18,662     (29,308     —          (29,308
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     33,678        23,333        57,011        35,728        54,724        90,452   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per ADS

            

- basic (8)

     1.30        0.89        2.19        1.36        2.08        3.44   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

- diluted (8)

     1.29        0.89        2.18        1.35        2.07        3.42   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of ADS

            

- basic (8)

     26,005,975        —          26,005,975        26,300,264        —          26,300,264   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

- diluted (8)

     26,128,403        —          26,128,403        26,485,024        —          26,485,024   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


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  
     June 30, 2011  
     GAAP     Adjustments     Non-GAAP  
     US$     US$     US$  
     (in thousands except for per ADS information)  

Net revenues (1)

     36,685        —          36,685   

Cost of revenues (2)

     (13,597     7,414        (6,183
  

 

 

   

 

 

   

 

 

 

Gross profit

     23,088        7,414        30,502   

Operating expenses

      

Research and development (3)

     (1,664     163        (1,501

Sales and marketing (3)

     (3,599     41        (3,558

General and administrative (3)

     (3,498     970        (2,528

Amortization of SPR intangible assets (4)

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     (8,761     1,174        (7,587
  

 

 

   

 

 

   

 

 

 

Operating income

     14,327        8,588        22,915   

Interest income

     1,135        —          1,135   

Interest expense – convertible notes (5)

     (5,159     153        (5,006

Interest expense – amortization of convertible notes issuance costs

     (620     —          (620

Interest expense – amortization of share lending costs (6)

     (363     363        —     

Other income (expense), net (7)

     742        (637     105   
  

 

 

   

 

 

   

 

 

 

Income before income tax

     10,062        8,467        18,529   

Income tax expense

     (4,534     —          (4,534
  

 

 

   

 

 

   

 

 

 

Net income

     5,528        8,467        13,995   
  

 

 

   

 

 

   

 

 

 

Earnings per ADS

      

- basic (8)

     0.21        0.32        0.53   
  

 

 

   

 

 

   

 

 

 

- diluted (8)

     0.21        0.32        0.53   
  

 

 

   

 

 

   

 

 

 

Weighted average number of ADS

      

- basic (8)

     26,300,264        —          26,300,264   
  

 

 

   

 

 

   

 

 

 

- diluted (8)

     26,485,024        —          26,485,024   
  

 

 

   

 

 

   

 

 

 

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.4635 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, June 30, 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 June 30, 2011 or at any other dates.


Table of Contents

Notes:

 

          For the Three Months Ended  
          June 30, 2010      June 30, 2011  
          RMB’000      RMB’000      US$’000  
(1)   

Net revenues

        
  

- Molecular diagnostic systems

     108,092         156,144         24,158   
  

- Immunodiagnostic systems

     78,078         80,967         12,527   
     

 

 

    

 

 

    

 

 

 
        186,170         237,111         36,685   
     

 

 

    

 

 

    

 

 

 
  

Molecular diagnostic systems

        
  

- HPV-DNA chips

     18         14,050         2,174   
     

 

 

    

 

 

    

 

 

 

 

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

 

     For the Three Months Ended  
     June 30, 2010      June 30, 2011  
     RMB’000      RMB’000      US$’000  

Stock compensation expense

     52         243         38   

Amortization of acquired intangible assets

     22,414         47,677         7,376   
  

 

 

    

 

 

    

 

 

 
     22,466         47,920         7,414   
  

 

 

    

 

 

    

 

 

 

 

(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  
     June 30, 2010      June 30, 2011  
     RMB’000      RMB’000      US$’000  

Gain on repurchase of convertible notes

     47,393         4,112         637   
  

 

 

    

 

 

    

 

 

 

 

(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.


