2014

Chindex International, Inc. Reports Financial Results for Third Quarter and First Nine Months of 2013

BETHESDA, Md., Nov. 11, 2013 /PRNewswire/ -- Chindex International, Inc. (NASDAQ: CHDX), an American healthcare company providing healthcare services in China through the operations of United Family Healthcare ("UFH"), a network of private primary care hospitals and affiliated ambulatory clinics, today announced financial results for the third quarter of 2013 ended September 30, 2013.

Third Quarter 2013 Financial Highlights

  • Revenue from healthcare services increased 16% to $43.1 million from $37.3 million in the prior year period.
  • Adjusted EBITDA was $5.0 million, compared to $6.0 million in the prior year period.
  • Development, pre-opening and start-up expense was $4.9 million, compared to $2.7 million in the prior year period.
  • Loss from operations was $2.8 million, compared to income from operations of $1.5 million in the prior year period.
  • Net loss was $3.8 million, or $(0.23) per diluted share, compared to net loss of $664,000, or $(0.04) per diluted share, in the prior year period.
  • Full year guidance adjustment primarily due to government regulatory delays.

Roberta Lipson, President and CEO of Chindex, commented, "Chindex's third quarter revenue growth, although lower than original expectations, has in fact resulted in the Company's highest revenue third quarter performance to date.  We believe this is reflective of continued healthy market demand for our services and the growing recognition of our expanding UFH network.  Our performance this year has been impacted by delayed openings at our Beijing Rehabilitation Hospital, Shanghai Quankou clinic and Beijing Shunyi clinic expansions, limiting our ability to accelerate growth at these three important projects. Additionally, the city of Shanghai experienced record heat in the summer months reducing patient volumes as well as higher-than-average physician personnel transitions that affected our ability to optimize performance in the third quarter. These challenges in Shanghai have since abated and we are positioned to resume higher levels of growth in the fourth quarter. Although the ramps of our new facilities are tracking our expectations, the delayed openings are expected to impact our growth through the end of the year, as our revenue ramp is on a delayed timeline.  Consequently, we now expect full year revenue growth to be in the high teens to low-twenties range and Adjusted EBITDA growth to be between five to ten percent over last year."

"The Chinese government has recently made unprecedented pronouncements on the key role of private healthcare in the continued healthcare reform process, reiterating the expectation that 20% of care will come from the private sector by 2015, and that by 2020 the healthcare market will be an RMB 8 trillion (USD$1.3 trillion) industry.  Chindex is best positioned as the earliest and largest private premium healthcare provider in China to capture this tremendous opportunity.  Chindex's United Family Healthcare system is dedicated to provide both the Chinese and expatriate communities in China with premium healthcare services, and we intend to deliver this commitment across an expanding network of geographic locations and service lines."

"We are particularly excited about our newly launched services and upcoming development projects which are designed to serve China's rapidly growing healthcare industry. In Beijing, our surgical and oncology services are furthering our leadership in the field of acute and chronic care, and our state-of-the-art hospital and clinic network will continue to expand its primary care services by opening new clinic locations in two additional business and residential areas. In addition, we have recently initiated our planned expansion into the affluent Haidian district in west Beijing, with plans to develop a new hospital and an ambulatory clinic. Outside of Beijing, we continue to develop our new United Family hospital in Guangzhou, and have recently initiated development of another comprehensive care hospital in the affluent port city of Qingdao in Shandong Province. We continue to evaluate opportunities in other second-tier cities for future United Family hospitals. We remain highly encouraged with our growth opportunities in the years ahead driven by the rise in China's affluent population and from the government's strengthened support for private capital investment in the healthcare services sector."

Third Quarter 2013 Financial Results
Third quarter 2013 revenue from healthcare services increased 16% to $43.1 million from $37.3 million in the prior year period. These results reflect continued growth of inpatient and outpatient volume across the United Family Healthcare network as well as increasing contributions from the expansion of the Company's flagship hospital in Beijing. The Company also began to generate revenue from its Beijing Rehabilitation Hospital which opened in July.  Overall, outpatient services contributed 56% and inpatient services contributed 44% of revenue, compared with 56% and 44%, respectively, in the prior year period. By service line, surgical services contributed 21.5%, OB/GYN contributed 17%, pediatrics contributed 8.8%, ancillary services contributed 31.1%, internal medicine contributed 3.6%, emergency room contributed 3.9%, dental contributed 2.4%, family medicine 1.6% and other clinical service lines contributed 10.1% of revenue.

