BEIJING, Nov. 19 /PRNewswire-Asia-FirstCall/ -- China Medical
Technologies, Inc. (the "Company") (NASDAQ:CMED), a leading
China-based medical device company that develops, manufactures and
markets advanced in-vitro diagnostic products, today announced its
unaudited financial results for the second fiscal quarter ended
September 30, 2009 ("2Q FY2009"). The Company's 2009 fiscal year
ends on March 31, 2010 ("FY2009"). 2Q FY2009 Highlights -- Revenues
decreased by 14.4% year-over-year to RMB166.1 million (US$24.3
million). -- Loss from continuing operations was RMB47.1 million
(US$6.9 million). -- Net loss was RMB47.1 million (US$6.9 million).
-- Non-GAAP income from continuing operations, as defined below,
decreased by 82.7% year-over-year to RMB17.7 million (US$2.6
million). -- Diluted loss from continuing operations per ADS* was
RMB1.78 (US$0.26). -- Non-GAAP diluted earnings from continuing
operations per ADS*, as defined below, decreased by 82.6%
year-over-year to RMB0.67 (US$0.10). -- Net cash generated from
operating activities was RMB45.5 million (US$6.7 million). 3Q
FY2009 Targets -- Target revenues are in the range of RMB170.0
million (US$24.9 million) and RMB180.0 million (US$26.4 million).
-- Target non-GAAP income from continuing operations is not less
than RMB38.0 million (US$5.6 million). *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. "Despite recent challenges, we have seen
several positive signs," commented Mr. Xiaodong Wu, Chairman and
Chief Executive Officer of the Company. "In the past quarter, we
received SFDA approvals for both our FISH probes in hematology and
our SPR-based analysis system, representing a major milestone.
Although our ECLIA business was impacted by increased competition
and our implementation of price reduction in September, we have
seen signs of stabilization. Our FISH business remained healthy
despite the diversion of management's attention and we have seen
growth resumed in this business recently. In addition, we have
completed a trial launch on our SPR-based analysis system in a
small number of top tier hospitals. With the constructive feedback
from key opinion leaders after initial usage, we are well
positioned for a full-scale launch on the system in the first
quarter of 2010. We expect to generate revenue from the sale of
HPV-DNA chips used with the system in that quarter." 2Q FY2009
Unaudited Financial Results The Company reported revenues of
RMB166.1 million (US$24.3 million) for 2Q FY2009, representing a
14.4% decrease from the corresponding period of FY2008. The
Company's revenues are currently generated from two segments,
immunodiagnostic systems and molecular diagnostic systems.
Immunodiagnostic systems are consisted of ECLIA products while
molecular diagnostic systems include FISH products and are expected
to include SPR products starting from 4Q FY2009. Immunodiagnostic
system sales for 2Q FY2009 were RMB76.8 million (US$11.3 million),
representing a 37.1% decrease from the corresponding period of
FY2008. The year-over-year decrease in the immunodiagnostic system
sales was primarily due to the decrease in customers' inventory
levels in anticipation of a selling price reduction on ECLIA
reagent kits as well as the price reduction for ECLIA reagent kits
in September 2009. Molecular diagnostic system sales for 2Q FY2009
were RMB89.2 million (US$13.1 million), representing a 24.3%
increase from the corresponding period of FY2008. The
year-over-year growth in the molecular diagnostic system sales was
primarily due to increase in sales of FISH probes to hospitals as a
result of increase in new hospital customers and the increased
usage of the Company's FISH probes by existing hospital customers.
