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Concord Medical Reports Second Quarter 2012 Financial Results
Date:8/20/2012

BEIJING, Aug. 20, 2012 /PRNewswire-Asia-FirstCall/ -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), a leading specialty hospital management solution provider and operator of the largest network of radiotherapy and diagnostic imaging centers in China, today reported its unaudited consolidated financial results for the second quarter ended June 30, 2012[1].

Second Quarter 2012 Highlights

  • Total net revenues in the second quarter of 2012 were RMB136.5 million ($21.5 million), a 10.2% increase from the second quarter of 2011.  "Lease and management services"revenues in the second quarter of 2012 were RMB119.5 million ($18.8 million), a 15.3% increase from the second quarter of 2011.
  • Gross profit in the second quarter of 2012 was RMB93.9 million ($14.8 million), a 12.1% increase from the second quarter of 2011.
  • Gross profit margin in the second quarter was 68.7%, compared to 58.4% in the first quarter of 2012 and 67.6% in the second quarter of 2011.
  • Net income in the second quarter of 2012 was RMB38.3 million ($6.0 million), a 2.3% increase from the second quarter of 2011. Both basic anddiluted earnings per American depositary share ("ADS")[2] for the second quarter of 2012 were RMB0.80 ($0.13).
  • Non-GAAP net income[3] in the second quarter of 2012 was RMB40.6 million ($6.4 million), a 2.4% increase from the second quarter of 2011. Both non-GAAP basic and diluted earnings per ADS for the second quarter of 2012 were RMB0.85 ($0.13).
  • Adjusted EBITDA[4](non-GAAP) in the second quarter of 2012 was RMB93.7 million ($14.7 million), a 10.0% increase from the second quarter of 2011, representing an EBITDA margin of 68.6% in the second quarter of 2012 compared to 68.8% in the second quarter of 2011.
  • Five new centers were established and two centers were closed in the second quarter of 2012, bringing the total number of centers in operation to 133 in 52 cities across 24 provinces in China as of June 30, 2012. The Company had outstanding agreements to establish 36 new centers, as of June 30, 2012.
  • The numbers of treatment and diagnostic patient cases in the second quarter of 2012 were 8,820 and 52,833, respectively, representing a 2.5% and 25.7% increase from the second quarter of 2011.
  • 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 RMB6.353 to US$1.00, the effective noon buying rate as of June 29, 2012 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 Each ADS represents three ordinary shares of the Company.

     3 Non-GAAP net income is defined in this announcement as net income excluding share-based compensation. Share-based compensation was RMB2.2 million and RMB 2.3 million ($0.4 million) in the second quarter 2011 and 2012, respectively.

     4 Adjusted EBITDA is defined in this  announcement as net income plus interestexpense, income tax expenses, depreciation and amortization, share-based compensation expenses, and other adjustments, including foreign exchange gains or losses, other income, and gain from disposal of property, plant and equipment."In the second quarter of 2012, we delivered healthy growth and increased net revenues compared with the second quarter of 2011," said Dr. Jianyu Yang, Chairman and Chief Executive Officer of Concord Medical, "Our core lease and management services business experienced strong growth momentum, benefiting from the expanding social insurance program in China.  We are confident in our expansion strategy and growth prospects. We are pushing forward on all fronts to establish standalone hospitals, open new centers with hospital partners, pursue acquisition targets, and increase the utilization rate andoperational efficiency at our existing facilities."

    Recent DevelopmentsUpdate on Chang'an Hospital Acquisition – On June 18, Concord Medical announced thesuccessful closing of its acquisition of 52% equity interests in Chang'an Hospital, a leading non-public general hospital located in Xi'an, Shaanxi Province. Previously, the company announced the signing of a definite agreement in connection with the acquisition on March 22, 2012.  Since then, the Company has received all necessary government approvals including a New Business License for Chang'an Hospital, and it has completed all registration procedures, including Capital Verification Report, Share Ownership Report, and Business Registration Change Report. During the first half of 2012, Chang'an Hospital generated revenues (unaudited) of RMB185.5 million, a 57.8% increase over the first half of 2011. The financial results of Chang'an Hospital will be reflected in the consolidated financial statements of the Company in the third quarter.

    Update on the Guangzhou Joint Venture Project with Sun Yat-Sen University Cancer Center -- The Company has obtained the approval from the Ministry of Health of Guangdong Province to build a 400-bed specialty cancer hospital. The Company expects to break ground on this project in early 2013.