Table of Contents

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

     For the Three Months Ended  
     March 31, 2011     June 30, 2011  
     RMB     RMB     US$  
     (in thousands)  

Cash flow from operating activities:

      

Net income

     16,095        35,728        5,528   

Adjustments to reconcile net income to net cash provided by operating activities:

      

Exchange loss

     3,216        1,180        183   

Depreciation and amortization of property, plant and equipment

     5,510        5,501        851   

Amortization of intangible assets

     48,185        47,677        7,376   

Non-cash interest expense on convertible notes

     1,387        990        153   

Amortization of convertible notes issuance costs

     4,150        4,007        620   

Amortization of share lending costs

     2,386        2,343        363   

Stock compensation expense

     8,519        7,826        1,212   

Land use rights expense

     47        48        7   

Loss on disposal of property, plant and equipment

     30        41        6   

Deferred income taxes

     6,660        7,389        1,143   

Gain on repurchase of convertible notes

     (1,570     (4,112     (637

Provision for allowance for doubtful accounts

     6,020        2,367        366   

Changes in operating assets and liabilities:

      

Trade accounts receivable

     (89,377     (86,332     (13,357

Prepayments and other receivables

     (5,058     1,846        286   

Inventories

     (2,633     (1,042     (161

Accounts payable

     25        7,073        1,094   

Accrued liabilities and other payables

     19,652        15,728        2,433   

Income taxes payable

     14,095        13,985        2,164   
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     37,339        62,243        9,630   
  

 

 

   

 

 

   

 

 

 

Cash flow from investing activities:

      

Purchase of property, plant and equipment

     (737     (656     (102

Purchase of intangible assets

     (274     —          —     

Proceeds from sale of HIFU business

     19,800        97,358        15,063   
  

 

 

   

 

 

   

 

 

 

Net cash provided by investing activities

     18,789        96,702        14,961   
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities:

      

Payment for repurchase of convertible notes

     (41,670     (41,621     (6,439

Prepayment for repurchase of convertible notes

     (4,127     —          —     

Payment for transaction cost for issuance of convertible notes

     (1,647     —          —     

Payment for high yield note offering expenses

     (1,477     —          —     
  

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (48,921     (41,621     (6,439
  

 

 

   

 

 

   

 

 

 

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

     (2,773     (1,684     (260
  

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     4,434        115,640        17,892   

Cash and cash equivalents at beginning of period

     1,119,384        1,123,818        173,871   
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

     1,123,818        1,239,458        191,763   
  

 

 

   

 

 

   

 

 

 


Table of Contents

China Medical Technologies, Inc.

EBITDA and Adjusted EBITDA Measures

 

     For the Three Months Ended  
     June 30, 2010     June 30, 2011  
     RMB     RMB     US$  
     (in thousands)  

Net income

     33,678        35,728        5,528   

Adjustments:

      

Interest income

     (4,597     (7,336     (1,135

Interest expense – convertible notes

     32,505        33,347        5,159   

Interest expense – amortization of convertible notes issuance costs

     4,012        4,007        620   

Interest expense – amortization of share lending costs

     2,475        2,343        363   

Income tax expense

     18,662        29,308        4,534   
  

 

 

   

 

 

   

 

 

 

EBIT (1)

     86,735        97,397        15,069   

Adjustments:

      

Depreciation

     5,475        5,501        851   

Amortization

     49,743        47,677        7,376   
  

 

 

   

 

 

   

 

 

 

EBITDA (2)

     141,953        150,575        23,296   
  

 

 

   

 

 

   

 

 

 

EBITDA (2)

     141,953        150,575        23,296   

Adjustments:

      

Stock compensation expense

     10,592        7,826        1,212   

Gain on repurchase of convertible notes

     (47,393     (4,112     (637
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (3)

     105,152        154,289        23,871   
  

 

 

   

 

 

   

 

 

 

Notes:

 

(1) EBIT represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense and income tax expense.
(2) EBITDA represents net income reported in accordance with GAAP, excluding the effects of interest income, interest expense, income tax expense, depreciation and amortization.
(3) Adjusted EBITDA represents EBITDA excluding the effects of stock compensation expense and gain on repurchase of convertible notes.
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