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China Medical Technologies Reports Third Fiscal Quarter Financial Results
Date:2/18/2011

BEIJING, Feb. 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 third fiscal quarter ended December 31, 2010 ("3Q FY2010") today.

3Q FY2010 HighlightsFor the Three Months EndedDecember 31,
2009December 31,
2010December 31,
2010RMBRMBUS$% change(in thousands except for per ADS information)Revenues, net172,320

223,948

33,932

30.0Adjusted EBITDA92,133

131,544

19,931

42.8Non-GAAP net income45,618

75,642

11,461

65.8Non-GAAP diluted earnings per ADS*1.74

2.87

0.43

64.9Nine Months FY2010 HighlightsFor the Nine Months EndedDecember 31,
2009December 31,
2010December 31,
2010RMBRMBUS$% change(in thousands except for per ADS information)Revenues, net547,343

611,952

92,720

11.8Adjusted EBITDA287,989

353,010

53,486

22.6Non-GAAP net income135,819

198,054

30,008

45.8Non-GAAP diluted earnings per ADS*5.15

7.55

1.14

46.6Outlook for 4Q FY2010

  • Target revenues are expected to be approximately RMB234.0 million (US$35.5 million), representing a year-over-year increase of 33.2%.
  • Target non-GAAP net income is expected to be approximately RMB71.0 million (US$10.8 million), representing a year-over-year increase of 37.9%. The Company has taken into account the impact of incremental cash interest arising from the issuance of 2016 Convertible Notes in December 2010 to refinance its 2011 Convertible Notes.
  • Target non-GAAP diluted earnings per ADS* is expected to be approximately RMB2.69 (US$0.41), representing a year-over-year increase of 35.9%.

  • Outlook for FY2010

  • Target revenues are expected to be approximately RMB846.0 million (US$128.2 million), representing a year-over-year increase of 17.0%.
  • Target non-GAAP net income is expected to be approximately RMB269.1 million (US$40.8 million), representing a year-over-year increase of 43.7%.
  • Target non-GAAP diluted earnings per ADS* is expected to be approximately RMB10.24 (US$1.55), representing a year-over-year increase of 43.6%.

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

    *One American Depositary Share ("ADS") = 10 ordinary shares

    See "Non-GAAP Measure Disclosures" below, where the impact of certain items on reported results is discussed.

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

    3Q FY2010 Unaudited Financial ResultsThe Company reported revenues of RMB223.9 million (US$33.9 million) for 3Q FY2010, representing a 30.0% increase from the corresponding period of FY2009.

    The Company's revenues are currently generated from two segments, molecular diagnostic systems and immunodiagnostic systems. The molecular diagnostic system segment includes FISH products and SPR products while the immunodiagnostic system segment consists of ECLIA products. The customers of the molecular diagnostic system segment, that is, Tier 1 hospitals in China, are being served by the Company's direct sales personnel.

    Molecular diagnostic system sales for 3Q FY2010 were RMB135.1 million (US$20.5 million), representing a 40.5% increase from the corresponding period of FY2009. The year-over-year increase was primarily due to the increase in usage of the Company's FISH probes by existing and new hospital customers as well as the sales of SPR-based HPV-DNA chips of RMB9.2 million (US$1.4 million) to hospitals during 3Q FY2010.

    Immunodiagnostic system sales for 3Q FY2010 were RMB88.9 million (US$13.5 million), representing a 16.7% increase from the corresponding period of FY2009. The year-over-year increase was primarily due to the increase in sales of the Company's ECLIA reagent kits to existing and new distributors.

    Gross margin was 58.1% for 3Q FY2010 which decreased year-over-year from 63.4% for the corresponding period of FY2009. The year-over-year decrease was primarily due to the classification of amortization of SPR intangible assets from operating expenses to cost of revenues after the commencement of sales of HPV-DNA chips in 2Q FY2010. Non-GAAP gross margin was 79.9% for 3Q FY2010 which increased year-over-year from 76.4% for the corresponding period of FY2009. The year-over-year increase in non-GAAP gross margin was primarily due to more contribution from the sales of FISH probes which generate higher gross margin.

    Research and development expenses were RMB12.3 million (US$1.9 million) for 3Q FY2010, representing a 15.0% year-over-year increase. Non-GAAP research and development expenses were RMB11.2 million (US$1.7 million) for 3Q FY2010, representing a 22.2% year-over-year increase. The year-over-year increase was primarily due to product research and development for FISH probes and SPR chips.