    Share repurchase program -- During the second quarter of 2012, the Company repurchased 394,169 ADSs, representing 1,182,507 ordinary shares, for an aggregate consideration of $1.4 million (including commissions), under the share repurchase program approved by the board of directors of the Company on September 30, 2011. Since the inception of the program, the Company has repurchased 1,283,847 ADSs, representing 3,851,541 ordinary shares, for an aggregate consideration of $4.6 million (including commissions).

    Second quarter 2012 ResultsTotal net revenues were RMB136.5 million ($21.5 million)  in the second quarter of 2012, a 10.2% increase from the second quarter of 2011, primarily due to the increases in the number of patient cases and centers in operation compared with the second quarter of 2011.

    Cost of revenues in the second quarter of 2012 was RMB42.7 million ($6.7 million), a 6.4% increase from the second quarter of 2011, primarily due to an increase in depreciation costs related to new equipment, partially offset by lower consumable and other center-related expenses as a result of our cost-control measures.

    Gross profit margin in the second quarter of 2012 was 68.7%, as compared to 67.6% in the second quarter of 2011. The higher gross profit margin is a result of cost-control measures taking effect as well as revenue contribution from recently-opened centers which have passed their ramp-up phases.

    Operating expenses, consisting of selling, general and administrative expenses, were RMB37.0 million ($5.8 million) in the second quarter of 2012 as compared to RMB28.6 million in the second quarter of 2011.  Selling expenses were RMB10.4 million ($1.6 million) in the second quarter of 2012, representing 7.6% of the total net revenues as compared to 9.0% in the second quarter of 2011.  The decrease as a percentage of net revenues was mainly due to the cost control measures implemented since the beginning of 2012.General and administrative expenses were RMB26.6 million ($4.2 million) in the second quarter of 2012, representing 19.5% of the total net revenues as compared to 14.1% in the second quarter of 2011.  The increaseas a percentage of net revenues was mainly due to an increase in rental expenses as well as other headquarter-related expenses.

    Operating income was RMB56.8 million ($8.9 million) in the second quarter of 2012, a 3.1% increase from the second quarter of 2011. Operating income excluding share-based compensation expenses (non-GAAP) was RMB59.1 million ($9.3 million), a 3.1% increase from the second quarter of 2011.

    Income tax expenses in the second quarter of 2012 were RMB16.9 million ($2.7 million), compared to an income tax expense of RMB14.0 million in the second quarter of 2011. The effective tax rate for the second quarter of 2012 was 30.7% as compared to 27.2% in the second quarter of 2011.

    Net income in the second quarter of 2012 was RMB38.3 million ($6.0 million), a 2.3% increase from the second quarter of 2011. Both basic and diluted earnings per ADS for the second quarter of 2012 were RMB0.80 ($0.13), as compared to RMB0.79 in the second quarter of 2011.

    Non-GAAP net income in the second quarter of 2012 was RMB40.6 million ($6.4 million), a 2.4% increase from the second quarter of 2011. Both non-GAAP basic and diluted earnings per ADS in the second quarter of 2012 were RMB0.85 ($0.13) compared to RMB0.84 in the second quarter of 2011.

    Adjusted EBITDA (non-GAAP) was RMB93.7 million ($14.7 million) for the second quarter of 2012, representing a 10.0% increase from the second quarter of 2011, primarily due to increase in operating income and depreciation expenses during the period.

    Capital expenditure in the second quarter of 2012 was RMB51.6 million ($8.1 million), primarily on purchasing new equipment for new centers.

    As of June 30, 2012, the Company had total fixed assets of RMB1, 087.4 million ($171.2 million), cash of RMB130.7 million ($20.6 million), and restricted cash of RMB69.9 million ($11.0 million).

    As of June 30, 2012, the Company had bank credit lines of RMB765.0 million ($120.4 million), of which RMB274.9 million ($43.3 million) were drawn down.

    Accounts receivable was RMB250.4 million ($39.4 million) as of June 30, 2012, as compared to RMB244.2 million as of December 31, 2011.

    Days sales outstanding was approximately 159 days in the second quarter of 2012, substantially less than 201 days in the first quarter of 2012, as a result of strengthened collection measures since the beginning of the year.

