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China Medical Technologies Reports Second Fiscal Quarter Financial Results
Date:11/18/2011

BEIJING, Nov. 18, 2011 /PRNewswire-Asia-FirstCall/ -- 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 second fiscal quarter ended September 30, 2011 ("2Q FY2011") today.

2Q FY2011and Six Months Ended September 30, 2011 HighlightsFor the Three Months EndedSeptember 30,
2010September 30,
2011September 30,
2011RMBRMBUS$% change(in thousands except for per ADS information)Net revenues201,834238,45037,38618.1%Net income (loss)(2,936)33,3435,228n/aDiluted earnings (loss) per ADS*(0.11)1.260.20n/aNon-GAAP net income65,40189,55714,04236.9%Non-GAAP diluted earnings per ADS*2.503.380.5335.2%Adjusted EBITDA116,314151,35123,73030.1%For the Three Months EndedJune 30,
2011September 30,
2011September 30,
2011RMBRMBUS$% change(in thousands)Net cash provided by operating 
activities62,24379,05312,39527.0%For the Six Months EndedSeptember 30,
2010September 30,
2011September 30,
2011RMBRMBUS$% change(in thousands except for per ADS information)Net revenues388,004475,56174,56322.6%Net income30,74269,07110,830124.7%Diluted earnings per ADS*1.182.610.41121.2%Non-GAAP net income122,412180,00928,22447.1%Non-GAAP diluted earnings per ADS*4.686.791.0745.1%Adjusted EBITDA221,466305,64047,92138.0%Outlook for the hirdFiscal Quarter Ending December31, 2011For the Three Months Ending December 31, 2011Year over YearRMBUS$% change(in millions except for per ADS information)Target net revenues245.0 – 250.0

38.4 – 39.2

9.4 – 11.6%Target non-GAAP net income85.0 –  88.0

13.3 – 13.8

12.4 – 16.3%Target non-GAAP diluted earnings per ADS*3.20 –  3.30

0.50 – 0.52

11.5 – 15.0%Outlook for the Full Fiscal Year Ending March 31, 2012For the Fiscal Year Ending March 31, 2012Year over YearRMBUS$% change(in millions except for per ADS information)Target net revenues970.0 – 980.0

152.1 – 153.7

15.2 – 16.3%Target non-GAAP net income335.0 – 340.0

52.5 –  53.3

22.7 – 24.5%Target non-GAAP diluted earnings per ADS*12.40 – 12.60

1.94 –  1.98

19.3 – 21.3%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 are pleased to receive SFDA approval on our second PCR-based companion diagnostic assay on KRAS mutation for colorectal cancer targeted drug. We see huge potential on personalized medicine for cancer patients in China and will continue to develop this market segment." commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company.

2Q FY2011 Unaudited Financial ResultsThe Company reported net revenues of RMB238.5 million (US$37.4 million) for 2Q FY2011, representing an 18.1% 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 2Q FY2011 were RMB164.0 million (US$25.7 million), representing a 38.5% 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 2Q FY2011.

Immunodiagnostic system sales for 2Q FY2011 were RMB74.5 million (US$11.7 million), representing a 10.8% decrease from the corresponding period of FY2010. The year-over-year decrease was primarily due to more stringent control over credit sales to distributors so as to mitigate the risk and magnitude of bad debts.

Gross margin was 64.9% for 2Q FY2011 which increased year-over-year from 55.2% for the corresponding period of FY2010. Non-GAAP gross margin was 84.8% for 2Q FY2011 which increased year-over-year from 79.7% for the corresponding period of FY2010. The year-over-year increase in gross margins was primarily due to more contribution from the sales of FISH probes and HPV-DNA chips which generated higher gross margin and a substantial reduction in the Company's provision of free ECLIA analyzers and SPR analyzers. The reduction in the provision of free analyzers resulted from the above-mentioned more stringent control over credit sales to ECLIA distributors and the research and development of a new generation of SPR analyzer.

Research and development expenses were RMB11.0 million (US$1.7 million) for 2Q FY2011, representing a 1.3% year-over-year increase. Non-GAAP research and development expenses were RMB10.4 million (US$1.6 million) for 2Q FY2011, representing a 6.9% year-over-year increase.

