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Chindex International, Inc. Reports First Quarter Fiscal 2010 Financial Results

BETHESDA, Md., Aug. 10 /PRNewswire-Asia/ -- Chindex International, Inc. ("Chindex") (Nasdaq: CHDX), a leading independent American provider of Western healthcare products and services in the People's Republic of China, today announced results for its first quarter of fiscal 2010, ended June 30, 2009.

First Quarter Fiscal 2010 Financial Results

Revenue for the first quarter of fiscal 2010, which ended June 30, 2009, increased 41% to $45.3 million from $32.1 million in the first quarter of fiscal year 2009. Revenue from the Medical Products division increased 86% to $23.3 million from $12.5 million in the prior year period, and revenue from the Healthcare Services division increased 13% to $22.0 million from $19.6 million in the first quarter of fiscal year 2009. Revenue performance reflects increased medical products sales, including revenue from the sale of two daVinci units, and year over year growth in inpatient and outpatient revenue in the Healthcare Services division.

During the quarter, the Company recorded income from operations of $5.3 million, a significant increase from $753,000 in the same quarter of last year. Total operating costs and expenses was $40.1 million compared to $31.3 million in the prior year period.

Operating expenses in the first quarter of fiscal 2010 include multi-year physician contracts renewed at higher rates in calendar 2008, additional medical personnel in Beijing and Shanghai hospitals and the Guangzhou clinic, increased direct patient care costs and increased medical product sales activities versus the prior year period. Additionally, Chindex recognized development and startup expenses of approximately $329,000, equivalent to approximately $0.02 per diluted share, and non-cash stock compensation expense of $689,000, equivalent to approximately $0.04 per diluted share, in the first quarter of 2010. In the prior year period, the Company's development and startup expenses in the Healthcare Services division were not material and non-cash stock compensation expense was $576,000 or roughly $0.04 per diluted share.

Roberta Lipson, President and CEO of Chindex, commented, "In the first quarter of fiscal 2010, we completed deliveries under our KfW Development Bank contracts and witnessed continued demand for the products from our diversified portfolio of leading medical equipment, particularly robotic surgical systems, including the sale of two daVinci surgical systems, as well as women's health imaging systems, cosmetic laser systems and clinical chemistry product lines. For healthcare services, we were particularly pleased to see growth in both inpatient and outpatient services in Beijing and Shanghai markets, as well as increasing patient revenues at our Guangzhou facilities."

Under new U.S. accounting principles which require the Company to record its warrants at fair value, the company recorded a non-cash charge to miscellaneous expense of approximately $741,000 or $0.05 per diluted share to reflect the change in the fair value of its outstanding warrants during the quarter.

The Company's tax expense was approximately $1.6 million in the first quarter of 2010, an effective tax rate of 32.6%. In the prior year period, tax expense was approximately $1.2 million.

Net income in the first quarter of fiscal 2010 was $3.3 million, or $0.20 per diluted share. This compares to a net loss of $161,000, or $(0.01) per diluted share, in the first quarter of fiscal 2009. Excluding the impact of the change in fair value of outstanding warrants, net income per diluted share was approximately $0.25.

Medical Products division business results:

For the first quarter of fiscal year 2010, revenue increased 86% to $23.3 million from $12.5 million in the prior year quarter. The year over year comparison reflects continued growth in the Medical Products division as well as the negative impact of the Sichuan earthquake, which disrupted purchasing behavior in the comparable quarter of the prior year. Gross profit in the Medical Products division increased to $5.8 million from $2.6 million in the prior fiscal year's first quarter. Gross profit margin increased to 25%, from 21% in the prior year period. Selling, marketing, general and administrative expenses for the Medical Products division increased 19% to $5.6 million from $4.7 million in the first quarter of the prior fiscal year. Increased expenses during the period primarily reflect increased staff levels to support higher revenues.