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

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

    Interest expense on convertible notes was RMB32.8 million (US$5.0 million) for 3Q FY2010. Non-GAAP interest expense on convertible notes was RMB26.7 million (US$4.0 million) for 3Q FY2010. As of December 31, 2010, the Company's outstanding convertible notes of US$29.1 million, US$248 million and US$150 million bear interest at 3.5%, 4% and 6.25% per annum, respectively, and will mature in November 2011, August 2013 and December 2016, respectively.

    Interest expense on amortization of convertible notes issuance costs was RMB3.9 million (US$0.6 million) for 3Q FY2010.

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

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

    Income tax expense was RMB25.2 million (US$3.8 million) for 3Q FY2010. The significant income tax expense was primarily because certain expenses of the Company such as stock compensation expense, amortization of acquired intangible assets and interest expense of convertible notes were not deductible for income tax purpose. In addition, the Company was required to accrue for withholding income tax on distributable earnings generated in China during 3Q FY2010.

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

    Earnings before interest, taxes, depreciation and amortization ("EBITDA") was RMB148.9 million (US$22.6 million) for 3Q FY2010, representing an 81.8% increase from the corresponding period of FY2009. The significant year-over-year increase in EBITDA was primarily due to the increase in both molecular diagnostic system sales and immunodiagnostic system sales as well as a gain on repurchase of 2011 Convertible Notes.

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

    Stock compensation expense for 3Q FY2010 was RMB8.8 million (US$1.3 million), of which RMB0.1 million was allocated to cost of revenues, RMB1.2 million to research and development expenses, RMB0.2 million to sales and marketing expenses and RMB7.3 million to general and administrative expenses.

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

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

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

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

    Nine Months FY2010 Unaudited Financial Results Revenues were RMB612.0 million (US$92.7 million) for the nine months ended December 31, 2010, representing an 11.8% increase from the corresponding period of FY2009. The year-over-year increase in revenues was primarily due to the increase in molecular diagnostic system sales.

    Gross margin was 59.8% for the nine months ended December 31, 2010 which decreased year-over-year from 67.9% for the corresponding period of FY2009. The year-over-year decrease was primarily due to the classification of amortization of SPR intangible assets from operating expenses to cost of revenues after the commencement of sales of HPV-DNA chips in 2Q FY2010. Non-GAAP gross margin was 79.6% for the nine months ended December 31, 2010 which decreased year-over-year from 80.2% for the corresponding period of FY2009. The year-over-year decrease in non-GAAP gross margin was primarily due to the impact of the price reduction for ECLIA reagent kits.

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

    Sales and marketing expenses were RMB64.2 million (US$9.7 million) for the nine months ended December 31, 2010, representing a 35.5% year-over-year increase. Non-GAAP sales and marketing expenses were RMB63.7 million (US$9.6 million) for the nine months ended December 31, 2010, representing a 34.5% year-over-year increase. The year-over-year increase was primarily due to an increase in direct sales efforts for molecular diagnostic systems.

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

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

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

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

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

    Amortization of acquired intangible assets for the nine months ended December 31, 2010 was RMB147.8 million (US$22.4 million), of which RMB120.5 million was allocated to cost of revenues and RMB27.3 million to operating expenses.

    For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.6000 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as of Thursday, December 30, 2010. No representation is made that the RMB amounts could have been or could be converted into U.S. dollars at that rate or at any other rate on December 30, 2010 or at any other dates.

    Update on Receivable from ChengxuanAs of December 31, 2010, the remaining amount of receivable due December 31, 2010 from Chengxuan, one of the Company's major shareholders and owned by Mr. Xiaodong Wu, was reduced from US$30 million to US$18 million. This receivable relates to the sale of the Company's HIFU business to Chengxuan. Chengxuan made two payments to the Company in the amount of US$8 million and US$4 million during 3Q FY2010. Subsequently, Chengxuan made another payment of US$3 million to the Company in January 2011. Chengxuan indicated to the Company that payments will be made to the Company to pay off the remaining balance together with interest thereon before June 30, 2011.