Sales and marketing expenses were RMB30.2 million (US$4.7 million) for 2Q FY2011, representing a 40.6% year-over-year increase. Non-GAAP sales and marketing expenses were RMB30.0 million (US$4.7 million) for 2Q FY2011, representing a 41.0% year-over-year increase. The year-over-year increases were primarily due to the increase in direct sales efforts for molecular diagnostic systems and sales incentives to direct sales personnel.

General and administrative expenses were RMB21.9 million (US$3.4 million) for 2Q FY2011, representing a 12.7% 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 RMB17.2 million (US$2.7 million) for 2Q FY2011, representing a 0.4% year-over-year decrease.

Interest expense on convertible notes was RMB32.7 million (US$5.1 million) for 2Q FY2011. Non-GAAP interest expense on convertible notes was RMB31.8 million (US$5.0 million) for 2Q FY2011. As of September 30, 2011, the Company had outstanding convertible notes of US$16.7 million in principal value which bore interest at 3.5% and matured in November 2011, and US$246.5 million and US$150.0 million in principal value of outstanding convertible notes which bear interest at 4% and 6.25% per annum, respectively, and matured or will mature in August 2013 and December 2016, respectively.

Interest expense related to amortization of convertible notes issuance costs was RMB3.9 million (US$0.6 million) for 2Q FY2011.

Interest expense related to amortization of share lending costs was RMB2.3 million (US$0.4 million) for 2Q FY2011.

Other income was RMB1.2 million (US$0.2 million) for 2Q FY2011.

Income tax expense was RMB29.4 million (US$4.6 million) for 2Q FY2011. The consistently 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 accrues for withholding income tax on distributable earnings generated in China which the Company does not intend to permanently reinvest in China.

Net income was RMB33.3 million (US$5.2 million) for 2Q FY2011, compared to net loss of RMB2.9 million for the corresponding period of FY2010. Non-GAAP net income was RMB89.6 million (US$14.0 million) for 2Q FY2011, representing a 36.9% increase from the corresponding period of FY2010. The year-over-year increases were primarily due to the increase in molecular diagnostic system sales and other reasons mentioned above.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") was RMB145.5 million (US$22.8 million) for 2Q FY2011, representing a 35.9% increase from the corresponding period of FY2010. The year-over-year increase was primarily due to the increase in molecular diagnostic system sales.

Adjusted EBITDA was RMB151.4 million (US$23.7 million) for 2Q FY2011, representing a 30.1% increase from the corresponding period of FY2010. The year-over-year increase was primarily due to the increase in molecular diagnostic system sales.

Stock compensation expense for 2Q FY2011 was RMB5.9 million (US$0.9 million), of which RMB0.4 million was allocated to cost of revenues, RMB0.6 million to research and development expenses, RMB0.2 million to sales and marketing expenses and RMB4.7 million to general and administrative expenses. The Company approved the grant of 4,500,000 restricted shares, equivalent to 450,000 ADSs, to directors, officers and certain employees on November 7, 2011. The restricted shares vest at the end of a two-year period.

Amortization of acquired intangible assets for 2Q FY2011 was RMB47.2 million (US$7.4 million) which was all allocated to cost of revenues.

As of September 30, 2011, the Company's cash and cash equivalents were RMB1,316.8 million (US$206.5 million). Net cash generated from operating activities for 2Q FY2011 was RMB79.1 million (US$12.4 million). Net cash used in investing activities for 2Q FY2011 was RMB0.6 million (US$0.1 million). There was no financing activity for 2Q FY2011.

As of September 30, 2011, the Company's net accounts receivable balance was RMB638.5 million (US$100.1 million), representing an increase of 13.0% from the balance at June 30, 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 slower payments from certain distributors of immunodiagnostic systems.

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 RMB4.8 million (US$0.8 million) to RMB33.6 million (US$5.3 million) as of September 30, 2011 from RMB28.8 million as of June 30, 2011.

Six MonthsEnded September 30, 2011Unaudited Financial ResultsRevenues were RMB475.6 million (US$74.6 million) for the six months ended September 30, 2011, representing a 22.6% increase from the corresponding period of FY2010. The year-over-year increase in revenues was primarily due to the increase in molecular diagnostic system sales which was offset in part by the decrease in immunodiagnostic system sales.

Gross margin was 63.9% for the six months ended September 30, 2011 which increased year-over-year from 60.9% for the corresponding period of FY2010. Non-GAAP gross margin was 84.0% for the six months ended September 30, 2011 which increased year-over-year from 79.4% for the corresponding period of FY2010. The year-over-year increase in gross margins was primarily due to more contribution from the sales of FISH probes and HPV-DNA chips which generated higher gross margin and the substantial reduction in the Company's provision of free ECLIA analyzers and SPR analyzers as noted above.

