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Chindex International, Inc. Reports Second Quarter and First Half Fiscal 2010 Financial Results
Date:11/9/2009

BETHESDA, Md., Nov. 9 /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 the second quarter and first half of fiscal 2010, which ended September 30, 2009.

    Financial Highlights:
    -- Revenue in the second quarter of fiscal 2010 was $38.1 million, flat on
       a year over year basis;
    -- Net income in the second quarter of fiscal 2010 was $538,000, or $0.03
       per diluted share, compared to net income of $862,000, or $0.05 per
       diluted share, in the second quarter of fiscal 2009;
    -- Revenue in the first half of fiscal 2010 increased 19% to $83.5 million
       from $70.2 million during the first half of fiscal 2009;
    -- Net income in the first half of fiscal 2010 increased to $3.8 million,
       or $0.24 per diluted share, from $700,000, or $0.04 per diluted share,
       in the year over year period;

Roberta Lipson, President and CEO of Chindex stated, "We are pleased with our financial results for the first half of fiscal year 2010, which puts us on track to meet our full year expectations. Our second quarter reflects continued growth in the Healthcare Services division, offset by disruption related to construction at our Beijing facility. The Medical Products division is always subject to quarterly variations, and this quarter we encountered regulatory delays on high-value medical equipment purchases, although this does not undermine the significant excitement we see in the marketplace for our products, particularly for daVinci. As we enter the back half of the fiscal year, we remain extremely well-positioned to capitalize on China's premium-quality healthcare services market, continued economic vibrancy and opportunities created by healthcare reform."

Second Quarter Fiscal 2010 Financial Results

Revenue for the second quarter of fiscal 2010 was flat on a year over year basis at $38.1 million. Revenue from the Healthcare Services division increased 10% to $21.0 million from $19.1 million in the prior year period, and reflects continued growth of inpatient and outpatient volume offset by disruption due to construction of the expanded facility in Beijing. Revenue from the Medical Products division decreased 10% to $17.1 million from $19.0 million in the prior year period, and reflects delays in the order cycle for high value capital medical equipment, particularly robotic surgical systems, resulting from the Chinese government's review of import approvals and the timing of the tender process.

During the quarter, the Company recorded income from operations of $1.4 million, compared to $1.6 million in the same quarter of last year. Total operating costs and expenses were flat year over year at $36.7 million and reflect expense controls as well as normalized salary costs in the Healthcare Services division. Additionally, Chindex recognized development and startup expenses of approximately $313,000, equivalent to approximately $0.02 per diluted share, and non-cash stock compensation expense of $852,000, equivalent to approximately $0.05 per diluted share, in the second quarter of fiscal 2010. In the prior year period, the Company's development and startup expenses in the Healthcare Services division were $645,000, roughly $0.04 per diluted share, and non-cash stock compensation expense was $646,000 or roughly $0.04 per diluted share.

The Company's tax expense was approximately $1.0 million in the second quarter of fiscal 2010, an effective tax rate of 65.2%. The tax rate reflects losses in entities for which the Company cannot yet recognize benefit. In the prior year period, tax expense was approximately $251,000.

Net income in the second quarter of fiscal 2010 was $538,000, or $0.03 per diluted share. This compares to net income of $862,000, or $0.05 per diluted share, in the second quarter of fiscal 2009.

Healthcare Services division business results:

Revenue in the second quarter of the fiscal year 2010 was $21.0 million, an increase of 10% from $19.1 million in the prior year quarter. Operating costs increased by 4% to $18.7 million from $18.0 million in the prior year's second quarter. Salary expense represented 48% of divisional revenue, down from 51% in the prior year period, and reflects the normalization of physician salary costs as well as increased staffing compared to the year before. Income from operations before foreign exchange gains increased to $2.3 million from $1.1 million in the prior year period.

Lipson stated, "Continued growth in patient volume throughout our hospital and clinic network during the second fiscal quarter demonstrates our unique offering, proven operating history and the continued growing demand for premium quality care in China. While on-site construction in Beijing caused some disruption in our existing offerings such as pediatrics, we remain extremely confident that high-end healthcare services in China address an increasingly affluent and growing, underserved market. Our sights remain set on our long-term goal to substantially grow our network in the coming years."