Gross margin decreased to 65.4% for 2Q FY2009 as compared to 70.5%
for the corresponding period of FY2008. The decrease in gross
margin was primarily due to the price reduction on ECLIA reagent
kits starting from September 2009. Research and development
expenses were RMB9.5 million (US$1.4 million) for 2Q FY2009,
representing a 49.9% year-over-year increase. The increase was
primarily due to the development of new ECLIA reagent kits, FISH
probes and SPR-based chips. Sales and marketing expenses were
RMB17.4 million (US$2.6 million) for 2Q FY2009, representing a
55.0% year-over-year increase. The increase was primarily due to
the continued expansion of the direct sales force for molecular
diagnostic system sales. General and administrative expenses were
RMB45.1 million (US$6.6 million) for 2Q FY2009, representing a
77.2% year-over-year increase. The increase was primarily due to
the costs of the independent internal investigation and provision
for bad debts related to certain ECLIA customers. Amortization of
SPR intangible assets was RMB27.4 million (US$4.0 million) for 2Q
FY2009. As the SPR acquisition was complete in December 2008, there
was no amortization of SPR intangible assets in the corresponding
period of FY2008. Interest expense on convertible notes was RMB35.4
million (US$5.2 million) for 2Q FY2009, representing a 38.6%
year-over-year increase. The increase was primarily due to the
issuance of US$276.0 million convertible notes in August 2008. The
Company's outstanding convertible notes of US$150.0 million and
US$276.0 million bear interest at 3.5% and 4.0% per annum,
respectively and will mature in November 2011 and August 2013,
respectively. Due to the adoption of new authoritative guidance
governing the accounting for convertible instruments that can be
settled in cash or partially in cash upon conversion effective on
April 1, 2009, the Company recorded additional non-cash interest
expense of RMB7.6 million (US$1.1 million) for the US$150.0 million
convertible notes in 2Q FY2009. The Company also made an adjustment
related to these convertible notes for the corresponding period of
FY2008 by increasing non-cash interest expense by RMB7.2 million to
adopt this guidance retrospectively. This new guidance is not
applicable to the US$276.0 million convertible notes. Interest
expense on amortization of convertible notes issuance costs was
RMB4.4 million (US$0.6 million) for 2Q FY2009, representing a 47.6%
year-over-year increase. The increase was primarily due to the
issuance of US$276.0 million convertible notes in August 2008.
Income tax expense was RMB18.3 million (US$2.7 million) for 2Q
FY2009. The occurrence of 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 as
well as the accrual for withholding income tax on distributable
earnings generated during the quarter in the PRC. Loss from
continuing operations was RMB47.1 million (US$6.9 million) for 2Q
FY2009 and net loss was RMB47.1 million (US$6.9 million) for 2Q
FY2009. Non-GAAP income from continuing operations excluding stock
compensation expense, amortization of acquired intangible assets
and non-cash interest expense of convertible notes arising from the
adoption of the new guidance related to convertible instruments
that can be settled in cash or partially in cash upon conversion
was RMB17.7 million (US$2.6 million) for 2Q FY2009, representing a
82.7% decrease from the corresponding period of FY2008. Stock
compensation expense for 2Q FY2009 was RMB7.4 million (US$1.1
million), of which RMB1.3 million was allocated to research and
development expenses and RMB6.1 million to general and
administrative expenses. The Company approved the grant of
2,450,000 restricted ordinary shares, equivalent to 245,000 ADS to
certain directors, officers and employees on November 16, 2009,
which was approximately 0.8% of the Company's issued ordinary
shares. These restricted ordinary shares vest over a period of
three years. Amortization of acquired intangible assets for 2Q
FY2009 was RMB49.8 million (US$7.3 million), of which RMB22.4
million was allocated to cost of revenues and RMB27.4 million to
operating expenses. As of September 30, 2009, the Company's cash
and cash equivalents was RMB1,236.7 million (US$181.2 million). Net
cash generated from operating activities for 2Q FY2009 was RMB45.5
million (US$6.7 million). As of September 30, 2009, the Company's
net accounts receivable was RMB317.9 million (US$46.6 million),
representing a decrease of 7.3% from the balance at March 31, 2009.
For the convenience of readers, certain RMB amounts have been
translated into U.S. dollars at the rate of RMB6.8262 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 Wednesday, September 30, 2009.