Research and development expenses were RMB21.8 million (US$3.4 million) for the six months ended September 30, 2011, representing a 1.2% year-over-year increase. Non-GAAP research and development expenses were RMB20.1 million (US$3.2 million) for the six months ended September 30, 2011, representing a 6.1% year-over-year increase.

Sales and marketing expenses were RMB53.4 million (US$8.4 million) for the six months ended September 30, 2011, representing a 34.5% year-over-year increase. Non-GAAP sales and marketing expenses were RMB53.0 million (US$8.3 million) for the six months ended September 30, 2011, representing a 34.3% year-over-year increase. The year-over-year increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems and sales incentives to direct sales personnel.

General and administrative expenses were RMB44.5 million (US$7.0 million) for the six months ended September 30, 2011, representing an 11.4% 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 RMB33.5 million (US$5.3 million) for the six months ended September 30, 2011, representing a 0.5% year-over-year decrease.

Net income was RMB69.1 million (US$10.8 million) for the six months ended September 30, 2011, which improved significantly from RMB30.7 million for the corresponding period of FY2010. Non-GAAP net income was RMB180.0 million (US$28.2 million) for the six months ended September 30, 2011, representing a 47.1% increase from the corresponding period of FY2010.

EBITDA was RMB296.1 million (US$46.4 million) for the six months ended September 30, 2011, representing an 18.9% increase from the corresponding period of FY2010.

Adjusted EBITDA was RMB305.6 million (US$47.9 million) for the six months ended September 30, 2011, representing a 38.0% increase from the corresponding period of FY2010.

Stock compensation expense for the six months ended September 30, 2011 was RMB13.7 million (US$2.1 million), of which RMB0.6 million was allocated to cost of revenues, RMB1.7 million to research and development expenses, RMB0.4 million to sales and marketing expenses and RMB11.0 million to general and administrative expenses.

Amortization of acquired intangible assets for the six months ended September 30, 2011 was RMB94.8 million (US$14.9 million), which was all allocated to cost of revenues.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.3780 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 Friday, September 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 September 30, 2011 or at any other dates.

Non-GAAP Measure DisclosuresThe Company reported its operating results in accordance with U.S. generally accepted accounting principles ("GAAP") for the three months and six months ended September 30, 2010 and 2011, respectively. The Company also presented non-GAAP information for the three months and six months ended September 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.

  • 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 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 1-866-519-4004
    - International Dial-in Number 1-718-354-1231
    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 November 19, 2011.  

    The dial-in details for the replay are as follows:
    - U.S. Toll Free Number 1-866-214-5335
    - International Dial-in Number 1-718-354-1232
    Passcode: 22980262

    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 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 "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 third fiscal quarter ending December 31, 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.

    ContactsWinnie Yam
    Tel: 852-2511-9808
    Email: IR@chinameditech.com

    China Medical Technologies, Inc.Unaudited Condensed Consolidated Balance SheetsAs ofJune 30, 2011September 30, 2011RMBRMBUS$(in thousands)AssetsCurrent assetsCash and cash equivalents

    1,239,4581,316,837206,466Trade accounts receivable, net (1)

    565,061638,506100,110Inventories

    20,31520,4063,199Prepayments and other receivables

    12,83311,9851,879Total current assets

    1,837,6671,987,734311,654Property, plant and equipment, net

    134,562129,66120,330Land use rights

    6,8116,7631,060Goodwill

    8,6548,6541,357Intangible assets, net 

    2,891,3532,810,152440,601Convertible notes issuance costs

    51,14846,7137,324Share lending costs

    19,80417,2442,704Total assets

    4,949,9995,006,921785,030Liabilities Current liabilitiesTrade accounts payable

    51,57553,3858,370Accrued liabilities and other payables 

    206,260222,33434,860Convertible notes

    107,136106,62216,717Income taxes payable

    91,939110,74917,364Total current liabilities

    456,910493,09077,311Convertible notes

    2,562,7782,528,877396,500Deferred income taxes

    98,985106,15516,644Total liabilities

    3,118,6733,128,122490,455Shareholders' equityOrdinary shares US$0.1 par value:
    500,000,000 authorized; 322,680,001 issued and 
    outstanding as of June 30, 2011 and 324,080,001 issued 
    and outstanding as of September 30, 2011