    Non-GAAP Measure DisclosuresThe Company reported its operating results in accordance with U.S. generally accepted accounting principles ("GAAP") for the three months and nine months ended December 31, 2009 and 2010, respectively. The Company also presented non-GAAP information, which included EBITDA and adjusted EBITDA, for the three months and nine months ended December 31, 2009 and 2010, respectively. The non-GAAP measures are defined below:

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

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

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

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

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

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

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

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

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

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

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

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

  • Non-GAAP financial measures are used by the Company in its financial and operating decision-making because management believes they reflect the Company's ongoing business in a manner that allows meaningful period-to-period comparison. The Company's management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company's current operating performance and future prospects in the same manner as management does, if they so choose.

    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 February 18, 2011 (or 9:00 p.m. Beijing/Hong Kong time on the same date) to discuss the results following this earnings announcement.

    The dial-in details for the live conference call are as follows:

    - U.S. Toll Free Number 1-866-783-2141- International Dial-in Number 1-857-350-1600Passcode: 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 February 19, 2011.  

    The dial-in details for the replay are as follows:

    - U.S. Toll Free Number 1-888-286-8010- International Dial-in Number 1-617-801-6888Passcode: 46276526About 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 4Q FY2010 and full year FY2010, contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

    ContactsSam Tsang and Winnie YamTel: 852-2511-9808Email: IR@chinameditech.comChina Medical Technologies, Inc.Unaudited Condensed Consolidated Balance SheetsAs ofSeptember 30, 2010December 31, 2010RMBRMB US$(in thousands)AssetsCurrent assetsCash and cash equivalents

    805,901

    1,119,384

    169,604Trade accounts receivable, net

    333,123

    397,739

    60,264Inventories

    21,351

    16,640

    2,521Prepayments and other receivables

    19,093

    9,503

    1,439Convertible notes issuance costs

    -

    1,018

    154Due from a related party

    200,715

    118,800

    18,000Total current assets

    1,380,183

    1,663,084

    251,982Property, plant and equipment, net

    147,355

    144,251

    21,857Land use rights

    6,954

    6,906

    1,046Goodwill

    8,654

    8,654

    1,311Intangible assets, net

    3,128,820

    3,042,474

    460,981Convertible notes issuance costs

    34,782

    60,163

    9,116Share lending costs

    27,905

    25,133

    3,808Total assets

    4,734,653

    4,950,665

    750,101Liabilities Current liabilitiesTrade accounts payable

    43,958

    44,477

    6,739Accrued liabilities and other payables

    173,693

    174,978

    26,512Convertible notes

    -

    186,763

    28,297Income taxes payable

    59,334

    63,859

    9,676Total current liabilities

    276,985

    470,077

    71,224Convertible notes

    2,528,848

    2,626,800

    398,000Deferred income taxes

    78,408

    84,936

    12,869Total liabilities

    2,884,241

    3,181,813

    482,093Shareholders' equityOrdinary shares US$0.1 par value:   500,000,000 authorized; 322,680,001 issued and   outstanding as of September 30, 2010 and December   31, 2010

    258,840

    258,840

    39,218Additional paid-in capital

    830,016

    869,439

    131,733Treasury stock

    (47,108)

    (201,362)

    (30,509)Accumulated other comprehensive loss

    (74,412)

    (76,923)

    (11,655)Retained earnings

    883,076

    918,858

    139,221Total shareholders' equity

    1,850,412

    1,768,852

    268,008Total liabilities and shareholders' equity

    4,734,653

    4,950,665

    750,101China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Income andReconciliations of GAAP Measures to Non-GAAP Measures   For the Three Months EndedFor the Three Months Ended 

    December 31, 2009December 31, 2010 

    GAAPAdjustmentsNon-GAAPGAAPAdjustmentsNon-GAAP 

    RMBRMBRMBRMBRMBRMBUS$ 

    As adjusted (9)       

    (in thousands except for per ADS information) Revenues, net (1)

    172,320

    -

    172,320

    223,948

    -

    223,948

    33,932Cost of revenues (2)

    (62,996)

    22,412

    (40,584)

    (93,903)

    48,786

    (45,117)

    (6,836)Gross profit

    109,324

    22,412

    131,736

    130,045

    48,786

    178,831

    27,096Operating expenses 

     

     

     

     

     

     Research anddevelopment (3)

    (10,738)

    1,592

    (9,146)

    (12,348)

    1,175

    (11,173)

    (1,693)Sales and marketing (3)

    (19,058)

    -

    (19,058)

    (24,426)