Medical Products division business results:

For the second quarter of fiscal 2010, revenue decreased 10% to $17.1 million from $19.0 million in the prior year period. The Company did not realize any sales of robotic surgical systems during the quarter and sales of diagnostic ultrasound, women's health imaging, clinical chemistry and cosmetic laser systems products increased at lower than expected rates. Revenue performance reflects delays in the order cycle for high value capital medical equipment, particularly for robotic surgical systems, resulting from the Chinese government's review of import approvals, and also reflects the overall timing of the tender process in China. Gross profit margin was 28% and was in line with historical averages. The division had a loss from operations before foreign exchange gains of $1.5 million compared with income from operations of approximately $582,000 in the prior year period.

"The government's review of importing high value technologies into public hospitals is a routine process impacting new, big ticket medical products. We believe that the review itself substantiates the continued demand we see for premium medical technology in China, and bodes well for future sales across our portfolio despite causing disruptions to daVinci sales this quarter. Our expectation for the order flow for daVinci's has not changed and we continue to expect sales of one to two systems per quarter on average, over time. We also see excitement in the market for the other new technologies we have introduced recently, including in ultrasound and digital mammography, for example. In addition, over the first and second quarters this year we have shipped products under our KfW Development Bank and U.S. Export Import Bank contracts and expect to execute additional government backed contracts in the future," concluded Lipson.

Conference Call

Management will host a conference call today at 8:00 am ET today to discuss financial results. To participate in the conference call, international callers dial 1-913-312-1510 and domestic callers dial 1-888-724- 9518 approximately 10 minutes before the conference call is scheduled to begin.

The telephone replay will be available from the day of the call until November 23, 2009 by dialing (international) 1-719-457-0820 and (domestic) 1- 888-203-1112, passcode 9542409.

A webcast will be accessible via Chindex's website at http://ir.chindex.com/events.cfm .

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 the 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-seven 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 http://www.chindex.com and http://www.unitedfamilyhospitals.com .

    For further information, please contact:

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



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


                                   Three months ended       Six months ended
                                     September 30,           September 30,
                                   2009        2008        2009        2008
    Product sales                 $17,120     $19,041     $40,404     $31,538
    Healthcare services
     revenue                       20,999      19,069      43,047      38,641
    Total revenue                  38,119      38,110      83,451      70,179

    Costs and expenses
    Product sales costs            12,384      13,187      29,853      23,083
    Healthcare services costs      17,352      16,666      34,102      32,401
    Selling and marketing
     expenses                       3,608       3,265       6,768       5,724
    General and administrative
     expenses                       3,362       3,344       6,040       6,570
        Income from operations      1,413       1,648       6,688       2,401
        Other (expenses) and
         income
    Interest expense                 (281)       (253)       (554)       (479)
    Interest income                   400         321         872         789
    Miscellaneous (expense)
     income - net                      15        (603)       (632)       (596)
    Income before income taxes      1,547       1,113       6,374       2,115
    Provision for income taxes     (1,009)       (251)     (2,583)     (1,415)
    Net income                       $538        $862      $3,791        $700
    Net income per common
     share - basic                   $.04        $.06        $.26        $.05
    Weighted average shares
     outstanding - basic       14,525,528  14,400,655  14,514,453  14,360,758
    Net income per common
     share - diluted                 $.03        $.05        $.24        $.04
    Weighted average shares
     outstanding - diluted     16,143,679  16,042,327  16,072,536  16,126,008



