BEIJING, Nov. 20, 2012 /PRNewswire-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 and the parent of Chang'an Hospital, today reported its unaudited consolidated financial results for the third quarter ended September 30, 2012.
For the third quarter of 2012, the Company consolidated the financial results of Chang'an Hospital, in which the Company had acquired a 52% equity interest. In order to properly reflect the different business units, the Company has changed its reporting structure and will now report its financial results under two reporting segments, namely, the network business, which includes the financial results in connection with the management services provided for the 134 centers nationwide, and the hospital business, which reflects the financial results of Chang'an Hospital.
In addition, the Company engaged an appraisal firm to conduct an appraisal on the purchase price allocation in connection with the Chang'an Hospital acquisition. The preliminary results of the appraisal work have been reflected in the unaudited consolidated financial statements. The appraisal results are expected to be finalized by the end of the fiscal year and the preliminary appraisal results are thus subject to changes.
Third Quarter 2012 HighlightsTotal net revenues were RMB206.1 million ($32.8 million)(a), a 65.2% increase from the third quarter of 2011. Total revenues for the third quarter of 2012 consisted of:
About Non-GAAP Financial MeasuresTo 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 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 current 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 expense income. Furthermore, Adjusted EBITDA eliminates the impact of items that the Company does not consider to be indicative of the performance of the network business and hospital business. 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. Adam J. Sun (Chinese and English)
+86 10 5957 5266
Ms. Gloria Huang (Chinese and English)
+86 10 5903 6688 (ext. 639)
Solebury CommunicationsIn China:
Ms. Vickie Zhao
(+86) 10 6563-0288 (ext. 801)
In the United States:
Mr. Richard Zubek
Notes(a) This news release contains translations of certain renminbi ("RMB") amounts into U.S. dollars at specified rates solely for the convenience of the reader and do not represent the Company's financial performance in US dollars, since its presentation currency is RMB, the currency of the People's Republic of China. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.2848 to US$1.00, the effective noon buying rate as of September 30, 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.
(b) Non-GAAP net income is defined in this news release as net income excluding share-based compensation expenses. Share-based compensation was RMB2.3 million ($0.36 million) in the third quarter 2012 and RMB2.2 million in the third quarter 2011.
(c) Adjusted EBITDA is defined in this news release as net income plus interest expense, income taxes, depreciation and amortization, share-based compensation expenses, and other adjustments, including foreign exchange gains or losses and other (expense) income.
46,788Restricted cash, current portion
-Time deposits with original maturities exceeding three months
3,263Prepayments and other current assets
9,867Net investments in direct financing leases, current portion
10,762Deferred tax assets, current portion
749Total current assets733,657748,211119,052Non-current assetsProperty, plant and equipment, net
36,494Acquired intangible assets, net
36,510Deposits for non-current assets
36,636Net investments in direct financing leases, non-current portion
21,005Deferred tax assets, non-current portion
2,848Equity method investments
105Other non-current assets
14,703Restricted cash, non-current portion
-Prepaid land lease payments
14,441Total non-current assets1,659,7892,447,971389,507Total assets2,393,4463,196,182508,559LIABILITIES AND EQUITYCurrent liabilitiesShort-term bank borrowings
6,969Long-term bank borrowings, current portion
20,566Accrual for purchase of property, plant and equipment
5,670Obligations under capital leases, current portion
475Accrued expenses and other liabilities
16,774Income tax payable
3,960Deferred revenue, current portion
2,641Contingent business acquisition consideration
-Total current liabilities216,672506,44780,583Non-current liabilitiesLong-term bank borrowings, non-current portion
43,913Deferred revenue, non-current portion
601Obligations under capitalized leases, non-current portion
318Deferred tax liabilities, non-current portion
9,807Total non-current liabilities138,678343,79554,703Total liabilities355,350850,242135,286Commitments and contingenciesEQUITYOrdinary shares
(1)Additional paid-in capital
401,315Accumulated other comprehensive loss
(79,719)Total Concord Medical Services Holdings Limited shareholders' equity1,934,5002,004,071318,874Non-controlling interests
54,399Total equity2,038,0962,345,940373,273Total liabilities and equity 2,393,4463,196,182508,559(*) 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 Comprehensive Income(in thousands, except for per ADS data)For The Three Months EndedSeptember 30, 2011 (*)September 30, 2012RMB