Lipson added, "Our first quarter medical products sales were strong and continued the momentum we witnessed in the March quarter as we shipped the remainder of our KfW Development Bank contracts. As a proven leader in the sector, we remain focused on enhancing and diversifying our portfolio so that we address new and existing markets. To this end, today we announced exclusive distribution agreements with Biotest AG and Cutera, Inc. for exclusive distribution of clinical chemistry products and aesthetic laser systems in China -- two exciting new product offerings. Our Medical Products division continues to be well-positioned to meet the increasing need for high end medical products in China."

Healthcare Services division business results:

Revenue in the first quarter of the fiscal year 2010 was $22.0 million, an increase of 13% from $19.6 million in the prior year quarter. Operating costs increased by 7% to $17.9 million from $16.8 million in the prior year's first quarter, reflecting increases in compensation and direct patient care costs resulting from expansion of hospital network operations offset by a decrease in other operating costs. Income from operations before foreign exchange gains increased to $4.1 million, from the $2.8 million in the prior year period.

Lipson stated, "First quarter healthcare services performance reflects increasing inpatient and outpatient traffic in the Beijing and Shanghai markets as well as a continued focus on efficiency and cost containment. We were particularly pleased with our operating income performance in the first quarter of 2010 although I'd like to point out that in the prior year period, we experienced higher than normal operating expenses related to JCI accreditation. Our UFH brand continues to be the leading provider of premium care in China and we believe that our long term opportunity is compelling."

Conference Call

Management will host a conference call today at 8:00 am ET to discuss financial results. To participate in the conference call, international callers dial 1-719-457-2655 and domestic callers dial 1-888-551-9020 approximately 10 minutes before the conference call is scheduled to begin. The telephone replay will be available on the day of the call at (international) 1-719-457-0820 and (domestic) 1-888-203-1112, pass code 2725441; and continue to be available through August 24, 2009. This call is also being webcast and will be accessible at Chindex's website . The event will be archived and available for replay through August 17, 2009.

About Chindex International, Inc.

Chindex is an American healthcare company that provides healthcare services and supplies medical capital equipment, instrumentation and products to the Chinese marketplace, including Hong Kong. Healthcare services are provided through the operations of its United Family Hospitals and Clinics, a network of private primary care hospitals and affiliated ambulatory clinics in China. The Company's hospital network currently operates in Beijing, Shanghai, Guangzhou and Wuxi. The Company sells medical products manufactured by various major multinational companies, including Siemens AG and Intuitive Surgical, for which the Company is the exclusive distribution partner for the sale and servicing of color ultrasound systems and surgical robotic systems respectively. It also arranges financing packages for the supply of medical products to hospitals in China utilizing the export loan and loan guarantee programs of both the U.S. Export-Import Bank and the German KfW Development Bank. With twenty-eight years of experience, approximately 1,300 employees, and operations in China, Hong Kong, the United States and Germany, the Company's strategy is to expand its cross-cultural reach by providing leading edge healthcare technologies, quality products and services to Greater China's professional communities. Further company information may be found at the Company's websites, and .

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 annual report on Form 10-K for the year ended March 31, 2009, 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.

    For further information, please contact:

    Integrated Corporate Relations
     Ashley M. Ammon
     Tel: +1-203-682-8200

                         CHINDEX INTERNATIONAL, INC.
                 (in thousands except share and per share data)

                                                  Three months ended June 30,
                                                      2009              2008
    Product sales                                  $23,283           $12,496
    Healthcare services revenue                     22,048            19,572
    Total revenue                                   45,331            32,068

    Cost and expenses
                   Product sales costs              17,469             9,896
                   Healthcare services
                    costs                           16,750            15,735
                   Selling and marketing
                    expenses                         3,160             2,458
                   General and
                    expenses                         2,678             3,226
     Income from operations                          5,274               753
     Other (expenses) and income
                   Interest expense                   (273)             (226)
                   Interest income                     472               469
                    (expense) income  -
                    net                               (647)                7
    Income before income taxes                       4,826             1,003
    Provision for income taxes                      (1,573)           (1,164)
    Net income (loss)                               $3,253             $(161)
    Net income (loss) per common share -
     basic                                            $.22             $(.01)
    Weighted average shares outstanding -
     basic                                      14,480,484        14,320,438
    Net income (loss) per common share -
     diluted                                          $.20             $(.01)
    Weighted average shares outstanding -
     diluted                                    15,943,992        14,320,438

