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Chindex International, Inc. Reports Second Quarter and First Half Fiscal 2011 Financial Results
Date:11/8/2010

BETHESDA, Md., Nov. 8, 2010 /PRNewswire-Asia/ -- Chindex International, Inc. (Nasdaq: CHDX), a leading independent American provider of Western healthcare products and services in the People's Republic of China, today announced financial results for the second quarter and first half of fiscal year 2011, which ended September 30, 2010.

  • Revenue in the second quarter of fiscal 2011 increased 18.6% to $45.2 million from $38.1 million in the second quarter of fiscal 2010;
  • Net income in the second quarter of fiscal 2011 was $3.2 million, or $0.20 per diluted share, compared to net income of $538,000, or $0.03 per diluted share, in the second quarter of fiscal 2010.
  • Revenue in the first half of fiscal 2011 increased 3.8% to $86.7 million from $83.5 million in the first half of fiscal 2010;
  • Net income in the first half of fiscal 2011 increased to $4.1 million, or $0.26 per diluted share, from $3.8 million, or $0.24 per diluted share, in the year over year period.

  • Second Quarter 2011 Financial ResultsRevenue in the second quarter of fiscal 2011 reflected continued growth in the Healthcare Services division and Medical Products division. Revenue from the Healthcare Services division increased 11.4% to $23.4 million from $21.0 million in the prior year period, and reflects growing inpatient and outpatient volume across the United Family Healthcare network. Revenue from the Medical Products division increased 27.5% to $21.8 million from $17.1 million in the prior year period, and mainly reflects stronger second quarter demand for imaging products. Total revenue increased 18.6% to $45.2 million from $38.1 million in the second quarter of fiscal year 2010.

    Income from operations in the second quarter of fiscal 2011 was $4.8 million, compared to income from operations of $1.4 million in the same quarter last year. Total operating costs and expenses for the second quarter of fiscal 2011 increased to $40.3 million compared to $36.7 million in the prior year period but decreased as a percentage of revenue to 89.3% from 96.3%. This primarily reflects cost containment in the Medical Products division and general and administrative expenditure commensurate with revenue growth in the Healthcare Services division.

    Operating expenses in the second quarter of fiscal 2011 include the benefit of a $1.1 million unrealized foreign exchange gain compared to a $613,000 unrealized foreign exchange gain in the same quarter of the prior year. The unrealized exchange gain was recognized as a result of the strength of the Euro against the U.S. Dollar during the period, which impacted the translated value of intercompany debt owed from the Company's German subsidiary to the U.S parent company.

    Operating expenses also included $375,000 of non-cash stock compensation expense compared to $852,000 in the prior year. Development, startup, and post-opening expenses in the Healthcare Services division were $653,000 in the period compared to $313,000 in the prior year.

    Income from operations before foreign exchange in the second quarter of fiscal 2011 was $3.7 million, compared to $800,000 in the prior year period.

    The Company recorded a $1.5 million provision for taxes, an effective tax rate of 31.6%, in the second quarter of fiscal 2011 as compared to a provision for taxes of $1.0 million, or an effective tax rate of 65.2%, 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 September 30, 2011 was $3.2 million, or $0.20 per diluted share. This compares to net income of $538,000, or $0.03 per diluted share, in the prior year period.

    Healthcare Services division business results:

    In the second quarter of fiscal year 2011, revenue increased 11.4% to $23.4 million from $21.0 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 second quarter of fiscal 2011, operating costs increased 6.0% to $19.9 million, a rate commensurate with revenue growth and inclusive of additional staffing efforts in advance of new facility openings. Income from operations before foreign exchange increased 47.8% to $3.4 million from $2.3 million in the prior year period.

    Roberta Lipson, President and CEO of Chindex, stated, "Our performance this quarter reflects ongoing demand for services across our network. Volumes in Shanghai and Guangzhou continue to validate that we are replicating the UFH brand in these newer locations. We are on-track to more than double our capacity in the Beijing hospital by calendar year-end, and we intend to start accepting patients into our New Hope cancer facility in the next several weeks."

    Medical Products division business results:

    In the second quarter of fiscal 2011, the Company reported revenue from the Medical Products division of $21.8 million compared to $17.1 million in the prior year period. Revenue increased 27.5% on a year over year basis and reflects strong demand for the Company's diagnostic ultrasound and imaging products despite a reduction in revenue from government-backed loan programs and lack of daVinci sales versus prior periods. While revenue performance continues to reflect general uncertainty around healthcare reform and expenditure, which impacts demand and order flow for medical devices, the Company's second quarter revenue illustrates ongoing market opportunities and consistent demand for high-end medical products in China.