US$Revenue, net of business tax, value-added tax and related surchargesNetwork
14,594Total net revenues124,723206,06332,787Cost of revenuesNetwork
(12,267)Total cost of revenues(41,799)(121,390)(19,315)Gross profit82,92484,67313,472Operating expensesSelling expenses
(2,823)General and administrative expenses
(2,127)Other operating income
228Operating income57,87654,9968,750Interest expenses
(573)Foreign exchange loss
(21)Loss from disposal of property, plant and equipment
189Other (expense) income
16Income before income taxes54,98052,3918,335Income tax expenses
(2,056)Net income38,33839,4716,279Net income attributable to noncontrolling interests
291Net income attributable to ordinary shareholders37,104
5,988Earnings per ADSBasic /Diluted
0.13Weighted average number of ADS outstanding:Basic /Diluted
45,795,431Other comprehensive (loss) income, net of taxForeign currency translation
28Total other comprehensive (loss) income, net of tax(615)
6,307(*) 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 except for per ADS data, unaudited)For the three months ended September 30, 2011For the three months ended September 30, 2012GAAP ResultAdjustmentNon-GAAP ResultsGAAP ResultAdjustmentNon-GAAP ResultsOperating income57,876
41,750Basic earnings per ADS0.81
0.87Diluted earnings per ADS0.81
0.87(*) The only adjustment is share-based compensation. Reconciliation from net income to adjusted EBITDA(*) (in RMB thousands, unaudited) For the three months ended For the three months endedSeptember 30, 2011September 30, 2012Net income38,338
39,471Interest (income) expenses, net
2,411Income tax expenses
12,920Depreciation and amortization
101,114(*) 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, loss from disposal of property, plant and equipment and other (expense) income.agement services in the amount of RMB103.6 million ($16.5 million), a 3.2% decrease from the third quarter of 2011. The decrease was mainly due to the exclusion of management fees from Chang'an Hospital and the closing of one center during the third quarter of 2012 upon the expiration of its service agreement; and
Cost of revenue was RMB121.4 million ($19.3 million) for the third quarter of 2012, as compared to RMB41.8 million for the third quarter of 2011. The increase was mainly due to the consolidation of the financial results of Chang'an Hospital, which had a lower gross profit margin compared to the network business.
Gross profit was RMB84.7 million ($13.5 million) for the third quarter of 2012, representing a 2.1% increase from the third quarter of 2011. The gross profit margin for the third quarter of 2012 was 41.1%. Gross profit for the third quarter of 2012 consisted of:
Operating expenses were RMB29.7 million ($4.7 million) for the third quarter of 2012, as compared to RMB25.0 million for the third quarter of 2011.
Operating income was RMB55.0 million ($8.8 million) for the third quarter of 2012, as compared to RMB57.9 million for the third quarter of 2011.
Income tax expense was RMB12.9 million ($2.1 million) for the third quarter of 2012, representing a 22.4% decrease from RMB16.6 million for the third quarter of 2011. The effective tax rate for the third quarter of 2012 was 24.7% as compared to 30.3% for the third quarter 2011, reflecting the lower effective tax rate of Chang'an Hospital.
Net income was RMB39.5 million ($6.3 million) for the third quarter of 2012, representing a 3.0% increase from the third quarter of 2011. The net profit margin in the third quarter of 2012 was 19.2%, as compared to 30.7% for the third quarter of 2011.
Basic and diluted earnings per American depositary share ("ADS") for the third quarter of 2012 were both RMB0.82 ($0.13), as compared to RMB0.81 for the third quarter of 2011. Each ADS represents three ordinary shares.
Non-GAAP net income(b) was RMB41.8 million ($6.6 million) for the third quarter of 2012, representing a 3.0% increase from the third quarter of 2011. Non-GAAP basic and diluted earnings per ADS were both RMB0.87 ($0.14) for the third quarter of 2012.
Adjusted EBITDA(c) (non-GAAP) was RMB101.1 million ($16.1 million) for the third quarter of 2012, representing a 8.7% increase from the third quarter of 2011.
As of September 30, 2012, the Company had RMB294.1 million ($46.8 million) in cash and RMB57.7 million ($9.2 million) in current portion of restricted cash.
Dr. Jianyu Yang, Chairman and Chief Executive Officer of Concord Medical, stated,
"We are very glad to welcome Chang'an Hospital into the CCM family. CCM has become the only US-listed Chinese healthcare service company that owns a general hospital with nearly 1,000 patient beds. The over 1,000 team members of Chang'an Hospital have worked very hard to build the hospital into one of the leading private hospitals in China. Chang'an Hospital celebrated its ten-year anniversary in September 2012. We are confident that it will see continued growth during the next decade."