    2012 OutlookThe Company intends to provide consolidated financial results that include the results of Chang'an Hospital beginning with the third quarter of 2012. The Company also updated its guidance for the second half of 2012 fiscal year as follows:

  • Net revenues from the current network business of RMB220 million to RMB240 million ; and
  • Revenues from Chang'an Hospital of RMB190 million to RMB210 million, reflecting six months of financial results; and
  • Network capital expenditures of RMB80 million to RMB120 million, primarily on purchasing new equipment for new centers.
  • Conference Call InformationConcord Medical's management will hold an earnings conference call at 8:00 a.m. EDT on August 21, 2012 (8:00 p.m. Beijing/Hong Kong time on August 21, 2012).

    Dial-in details for the earnings conference call are as follows:U.S. Toll Free: 1-866-519-4004
    International: 1-718-354-1231
    U.K. Toll Free: 8082346646
    China Toll Free: 400-620-8038 / 800-819-0121
    Hong Kong Toll Free: 800-930-346
    Passcode: CCM

    A replay of the conference call may be accessed by phone at the following number until August 28, 2012:

    U.S. Toll Free: 1-866-214-5335
    International: 1-718-354-1232
    Passcode: 18045582

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

    About Concord MedicalConcord Medical Services Holdings Limited operates the largest network of radiotherapy and diagnostic imaging centers in China, measured by revenues and the number of centers in operation. As of June 30, 2012, the Company operated a network of 133 centers with 75 hospital partners that spanned 52 cities and 24 provinces and administrative regions in China. Under long-term arrangements with top-tier hospitals in China, Concord Medical provides radiotherapy and diagnostic imaging equipment and manages the daily operations of these centers, which are located on the premises of its hospital partners. The Company also provides ongoing training to doctors and other medical professionals in its network of centers to ensure a high level of clinical care for patients. For more information, please see http://ir.concordmedical.com.

    Safe Harbor StatementThis 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. In particular, many of the statements from management in this press release and the section under "Outlook for Full Year 2012" are forward-looking in nature.  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 income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include foreign exchange losses and other income, and loss from disposal of property, plant and equipment. 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 information.

    For more information, please contact:Concord Medical Services
    Mr. Tony Tian
    tony.tian@concordmedical.com
    (+86) 10 5957-5287

    Solebury Communications
    In China:
    Ms. Ran Zhang
    CCM@soleburyir.com
    (+86) 10 6563-0288

    In the United States:
    Mr. Richard Zubek
    rzubek@soleburyir.com
    (+1) 203-428-3230Concord Medical Services Holdings Co., Ltd. Unaudited Condensed Consolidated Balance Sheets(in thousands) December 31, 2011 (*)June 30, 2012RMB

    RMB

    US$ASSETSCurrent assetsCash 

    219,078

    130,729

    20,578Restricted cash, current portion

    2,512

    39,312

    6,188Held-to-maturity securities

    100,466

    -

    -Time deposit with original maturities exceeding three months

    50,372

    -

    -Accounts receivable

    244,189

    250,383

    39,412Prepayments and other current assets

    61,630

    72,133

    11,354Net investments in direct financing leases, current portion

    49,821

    74,305

    11,696Deferred tax assets, current portion

    5,589

    5,064

    797Total current assets733,657571,92690,025Non-current assetsProperty, plant and equipment, net

    1,068,703

    1,087,444

    171,170Acquired intangible assets, net

    129,018

    117,254

    18,456Deposits for non-current assets

    207,287

    185,910

    29,263Prepayment for acquisition of Chang'an

    -

    248,909

    39,180Net investments in direct financing leases, non-current portion

    97,262

    138,834

    21,853Deferred tax assets, non-current portion

    20,866

    18,956

    2,984Equity method investments

    540

    540

    85Other non-current assets

    86,731

    84,392

    13,284Restricted cash, non-current portion

    22,012

    30,601

    4,817Prepaid land lease payments

    27,370

    26,998

    4,250Total non-current assets1,659,7891,939,838305,342Total assets2,393,446

    2,511,764

    395,367LIABILITIES AND EQUITYCurrent liabilitiesShort-term bank borrowings

    15,000

    15,000

    2,361Long-term bank borrowings, current portion

    77,479

    92,156

    14,505Accounts payable

    2,170

    452

    71Accrual for purchase of property, plant and equipment

    13,294

    11,229

    1,768Obligations under capital leases, current portion

    3,582

    3,582

    564Accrued expenses and other liabilities

    59,097

    59,241

    9,325Income tax payable

    20,936

    23,265

    3,662Deferred revenue, current portion

    13,115

    12,955

    2,039Contingent business acquisition consideration 

    11,999

    11,999

    1,889Total current liabilities216,672229,87936,184Non-current liabilitiesLong-term bank borrowings, non-current portion

