BEIJING, Nov. 17, 2010 /PRNewswire-Asia-FirstCall/ -- China Medical Technologies, Inc. (the "Company") (Nasdaq: CMED), a leading China-based advanced in-vitro diagnostic ("IVD") company, today announced its unaudited financial results for the second fiscal quarter ended September 30, 2010 ("2Q FY2010").
2Q FY2010 Highlights
Outlook for 3Q FY2010
Outlook for FY2010
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 to see the commencement of contribution from sales of HPV-DNA chips which are expected to become another main revenue stream and an important growth driver in addition to our FISH business during the next few years. We have received strong interest in our SPR equipment from many of our top tier hospital customers and significant purchase orders on our chips from hospitals which have used our chips for their patients on a regular basis. We expect substantial growth on sales of our chips in upcoming quarters. In addition, our FISH business continued its growth momentum and our ECLIA business has resumed year-over-year growth," commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company.
2Q FY2010 Unaudited Financial ResultsThe Company reported revenues of RMB201.8 million (US$30.2 million) for 2Q FY2010, representing a 21.5% 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.
Molecular diagnostic system sales for 2Q FY2010 were RMB118.3 million (US$17.7 million), representing a 32.6% 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 served by the Company's direct sales personnel as well as the sales of SPR-based HPV-DNA chips of RMB3.8 million (US$0.6 million) to hospitals during 2Q FY2010.
Immunodiagnostic system sales for 2Q FY2010 were RMB83.5 million (US$12.5 million), representing an 8.7% 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 55.2% for 2Q FY2010 which decreased year-over-year from 65.4% for the corresponding period of FY2009. Due to the commencement of sales of HPV-DNA chips, the amortization of SPR intangible assets amounted to RMB27.3 million (US$4.1 million) was classified from operating expenses to cost of revenues starting from 2Q FY2010. The year-over-year decrease in gross margin was primarily due to this change in classification. The gross margin for 2Q FY2010 would be 68.6% without this change in classification of expense.
Research and development expenses were RMB10.9 million (US$1.6 million) for 2Q FY2010, representing a 14.5% 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 RMB21.5 million (US$3.2 million) for 2Q FY2010, representing a 23.2% year-over-year increase. The year-over-year increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems.
General and administrative expenses were RMB25.0 million (US$3.7 million) for 2Q FY2010, representing a 44.5% year-over-year decrease. The year-over-year decrease was primarily due to no cost of independent internal investigation and lower allowance for doubtful accounts for 2Q FY2010.
Interest expense on convertible notes was RMB32.0 million (US$4.8 million) for 2Q FY2010. As of September 30, 2010, the Company's outstanding convertible notes of US$135 million and US$248 million bear interest at 3.5% and 4% per annum, respectively, and will mature in November 2011 and August 2013, respectively.
Interest expense on amortization of convertible notes issuance costs was RMB3.9 million (US$0.6 million) for 2Q FY2010.
Interest expense on amortization of share lending costs was RMB2.5 million (US$0.4 million) for 2Q FY2010.
Income tax expense was RMB21.8 million (US$3.3 million) for 2Q 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 2Q FY2010.
Net loss was RMB2.9 million (US$0.4 million) for 2Q FY2010, representing a 94.1% decrease from the corresponding period of FY2009. The significant year-over-year decrease in net loss was primarily due to growth in molecular diagnostic system sales and recovery from immunodiagnostic system sales.
Non-GAAP net income, as defined below, was RMB65.4 million (US$9.8 million) for 2Q FY2010, representing a 270.1% increase from the corresponding period of FY2009.
Earnings before interest, taxes, depreciation and amortization ("EBITDA") was RMB107.1 million (US$16.0 million) for 2Q FY2010, representing a 66.8% increase from the corresponding period of FY2009.
Adjusted EBITDA, which excludes stock compensation expense and gain on purchase of convertible notes from EBITDA, was RMB116.3 million (US$17.4 million) for 2Q FY2010, representing a 62.6% increase from the corresponding period of FY2009.