"The Company's network business was stable in this quarter," Mr. Yang continued. "Since the beginning of 2012, we have been focusing on improving the operating efficiency of the existing centers and enhancing the performance of the new centers in the network. The initiative is starting to bear results. The cost structure has been stabilized and new centers are making significant contribution to both our top and bottom lines."
"We are very glad to see the positive developments in China's healthcare system," Mr. Yang continued. "The high demand for quality healthcare services is translating into solid results in our network and hospital businesses. We expect the growth momentum to continue strongly in the future." Recent DevelopmentsGuangzhou Specialty Hospital construction -- The Company has received approval for the land use right for the designated site of the Guangzhou Specialty Hospital in Guangzhou and made the relevant payments subsequent to end of the third quarter. The hospital is now under the design stage and construction is expected to commence during the second half of 2013.
Framework agreement with Beijing International Medical Center ("BIMC") to establish a cancer specialty hospital -- The Company entered into a framework agreement with BIMC to establish a cancer specialty hospital in BIMC. BIMC is expected to be developed into a world-class healthcare service industry park over the next decade. Under the agreement, the caner specialty hospital, as part of BIMC, is expected to be wholly owned by the Company. The hospital plans to provide comprehensive high-end cancer therapies, including surgery, chemotherapy, radiotherapy and gene therapy, to cancer patients. The Company has agreed to provide management support, treatment, technology and research to the hospital, including protocols and clinical practice guidelines, by collaborating with top-notch cancer institutions around the world. The Company plans to begin design stage of the hospital and other early-stage works soon.
Share repurchase program -- On October 9, 2012, the Company announced that its board of directors has approved the extension of its current share repurchase program which was approved by the board of directors on September 30, 2011. Through November 15, 2012, the Company has repurchased 2,162,903 ADSs, representing 6,488,709 ordinary shares, in the open market, for a total consideration of $7,512,467 (including commissions) under the share repurchase program.
Third quarter 2012 results by segmentTotal net revenues consist of net revenues generated from the network business and hospital business.
Network businessThe Company added two radiotherapy and diagnostic imaging centers in the third quarter of 2012 and closed one center upon the expiration of its contract, bringing the total number of centers in operation to 134 in 53 cities in China as of September 30, 2012. As of the same date, the Company had entered into agreements to establish 36 additional centers.
Net revenues from the network business were RMB114.3 million ($18.2 million) for the third quarter of 2012, representing a decrease of 8.3% from the third quarter of 2011, primarily due to the exclusion of management fee from Chang'an Hospital and the closing of one center upon the expiration of its contract during the third quarter of 2012.
Gross profit margin of the network business was 61.3% for the third quarter of 2012, as compared to 66.5% for the third quarter of 2011. The lower gross profit margin was primarily due to exclusion of Chang'an Hospital management fee from the network business revenues.
Capital expenditure of the network business was RMB131.4 million ($20.9million) for the third quarter of 2012.
Accounts receivable from the network business was RMB174.4 million ($27.8 million) as of September 30, 2012, as compared to RMB244.2 million as of December 31, 2011. The average period of sales outstanding for accounts receivable (also known as days sales outstanding) was 167 days for the third quarter of 2012, as compared to 159 days for the second quarter of 2012.
As of September 30, 2012, the Company had bank credit lines of RMB941.0 million ($149.7 million), of which RMB456.6 million ($72.7 million) was utilized.
During the third quarter of 2012, the Company handled 10,632 patient treatment cases and 73,922 patient diagnostic cases, representing 18.9% and 47.9% increases from the third quarter of 2011, respectively.
Hospital businessNet revenues from the hospital business were RMB91.7 million ($14.6 million) for the third quarter of 2012, which consisted of:
Cost of service for the hospital business for the third quarter of 2012 was RMB77.1 million ($12.3 million).
Gross profit margin of the hospital business was 15.9% for the third quarter of 2012.
As of September 30, 2012, Chang'an Hospital had accounts receivable of RMB37.2 million ($5.9 million), representing days sales outstanding of 34 days. The accounts receivable was mainly from medical revenues covered by various government-sponsored insurance programs. Chang'an Hospital settles the balance with the local social insurance bureau on a periodic basis. The Company considers the collection risk to be low.
