Chindex International, Inc. Reports Financial Results for the Three and Nine Month Period Ended December 31, 2010

Mar 15, 2011, 16:01 ET from Chindex International, Inc.

BETHESDA, Md., March 15, 2011 /PRNewswire-Asia/ -- Chindex International, Inc. (Nasdaq: CHDX), founded in 1981, an American health care company providing health care 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 three and nine month period ended December 31, 2010.

Presentation of Financial Results

Effective on December 31, 2010, Chindex International, Inc. (Chindex) and Shanghai Fosun Pharmaceutical (Group) Co., Ltd., (FosunPharma) and certain of their respective subsidiaries, formed a joint venture created and consolidated under Chindex Medical Limited (CML), a newly-formed Hong Kong company. The former Medical Products division of Chindex and three medical device companies of FosunPharma were transferred to the joint venture. CML commenced operations effective January 1, 2011 and will engage in the manufacturing, marketing, sales and distribution of medical devices, medical equipment and consumables in China, Hong Kong and other markets. FosunPharma owns 51% and Chindex owns 49% of the CML joint venture. Consequently, going forward, the business and results of operations of the former Chindex division are deconsolidated from the Company's financial statements. In the future, the Company's 49% equity interest in the CML joint venture will be recognized using the equity method of accounting.

The financial statements presented in this press release and filed in the Transition Report on Form 10-K for the period ended December 31, 2010 present the Company's statements of operations on a consolidated basis (including both the Healthcare Services division and the former Medical Products division) and balance sheet on a deconsolidated basis (giving effect to the transfer of the Medical Products division on December 31, 2010).

Financial Highlights for the Three Months Ended December 31, 2010

  • Revenue increased 7.7% to $50.0 million from $46.5 million in the prior year period.
  • Revenue from Healthcare Services increased 21% to $26.1 million, from $21.6 million in the prior year period. 
  • Net income for the quarter ended December 31, 2010 was $1.7 million, or $0.10 per diluted share, compared to net income of $3.9 million, or $0.24 per diluted share, in the prior year period.  

Three Months Ended December 31, 2010 Consolidated Financial Results

Revenue in the three months ended December 31, 2010 increased 7.5% to $50.0 million from $46.5 million in the prior year period, and reflects growing inpatient and outpatient volume across the United Family Healthcare network.  

Income from operations in the quarter ended December 31, 2010 was $2.7 million, compared to income from operations of $6.6 million in the same quarter last year.  Total operating costs and expenses for the quarter ended December 31, 2010 increased to $47.2 million compared to $39.9 million in the prior year period.

The variance in income from operations between the two periods of $3.8 million was primarily due to two items. First, during the three months ended December 31, 2010, the Company completed the formation of the CML joint venture with FosunPharma. Related to this transaction, Chindex incurred $942,000 in legal and professional fees which was recorded in general and administrative expenses. Second, in the prior year period, the Company recorded a benefit of $3.2 million to healthcare services costs to reflect the effect of business tax refunds, and had no similar benefit in the current period.

Operating expenses included $1.0 million of non-cash stock compensation expense compared to $889,000 in the prior year.  Development, startup, and post-opening expenses in the Healthcare Services division were $517,000 in the period compared to $313,000 in the prior year. Operating expenses in the quarter also included a $446,000 unrealized foreign exchange loss compared to a $309,000 unrealized foreign exchange loss in the same quarter of the prior year.

The Company recorded a $1.0 million provision for taxes, an effective tax rate of 36%, in the quarter ended December 31, 2010 as compared to a provision for taxes of $2.7 million, or an effective tax rate of 41%, in the prior year period. The effective tax rate in the prior period reflected losses in entities for which the Company could not recognize a tax benefit.

Net income for the quarter ended December 31, 2010 was $1.7 million, or $0.10 per diluted share. This compares to net income of $3.9 million or $0.24 per diluted share, in the prior year period.

Healthcare Services division business results:

In the quarter ended December 31, 2010, revenue increased 21% to $26.1 million from $21.6 million in the prior year period.  The increase reflects continued growth of inpatient and outpatient volume across the Company's United Family Healthcare network.

In the quarter ended December 31, 2010, operating costs increased to $20.3 million from $14.7 million in the prior year period. In the prior year period, the Company recorded a benefit of $1.0 million to healthcare services costs to reflect the effect of business tax refunds, and had no similar benefit in the current period. Income from operations before foreign exchange was $3.8 million compared to $5.6 million in the prior year period.