    258,840259,73840,724Additional paid-in capital

    881,287895,888140,465Treasury stock

    (201,362)(201,362)(31,571)Accumulated other comprehensive loss

    (78,120)(79,489)(12,463)Retained earnings

    970,6811,004,024157,420Total shareholders' equity

    1,831,3261,878,799294,575Total liabilities and shareholders' equity

    4,949,9995,006,921785,030Note:As ofJune 30, 2011September 30, 2011RMB'000RMB'000US$'000(1) Trade accounts receivable

    593,814672,154105,386Allowance for doubtful accounts

    (28,753)(33,648)(5,276)Trade accounts receivable, net

    565,061638,506100,110China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Income andReconciliations of GAAP Measures to Non-GAAMeasuresFor the Three Months EndedFor the Three Months EndedSeptember 30, 2010September 30, 2011GAAPAdjustmentsNon-GAAPGAAPAdjustmentsNon-GAAPRMBRMBRMBRMBRMBRMB(in thousands except for per ADS information)Net revenues (1)

    201,834-201,834238,450-238,450Cost of revenues (2)

    (90,477)49,539(40,938)(83,713)47,523(36,190)Gross profit

    111,35749,539160,896154,73747,523202,260Operating expensesResearch anddevelopment (3)

    (10,877)1,145(9,732)(11,014)607(10,407)Sales and marketing (3)

    (21,473)204(21,269)(30,183)191(29,992)General andadministrative (3)

    (25,048)7,772(17,276)(21,877)4,673(17,204)Total operating expenses

    (57,398)9,121(48,277)(63,074)5,471(57,603)Operating income

    53,95958,660112,61991,66352,994144,657Interest income

    5,119-5,1198,820-8,820Interest expense –convertible notes (4)

    (32,019)7,221(24,798)(32,699)908(31,791)Interest expense – 
    amortization of 
    convertible notes 
    issuance costs

    (3,906)-(3,906)(3,943)-(3,943)Interest expense –amortization ofshare lending costs (5)

    (2,456)2,456-(2,312)2,312-Other income (expense),net

    (1,802)-(1,802)1,193-1,193Income beforeincome tax

    18,89568,33787,23262,72256,214118,936Income tax expense

    (21,831)-(21,831)(29,379)-(29,379)Net income (loss)

    (2,936)68,33765,40133,34356,21489,557Earnings (loss) per ADS- basic (6)

    (0.11)2.612.501.262.123.38- diluted (6)

    (0.11)2.612.501.262.123.38Weighted average
    number of ADS- basic (6)

    26,117,308-26,117,30826,495,308-26,495,308- diluted (6)

    26,117,308-26,117,30826,513,672-26,513,672China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Income andReconciliations of GAAP Measures to Non-GAAMeasuresConvenience Translation for Reference OnlyFor the Three Months EndedSeptember 30, 2011GAAPAdjustmentsNon-GAAPUS$US$US$(in thousands except for per ADS information)Net revenues (1)

    37,386-37,386Cost of revenues (2)

    (13,125)7,451(5,674)Gross profit

    24,2617,45131,712Operating expensesResearch and development (3)

    (1,727)95(1,632)Sales and marketing (3)

    (4,732)30(4,702)General and administrative (3)

    (3,430)733(2,697)Total operating expenses

    (9,889)858(9,031)Operating income

    14,3728,30922,681Interest income

    1,383-1,383Interest expense – convertible notes (4)

    (5,127)143(4,984)Interest expense – amortization ofconvertible notes issuance costs

    (619)-(619)Interest expense – amortization ofshare lending costs (5)

    (362)362-Other income (expense), net

    187-187Income before income tax

    9,8348,81418,648Income tax expense

    (4,606)-(4,606)Net income

    5,2288,81414,042Earnings per ADS- basic (6)

    0.200.330.53- diluted (6)

    0.200.330.53Weighted average number of ADS- basic (6)

    26,495,308-26,495,308- diluted (6)

    26,513,672-26,513,672For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of
    RMB6.3780 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 Friday, September 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 September 30, 2011 or at any other dates.Notes:For
     the Three Months EndedSeptember 30, 2010September 30, 2011(1)
    Net revenues

    RMB'000RMB'000US$'000- Molecular diagnostic systems

    118,347163,94125,704- Immunodiagnostic systems

    83,48774,50911,682201,834238,45037,386Molecular diagnostic systems - HPV-DNA chips

