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Concord Medical Announces First Quarter 2010 Financial Results
Date:5/27/2010

BEIJING, May 27 /PRNewswire-Asia-FirstCall/ -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), the operator of the largest network of radiotherapy and diagnostic imaging centers in China, today announced its unaudited financial results for the first quarter ended March 31, 2010(1).

    First Quarter Fiscal 2010 Highlights

    -- Total net revenues in the first quarter of 2010 were RMB76.2 million
       ($11.2 million), a 36.6% increase from the corresponding period in 2009.
    -- Gross profit in the first quarter of 2010 was RMB49.1 million ($7.2
       million), a 30.4% increase from the corresponding period in 2009.
    -- Non-GAAP Net income(2) in the first quarter of 2010 was RMB24.2 million
       ($3.5 million), a 10.7% increase from the corresponding period in 2009.
    -- Both Non-GAAP basic and diluted earnings per American Depository Share
       ("ADS")(3) for the first quarter of 2010 were RMB0.49 ($0.07).
    -- Adjusted EBITDA(4) (non-GAAP) in the first quarter of 2010 was RMB57.9
       million ($8.5 million), a 19.8% increase from the corresponding period
       in 2009.
    -- Concord Medical opened one center in the first quarter of 2010,
       bringing the total number of centers in operation to 89 across 37
       cities in China, as of March 31, 2010. To date, the Company has entered
       into agreements to establish 38 new centers.
    -- The number of treatment patient cases and diagnostic patient cases was
       6,868 and 26,562 during the first quarter of 2010, respectively.
       Treatment patient cases increased by 18.2% from the corresponding
       period in 2009. Diagnostic patient cases increased by 100.8% from the
       corresponding period in 2009.

    (1)  This announcement contains translations of certain RMB amounts into
         U.S. dollars at specified rates solely for the convenience of the
         reader. Unless otherwise noted, all translations from RMB to U.S.
         dollars are made at a rate of RMB6.8258 to US$1.00, the effective
         noon buying rate as of March 31, 2010 in The City of New York for
         cable transfers of RMB as certified for customs purposes by the
         Federal Reserve Bank of New York.
    (2)  Non-GAAP net income is defined in this announcement as net income
         excluding share-based compensation expenses, which amounted to RMB2.6
         million ($0.4 million) for the first quarter of 2010. The Company did
         not incur share-based compensation expenses for the first quarter of
         2009.
    (3)  Each ADS represents three ordinary shares of the Company.
    (4)  Adjusted EBITDA is defined in this announcement as net income plus
         interest, taxes, depreciation and amortization, share-based
         compensation expenses and other adjustments. Other adjustments
         include change in fair value of convertible notes, foreign exchange
         loss and other income.

"We are pleased with our solid financial results for the first quarter despite the usual seasonality factor associated with the Chinese New Year holiday," said Dr. Jianyu Yang, director, president and chief executive officer of Concord Medical. "In addition, we made good progress toward our goal of operating at least 200 radiotherapy and diagnostic imaging centers by 2012. We opened one new center in the first quarter, acquired four centers in April, and our first specialty hospital, the Chang'an CMS International Cancer Center, is on track to begin operations in June 2010. Looking forward, we will continue to grow both organically and through acquisitions. On top of the four centers acquired in April, we also expect to open eight to ten centers organically in the second quarter, and will continue to explore additional acquisition targets for 2010."

Dr. Yang added, "We continue to receive encouraging signals from industry regulators. On May 7, 2010, the Chinese State Council issued a new statement reiterating its intention to enhance the scope and quality of healthcare services by attracting more private investments. As the operator of the largest network of radiotherapy and diagnostic imaging centers in China, we are confident that Concord Medical is well positioned to benefit from the favorable market environment supported by medical reform policies and increasing consumer demand for world-class cancer treatment."

Mr. Boxun Zhang, Concord Medical's corporate vice president, commented, "In the first quarter of 2010, we achieved strong top line growth and made good progress toward our full year operational and financial targets. For the rest of the year, we will continue to enhance operational and financial efficiency while supporting our network expansion with our strong financial resources. As a newly listed company, we are also committed to fulfilling the requirements of Sarbanes Oxley Section 404, and we are in the process of reviewing our internal control mechanisms accordingly."

First Quarter Fiscal 2010 Results

Concord Medical reported total net revenues of RMB76.2 million ($11.2 million) for the first quarter of 2010, representing a 36.6% increase from the corresponding period in 2009, primarily due to patient volume growth from established centers as well as from new centers opened in 2009.