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
certain rate on September 30, 2009 or at any other dates. Outlook
for 3Q FY2009 Given the full impact of the price reduction on ECLIA
reagent kits but certain positive trends in December quarter, the
Company estimates the target revenues for 3Q FY2009 range from
RMB170.0 million (US$24.9 million) to RMB180.0 million (US$26.4
million). The Company estimates the target non-GAAP income from
continuing operations for 3Q FY2009 to be not less than RMB38.0
million (US$5.6 million). The above targets are based on the
Company's current views on the operating and marketing conditions,
which are subject to change. Non-GAAP Measure Disclosures To
supplement its consolidated financial statements presented in
accordance with United States Generally Accepted Accounting
Principles ("GAAP"), the Company uses non-GAAP measures of gross
profit, operating income, income from continuing operations and
earnings from continuing operations per ADS, which are adjusted
from the results based on GAAP to exclude the impact of stock
compensation expense, amortization of acquired intangible assets
and non-cash interest expense of convertible notes arising from the
adoption of the new guidance related to convertible instruments
that can be settled in cash or partially in cash upon conversion.
Non-GAAP financial measures are used by the Company in their
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
Company's management also believes the non-GAAP financial measures
are useful for itself and investors because it makes more
meaningful comparisons of the Company's current results of
operations to those of prior periods. The presentation of this
additional financial information is not intended to be considered
in isolation or as a substitute for the financial information
prepared and presented in accordance with GAAP. For a
reconciliation of the non-GAAP financial measures to the most
directly comparable GAAP financial measures, please see the
financial information included with this earnings announcement.
Conference Call The Company's management team will host a
conference call at 8:00a.m. U.S. Eastern Time on November 19, 2009
(or 9:00p.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 1-800-435-1398 International dial-in number 1-617-614-4078
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 10:00a.m. U.S. Eastern Time on
November 20, 2009. The dial-in details for the replay are as
follows: U.S. Toll Free Number 1-888-286-8010 International dial in
numbers 1-617-801-6888 Passcode 45921509 About China Medical
Technologies, Inc. China Medical Technologies is a leading
China-based medical device company that develops, manufactures and
markets advanced in-vitro diagnostic products using Enhanced
Chemiluminescence (ECLIA) technology, Fluorescent in situ
Hybridization (FISH) technology and Surface Plasmon Resonance (SPR)
technology to detect and monitor various diseases and disorders.
For more information, please visit http://www.chinameditech.com/ .
Safe Harbor Statement This press release contains forward-looking
statements. These statements constitute "forward-looking"
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and as defined in the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
"will," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates" and similar statements. Among other things,
the quotations from management in this press release, the Company's
strategic operational plans, as well as its outlook for 3Q FY2009,
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. For more information, please
contact: Sam Tsang and Winnie Yam Tel: +852-2511-9808 Email: China
Medical Technologies, Inc. Unaudited Condensed Consolidated Balance
Sheets As of March 31, 2009 September 30, 2009 RMB RMB RMB US$ As