Medical Products division business results:

During the three month period ended December 31, 2010, revenue decreased 4% year over year to $23.9 million, compared to $24.9 million in the prior year.  The division recorded a loss on operations of $538,000 during the period compared to income from operations of $1.3 million the prior year period.  Gross margin percentage was constant period to period at 29%.  Total operating expenses increased 23% to $7.4 million from $6.0 million in the prior year and include a portion of the legal and professional fees related to the formation of the CML joint venture.

Roberta Lipson, President and CEO of Chindex, stated, "Our 21 percent year over year growth in healthcare services reflects ongoing demand for services across our network as well as validation of the UFH brand in newer locations such as Shanghai and Guangzhou. Entering 2011 as a pure play healthcare services company, we are more focused than ever before on our expansion opportunities whether they be new geographic locations or rolling out new service offerings within the UFH network. We are excited about the formation of the Chindex Medical Limited joint venture with our partners at FosunPharma.  We believe Chindex Medical Limited is an exciting growth opportunity as the medical device markets in China continue to grow at a rapid pace."

Nine Months Ended December 31, 2010 Consolidated Financial Results

During the nine month period ended December 31, 2010, revenue increased 5.2% year over year to $136.7 million, compared to $130.0 million in the prior year.  Income from operations was $9.5 million during the period, as compared to $13.3 million in the prior year period. Total operating costs and expenses increased 9.0% to $127.1 million from $116.7 million in the prior year. This reflects $2.1 million of non-cash stock compensation expense compared to $2.4 million in the prior year period. Development, startup, and post-opening expenses in the Healthcare Services division were $1.7 million in the period compared to $1.1 million in the prior year.

The Company recorded a $3.5 million provision for taxes, or an effective tax rate of 37.5%, in the nine month period ended December 31, 2010, compared to a provision for taxes of $5.3 million, or an effective tax rate of 40.8 %, for the prior year period.

Net income was $5.8 million, or $0.36 per diluted share, compared to $7.7 million, or $0.48 per diluted share, in the prior year period.  Non-cash stock compensation expense was $2.1 million during the nine month period ended December 31, 2010 compared to $2.4 million in the prior year period.

Conference Call

Management will host a conference call at 8:00 am ET on March 16, 2011, 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.  A telephone replay will be available from the day of the call until March 30, 2011, by dialing (U.S. domestic) 1-800-642-1687 or (international) 1-706-645-9291, passcode 49209447. A webcast 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 and Guangzhou.  The Company also provides medical capital equipment and products through Chindex Medical Limited, a joint venture company with manufacturing and distribution businesses serving both domestic China and export markets.  With 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.

About Chindex Medical Limited

The Chindex Medical Limited joint venture between FosunPharma and Chindex International began operations on January 1, 2011. The strategic venture merged the former Medical Products division of Chindex International and selected medical device companies of FosunPharma. The Chindex contributed businesses include distribution rights in China and Hong Kong for major imported brands in the areas of diagnostic ultrasound systems, robotic surgical systems, women's health imaging systems and aesthetic laser systems. The FosunPharma contributed businesses include research and development and manufacturing in the areas of blood transfusion consumables and viral inactivation systems, surgical consumables and dental products and materials. The joint venture growth strategy includes expansion of sales of existing products in the China market, new product introductions focusing on surgery, cardiology, dermatology, orthopedics, neurology/neurosurgery, and women's health.

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 our transition report on Form 10-K for the nine months ended December 31, 2010, updates and additions to those "Risk Factors" in our 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 we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We have 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)

Three months ended December 31,

Nine months ended December 31,

2010

2009

2010

2009

Unaudited

Product sales

$23,900

$24,921

$62,452

$65,324

Healthcare services revenue

26,115

21,563

74,224

64,610

Total revenue

50,015

46,484

136,676

129,934

Cost and expenses

Product sales costs

17,018

17,652

43,773

47,506

Healthcare services costs

20,336

14,699

57,288

48,801

Selling and marketing expenses

4,071

3,841

11,938

10,609

General and administrative expenses

5,769

3,699

14,129

9,740

Income from operations

2,821

6,593

9,548

13,278

Other (expenses) and income

Interest expense

(140)

(230)

(560)

(784)

Interest income

224

477

496

1,350

Loss on deconsolidation of subsidiaries

(126)

-

(126)

-

Miscellaneous (expense)  - net

(59)

(220)

(56)

(851)

Income before income taxes

2,720

6,620

9,302

12,993

Provision for income taxes

(979)

(2,722)

(3,488)

(5,304)

Net income

$1,741

$3,898

$5,814

$7,689

Net income per common share - basic

$.11

$.27

$.38

$.53

Weighted average shares outstanding - basic

16,036,825

14,592,992

15,347,173

14,533,601

Net income per common share - diluted

$.10

$.24

$.36

$.48

Weighted average shares outstanding - diluted

17,362,919

16,211,607

16,703,670

16,127,180

CHINDEX INTERNATIONAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(in thousands except share data)