Operating expenses in the third quarter of 2013 increased 28% to $45.8 million from $35.8 million in the prior year period. These costs were primarily driven by the Company's development of new facilities and network infrastructure projects. Salaries, wages and benefits in the third quarter of 2013 increased 24% to $26.2 million from $21.1 million in the prior year period, reflecting a 13.6% increase in headcount to support revenue growth and development activities, including newly recruited staff for the Company's Beijing United Family Rehabilitation Hospital and United Family Quankou Clinic in Shanghai. Development, pre- and post-opening and start-up expenses were $4.9 million this quarter, compared to $2.7 million for the prior year period.  These expenses were driven by development projects across all markets, particularly the Beijing United Family Rehabilitation Hospital, Tianjin United Family Hospital and Quankou clinic. Operating expenses also included certain non-cash expenses including $1,001,000 of stock-based compensation expense compared to $904,000 for the prior year period.

Adjusted EBITDA in the third quarter of 2013 was approximately $5.0 million, compared to $6.0 million in the prior year period. The Adjusted EBITDA results reflected a slower growth cycle associated with the delayed opening of the Beijing United Family Rehabilitation Hospital, the Quankou clinic and expanded investment in network infrastructure projects.  

Loss from operations was $2.8 million, compared to income from operations of $1.5 million in the prior year period.

The Company recorded a $1.0 million provision for taxes in the third quarter of 2013, compared to the tax provision of $1.5 million in the prior year period. As in past quarters, the current period provision continued to be heavily impacted by losses in development and start-up entities for which the Company cannot currently recognize tax benefits.

Net loss for the quarter ended September 30, 2013 was $3.8 million, or $(0.23) per diluted share, compared to net loss of $664,000, or $(0.04) per diluted share, in the prior year period. This included income from our minority interest in CML of $52,000 this year compared to a loss of $785,000 in the prior year period. For the third quarter of 2013, weighted average diluted shares outstanding were 16.7 million.

As of September 30, 2013, the Company had $32.6 million in unrestricted cash, cash equivalents and investments.

First Nine months 2013 Financial Results
During the first nine months of 2013, revenue from healthcare services increased 20% to $130.6 million from $108.9 million in the prior year period, reflecting growing inpatient and outpatient volume across the United Family Healthcare network. Outpatient services contributed 57% of revenue and inpatient services contributed 43% of revenue in the first nine months of 2013 compared with 59% and 41%, respectively, for the first nine months of 2012. By service line, surgical services contributed 21.8%, OB/GYN contributed 15.4%, pediatrics contributed 8.2%, ancillary services contributed 31.3%, internal medicine contributed 3.8%, emergency room contributed 4%, dental contributed 3.1%, family medicine 1.5% and other services contributed 10.9% of revenue.

Operating expenses for the first nine months of 2013 increased 25% to $128.9 million from $103.4 million in the prior year period. Development, pre-opening and start up expenses increased to $10.5 million from $8.5 million in the prior year period primarily as a result of delayed project openings as well as several new pipeline projects. Operating expenses also included certain non-cash expenses including $3.2 million of non-cash stock compensation expense compared to $2.5 million for the prior year. Income from operations was $1.7 million, compared to income from operations of $5.5 million in the prior year period. Adjusted EBITDA was approximately $19.7 million compared to $19.2 million in the prior year period.

Provision for taxes was $4.6 million, compared to $4.5 million in the prior year period. Net loss was $4.0 million, or $(0.24) per diluted share, compared to net income of $615,000, or $0.05 per diluted share, in the first nine months of 2012. This included a loss from our minority interest in CML of $1.2 million this year compared to a loss of $573,000 in the prior year period. For the first nine months of 2013 ended September 30, 2013, weighted average diluted shares outstanding were 16.6 million.

Chindex Medical Limited
For Chindex Medical Limited (CML), a joint venture between Shanghai Fosun Pharmaceutical (Group) Co., Ltd. ("Fosun Pharma") and Chindex International, Chindex recognized its 30% interest in CML's net income using the equity method of accounting since the acquisition of Alma Lasers, Inc. on May 27, 2013.

In the third quarter of 2013, Chindex recognized $52,000 in income for its equity interest in CML. For the first nine months of 2013, the Company recognized a loss of $1.2 million for its equity interest in CML.

The operating results of CML in 2013 have thus far been adversely impacted by restructuring at the Ministry of Health, uncertainty surrounding proposed government reforms and the disruption to normal hospital purchasing activity due to the government campaign to improve compliance in the public hospitals' purchasing activities, all of which has led to an overall slowdown in business activity among capital medical equipment markets in China.