Based on the preliminary purchasing price allocation (the "PPA") results, we have identified intangible assets as well as prepaid land lease payments valued at RMB184.8 million ($29.4 million). The intangible assets include information system, healthcare qualification and oncology operation licenses. The resulting amortization expense in the third quarter of RMB4.3 million ($0.7 million) was included in Chang'an Hospital's cost of revenue and operating expenses. The PPA results are subject to changes.
Chang'an Hospital received 121,092 outpatients and 7,309 inpatients for the third quarter of 2012. The average bed utilization for the quarter was 93%. The average days of hospital stay was 10.2 days per patient for the quarter. Chang'an Hospital operated 978 beds as of September 30, 2012.
Chang'an Hospital is a leading private-owned, general service, for-profit hospital, located in Xi'an, Shaanxi Province. Established in 2002, Chang'an Hospital had 51 departments with over 1,000 medical and non-medical staff as of September 30, 2012. The total number of hospital beds reached 978 in the third quarter 2012.
Results for the nine months ended September 30, 2012 Net revenues were RMB449.3 million ($71.5 million) for the nine months ended September 30, 2012, representing a 33.7% increase from the nine months ended September 30, 2011.
Cost of revenues was RMB208.5 million ($33.2 million) for the nine months ended September 30, 2012, representing a 81.9% increase from the nine months ended September 30, 2011, which was primarily due to the consolidation of the financial results of Chang'an Hospital in the third quarter of 2012.
Gross profit margin was 53.6% for the nine months ended September 30, 2012, compared with 65.9% for the nine months ended September 30, 2011. The decrease in gross profit margin was primarily due to the consolidation of the financial results of Chang'an Hospital in the third quarter of 2012, as gross profit margin for the hospital business was lower than that for the network business.
Operating expenses were RMB91.6 million ($14.6 million) for the nine months ended September 30, 2012, representing a 24.6% increase from RMB73.5 million for the nine months ended September 30, 2011, which was primarily due to the consolidation of the financial results of Chang'an Hospital in the third quarter of 2012.
As a result, operating income was RMB149.2 million ($23.7 million) for the nine months ended September 30, 2012, representing a 0.9% increase from RMB147.8 million for the nine months ended September 30, 2011.
Income tax expense was RMB38.6 million ($6.1 million) for the nine months ended September 30, 2012, as compared to RMB39.5 million for the nine months ended September 30, 2011. The effective tax rate for the nine months ended September 30, 2012 was 27.3%, as compared to 28.6% for the first nine months of 2011, primarily attributable to the lower effective tax rate of Chang'an Hospital.
As a result, net income was RMB102.8 million ($16.4 million) for the nine months ended September 30, 2012, representing a 4.2% increase from RMB98.7 million for the nine months ended September 30, 2011.
Basic and diluted earnings per ADS for the nine months ended September 30, 2012 were both RMB2,20 ($0.35), representing a 5.8% increase from the basic and diluted earnings per ADS of RMB2.04 for nine months ended September 30, 2011.
Revenue Outlook for Fourth Quarter 2012Based on the current market and operating conditions, planned business expansion, and estimated patient volume from Chang'an Hospital, Concord Medical estimates total net revenues for the fourth quarter of 2012 to be between RMB193 million and RMB210 million, including net revenues from the network business to be between RMB105 million to RMB115 million and net revenues from the hospital business to be between RMB88 million and RMB95 million.
These estimates are based on current market and operating conditions, are subject to change, and may be influenced positively or negatively by factors outside the Company's control, including but not limited to macroeconomic events in the markets in which the Company operates. See "Safe Harbor Statement" below for additional information regarding forward-looking statements.
Conference Call InformationConcord Medical will hold an earnings conference call at 8:00 a.m. Eastern Standard Time (New York) on November 21, 2012, which is also 9:00 p.m. in Beijing and Hong Kong on the same day.
The dial-in details for the live conference call are as follows:U.S. Toll Free: 1-866-519-4004
International: 65 67239381
U.K. Toll Free: 08082346646
China Toll Free: 400-620-8038 / 800-819-0121
Hong Kong Toll Free: 800-930-346
A replay of the conference call may be accessed by phone at the following numbers for 7 days:
U.S. Toll Free: 1 646 254 3697
International: 1 855 452 5696
A live webcast of the conference call will be available on the investor relations section of the Company's website at http://ir.concordmedical.com. A replay of the webcast will be available for one month.
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 and is the parent of Chang'an Hospital. As of September 30, 2012, the Company operated a network of 134 centers with 75 hospital partners that spanned 53 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 news release may contain "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 id
|SOURCE Concord Medical Services Holdings Limited|
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