December 312010

March 312010

ASSETS

Current assets:

Cash and cash equivalents

$32,007

$50,654

Restricted cash

300

468

Investments

37,631

37,207

Receivables from affiliates

9,330

-

  Accounts receivable, less allowance for doubtful accounts of $6,748 and $6,158, respectively

Product sales receivables

-

22,760

Patient service receivables

11,601

10,357

Inventories, net

1,413

14,411

Deferred income taxes

3,242

2,843

Other current assets

3,856

3,032

Total current assets

99,380

141,732

Restricted cash

980

2,556

Investments

2,439

-

Investment in unconsolidated affiliate

31,756

-

Property and equipment, net

37,099

23,678

Noncurrent deferred income taxes

108

103

Other assets

2,411

2,774

Total assets

$174,173

$170,843

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term debt, current portion of long-term debt and vendor financing

$-

$1,453

Accounts payable

4,038

13,979

Accrued expenses

8,541

14,022

Other current liabilities

3,874

3,826

Deferred revenue

-

2,549

Income taxes payable

2,147

2,218

Total current liabilities

18,600

38,047

Long-term debt, vendor financing and convertible debentures

23,070

22,593

Long-term accrued liabilities

-

84

Long-term deferred revenue

-

968

Long-term deferred tax liability

431

240

Total liabilities

42,101

61,932

Commitments and contingencies

Stockholders' equity: 

Common stock – 15,310,426 and 13,765,857 shares issued and

outstanding at December 31, 2010 and March 31, 2010, respectively

153

138

Class B stock – 1,162,500 shares issued and outstanding at December 31,

2010 and March 31, 2010, respectively

12

12

  Additional paid-in capital

115,815

100,269

Accumulated other comprehensive income

4,802

3,016

Retained earnings

11,290

5,476

Total stockholders' equity

132,072

108,911

           Total liabilities and stockholders' equity

$174,173

$170,843

CHINDEX INTERNATIONAL, INC.

SEGMENT INFORMATION

For the nine months ended December 31, 2010 and the years ended March 31, 2010 and 2009, the Company operated in two businesses: Healthcare Services and Medical Products. The Company evaluates performance and allocates resources based on income or loss from operations before income taxes, not including foreign exchange gains or losses.  The following segment information has been provided as per ASC 280 (in thousands):

(in thousands except share data)

Healthcare Services

Medical Products

Total

For the three months ended December 31, 2010:  

Sales and service revenue

$26,115

$23,900

$50,015

Gross Profit

n/a *

6,882

n/a

Gross Profit %

n/a *

29%

n/a

Income(loss) from operations before foreign exchange

$3,806

$(538)

$3,268

Foreign exchange (loss)

(446)

Income from operations

$2,822

Other (expense), net

(101)

Income before income taxes

$2,721

As of December 31, 2010:

Assets

$142,417

$31,756

$174,173

Healthcare Services

Medical Products

Total

For the three months ended December 31, 2009:

Sales and service revenue

$21,563

$24,921

$46,484

Gross Profit

n/a *

7,269

n/a

Gross Profit %

n/a *

29%

n/a

Income from operations before foreign exchange

$5,637

$1,265

$6,902

Foreign exchange (loss)

(309)

Income from operations

$6,593

Other income, net

27

Income before income taxes

$6,620

As of December 31, 2009:

Assets

$106,242

$63,037

$169,279

Healthcare Services

Medical Products

Total

For the nine months ended December 31, 2010:

Sales and service revenue

$74,224

$62,452

$136,676

Gross Profit

n/a *

18,679

n/a

Gross Profit %

n/a *

30%

n/a

Income (loss) from operations before foreign exchange

$11,898

$(1,806)

$10,092

Foreign exchange (loss)

(544)

Income from operations

$9,548

Other (expense), net

(246)

Income before income taxes

$9,302

As of December 31, 2010:

Assets

$142,417

$31,756

$174,173

Healthcare Services

Medical Products

Total

For the nine months ended December 31, 2009:  

Sales and service revenue

$64,610

$65,324

$129,934

Gross Profit

n/a *

17,818

n/a

Gross Profit %

n/a *

27%

n/a

Income from operations before foreign exchange

$12,043

$25

$12,068

Foreign exchange gain

1,210

Income from operations

$13,278

Other (expense), net

(285)

Income before income taxes

$12,993

As of December 31, 2009:

Assets

$106,242

$63,037

$169,279

Contact:

ICR, LLC

Ashley Ammon De Simone

+1-646-277-1227

SOURCE Chindex International, Inc.



RELATED LINKS

http://www.chindex.com