    Gross profit for the Medical Products division was $6.7 million, compared to $4.7 million in the prior year period. Gross margin was 30.7% compared to 27.7 % in the prior year period, at the high end of historical averages. Selling, marketing, general and administrative expenses for the Medical Products division increased to $6.4 million from $6.2 million in the second quarter of the prior year. The division had an income from operations before foreign exchange of $306,000 for the three months ended September 30, 2011, compared with a loss of $1.5 million in the prior year period.

    Lipson added, "In the second quarter, we witnessed strong demand for our imaging products, despite systemic headwinds relating to temporary regulatory uncertainty, which we believe could be alleviated in the coming months. Strict attention to optimizing our purchase behavior helped drive profitability this quarter, in tandem with our revenue performance. We continue to take a long-term view that the medical device market in China is extremely compelling."

    First Half Fiscal 2011 Financial ResultsDuring the first half of fiscal 2011, revenue increased 3.8% year over year to $86.7 million, compared to $83.5 million in the prior year. Revenue from the Healthcare Services division increased 11.9% to $48.1 million from $43.0 million in the first half of fiscal 2010. Revenue from the Medical Products division was $38.6 million, down 4.5% from $40.4 million in the prior year.

    Income from operations remained flat at $6.6 million for the first half of fiscal 2011 as compared to the prior year period. Total operating costs and expenses for the fiscal year 2010 increased 4.0% to $79.9 million from $76.8 million in the prior year. This reflects $1.0 million of non-cash stock compensation expense compared to $1.5 million in the prior year period. Development, startup, and post-opening expenses in the Healthcare Services division were $1.1 million in the period compared to $642,000 in the prior year.

    The Company recorded a $2.5 million provision for taxes, or an effective tax rate of 38.1%, in the first half of fiscal 2011, compared to a provision for taxes of $2.6 million, or an effective tax rate of 40.5%, for the prior year period.

    In the first half of fiscal 2011, net income increased 7.9% to $4.1 million, or $0.26 per diluted share, from $3.8 million, or $0.24 per diluted share, in the prior year period. Non-cash stock compensation expense was $1.0 million during the first half of fiscal 2011 compared to $1.5 million in the prior year period.

    Second Quarter Fiscal 2011 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 should dial 1-760-666-3567 and domestic callers should dial 1-877-303-9231 approximately 10 minutes before the conference call is scheduled to begin.

    The telephone replay will be available from the day of the call at (international) 1-706-645-9291 and (domestic) 1-800-642-1687, passcode 79429622.

    This call is also being webcast and will be accessible at Chindex's website: http://ir.chindex.com/events.cfm. The event will be archived and available for replay through November 15, 2010.

    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-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.

    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, 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.Contact:ICR, LLCAshley M. Ammon +1-646-277-1227Financial Summary Attached

    CHINDEX INTERNATIONAL, INC.CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS(in thousands except share and per share data)(Unaudited)Three months ended
    September 30,Six months ended
    September 30,2010200920102009Product sales

    $21,813

    $17,120

    $38,552

    $40,404Healthcare services revenue

    23,361

    20,999

    48,110

    43,047Total revenue

    45,174

    38,119

    86,662

    83,451Cost and expensesProduct sales costs

    15,112

    12,384

    26,756

    29,853Healthcare services costs

    18,391

    17,352

    36,952

    34,102Selling and marketing expenses

    4,100

    3,608

    7,868

    6,768General and administrative expenses

    2,740

    3,362

    8,360

    6,040 Income from operations

    4,831

    1,413

    6,726

    6,688 Other (expenses) and incomeInterest expense

    (212)

    (281)

    (420)

    (554)Interest income

    108

    400

    273

    872Miscellaneous income (expense) - net

    7

    15

    3

    (632)Income before income taxes

    4,734

    1,547

    6,582

    6,374Provision for income taxes

    (1,497)

    (1,009)

    (2,509)

    (2,583)Net income

    $3,237

    $538

    $4,073

    $3,791Net income per common share - basic

    $.21

    $.04

    $.27

    $.26Weighted average shares outstanding - basic

    15,213,124

    14,525,528

    15,000,464

    14,514,453Net income per common share - diluted

    $.20

    $.03

    $.26

    $.24Weighted average shares outstanding - diluted

    16,582,181

    16,143,679

    16,399,650

    16,072,536CHINDEX INTERNATIONAL, INC.CONSOLIDATED CONDENSED BALANCE SHEETS(in thousands except share data)(Unaudited)September 30, 2010March 31, 2010ASSETSCurrent assets:Cash and cash equivalents