Non-GAAP Measures
The Company presents Adjusted EBITDA to better illustrate ongoing operational results. Adjusted EBITDA is defined as income (loss) before interest expense, interest and other income, income taxes, depreciation and amortization, and also excludes development, pre-opening and start-up expenses related to new and pending hospitals and clinics and equity in earnings (loss) of unconsolidated affiliate. The Company anticipates recurring development, pre-opening and start-up expense and notes that such expense is a basic element of the long term growth plan. Management believes that providing an Adjusted EBITDA analysis to investors is a helpful metric to better illustrate the Company's operations, including development plans, and changes in presentation from historical periods. The Company uses Adjusted EBITDA for business planning and other purposes. Other companies may calculate Adjusted EBITDA differently, and therefore Chindex's Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and should not be considered in isolation or as an alternative to net income (loss), cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of the Company's business, and, therefore, Adjusted EBITDA should only be used as a supplemental measure of operating performance.

Conference Call
Management will host a conference call at 8:30 am ET Monday on November 11, 2013 to discuss financial results. To participate in the conference call, U.S. domestic callers may dial 1-877-303-9231 and international callers may dial 1-760-666-3567 approximately 10 minutes before the conference call is scheduled to begin. The conference ID is 89382773. A webcast and replay of the earnings call will be accessible via Chindex's website at http://ir.chindex.com/events.cfm.  

About Chindex International, Inc.
Chindex is an American health care company providing health care services in China through the operations of United Family Healthcare, a network of private primary care hospitals and affiliated ambulatory clinics. United Family Healthcare currently operates in Beijing, Shanghai, Tianjin and Guangzhou. The Company also provides medical capital equipment and products through Chindex Medical Ltd., a joint venture company with manufacturing and distribution businesses serving both domestic China and export markets. With more than thirty years of experience, the Company's strategy is to continue its growth as a leading integrated health care provider in the Greater China region. Further Company information may be found at the Company's website at http://www.chindex.com.

Safe Harbor Statement
Statements made in this press release relating to plans, strategies, objectives, economic performance and trends and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, the factors set forth under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, updates and additions to those "Risk Factors" in the Company's interim reports on Form 10-Q, Forms 8-K and in other documents filed by us with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as "may," "will," "should," "could," "expects," "plans," "intends," "anticipates," "believes," "estimates," "predicts," "forecasts," "potential," or "continue" or similar terms or the negative of these terms. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. The Company has no obligation to update these forward-looking statements.

 

Financial Summary Attached


 

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands except share and per share data)
(Unaudited)

 


Three months ended

September 30,

2013              2012

Nine months ended

September 30,

2013                 2012






Healthcare services revenue

$43,058

$37,299

$130,600

$108,928







Operating expenses






Salaries, wages and benefits

26,170

21,064

75,667

60,989


Other operating expenses

7,690

5,595

19,156

15,704


Supplies and purchased medical services

5,396

4,532

15,951

13,582


Bad debt expense

1,084

865

3,203

2,260


Depreciation and amortization

2,842

1,797

7,497

5,268


Lease and rental expense

2,650

1,915

7,421

5,602


45,832

35,768

128,895

103,405






(Loss) income from operations

(2,774)

1,531

1,705

5,523






Other income and (expenses)






Interest income

246

214

735

487


Interest expense

(424)

(141)

(752)

(356)


Equity in (loss) income of unconsolidated affiliate

52

(785)

(1,235)

(573)


Miscellaneous income (expense) - net

110

(5)

147

(5)

(Loss) income before income taxes

(2,790)

814

600

5,076

Provision for income taxes

(1,035)

(1,478)

(4,609)

(4,461)

Net (loss) income

$(3,825)

$(664)

$(4,009)

$615







Net (loss) income  per common share - basic

$(.23)

$(.04)

$(.24)

$.04

Weighted average shares outstanding - basic

16,703,827

16,404,635

16,612,450

16,338,332







Net (loss) income per common share - diluted

$(.23)

$(.04)

$(.24)

$.05

Weighted average shares outstanding - diluted

16,703,827

16,404,635

16,612,450

17,621,675

 

 

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)


September 30, 2013

December 31, 2012

ASSETS



Current assets:



 Cash and cash equivalents

$32,624

$33,184

 Restricted cash

2,045

754

    Accounts receivable, less allowance for doubtful accounts of $14,087 and $10,612, respectively

21,146

19,564

    Receivables from affiliates

2,995

2,110

 Inventories of supplies, net

2,946

2,328

 Deferred income taxes

4,161

3,209

 Other current assets

4,796

3,798

Total current assets

70,713

64,947

Restricted cash and sinking funds

19,086

20,351

Investment in unconsolidated affiliate

33,582

34,847

Property and equipment, net

106,157

97,952

Noncurrent deferred income taxes

833

925

Other assets

3,571

3,428

Total assets

$233,942

$222,450

LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Short-term debt

$2,960

$1,586

Accounts payable

6,131

9,520

Payable to affiliates

2,308

1,334

Accrued expenses

18,109

15,540

Other current liabilities

9,839

8,558

Income taxes payable

1,557

2,772

Total current liabilities

40,904

39,310

Long-term debt and convertible debentures

41,268

32,812

Long-term deferred tax liability

262

262

Total liabilities

82,434

72,384

Commitments and contingencies



Stockholders' equity: 