Stock compensation expense for 2Q FY2010 was RMB9.2 million (US$1.4 million), of which RMB0.1 million was allocated to cost of revenues, RMB1.1 million to research and development expenses, RMB0.2 million to sales and marketing expenses and RMB7.8 million to general and administrative expenses. The Company approved the grant of 2,100,000 restricted stock, equivalent to 210,000 ADSs, to directors, officers and certain employees on November 5, 2010. The restricted stock vests at the end of a three-year period.
Amortization of acquired intangible assets for 2Q FY2010 was RMB49.4 million (US$7.4 million) which was all allocated to cost of revenues.
As of September 30, 2010, the Company's cash and cash equivalents was RMB805.9 million (US$120.5 million). Net cash generated from operating activities for 2Q FY2010 was RMB67.3 million (US$10.1 million). Net cash used in investing activities for 2Q FY2010 was RMB1.2 million (US$0.2 million). There was no financing activity for 2Q FY2010.
As of September 30, 2010, the Company's net accounts receivable was RMB333.1 million (US$49.8 million), representing an increase of 7.0% from the balance at June 30, 2010.
For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.6905 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, September 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 September 30, 2010 or at any other dates.
Update on Receivable from ChengxuanThe receivable of US$30 million from Chengxuan, one of the Company's major shareholders and owned by Mr. Xiaodong Wu, is due on December 31, 2010 which relates to the sale of the Company's HIFU business to Chengxuan. Chengxuan made an early payment of US$8 million to the Company in November 2010 and has indicated to the Company that the remaining amount will be paid on or before December 31, 2010.
Non-GAAP Measure DisclosuresThe Company provides gross profit, operating income, net income, earnings per ADS, EBITDA and adjusted EBITDA on a Non-GAAP basis to enable investors to better assess the Company's operating performance. The Non-GAAP measures described by the Company are reconciled to the corresponding GAAP measures in the exhibit below titled "Reconciliations of GAAP measures to Non-GAAP measures".
The Company reported for 2Q FY2010 and provided estimates of net income and diluted earnings per ADS for 3Q FY2010 and full year FY2010 on a Non-GAAP basis. Each of the terms used by the Company is defined as follows:
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 CallThe Company's senior management team will host an earnings conference call at 8:00 a.m. U.S. Eastern Time on November 17, 2010 (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 1-800-591-6923International Dial-in Number 1-617-614-4907Passcode: CMEDCALLA 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 November 18, 2010.
The dial-in details for the replay are as follows:U.S. Toll Free Number 1-888-286-8010International Dial-in Number 1-617-801-6888Passcode: 10798661About China Medical Technologies, Inc.China Medical Technologies, Inc. is a leading China-based advanced IVD company using molecular diagnostic technologies including Fluorescent in situ Hybridization (FISH) and Surface Plasmon Resonance (SPR) and an immunodiagnostic technology, Enhanced Chemiluminescence Immunoassay (ECLIA), to develop, manufacture and distribute diagnostic products used for the detection of various cancers, diseases and disorders as well as companion diagnostic tests for targeted cancer drugs. The Company generates all of its revenues in China through the sale of diagnostic consumables including FISH probes, SPR-based DNA chips and ECLIA reagent kits to hospitals which are recurring users of the consumables for their patients. The Company sells FISH probes and SPR chips to large hospitals through its direct sales force and ECLIA reagent kits to small and mid-size hospitals through distributors. For more information, please visit http://www.chinameditech.com.
Safe Harbor StatementThis press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the quotations from management in this press release, as well as its outlook for 3Q 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.