Cost of revenues in the first quarter of 2010 was RMB27.0 million ($4.0 million), a 49.8% increase from the corresponding period in 2009, primarily due to increased depreciation expenses related to new centers opened in 2009.

Gross profit margin in the first quarter of 2010 was 64.5% as compared to 67.6% in the corresponding period in 2009. The marginal decrease was primarily due to new centers opened in the second half of 2009 having lower gross profit margin in their ramp-up periods comparing to established centers.

Operating expenses, consisting of selling expenses and general and administrative expenses, were RMB17.6 million ($2.6 million) in the first quarter of 2010, compared to RMB13.3 million in the previous quarter and RMB7.1 million in the corresponding period in 2009. The increase in operating expenses was mainly due to additional accrued expenses associated with post- IPO professional service charges, such as legal and auditing fees, and share- based compensation expenses, which are amortized through the year using the straight line method.

Operating Income was RMB31.5 million ($4.6 million), representing a 2.9% increase from the corresponding period in 2009. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB34.1 million ($5.0 million), an 11.4% increase from the corresponding period in 2009.

Income tax expense was RMB8.5 million ($1.2 million), compared to an income tax expense of RMB6.7 million in the corresponding period in 2009. The effective tax rate for the first quarter of 2010 was 28.3% as compared to 22.9% in the previous quarter and 23.5% in the corresponding period in 2009. The increase in the effective tax rate was in relation to share-based compensation expenses and professional service expenses paid by off-shore subsidiaries being not directly tax deductable at on-shore entities.

Net income was RMB21.6 million ($3.2 million), representing a 1.2% decrease from the corresponding period in 2009. Both basic and diluted earnings per ADS for the first quarter of 2010 amounted to RMB0.44 ($0.06).

Net income excluding share-based compensation expenses (non-GAAP) was RMB24.2 million ($3.5 million), a 10.7% increase from the corresponding period in 2009. Both Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the first quarter of 2010 amounted to RMB0.49 ($0.07).

Adjusted EBITDA (non-GAAP), was RMB57.9 million ($8.5 million) for the first quarter of 2010, representing a 19.8% increase from the corresponding period in 2009.

Capital expenditure for the first quarter of 2010 was RMB81.4 million ($11.9 million). Total depreciation expenses were RMB17.1 million ($2.5 million). In addition, amortization of acquired intangibles was RMB6.7 million ($1.0 million). The Company expects amortization of acquired intangibles to be approximately RMB26.8 million ($3.9 million) in 2010, assuming no additional intangibles are acquired through potential acquisitions.

As of March 31, 2010, the Company had total fixed assets with a net book value of RMB592.3 million ($86.8 million) and cash of RMB993.6 million ($145.6 million).

As of March 31, 2010, the Company had bank credit lines totaling RMB2.1 billion (US$314.2 million).

Accounts receivable was RMB112.5 million ($16.5 million) as of March 31, 2010, similar to RMB111.3 million as of December 31, 2009.

Outlook for Fiscal Year 2010

Taking into consideration the projected contribution from the four recently acquired centers, Concord Medical raises the estimated range of total net revenues for 2010 to RMB367 million to RMB398 million, which would represent a 25.5% to 36.1% increase from 2009.

Also as a result of the recent acquisition, the Company raises its network expansion target to 34 to 39 radiotherapy and diagnostic imaging centers in 2010, and the range of expected total capital expenditures related to these new centers to RMB400 million to RMB450 million.

This forecast reflects Concord Medical's current and preliminary view, which is subject to change.

Conference Call Information

Concord Medical's management will hold an earnings conference call at 8 AM on May 27, 2010 U.S. Eastern Time (8 PM on May 27, 2010 Beijing/Hong Kong time).

    Dial-in details for the earnings conference call are as follows:

    US:             +1 866.730.5766
    China:          + 10.800.152.1490 (North) / 10.800.130.0399 (South)
    Hong Kong:      + 800.96.3844
    International:  +1 857.350.1590

    Passcode:       87425784

A replay of the conference call may be accessed by phone at the following number until June 3, 2010:

    US:             + 1.888.286.8010
    International:  + 1.617.801.6888

    Passcode:       58084651

Additionally, a live and archived webcast of this conference call will be available at http://ir.cmsholdings.com/ .

