omniture

Concord Medical Announces Second Quarter 2010 Financial Results

    BEIJING, Aug. 18 /PRNewswire-Asia-FirstCall/ -- Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), the operator of the largest network of radiotherapy and diagnostic imaging centers in China, today announced its unaudited financial results for the second quarter ended June 30, 2010(1).

    Second Quarter Fiscal 2010 Highlights
    -- Total net revenues in the second quarter of 2010 were RMB99.4 million 
       ($14.7million), a 38.3% increase from the corresponding period in 2009.

    -- Gross profit in the second quarter of 2010 was RMB69.3 million ($10.2 
       million), a 39.2% increase from the corresponding period in 2009.

    -- Non-GAAP net income(2) in the second quarter of 2010 was RMB34.9 
       million ($5.1 million), a 5.8% increase from the corresponding period 
       in 2009. 

    -- Both Non-GAAP basic and diluted earnings per American Depositary Share 
       ("ADS")(3) for the second quarter of 2010 were RMB0.71 ($0.10).

    -- Adjusted EBITDA(4)  (non-GAAP) in the second quarter of 2010 was 
       RMB76.2 million ($11.2 million), a 22.6% increase from the 
       corresponding period in 2009. 

    -- Concord Medical added eleven centers in the second quarter of 2010, 
       bringing the total number of centers in operation to 100 across 39 
       cities in China, as of June 30, 2010. To date, the Company has entered 
       into agreements to establish 31 new centers.

    -- The number of treatment patient cases and diagnostic patient cases was 
       8,548 and 35,786 during the second quarter of 2010, respectively. 
       Compared to the corresponding period in 2009, treatment patient cases 
       increased by 26.6% and diagnostic patient cases increased by 47.6% .

    -- On July 1, 2010, Concord Medical entered into a joint venture agreement 
       with Chang'An Hospital for the preliminary operation of Chang'An 
       Hospital's cancer treatment facilities in preparation for the full 
       operation of the future Chang'An CMS International Cancer Center 
       (CCICC).
 
    -- On June 30, 2010, Concord Medical's board of directors approved a share 
       repurchase program of up to $20 million.

       (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 RMB6.7815 to US$1.00, the effective 
           noon buying rate as of June 30, 2010 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) Non-GAAP net income is defined in this announcement as net income 
           excluding share-based compensation expenses, which amounted to 
           RMB2.6 million ($0.4 million) for the second quarter of 2010. The 
           Company did not incur share-based compensation expenses for the 
           second quarter of 2009 and therefore no reconciliation for this 
           period has been provided herein.
       (3) Each ADS represents three ordinary shares of the Company.
       (4) Adjusted EBITDA is defined in this announcement as net income plus 
           interest, taxes, depreciation and amortization, share-based 
           compensation expenses and other adjustments. Other adjustments 
           include change in fair value of convertible notes, foreign exchange 
           loss and other income.

    "We saw another quarter of solid growth driven by healthy revenue increases in both existing and newly added centers," said Dr. Jianyu Yang, director, president and chief executive officer of Concord Medical. "In line with our expansion plan, we opened seven new centers and acquired four centers during the quarter. With a healthy acquisition pipeline and existing contracts for the opening of new centers, we remain confident to meet our target of adding 34 to 39 centers in 2010." 
    "We continue to build Concord Medical's brand awareness and reputation through high-profile marketing and academic activities," continued Dr. Yang. "In June, we hosted the largest cancer treatment and diagnosis forum in our history, attracting more than 350 established professionals. During the forum, we were proud to announce the publication of Concord Medical's clinical textbook on stereotactic body radiation therapy using the body gamma knife, a first in China."
    "With a favorable regulatory environment and increasing consumer demand, the cancer treatment and diagnostic market in China continues to be very strong. We will continue to work to extend our leadership, educate the market and differentiate the Concord Medical brand. I am confident that Concord Medical is well positioned to maximize our potential in this rapidly developing market," Dr. Yang concluded. 
    Mr. Boxun Zhang, Concord Medical's corporate vice president, commented, "Healthy top line growth contributed to margin expansion compared to the first quarter, which is a seasonally slow period due to the Chinese New Year holiday. During the second half of the year, we plan to continue to enhance operational efficiency while strategically investing in network expansion to support profitable growth. We also continue to progress according to our schedule for fulfilling Sarbanes Oxley requirements."