    3,80216,3192,559(2)  Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.For the Three Months EndedSeptember 30, 2010September 30, 2011RMB'000RMB'000US$'000Stock compensation expense

    11737358Amortization of acquired intangible assets

    49,42247,1507,39349,53947,5237,451(3)  Non-GAAP numbers exclude stock compensation expense.(4)  Non-GAAP numbers exclude non-cash interest expense of convertible notes.(5)  Non-GAAP numbers exclude interest expense for amortization of share lending costs.(6)  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.China Medical Technologies, Inc.Unaudited
    Condensed Consolidated Statements of Income andReconciliations of GAAP Measures to Non-GAAMeasuresFor the Six Months EndedFor the Six Months EndedSeptember 30, 2010September 30, 2011GAAPAdjustmentsNon-GAAPGAAPAdjustmentsNon-GAAPRMBRMBRMBRMBRMBRMB(in thousands except for per ADS information)Net revenues (1)

    388,004-388,004475,561-475,561Cost of revenues (2)

    (151,831)72,005(79,826)(171,593)95,443(76,150)Gross profit

    236,17372,005308,178303,96895,443399,411Operating expensesResearch anddevelopment (3)

    (21,509)2,563(18,946)(21,766)1,655(20,111)Sales and marketing (3)

    (39,739)295(39,444)(53,446)456(52,990)General andadministrative (3)

    (50,197)16,803(33,394)(44,490)10,943(33,547)Amortization ofSPR intangibleassets (4)

    (27,329)27,329----Total operating expenses

    (138,774)46,990(91,784)(119,702)13,054(106,648)Operating income

    97,399118,995216,394184,266108,497292,763Interest income

    9,716-9,71616,156-16,156Interest expense –convertible notes (5)

    (64,524)15,137(49,387)(66,046)1,898(64,148)Interest expense – 
    amortization of 
    convertible notes 
    issuance costs

    (7,918)-(7,918)(7,950)-(7,950)Interest expense –amortization ofshare lending costs (6)

    (4,931)4,931-(4,655)4,655-Other income (expense),net (7)

    41,493(47,393)(5,900)5,987(4,112)1,875Income beforeincome tax

    71,23591,670162,905127,758110,938238,696Income tax expense

    (40,493)-(40,493)(58,687)-(58,687)Net income

    30,74291,670122,41269,071110,938180,009Earnings per ADS- basic (8)

    1.183.524.702.624.206.82- diluted (8)

    1.183.504.682.614.186.79Weighted averagenumber of ADS- basic (8)

    26,061,946-26,061,94626,398,319-26,398,319- diluted (8)

    26,147,246-26,147,24626,499,427-26,499,427China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Income andReconciliations of GAAP Measures to Non-GAAMeasuresConvenience Translation for Reference OnlyFor the Six Months EndedSeptember 30, 2011GAAPAdjustmentsNon-GAAPUS$US$US$(in thousands except for per ADS information)Net revenues (1)

    74,563-74,563Cost of revenues (2)

    (26,904)14,964(11,940)Gross profit

    47,65914,96462,623Operating expenses  Research and development (3)

    (3,413)260(3,153)  Sales and marketing (3)

    (8,380)72(8,308)  General and administrative (3)

    (6,976)1,716(5,260)  Amortization of SPR intangible assets (4)

    ---Total operating expenses

    (18,769)2,048(16,721)Operating income

    28,89017,01245,902  Interest income

    2,533-2,533  Interest expense – convertible notes (5)

    (10,355)297(10,058)  Interest expense – amortization ofconvertible notes issuance costs

    (1,246)-(1,246)  Interest expense – amortization ofshare lending costs (6)

    (730)730-  Other income (expense), net (7)

    939(645)294Income before income tax

    20,03117,39437,425Income tax expense

    (9,201)-(9,201)Net income

    10,83017,39428,224Earnings per ADS- basic (8)

    0.410.661.07- diluted (8)

    0.410.661.07Weighted average number of ADS- basic (8)

    26,398,319-26,398,319- diluted (8)

    26,499,427-26,499,427For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of
    RMB6.3780 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 Friday, September 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 September 30, 2011 or at any other dates.Notes:For
     the Six Months EndedSeptember 30, 2010September 30, 2011(1)
    Net revenues

    RMB'000RMB'000US$'000- Molecular diagnostic systems

    226,439320,08550,186- Immunodiagnostic systems

    161,565155,47624,377388,004475,56174,563Molecular diagnostic systems - HPV-DNA chips