About Concord Medical

Concord Medical operates the largest network of radiotherapy and diagnostic imaging centers in China in terms of revenues and the total number of centers in operation per available statistics. The Company currently operates a network of more than 89 centers spanning 37 cities and 21 provinces and administrative regions in China. Under long-term arrangements with top- tier hospitals in China, the Company provides radiotherapy and diagnostic imaging equipments and manages the daily operations of these centers located on its hospital partners' premises. The Company also provides ongoing training to doctors and other medical personnel in its network of centers to ensure a high level of clinical care for patients.

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 "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions. These forward looking statements are based upon management's current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a number of factors. Such factors include: the number of new radiotherapy and diagnostic imaging centers opened; the increase in the number of patients in existing centers; the establishment of specialty cancer hospitals; changes in the healthcare industry in China, including changes in the healthcare policies and regulations of the PRC government; and technological or therapeutic changes affecting the field of cancer treatment and diagnostic imaging. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission at www.sec.gov. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement the consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (GAAP), Concord Medical uses certain non-GAAP measures. The Company presents certain of its financial information that is adjusted from results based on GAAP to exclude the impact of share-based compensation expense. The Company believes excluding share-based compensation expense from its non-GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results as such expense is not directly attributable to the underlying performance of the Company's business operations and do not impact its cash earnings. Concord Medical also believes these non-GAAP measures excluding share-based compensation expense are important in helping investors to understand the Company's current financial performance and future prospects and to compare business trends among different reporting periods on a consistent basis. In addition, Concord Medical also presents the non-GAAP measure of Adjusted EBITDA, which is defined in this announcement as net (loss) income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include change in fair value of convertible notes, foreign exchange loss and other income. Furthermore, Adjusted EBITDA eliminates the impact of items that the Company does not consider indicative of the performance of its network of centers. The Company believes investors will similarly use Adjusted EBITDA as one of the key metrics to evaluate its financial performance and to compare its current operating results with corresponding historical periods and with other companies in the healthcare services industry. The presentation of these additional measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported or forecasted by other companies. The non-GAAP measures have been reconciled to GAAP measures in the attached financial statements.


    For investor and media inquiries, please contact:

    China

     Stephanie Song
     Concord Medical Services
     Phone: +86-10-5957-5287
     Email: stephanie.song@cmsholdings.com

     Lilian Wong
     Brunswick Group, LLC
     Phone: +86-10-6566-2256
     Email: lwong@brunswickgroup.com

    U.S.

     Nicki Kahner
     Brunswick Group, LLC
     Phone: +1-212-333-3810
     Email: nkahner@brunswickgroup.com



                    Concord Medical Services Holdings Co., Ltd.
                  Unaudited Condensed Consolidated Balance Sheets
                                   (in thousand)

                                            December 31,     March 31,
                                               2009            2010
                                                RMB        RMB       US$
    ASSETS
    Current assets
    Cash                                     1,037,239    993,597  145,565
    Restricted cash, current portion               293        593       87
    Accounts receivable                        111,328    112,527   16,486
    Prepayment and other current assets        100,484    119,552   17,516
    Deferred tax assets, current portion         3,168      2,788      408
    Total current assets                     1,252,512  1,229,057  180,062

    Non-current assets
    Property, plant and equipment, net         584,869    592,265   86,769
    Goodwill                                   300,163    300,163   43,975
    Acquired intangible assets, net            155,345    148,641   21,776
    Deposits for non-current assets            115,323    144,480   21,167
    Deferred tax assets, non-current
     portion                                    19,700     20,531    3,008
    Net investment in financing lease               --     23,176    3,395
    Other non-current assets                    11,532     50,149    7,347
    Restricted cash, non-current portion         4,421      6,564      962
    Total non-current assets                 1,191,353  1,285,969  188,399

    Total assets                             2,443,865  2,515,026  368,461


    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Short-term bank borrowing                   11,500     27,000    3,956
    Long-term bank borrowings,
     current portion                            35,647     31,424    4,604
    Accounts payable                             9,759      9,822    1,439
    Accrual for purchase of
     property, plant and equipment              12,043     10,120    1,483
    Obligations under capital
     leases, current portion                     3,582      3,582      525
    Accrued expenses and other
     liabilities                                48,663     47,486    6,957
    Income tax payable                          14,642     14,996    2,197
    Deferred revenue, current portion           10,401     12,012    1,760
    Amounts due to related parties               1,546      1,617      237