    Recent Business Update
    In July, Concord Medical began preliminary operations of its first specialty cancer treatment hospital under a joint venture agreement with the Chang'An Hosptal. Also in July, the Company's second specialty cancer treatment hospital, the Beijing Proton Medical Center, received approval from the Ministry of Health and is in the process of completing the remaining application process. 

    Second Quarter Fiscal 2010 Results
    Concord Medical reported total net revenues of RMB99.4 million ($14.7 million) for the second quarter of 2010, representing a 38.3% increase from the corresponding period in 2009, primarily due to patient volume growth from established centers as well as from new centers added through organic development and acquisitions in 2009 and the first half of 2010.
    Cost of revenues in the second quarter of 2010 was RMB30.2 million ($4.5 million), a 36.2% increase from the corresponding period in 2009, primarily due to the higher depreciation cost associated with the new equipment purchases in 2009 and the first half of 2010.
    Gross profit margin in the second quarter of 2010 was 69.7% as compared to 69.2% in the corresponding period in 2009. 
    Operating expenses, consisting of selling expenses and general and administrative expenses, were RMB22.2 million ($3.3 million) in the second quarter of 2010, compared to RMB7.4 million in the corresponding period in 2009. The increase was largely due to the expanded business size and additional post-IPO related professional expenses.
    Operating income was RMB47.1 million ($6.9 million), representing an 11.2% increase from the corresponding period in 2009. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB49.7 million ($7.3 million), a 17.3% increase from the corresponding period in 2009.
    Income tax expense was RMB12.9 million ($1.9 million), compared to an income tax expense of RMB8.8 million in the corresponding period in 2009. The effective tax rate for the second quarter of 2010 was 28.5% as compared to 28.3% in the previous quarter and 21.1% in the corresponding period in 2009. 
    Net income was RMB32.2 million ($4.8 million), representing a 2.1% decrease from the corresponding period in 2009. Both basic and diluted earnings per ADS for the second quarter of 2010 were RMB0.66 ($0.10).
    Net income excluding share-based compensation expenses (non-GAAP) was RMB34.9 million ($5.1 million), a 5.8% increase from the corresponding period in 2009. Both Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the second quarter of 2010 were RMB0.71 ($0.10). 
    Adjusted EBITDA (non-GAAP), was RMB76.2 million ($11.2 million) for the second quarter of 2010, representing a 22.6% increase from the corresponding period in 2009.
    Capital expenditure for the second quarter of 2010 was RMB130.9 million ($19.3 million). Total depreciation expenses were RMB19.8 million ($2.9 million). In addition, amortization of acquired intangibles was RMB6.7 million ($1.0 million). The Company expects amortization of acquired intangibles to be approximately RMB28.5 million ($4.2 million) in 2010, assuming no additional intangibles are acquired through potential acquisitions during the year.
    As of June 30, 2010, the Company had total fixed assets with a net book value of RMB677.1million ($99.9 million) and cash of RMB863.4 million ($127.3 million). The decline was mainly due to the increased fixed assets balance and prepayment for equipment purchase for our network expansion. 
    As of June 30, 2010, the Company had bank credit lines totaling RMB2.0 billion (US$297.9million). 
    Accounts receivable was RMB137.1 million ($20.2 million) as of June 30, 2010, as compared to RMB111.3 million as of December 31, 2009. The average turnover days was 113 days as of June 30, 2010, as compared to 119 days as of December 31, 2009. 

    Outlook for Fiscal Year 2010
    Concord Medical reaffirms that its estimated range of total net revenues for 2010 is RMB367 million to RMB398 million, which would represent a 25.5% to 36.1% increase from 2009. 
    The Company reaffirms that it expects to add 34 to 39 radiotherapy and diagnostic imaging centers in 2010, and the range of expected total capital expenditures related to these new centers is approximately RMB400 million to RMB450 million.
    This forecast reflects Concord Medical's current and preliminary view, which is subject to change. 

    Conference Call Information
    Concord Medical's management will hold an earnings conference call at 8 AM on August 18, 2010 U.S. Eastern Time (8 PM on August 18, 2010 Beijing/Hong Kong time). 