ContactsSam Tsang and Winnie YamTel: +852-2511-9808Email: IR@chinameditech.comChina Medical Technologies, Inc.Unaudited Condensed Consolidated Balance SheetsAs ofMarch 31,
2010RMBRMBRMBUS$(in thousands)AssetsCurrent assetsCash and cash equivalents
120,455Trade accounts receivable, net
3,191Prepayments and other receivables
2,854Due from a related party
30,000 Total current assets
206,291Property, plant and equipment, net
22,024Land use rights
1,293Intangible assets, net
467,651Convertible notes issuance costs
5,199Share lending costs
707,668Liabilities Current liabilitiesTrade accounts payable
6,570Accrued liabilities and other payables
25,960Income taxes payable
8,869Total current liabilities
377,976Deferred income taxes
431,095Shareholders' equityOrdinary shares US$0.1 par value:
500,000,000 authorized; 322,680,001 issued and outstanding as of March 31, 2010, June 30, 2010 and September 30, 2010
38,688Additional paid-in capital
(7,041)Accumulated other comprehensive loss
131,990Total shareholders' equity
276,573Total liabilities and shareholders' equity
707,668China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of IncomeFor the Three Months EndedSeptember 30, 2009June 30, 2010September 30, 2010RMBRMBRMBUS$ As adjusted (4)(in thousands except for per ADS information)Revenues, net (1)
30,167Cost of revenues (2)
16,644Operating expensesResearch and development (2)
(1,625)Sales and marketing (2)
(3,209)General and administrative (2)
(3,744) Amortization of SPR intangible assets
-Total operating expenses
765Interest expense – convertible notes
(4,786)Interest expense – amortization of convertible notes issuance costs
(584)Interest expense – amortization of share lending costs
(367) Other (expense) income, net
(269)Income (loss) before income tax
2,825Income tax expense
(3,263)Net income (loss)
(438)Earnings (loss) per ADS- basic
(0.02)- diluted (3)
(0.02)Weighted average number of ADS- basic
26,117,308- diluted (3)
26,117,308Notes:(1) Revenues, net
RMB'000RMB'000RMB'000US$'000- Molecular diagnostic systems
17,689- Immunodiagnostic systems
30,167Molecular diagnostic systems
- HPV-DNA chips
568(2) Stock compensation expense
RMB'000RMB'000RMB'000US$'000- Cost of revenues
18- Research and development
171- Sales and marketing
30- General and administrative
1,381(3) Interest expense and amortization in connection with convertible notes were not added back in computing diluted earnings per ADS because they were anti-dilutive.(4) 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 September 30, 2009 retrospectively in accordance with GAAP.China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Cash FlowsFor the Three Months EndedSeptember 30, 2009June 30, 2010September 30, 2010RMBRMBRMBUS$(in thousands)Net cash provided by operating activities
10,059Net cash used in investing activities
(186)Net cash provided by (used in) financing activities
-Effect of foreign currency exchange rate change on cash
(372)Net increase (decrease) in cash and cash equivalents
9,501Cash and cash equivalents:At beginning of period
110,954At end of period
120,455China Medical Technologies, Inc.Reconciliations of GAAP measures to Non-GAAmeasuresFor the Three Months EndedSeptember 30, 2009June 30, 2010September 30, 2010 RMBRMBRMBUS$As adjusted (2)(in thousands except for per ADS information)Gross profit
16,644Adjustments:Stock compensation expense
18 Amortization of acquired intangible assets
7,386Non-GAAP gross profit
55.2%Non-GAAP gross margin
8,066Adjustments:Stock compensation expense
1,381Amortization of acquired intangible assets
7,386Non-GAAP operating income
26.7%Non-GAAP operating margin
55.8%Net income (loss)
(438)Adjustments:Stock compensation expense
1,381Amortization of acquired intangible assets
7,386Non-cash interest expense of convertible notes
1,079Non-cash interest expense – amortization of share lending costs
367Gain on purchase of convertible notes
-Non-GAAP net income
9,775GAAP net margin
-Non-GAAP net margin
32.4%Net income (loss)
(765)Interest expense – convertible notes
4,786Interest expense – amortization of convertible notes issuance costs
584Interest expense – amortization of share lending costs
367Income tax expense
822Amortization of acquired intangible assets
16,005Adjustments:Stock compensation expense
1,381Gain on purchase of convertible notes
17,386Adjusted EBITDA margin
57.6%Earnings (loss) per ADS- basic
(0.02)Non-GAAP earnings per ADS- basic
0.37- diluted (1)
0.37Weighted average number of ADS- basic
26,117,308- diluted (1)
26,117,308Notes:(1) Interest expense and amortization in connection with convertible notes were not added back in computing non-GAAP diluted earnings per ADS because they were anti-dilutive.(2) 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 September 30, 2009 retrospectively in accordance with GAAP.
|SOURCE China Medical Technologies, Inc.|
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