    185

    (24,241)

    (3,673)General andadministrative (3)

    (25,844)

    8,642

    (17,202)

    (20,989)

    7,339

    (13,650)

    (2,068)Amortization ofSPR intangibleassets (4)

    (27,343)

    27,343

    -

    -

    -

    -

    -Total operating expenses

    (82,983)

    37,577

    (45,406)

    (57,763)

    8,699

    (49,064)

    (7,434)Operating income

    26,341

    59,989

    86,330

    72,282

    57,485

    129,767

    19,662Interest income

    4,332

    -

    4,332

    5,387

    -

    5,387

    816Interest expense –convertible notes (5)

    (35,421)

    7,618

    (27,803)

    (32,782)

    6,104

    (26,678)

    (4,042)Interest expense –

     

     

     

     

     

     

     amortization of

     

     

     

     

     

     

     convertible notesissuance costs

    (4,378)

    -

    (4,378)

    (3,941)

    -

    (3,941)

    (597)Interest expense –amortization ofshare lending costs (6)

    (2,756)

    2,756

    -

    (2,414)

    2,414

    -

    -Other income (expense), net (7)

    225

    -

    225

    22,449

    (26,143)

    (3,694)

    (560)Income (loss) before   income tax

    (11,657)

    70,363

    58,706

    60,981

    39,860

    100,841

    15,279Income tax expense

    (13,088)

    -

    (13,088)

    (25,199)

    -

    (25,199)

    (3,818)Net income (loss)

    (24,745)

    70,363

    45,618

    35,782

    39,860

    75,642

    11,461Earnings (loss) per ADS

     

     

     

     

     

     

     - basic (8)

    (0.94)

    2.68

    1.74

    1.37

    1.52

    2.89

    0.44- diluted (8)

    (0.94)

    2.68

    1.74

    1.36

    1.51

    2.87

    0.43Weighted average

     

     

     

     

     

     

        number of ADS- basic (8)

    26,262,471

    -

    26,262,471

    26,151,808

    -

    26,151,808

    26,151,808- diluted (8)

    26,262,471

    -

    26,262,471

    26,377,378

    -

    26,377,378

    26,377,378Notes:

     

    For the Three Months EndedDecember 31, 2009December 31, 2010(1) Revenues, net

    RMB'000RMB'000US$'000- Molecular diagnostic systems96,166

    135,088

    20,468- Immunodiagnostic systems

    76,154

    88,860

    13,464172,320

    223,948

    33,932Molecular diagnostic systems- HPV-DNA chips

    -

    9,186

    1,392(2) Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.For the Three Months EndedDecember 31, 2009December 31, 2010RMB'000RMB'000US$'000Stock compensation expense

    -

    106

    16Amortization of acquired intangible assets22,412

    48,680

    7,37622,412

    48,786

    7,392(3) Non-GAAP numbers exclude stock compensation expense.(4) Non-GAAP numbers exclude amortization of acquired intangible assets.(5) Non-GAAP numbers exclude non-cash interest expense of convertible notes.(6) Non-GAAP numbers exclude non-cash interest expense for amortization of share lending costs.(7) Non-GAAP numbers exclude gain on repurchase of convertible notes as well as high yield note offering expenses. 

    For the Three Months EndedDecember 31, 2009December 31, 2010RMB'000RMB'000US$'000Gain on repurchase of convertible notes-

    (31,379)

    (4,754)High yield note offering expenses

    -

    5,236

    793-

    (26,143)

    (3,961)(8) Interest expense and amortization in connection with convertible notes were not added back in computing GAAP diluted earnings per ADS because they were anti-dilutive. Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.(9) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing effective on April 1, 2010,  the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the three months ended December 31, 2009 retrospectively in accordance with GAAP.China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Income andReconciliations of GAAP Measures to Non-GAAP Measures   

    For the Nine Months EndedFor the Nine Months Ended 

    December 31, 2009December 31, 2010 

    GAAPAdjustmentsNon-GAAPGAAPAdjustmentsNon-GAAP 

    RMBRMBRMBRMBRMBRMBUS$ 

    As adjusted (9)       

    (in thousands except for per ADS information) Revenues, net (1)

    547,343

    -

    547,343

    611,952

    -

    611,952

    92,720Cost of revenues (2)

    (175,926)

    67,297

    (108,629)

    (245,734)

    120,791

    (124,943)