    $52,579

    $50,654Restricted cash

    2,859

    468Investments

    39,704

    37,207   Accounts receivable, less allowance for doubtful accounts of $6,893 and $6,158,

    respectively Product sales receivables

    21,711

    22,760Patient service receivables

    11,341

    10,357Inventories, net

    17,238

    14,411Deferred income taxes

    3,118

    2,843Other current assets

    3,614

    3,032Total current assets

    152,164

    141,732Restricted cash

    980

    2,556Investments

    2,441

    -Property and equipment, net

    30,865

    23,678Noncurrent deferred income taxes

    310

    103Other assets

    2,866

    2,774   Total assets

    $189,626

    $170,843LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Short-term debt, current portion of long-term debt and vendor financing

    $-

    $1,453Accounts payable

    16,825

    13,979Accrued expenses

    10,876

    14,022Other current liabilities

    4,739

    3,826Deferred revenue

    2,664

    2,549Income taxes payable

    2,034

    2,218Total current liabilities

    37,138

    38,047Long-term debt, vendor financing and convertible debentures

    22,894

    22,593Long-term accrued liabilities

    126

    84Long-term deferred revenue

    784

    968Long-term deferred tax liability

    240

    240Total liabilities

    61,182

    61,932Commitments and contingenciesStockholders' 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 – 14,942,872 and 13,765,857 shares issued and outstanding at September 30, 2010 and March 31, 2010, respectively

    149

    138 Class B stock – 1,162,500 shares issued and outstanding at September 30, 2010 and March 31, 2010, respectively

    12

    12   Additional paid-in capital

    114,645

    100,269   Accumulated other comprehensive income

    4,089

    3,016   Retained earnings

    9,549

    5,476Total stockholders' equity

    128,444

    108,911Total liabilities and stockholders' equity

    $189,626

    $170,843CHINDEX INTERNATIONAL, INC.SEGMENT INFORMATIONThe 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.

    (in thousands)Healthcare ServicesMedical ProductsTotalFor the three months ended September 30, 2010:Sales and service revenue

    $23,361

    $21,813

    $45,174Gross Profit

    n/a *

    6,701

    n/aGross Profit %

    n/a *

    31%

    n/aIncome from operations before foreign  exchange

    $3,435

    $306

    $3,741Foreign exchange gain1,090Income from operations $4,831Other (expense), net(97)Income before income taxes$4,734Assets as of September 30, 2010

    $132,559

    $57,067

    $189,626Healthcare ServicesMedical ProductsTotalFor the three months ended September 30, 2009:Sales and service revenue

    $20,999

    $17,120

    $38,119Gross Profit

    n/a *

    4,736

    n/aGross Profit %

    n/a *

    28%

    n/aIncome (loss) from operations before foreign exchange

    $2,281

    $(1,481)

    $800Foreign exchange gain613Income from operations $1,413Other income, net134Income before income taxes$1,547Assets as of March 31, 2010

    $112,929

    $57,914

    $170,843Healthcare ServicesMedical ProductsTotalFor the six months ended September 30, 2010: Sales and service revenue

    $48,110

    $38,552

    $86,662Gross Profit

    n/a *

    11,796

    n/aGross Profit %

    n/a *

    31%

    n/aIncome (loss) from operations before foreign  exchange

    $8,092

    $(1,268)

    $6,824Foreign exchange loss(98)Income from operations $6,726Other (expense), net(144)Income before income taxes$6,582Assets as of September 30, 2010

    $132,559

    $57,067

    $189,626Healthcare ServicesMedical ProductsTotalFor the six months ended September 30, 2009:  Sales and service revenue

    $43,047

    $40,404

    $83,451Gross Profit

    n/a *

    10,551

    n/aGross Profit %

    n/a *

    26%

    n/aIncome (loss) from operations before foreign exchange

    $6,406

    $(1,237)

    $5,169Foreign exchange gain1,519Income from operations $6,688Other (expense), net(314)Income before income taxes$6,374Assets as of March 31, 2010

    $112,929

    $57,914

    $170,843* Gross profit margins are not routinely calculated in the healthcare services industry.
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    SOURCE Chindex International, Inc.
    Copyright©2010 PR Newswire.
    All rights reserved


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