    108,700

    172,760

    27,193Deferred revenue, non-current portion

    6,839

    4,197

    661Obligations under capitalized leases, non-current portion

    2,289

    653

    103Lease deposits

    2,000

    2,000

    315Deferred tax liabilities, non-current portion

    18,850

    18,284

    2,878Total non-current liabilities138,678197,89431,150Total liabilities355,350427,77367,334Commitments and contingenciesEQUITYOrdinary shares

    105

    105

    17Treasuary stock

    (1)

    (3)

    -Additional paid-in capital

    2,551,877

    2,534,273

    398,909Accumulated other comprehensive loss

    (17,595)

    (17,383)

    (2,736)Accumulated deficit

    (599,886)

    (538,493)

    (84,762)Total Concord Medical Services Holdings Limited shareholders' equity1,934,5001,978,499311,428Non-controlling interests

    103,596

    105,492

    16,605Total equity2,038,0962,083,991328,033Total liabilities and equity 2,393,446

    2,511,764

    395,367(*) Amounts for the year ended December 31, 2011 were derived from the December 31, 2011 audited consolidated financial statements. Concord Medical Services Holdings LimitedUnaudited Condensed Consolidated Statements of Income(in thousands, except per  ADS data) For The Three Months EndedJune 30, 2011 (*)June 30, 2012RMB

    RMB

    US$Revenue, net of business tax, value-added tax and related surchargesLease and management services

    103,650

    119,542

    18,817Management services

    11,784

    4,071

    641Other, net

    8,413

    12,917

    2,033Total net revenues123,847136,53021,491Cost of revenuesDepreciation

    (20,657)

    (27,319)

    (4,300)Amortisation of acquired intangibles

    (6,463)

    (6,303)

    (992)Others

    (12,998)

    (9,053)

    (1,425)Total cost of revenues(40,118)(42,675)(6,717)Gross profit83,72993,85514,774Operating expensesSelling expenses

    (11,144)

    (10,426)

    (1,641)General and administrative expenses

    (17,424)

    (26,580)

    (4,184)Operating income55,16156,8498,949Interest expenses

    (1,661)

    (3,504)

    (552)Foreign exchange (loss) gain

    (3,108)

    399

    63Gain from disposal of property, plant and equipment

    -

    92

    14Interest income

    1,052

    1,367

    215Other income

    -

    33

    5Income before income taxes51,44455,2368,694Income tax expenses

    (14,015)

    (16,933)

    (2,665)Net income37,429

    38,303

    6,029Net income attributable to noncontrolling interests

    1,495

    1,087

    171Net income attributable to ordinary shareholders35,934

    37,216

    5,858Earnings per ADSBasic /Diluted

    0.79

    0.80

    0.13Weighted average number of ADS outstanding:Basic /Diluted

    47,451,177

    46,359,145

    46,359,145Other comprehensive (loss) income, net of taxForeign currency translation

    (1,206)

    184

    29Total other comprehensive (loss) income, net of tax(1,206)

    184

    29Comprehensive income36,223

    38,487

    6,058(*) Certain amounts in the prior year quarterly financial information are being reclassified for comparison purposes. Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (*) (in RMB thousands, unaudited)For the three months ended June 30, 2011For the three months ended June 30, 2012GAAP ResultAdjustmentNon-GAAP ResultsGAAP ResultAdjustmentNon-GAAP ResultsOperating income55,161

    2,200

    57,361

    56,849

    2,282

    59,131Net income37,429

    2,200

    39,629

    38,303

    2,282

    40,585Basic earnings per ADS0.79

    0.05

    0.84

    0.80

    0.05

    0.85Diluted earnings per ADS0.79

    0.05

    0.84

    0.80

    0.05

    0.85(*) The only adjustment is share-based compensation. Reconciliation from net income to adjusted EBITDA(*) (in RMB thousands, unaudited)For the three months endedFor the three months endedJune 30, 2011June 30, 2012Net income37,429

    38,303Interest expenses (income), net

    609

    2,137Income tax expenses

    14,015

    16,933Depreciation and amortization

    27,858

    34,568Share-based compensation

    2,200

    2,282Other adjustments

    3,108

    (524)Adjusted EBITDA85,219

    93,699(*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include foreign exchange losses, gain from disposal of property, plant and equipment and other income.
     


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