    (18,931)Gross profit

    371,417

    67,297

    438,714

    366,218

    120,791

    487,009

    73,789Operating expenses 

     

     

     

     

     

     Research anddevelopment (3)

    (31,941)

    4,895

    (27,046)

    (33,857)

    3,738

    (30,119)

    (4,563)Sales and marketing (3)

    (47,360)

    -

    (47,360)

    (64,165)

    480

    (63,685)

    (9,649)General andadministrative (3)

    (117,928)

    24,850

    (93,078)

    (71,186)

    24,142

    (47,044)

    (7,128)Amortization ofSPR intangible

     

     

     

     

     

     

     assets (4)

    (82,052)

    82,052

    -

    (27,329)

    27,329

    -

    -Total operating expenses

    (279,281)

    111,797

    (167,484)

    (196,537)

    55,689

    (140,848)

    (21,340)Operating income

    92,136

    179,094

    271,230

    169,681

    176,480

    346,161

    52,449Interest income

    9,301

    -

    9,301

    15,103

    -

    15,103

    2,288Interest expense –convertible notes (5)

    (106,292)

    22,859

    (83,433)

    (97,306)

    21,241

    (76,065)

    (11,525)Interest expense –amortization of

     

     

     

     

     

     

     convertible notes

     

     

     

     

     

     

     issuance costs

    (13,139)

    -

    (13,139)

    (11,859)

    -

    (11,859)

    (1,797)Interest expense –amortization of

     

     

     

     

     

     

     share lending costs (6)

    (8,268)

    8,268

    -

    (7,345)

    7,345

    -

    -Other income (expense), net (7)

    210

    -

    210

    63,942

    (73,536)

    (9,594)

    (1,454)Income (loss) before   income tax

    (26,052)

    210,221

    184,169

    132,216

    131,530

    263,746

    39,961Income tax expense

    (48,350)

    -

    (48,350)

    (65,692)

    -

    (65,692)

    (9,953)Net income (loss)

    (74,402)

    210,221

    135,819

    66,524

    131,530

    198,054

    30,008Earnings (loss) per ADS

     

     

     

     

     

     

     - basic (8)

    (2.82)

    7.97

    5.15

    2.55

    5.04

    7.59

    1.15- diluted (8)

    (2.82)

    7.97

    5.15

    2.54

    5.01

    7.55

    1.14Weighted average

     

     

     

     

     

     

        number of ADS

     

     

     

     

     

     

     - basic (8)

    26,353,485

    -

    26,353,485

    26,092,009

    -

    26,092,009

    26,092,009- diluted (8)

    26,353,485

    -

    26,353,485

    26,229,552

    -

    26,229,552

    26,229,552Notes:

     For the Nine Months EndedDecember 31, 2009December 31, 2010(1) Revenues, net

    RMB'000RMB'000US$'000- Molecular diagnostic systems283,865

    361,527

    54,777- Immunodiagnostic systems

    263,478

    250,425

    37,943547,343

    611,952

    92,720Molecular diagnostic systems- HPV-DNA chips

    -

    13,006

    1,971(2) Non-GAAP numbers exclude stock compensation expense and amortization of acquired intangible assets.For the Nine Months EndedDecember 31, 2009December 31, 2010RMB'000RMB'000US$'000Stock compensation expense

    -

    275

    42Amortization of acquired intangible assets67,297

    120,516

    18,26067,297

    120,791

    18,302(3) Non-GAAP numbers exclude stock compensation expense.(4) Non-GAAP numbers exclude amortization of acquired intangible assets.(5) Non-GAAP numbers exclude non-cash interest expense of convertible notes. (6) Non-GAAP numbers exclude non-cash interest expense for amortization of share lending costs. (7) Non-GAAP numbers exclude gain on repurchase of convertible notes as well as high yield note offering expenses. 