previously As reported adjusted(1) (in thousands) Assets Current
assets Cash and cash equivalents 1,456,410 1,456,410 1,236,696
181,169 Trade accounts receivable, net 343,037 343,037 317,874
46,566 Inventories 16,932 16,932 38,995 5,713 Prepayments and other
receivables 20,425 20,425 31,498 4,614 Due from a related party
204,987 204,987 204,786 30,000 Total current assets 2,041,791
2,041,791 1,829,849 268,062 Property, plant and equipment, net
169,422 169,422 164,917 24,160 Land use rights 7,239 7,239 7,144
1,046 Goodwill 8,654 8,654 8,654 1,268 Intangible assets, net
3,487,474 3,487,474 3,384,883 495,866 Convertible notes issuance
costs(1) 68,596 65,816 56,996 8,350 Total assets 5,783,176
5,780,396 5,452,443 798,752 Liabilities Current liabilities Trade
accounts payable 27,863 27,863 23,287 3,411 Accrued liabilities and
other payables 892,905 892,905 557,754 81,708 Income taxes payable
77,112 77,112 69,208 10,139 Dividend payable -- -- 121,097 17,740
Total current liabilities 997,880 997,880 771,346 112,998
Convertible notes(1) 2,910,815 2,826,348 2,838,810 415,870 Deferred
income taxes 29,898 29,898 39,757 5,824 Total liabilities 3,938,593
3,854,126 3,649,913 534,692 Shareholders' equity Ordinary shares
US$0.1 par value: 500,000,000 authorized; 321,066,661 issued and
outstanding as of March 31, 2009 and 322,546,661 issued and
outstanding as of September 30, 2009 257,738 257,738 258,749 37,905
Additional paid-in capital(1) 544,178 709,949 729,460 106,862
Accumulated other comprehensive loss(1) (51,946) (69,957) (70,350)
(10,306) Retained earnings(1) 1,094,613 1,028,540 884,671 129,599
Total shareholders' equity 1,844,583 1,926,270 1,802,530 264,060
Total liabilities and shareholders' equity 5,783,176 5,780,396
5,452,443 798,752 Note: (1) As a result of the adoption of new
authoritative guidance changing the accounting for convertible
instruments that can be settled in cash or partially in cash upon
conversion, the Company adjusted relevant numbers in the condensed
consolidated balance sheet as of March 31, 2009 retrospectively in
accordance with GAAP. China Medical Technologies, Inc. Unaudited
Condensed Consolidated Statements of Income For the Three Months
Ended September 30, 2008 June 30, 2009 September 30, 2009 RMB RMB
RMB US$ As As previously adjusted reported (3) (in thousands except
for per ADS information) Revenues(1) 193,967 193,967 208,957
166,066 24,328 Cost of revenues (57,308) (57,308) (55,413) (57,517)
(8,426) Gross profit 136,659 136,659 153,544 108,549 15,902
Operating expenses: Research and development (6,338) (6,338)
(11,703) (9,500) (1,392) Sales and marketing (11,250) (11,250)
(10,870) (17,432) (2,554) General and Administrative (25,472)
(25,472) (46,954) (45,130) (6,611) Amortization of SPR intangible
assets -- -- (27,352) (27,357) (4,008) Total operating expenses
(43,060) (43,060) (96,879) (99,419) (14,565) Operating income
93,599 93,599 56,665 9,130 1,337 Interest income 10,301 10,301
2,773 2,196 322 Interest expense - convertible notes(3) (18,410)
(25,563) (35,432) (35,439) (5,192) Interest expense - amortization
of convertible notes issuance costs(3) (3,235) (2,969) (4,380)
(4,381) (642) Interest expense - other (1,145) (1,145) -- -- --
Other income/ (expense), net (1,387) (1,387) 240 (255) (37) Income/
(loss) before income tax 79,723 72,836 19,866 (28,749) (4,212)
Income tax expense (14,423) (14,423) (16,919) (18,343) (2,687)
Income/ (loss) from continuing operations 65,300 58,413 2,947
(47,092) (6,899) Income from discontinued operation 52,432 52,432
-- -- -- Net income/ (loss) 117,732 110,845 2,947 (47,092) (6,899)
Earnings/ (loss) from continuing operations per ADS - basic 2.49
2.23 0.11 (1.78) (0.26) - diluted(2) 2.43 2.20 0.11 (1.78) (0.26)
Earnings from discontinued operation per ADS - basic 2.00 2.00 N/A
N/A N/A - diluted(2) 2.02 1.98 N/A N/A N/A Weighted average number