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

                                         September 30, 2009    March 31, 2009
    ASSETS
    Current assets:
    Cash and cash equivalents                      $16,207           $20,293
    Restricted cash                                    734             1,854
    Investments                                     55,494            51,502
        Accounts receivable, less
         allowance for doubtful accounts
         of $5,381 and
         $5,041, respectively
        Product sales receivables                   31,689            37,994
        Patient service receivables                  9,971             8,837
    Inventories, net                                13,182            11,346
    Deferred income taxes                            2,845             2,410
    Other current assets                             3,327             3,239
    Total current assets                           133,449           137,475
    Restricted cash                                  2,445             1,437
    Property and equipment, net                     21,434            20,633
    Noncurrent deferred income taxes                 1,019             1,031
    Other assets                                     2,896             2,061
        Total assets                              $161,243          $162,637
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Short-term debt, current portion of
     long-term debt and vendor financing            $2,441            $1,631
    Current portion of capitalized leases                3                22
    Accounts payable                                11,626            12,259
    Accrued expenses                                10,537            20,607
    Other current liabilities                        6,265             4,148
    Deferred revenue                                 2,458             1,539
    Income taxes payable                             1,970             1,568
    Total current liabilities                       35,300            41,774
    Long-term debt, vendor financing and
     convertible debentures                         22,465            23,709
    Long-term deferred revenue                       1,396               595
    Long-term deferred tax liability                   119               119
    Total liabilities                               59,280            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 - 13,605,960 and
         13,452,007 shares issued and
         outstanding at September 30,
         2009 and March 31, 2009,
         respectively                                  136               135
        Class B stock - 1,162,500 shares
         issued and outstanding at
         September 30, 2009 and March 31,
         2009, respectively                             12                12
        Additional paid-in capital                  97,684            95,808
        Accumulated other comprehensive
         income                                      3,068             3,072
        Retained earnings (accumulated
         deficit)                                    1,063            (2,587)
        Total stockholders' equity                 101,963            96,440
        Total liabilities and
         stockholders' equity                     $161,243          $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" (included in ASC 280).

                        (in thousands except percentages)

                                          Healthcare     Medical
                                            Services    Products        Total
    For the three months ended September
     30, 2009:
    Sales and service revenue                $20,999     $17,120      $38,119
    Gross Profit                                n/a *      4,736          n/a
    Gross Profit %                              n/a *        28%          n/a
    Income (loss) from operations before
     foreign exchange                         $2,281     $(1,481)        $800
    Foreign exchange gain                                                 613
    Income from operations                                             $1,413
    Other income, net                                                     134
    Income before income taxes                                         $1,547
    Assets as of September 30, 2009          $99,595     $61,648     $161,243

                                          Healthcare     Medical
                                            Services    Products        Total
    For the three months ended September
     30, 2008:
    Sales and service revenue                $19,069     $19,041      $38,110
    Gross Profit                                n/a *      5,854          n/a
    Gross Profit %                              n/a *        31%          n/a
    Income from operations before foreign
     exchange                                 $1,052        $582       $1,634
    Foreign exchange gain                                                  14
    Income from operations                                             $1,648
    Other (expense), net                                                 (535)
    Income before income taxes                                         $1,113
    Assets as of March 31, 2009              $94,675     $67,962     $162,637

                                          Healthcare     Medical
                                            Services    Products        Total
    For the six months ended September
     30, 2009:
    Sales and service revenue                $43,047     $40,404      $83,451
    Gross Profit                                n/a *     10,551          n/a
    Gross Profit %                              n/a *        26%          n/a
    Income (loss) from operations before
     foreign exchange                         $6,406     $(1,237)      $5,169
    Foreign exchange gain                                               1,519
    Income from operations                                             $6,688
    Other (expense), net                                                 (314)
    Income before income taxes                                         $6,374
    Assets as of September 30, 2009          $99,595     $61,648     $161,243

                                          Healthcare     Medical
                                            Services    Products        Total
    For the six months ended September
     30, 2008:
    Sales and service revenue                $38,641     $31,538      $70,179
    Gross Profit                                n/a *      8,455          n/a
    Gross Profit %                              n/a *        27%          n/a
    Income (loss) from operations before
     foreign exchange                         $3,827     $(1,554)      $2,273
    Foreign exchange gain                                                 128
    Income from operations                                             $2,401
    Other (expense), net                                                 (286)
    Income before income taxes                                         $2,115
    Assets as of March 31, 2009              $94,675     $67,962     $162,637

    * Gross profit margins are not routinely calculated in the healthcare
      industry.

SOURCE Chindex International, Inc.


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SOURCE Chindex International, Inc.
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