    3,82030,3694,762(2)  Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.For the Six Months EndedSeptember 30, 2010September 30, 2011RMB'000RMB'000US$'000Stock compensation expense

    16961696Amortization of acquired intangible assets

    71,83694,82714,86872,00595,44314,964(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 Six Months EndedSeptember 30, 2010September 30, 2011RMB'000RMB'000US$'000Gain on repurchase of convertible notes

    47,3934,112645(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.China Medical Technologies, Inc.Unaudited Condensed
    Consolidated Statements of Cash FlowsFor the Three Months EndedJune 30, 2011September 30, 2011RMBRMBUS$(in thousands)Cash flow from operating activities:Net income

    35,72833,3435,228Adjustments to reconcile net income to net cash provided 

    by operating activities:Exchange loss (gain)

    1,180(1,193)(187)Depreciation and amortization of property, plantand equipment

    5,5015,501862Amortization of intangible assets

    47,67747,1507,393Non-cash interest expense on convertible notes

    990908143Amortization of convertible notes issuance costs

    4,0073,943619Amortization of share lending costs

    2,3432,312362Stock compensation expense

    7,8265,844916Land use rights expense

    48488Loss on disposal of property, plant and equipment

    4141Deferred income taxes

    7,3897,1701,124Gain on repurchase of convertible notes

    (4,112)--Provision for allowance for doubtful accounts

    2,3674,895767Changes in operating assets and liabilities:Trade accounts receivable

    (86,332)(78,340)(12,283)Prepayments and other receivables

    1,846749117Inventories

    (1,042)(91)(14)Accounts payable

    7,0731,810284Accrued liabilities and other payables

    15,72826,1904,106Income taxes payable

    13,98518,8102,949Net cash provided by operating activities62,24379,05312,395Cash flow from investing activities:Purchase of property, plant and equipment

    (656)(604)(95)Proceeds from sale of HIFU business

    97,358--Net cash provided by (used in) investing activities96,702(604)(95)Cash flow from financing activities:Payment for repurchase of convertible notes

    (41,621)--Net cash used in financing activities(41,621)--Effect of foreign currency exchange rate change on cashand cash equivalents

    (1,684)(1,070)(167)Net increase in cash and cash equivalents115,64077,37912,133Cash and cash equivalents at beginning of period

    1,123,8181,239,458194,333Cash and cash equivalents at end of period1,239,4581,316,837206,466China Medical Technologies, Inc.EBITDA and Adjusted EBITDA MeasuresFor the Three Months EndedSeptember 30, 2010September 30, 2011RMBRMBUS$(in thousands)Net income (loss)

    (2,936)33,3435,228Adjustments:Interest income

    (5,119)(8,820)(1,383)Interest expense – convertible notes

    32,01932,6995,127Interest expense – amortization of convertible notes issuance costs

    3,9063,943619Interest expense – amortization of share lending costs

    2,4562,312362Income tax expense

    21,83129,3794,606EBIT (1)

    52,15792,85614,559Adjustments:Depreciation

    5,4975,501862Amortization

    49,42247,1507,393EBITDA (2)

    107,076145,50722,814EBITDA (2)

    107,076145,50722,814Adjustments:Stock compensation expense

    9,2385,844916Adjusted EBITDA (3)

    116,314151,35123,730For the Six Months EndedSeptember 30, 2010September 30, 2011RMBRMBUS$(in thousands)Net income

    30,74269,07110,830Adjustments:Interest income

    (9,716)(16,156)(2,533)Interest expense – convertible notes

    64,52466,04610,355Interest expense – amortization of convertible notes issuance costs

    7,9187,9501,246Interest expense – amortization of share lending costs

    4,9314,655730Income tax expense

    40,49358,6879,201EBIT (1)

    138,892190,25329,829Adjustments:Depreciation

    10,97211,0021,725Amortization

    99,16594,82714,868EBITDA (2)

    249,029296,08246,422EBITDA (2)

    249,029296,08246,422Adjustments:Stock compensation expense

    19,83013,6702,144Gain on repurchase of convertible notes

    (47,393)(4,112)(645)Adjusted EBITDA (3)

    221,466305,64047,921Notes:(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.
    '/>"/>

    SOURCE China Medical Technologies, Inc.
    Copyright©2010 PR Newswire.
    All rights reserved


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