                           CHINDEX INTERNATIONAL, INC.
                        (in thousands except share data)

                                             June 30, 2009    March 31, 2009
    Current assets:
    Cash and cash equivalents                      $15,580           $20,293
    Restricted cash                                    634             1,854
    Investments                                     53,103            51,502
       Accounts receivable, less
        allowance for doubtful accounts
        of $5,116 and $5,041,respectively
                 Product sales
                  receivables                       36,404            37,994
                 Patient service
                  receivables                        9,898             8,837
    Inventories, net                                11,260            11,346
    Deferred income taxes                            2,575             2,410
    Other current assets                             3,763             3,239
    Total current assets                           133,217           137,475
    Restricted cash                                  1,572             1,437
    Property and equipment, net                     21,143            20,633
    Noncurrent deferred income taxes                 1,021             1,031
    Other assets                                     1,927             2,061
       Total assets                               $158,880          $162,637
    Current liabilities:
    Short-term debt, current portion of
     long-term debt and vendor financing            $4,019            $1,631
    Current portion of capitalized leases               13                22
    Accounts payable                                11,018            12,259
    Accrued expenses                                10,300            20,607
    Other current liabilities                        5,177             4,148
    Deferred revenue                                 2,011             1,539
    Income taxes payable                             1,581             1,568
    Total current liabilities                       34,119            41,774
    Long-term debt, vendor financing and
     convertible debentures                         22,603            23,709
    Long-term deferred revenue                       1,750               595
    Long-term deferred tax liability                   119               119
    Total liabilities                               58,591            66,197
    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 - 13,464,807
              and 13,452,007 shares
              issued and outstanding at
              June 30, 2009 and March
              31, 2009, respectively                   135               135
             Class B stock - 1,162,500
              shares issued and
              outstanding at June 30,
              2009 and March 31, 2009,
              respectively                              12                12
       Additional paid-in capital                   96,562            95,808
       Accumulated other comprehensive
        income                                       3,055             3,072
       Retained earnings (accumulated
        deficit)                                       525            (2,587)
                Total stockholders'
                 equity                            100,289            96,440
                    Total liabilities and
                     stockholders' equity         $158,880          $162,637

                           CHINDEX INTERNATIONAL, INC.
                               SEGMENT INFORMATION

The Company operates in two businesses: Healthcare Services and Medical Products. The Company evaluates performance and allocates resources based on profit or loss from operations before income taxes, not including foreign exchange gains or losses. The following segment information has been provided per Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information:" (in thousands except percentages)

                                          Healthcare     Medical
                                            Services    Products        Total
    For the three months ended June 30,
    Sales and service revenue                $22,048     $23,283      $45,331
    Gross Profit                                n/a *      5,814          n/a
    Gross Profit %                              n/a *        25%          n/a
    Income from operations before foreign
     exchange                                 $4,125        $243       $4,368
    Foreign exchange gain                                                 906
    Income from operations                                             $5,274
    Other (expense), net                                                 (448)
    Income before income taxes                                         $4,826
    Assets as of June 30, 2009               $95,851     $63,029     $158,880

                                          Healthcare     Medical
                                            Services    Products        Total
    For the three months ended June 30,
    Sales and service revenue                $19,572     $12,496      $32,068
    Gross Profit                                n/a *      2,600          n/a
    Gross Profit %                              n/a *        21%          n/a
    Income from operations before foreign
     exchange                                 $2,775     $(2,136)        $639
    Foreign exchange gain                                                 114
    Income from operations                                               $753
    Other income, net                                                     250
    Income before income taxes                                         $1,003
    Assets as of March 31, 2009              $94,675     $67,962     $162,637

    * Gross profit margins are not routinely calculated in the healthcare

SOURCE Chindex International, Inc.
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