    Total current liabilities                  147,783    158,059   23,158

    Non-current liabilities
    Long-term bank borrowings,
     non-current portion                       102,755    132,009   19,340
    Deferred revenue, non-current
     portion                                     5,188     12,964    1,899
    Obligations under capitalized
     leases, non-current portion                 8,074      7,412    1,086
    Lease deposit                                1,000      1,000      147
    Deferred tax liabilities,
     non-current portion                        25,317     25,920    3,797
    Total non-current liabilities              142,334    179,304   26,269

    Total liabilities                          290,117    337,363   49,427

    Commitments and contingencies

    Shareholders' equity
    Ordinary shares                                108        108       16
    Additional paid-in capital               2,671,910  2,674,496  391,822
    Accumulated other comprehensive loss        (3,987)    (4,237)    (621)
    Accumulated deficit                       (514,283)  (492,704) (72,183)

    Total shareholders' equity               2,153,748  2,177,663  319,034

    Total liabilities and
     shareholders' equity                    2,443,865  2,515,026  368,461

    *Amounts for the year ended December 31, 2009 were derived from the
     December 31, 2009 unaudited consolidated financial statements.



                     Concord Medical Services Holdings Co., Ltd.
                Unaudited Condensed Consolidated Statements of Income
                         (in thousand, except per ADS data)

                                              For The Three Months Ended
                                            March 31,         March 31,
                                              2009              2010
                                               RMB         RMB         US$
    Revenue, net
    Lease and management services            47,349      71,707      10,505
    Management services                       8,323       2,721         399
    Other, net                                   79       1,753         257
    Total net revenues                       55,751      76,181      11,161

    Cost of revenues
    Lease and management services           (11,171)    (20,336)     (2,979)
    Amortisation of acquired
     intangibles                             (6,882)     (6,704)       (982)
    Management services                          (3)         (1)         (0)
    Total cost of revenues                  (18,056)    (27,041)     (3,962)

    Gross profit                             37,695      49,140       7,199

    Operating expenses

    Selling expenses                         (1,316)     (2,093)       (307)
    General and administrative
     expenses                                (5,754)    (15,529)     (2,275)

    Operating income                         30,625      31,518       4,617
    Interest expense                         (1,638)     (1,980)       (290)
    Foreign exchange loss                      (663)       (776)       (114)
    Gain from disposal of equipment              --         344          50
    Interest income                             224         975         143

    Income before income taxes               28,548      30,081       4,407
    Income tax expense                       (6,709)     (8,503)     (1,246)
    Net income                               21,839      21,578       3,161

    Accretion of Series A
     contingently redeemable
     convertible preferred shares            (7,951)         --          --
    Accretion of Series B
     contingently redeemable
     convertible preferred shares           (12,796)         --          --

    Net income attributable to
     ordinary shareholders                    1,092      21,578       3,161

    Earnings per ADS
    Basic /Diluted                             0.05        0.44        0.06

    Weighted average number of
     ADS outstanding:
    Basic /Diluted                       23,476,033  49,151,833  49,151,833



    Reconciliations of non-GAAP results of operations measures to the nearest
    comparable GAAP measures (*) (in RMB thousands, unaudited)

                               Three months ended      Three months ended
                                  March 31, 2009          March 31, 2010

                                GAAP  Adjust- Non-GAAP  GAAP  Adjust- Non-GAAP
                               Result  ment    Results Result   ment   Results
    Operating profit           30,625   --      30,625 31,518  2,586   34,104
    Net income                 21,839   --      21,839 21,578  2,586   24,164
    Net income attributable
     to ordinary shareholders      --   --          --     --     --       --

    Basic (Loss) earning per
     ADS                         0.05   --        0.05   0.44   0.05     0.49
    Diluted (Loss) earning
     per ADS                     0.05   --        0.05   0.44   0.05     0.49

    (*) The adjustment is only for share-based compensation.



    Reconciliation from net income to adjusted EBITDA(*)
    (in RMB thousands, unaudited)

                                         Three months ended Three months ended
                                           March 31, 2009    March 31, 2010
    Net income                                 21,839              21,578
      Interest expense, net                     1,414               1,005
      Income taxes expense (benefit)            6,709               8,503
      Depreciation and amortization            17,753              23,842
      Share-based compensation                     --               2,586
      Other adjustments                           663                 432

    Adjusted EBITDA                            48,378              57,946

    (*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net
        (loss) income plus interest, taxes, depreciation and amortization,
        share-based compensation expenses and other adjustments. Other
        adjustments include change in fair value of convertible notes, foreign
        exchange loss and other income.


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