of ADS - basic 26,242,974 26,242,974 26,324,842 26,432,974
26,432,974 - diluted(2)(3) 31,278,897 26,491,563 26,438,076
26,432,974 26,432,974 Notes: (1) Revenues RMB'000 RMB'000 RMB'000
RMB'000 US$'000 - Immunodiagnostic systems 122,160 122,160 110,491
76,833 11,256 - Molecular diagnostic systems 71,807 71,807 98,466
89,233 13,072 193,967 193,967 208,957 166,066 24,328 (2) In
computing diluted earnings from continuing operations per ADS,
interest expense and amortization in connection with convertible
notes were not added back in computing diluted earnings from
continuing operations per ADS for the three months ended September
30, 2008 (as adjusted), June 30, 2009 and September 30, 2009
because the ordinary shares issued upon conversion of convertible
notes (using the treasury stock method) were anti-dilutive. (3) As
a result of the adoption of new authoritative guidance changing the
accounting for convertible instruments that can be settled in cash
or partially in cash upon conversion, the Company adjusted relevant
numbers in the condensed consolidated statement of income for the
three months ended September 30, 2008 retrospectively in accordance
with GAAP. China Medical Technologies, Inc. Reconciliations of GAAP
measures to Non-GAAP measures For the Three Months Ended September
June 30, September 30, 2008 2009 30, 2009 RMB RMB RMB US$ As
adjusted (2) (in thousands except for per ADS information) Gross
profit 136,659 153,544 108,549 15,902 Adjustment: Amortization of
acquired intangible assets 22,447 22,428 22,430 3,286 Non-GAAP
gross profit 159,106 175,972 130,979 19,188 Gross margin 70.5%
73.5% 65.4% 65.4% Non-GAAP gross margin 82.0% 84.2% 78.9% 78.9%
Operating income 93,599 56,665 9,130 1,337 Adjustments: Stock
compensation expense 14,080 12,157 7,354 1,077 Amortization of
acquired intangible assets 22,447 49,807 49,787 7,294 Non-GAAP
operating income 130,126 118,629 66,271 9,708 Operating margin
48.3% 27.1% 5.5% 5.5% Non-GAAP operating margin 67.1% 56.8% 39.9%
39.9% Income/ (loss) from continuing operations 58,413 2,947
(47,092) (6,899) Adjustments: Stock compensation expense 14,080
12,157 7,354 1,077 Amortization of acquired intangible assets
22,447 49,807 49,787 7,294 Non-cash interest expense of convertible
notes arising from the adoption of new guidance related to
convertible instruments 7,153 7,620 7,621 1,116 Non-GAAP income
from continuing operations 102,093 72,531 17,670 2,588 GAAP net
margin 30.1% 1.4% -- -- Non-GAAP net margin 52.6% 34.7% 10.6% 10.6%
Earnings/ (loss) from continuing operations per ADS - basic 2.23
0.11 (1.78) (0.26) - diluted 2.20 0.11 (1.78) (0.26) Non-GAAP
earnings from continuing operations per ADS - basic 3.89 2.76 0.67
0.10 - diluted(1) 3.85 2.74 0.67 0.10 Weighted average number of
ADS - basic 26,242,974 26,324,842 26,432,974 26,432,974 -
diluted(1)(2) 26,491,563 26,438,076 26,432,974 26,432,974 Notes:
(1) Interest expense and amortization in connection with
convertible notes were not added back in computing non-GAAP diluted
earnings from continuing operations per ADS for the three months
ended September 30, 2008 (as adjusted), June 30, 2009 and September
30, 2009 because the ordinary shares issued upon conversion of
convertible notes (using the treasury stock method) were
anti-dilutive. (2) As a result of the adoption of new authoritative
guidance changing the accounting for convertible instruments that
can be settled in cash or partially in cash upon conversion, the
Company adjusted relevant numbers for the three months ended
September 30, 2008 retrospectively in accordance with GAAP.
DATASOURCE: China Medical Technologies, Inc. CONTACT: Sam Tsang and
Winnie Yam, both of China Medical Technologies, Inc.,
+852-2511-9808, Web site: http://www.chinameditech.com/
http://ir.chinameditech.com/
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