    For the Nine Months EndedDecember 31, 2009December 31, 2010RMB'000RMB'000US$'000Gain on repurchase of convertible notes-

    (78,772)

    (11,935)High yield note offering expenses

    -

    5,236

    793-

    (73,536)

    (11,142)(8) Interest expense and amortization in connection with convertible notes were not added back in computing GAAP diluted earnings per ADS because they were anti-dilutive. Non-GAAP earnings per ADS represents non-GAAP net income divided by the weighted average number of ADSs used in computing basic and diluted earnings per ADS in accordance with GAAP.(9) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing effective on April 1, 2010,  the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the nine months ended December 31, 2009 retrospectively in accordance with GAAP.China Medical Technologies, Inc.Unaudited Condensed Consolidated Statements of Cash FlowsFor the Three Months EndedDecember 31, 2009December 31, 2010RMBRMBUS$(in thousands)Net cash provided by operating activities

    80,362

    49,687

    7,528Net cash provided by (used in) investing activities

    (354,927)

    77,913

    11,805Net cash provided by (used in) financing activities

    (132,476)

    190,458

    28,858Effect of foreign currency exchange rate change on cash232

    (4,575)

    (693)Net increase (decrease) in cash and cash equivalents

    (406,809)

    313,483

    47,498Cash and cash equivalents:   At beginning of period

    1,236,696

    805,901

    122,106   At end of period

    829,887

    1,119,384

    169,604For the Nine Months EndedDecember 31, 2009December 31, 2010RMBRMBUS$(in thousands)Net cash provided by operating activities

    220,119

    186,837

    28,309Net cash provided by (used in) investing activities

    (714,913)

    75,380

    11,421Net cash provided by (used in) financing activities

    (131,465)

    45,921

    6,958Effect of foreign currency exchange rate change on cash(264)

    (4,207)

    (637)Net increase (decrease) in cash and cash equivalents

    (626,523)

    303,931

    46,051Cash and cash equivalents:   At beginning of period

    1,456,410

    815,453

    123,553   At end of period

    829,887

    1,119,384

    169,604China Medical Technologies, Inc.EBITDA and Adjusted EBITDA MeasuresFor the Three Months EndedDecember 31, 2009December 31, 2010RMBRMBUS$As adjusted (1)(in thousands)Net income (loss)

    (24,745)

    35,782

    5,421Adjustments:Interest income

    (4,332)

    (5,387)

    (816)Interest expense – convertible notes

    35,421

    32,782

    4,967Interest expense – amortization of convertible notes issuance costs

    4,378

    3,941

    597Interest expense – amortization of share lending costs

    2,756

    2,414

    366Income tax expense

    13,088

    25,199

    3,818Depreciation

    5,578

    5,471

    829Amortization

    49,755

    48,680

    7,376EBITDA (2)

    81,899

    148,882

    22,558EBITDA (2)

    81,899

    148,882

    22,558Adjustments:Stock compensation expense

    10,234

    8,805

    1,334Gain on repurchase of convertible notes

    -

    (31,379)

    (4,754)High yield note offering expenses

    -

    5,236

    793Adjusted EBITDA (3)

    92,133

    131,544

    19,931For the Nine Months EndedDecember 31, 2009December 31, 2010RMBRMBUS$As adjusted (1)(in thousands)Net income (loss)

    (74,402)

    66,524

    10,079Adjustments:Interest income

    (9,301)

    (15,103)

    (2,288)Interest expense – convertible notes

    106,292

    97,306

    14,743Interest expense – amortization of convertible notes issuance costs

    13,139

    11,859

    1,797Interest expense – amortization of share lending costs

    8,268

    7,345

    1,113Income tax expense

    48,350

    65,692

    9,953Depreciation

    16,549

    16,443

    2,491Amortization

    149,349

    147,845

    22,401EBITDA (2)

    258,244

    397,911

    60,289EBITDA (2)

    258,244

    397,911

    60,289Adjustments:Stock compensation expense

    29,745

    28,635

    4,339Gain on repurchase of convertible notes

    -

    (78,772)

    (11,935)High yield note offering expenses

    -

    5,236

    793Adjusted EBITDA (3)

    287,989

    353,010

    53,486(1) As a result of the adoption of new authoritative guidance governing the accounting for own-share lending arrangements in contemplation of convertible debt issuance or other financing effective on April 1, 2010, the Company adjusted relevant numbers in the unaudited condensed consolidated statements of income for the three months and nine months ended December 31, 2009 retrospectively in accordance with GAAP.(2) EBITDA represents net income reported in accordance with GAAP, adjusted for the effects of interest income, interest expenses, income tax expense, depreciation and amortization.(3) Adjusted EBITDA represents EBITDA adjusted for the effects of stock compensation expense, gain on repurchase of convertible notes as well as high yield note offering expenses.
    '/>"/>

    SOURCE China Medical Technologies, Inc.
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