   Preferred stock, $.01 par value, 500,000 shares authorized, none issued

-

-

   Common stock, $.01 par value, 28,200,000 shares authorized, including

                              3,200,000 designated Class B:



                Common stock – 16,070,962 and 15,904,836 shares issued and

                              outstanding at September 30, 2013 and December 31, 2012,

                              respectively

161

159

 Class B stock – 1,162,500 shares issued and outstanding at September 30,

             2013 and December 31, 2012, respectively

12

12

   Additional paid-in capital

125,495

122,109

Retained earnings

14,574

18,583

Accumulated other comprehensive income

11,266

9,203

            Total stockholders' equity

151,508

150,066

            Total liabilities and stockholders' equity

$233,942

$222,450

 

 

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)


Nine months ended September 30,


2013                        2012

OPERATING ACTIVITIES



Net (loss) income

$                (4,009)

$            615

Adjustments to reconcile net (loss) income to net cash provided by operating activities:



     Depreciation and amortization

7,497

5,268


     Inventory write down

18

42


     Provision for doubtful accounts

3,203

2,260


     Loss on disposal of property and equipment

20

29


     Equity in loss (income) of unconsolidated affiliate

1,235

573


     Deferred income taxes

(774)

96


     Stock based compensation

3,235

2,505


     Foreign exchange (gain) loss

(372)

279


     Amortization of debt issuance costs

136

7


     Amortization of debt discount

186

186


Changes in operating assets and liabilities:




     Accounts receivable

(4,307)

(5,977)


     Accounts receivable from affiliates

(885)

(744)


     Inventories of supplies

(577)

(51)


     Other current assets and other assets

(733)

(354)


     Accounts payable, accrued expenses, other current liabilities and deferred revenue

(2,784)

2,734


     Accounts payable to affiliates

973

2,287


     Income taxes payable

(1,253)

(274)


Net cash provided by operating activities

809

9,481


INVESTING ACTIVITIES




     Proceeds from redemption of CDs

-

26,530


     Purchases of property and equipment

(10,896)

(21,986)


Net cash (used in) provided by investing activities

(10,896)

4,544


FINANCING ACTIVITIES




     Restricted cash from (to) IFC RMB loan sinking funds

446

(10,940)


     Restricted cash for Exim loan collateral

-

(8,957)


     Proceeds from debt

11,000

-


     Repayment of debt

(1,596)

-


     Payment for debt issuance cost

(441)



     Repurchase of restricted stock for income tax withholding

(311)

(151)


     Proceeds from exercise of stock options

464

16


Net cash provided by (used in) financing activities

9,562

(20,032)


Effect of foreign exchange rate changes on cash and cash equivalents

(35)

(269)


Net decrease in cash and cash equivalents

(560)

(6,276)


Cash and cash equivalents at beginning of period

33,184

33,755


Cash and cash equivalents at end of period

$                 32,624

$                 27,479






Supplemental disclosures of cash flow information:




Cash paid for interest

$                     695

$                    546


Cash paid for taxes

$                  6,685

$                 4,626






Non-cash investing and financing activities consist of the following:




Change in property and equipment additions included in accounts payable and payable to affiliates

$                 2,672

$                  4,118





 

The table below reconciles our consolidated net (loss) income to Adjusted EBITDA (in thousands)

 


Three months ended

September 30,

Nine months ended

September 30,


2013

2012

2013

2012






Consolidated net (loss) income

$(3,825)

$(664)

$(4,009)

$615






Adjustments:





          Depreciation and amortization

2,842

1,797

7,497

5,268

          Provision for income taxes

1,035

1,478

4,609

4,461

          Interest expense

424

141

752

356

          Interest and other income, net

(356)

(209)

(882)

(482)

          Development, pre-opening and start-up expense

4,912

2,716

10,463

8,457

          Equity in loss (income) of unconsolidated affiliate

(52)

785

1,235

573







8,805

6,708

23,674

18,633






Adjusted EBITDA

$4,980

$6,044

$19,665

$19,248

 

 

Contact:
ICR, Inc.
Bill Zima
(+86) 10-6583-7511
(646) 328-2510

 

 

 

 

SOURCE Chindex International, Inc.



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