    Dial-in details for the earnings conference call are as follows:

     US:              +1.866.270.6057
     China:           +10-800-852-1490 China Netcom (South China)
                      +10-800-152-1490 China Telecom (North China)
                      +10-800-130-0399 China Telecom (South China)
     Hong Kong:       +800-96-3844
     International:   +1-617-213-8891

     Passcode:        70681252


    A replay of the conference call may be accessed by phone at the following number until August 25, 2010:

     US:              +1-888-286-8010
     International:   +1-617-801-6888

     Passcode:        55593251


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

    About Concord Medical
    Concord Medical operates the largest network of radiotherapy and diagnostic imaging centers in China in terms of revenues and the total number of centers in operation per available statistics. The Company currently operates a network of more than 100 centers spanning 39 cities and 22 provinces and administrative regions in China. Under long-term arrangements with top-tier hospitals in China, the Company provides radiotherapy and diagnostic imaging equipments and manages the daily operations of these centers located on its hospital partners' premises. The Company also provides ongoing training to doctors and other medical personnel in its network of centers to ensure a high level of clinical care for patients.

    Safe Harbor Statement
    This 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. 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 http://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 change in fair value of convertible notes, foreign exchange loss and other income. 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 statements.

    For investor and media inquiries please contact:

    China
     Stephanie Song
     Concord Medical Services
     Tel:   +86-10-5957-5287
     Email: stephanie.song@cmsholdings.com

     Lilian Wong
     Brunswick Group, LLC
     Tel:   +86-10-6566-2256 
     Email: lwong@brunswickgroup.com

    U.S.
     Nicki Kahner
     Brunswick Group, LLC
     Tel:   +1-212-333-3810
     Email: nkahner@brunswickgroup.com



                   Concord Medical Services Holdings Co., Ltd.
                 Unaudited Condensed Consolidated Balance Sheets
                                  (in thousands)

                                           December 31, 
                                              2009           June 30, 2010
                                               RMB          RMB         US$
    ASSETS
    Current assets
    Cash                                    1,037,239      863,404    127,318
    Restricted cash, current portion              293        2,167        320
    Accounts receivable                       111,328      137,149     20,224
    Prepayment and other current assets       100,484       95,248     14,045
    Deferred tax assets, current portion        3,168        2,282        336
    Total current assets                    1,252,512    1,100,250    162,243
    
    Non-current assets
    Property, plant and equipment, net        573,042      677,140     99,851
    Goodwill                                  300,163      300,163     44,262
    Acquired intangible assets, net           155,345      165,437     24,395
    Deposits for non-current assets           127,150      194,589     28,694
    Deferred tax assets, non-current     
     portion                                   19,700       21,158      3,120
    Net investment in financing lease              --       26,204      3,864
    Other non-current assets                   11,532       54,674      8,062
    Restricted cash, non-current portion        4,421        2,433        359
    Total non-current assets                1,191,353    1,441,798    212,607
    
    Total assets                            2,443,865    2,542,048    374,850
    
    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities
    Short-term bank borrowing                  11,500       27,000      3,981
    Long-term bank borrowings, current   
     portion                                   57,487       59,406      8,760
    Accounts payable                            9,759       10,257      1,512
    Accrual for purchase of property,    
     plant and equipment                       12,043        8,043      1,186
    Obligations under capital leases,    
     current portion                            3,582        3,582        528
    Accrued expenses and other           
     liabilities                               48,663       45,323      6,683
    Income tax payable                         14,642       20,107      2,965
    Deferred revenue, current portion          10,401       14,448      2,131
    Payable for acquisition of a         
     subsidiary and business components            --       18,495      2,727
    Amounts due to related parties              1,546           --         --
    
    Total current liabilities                 169,623      206,661     30,473
    
    Non-current liabilities
    Long-term bank borrowings, non-      
     current portion                           80,915       75,542     11,140
    Deferred revenue, non-current portion       5,188       11,603      1,711
    Obligations under capitalized leases,
     non-current portion                        8,074        6,734        993
    Lease deposit                               1,000        2,044        301
    Deferred tax liabilities, non-current
     portion                                   25,317       30,065      4,433
    Total non-current liabilities             120,494      125,988     18,578
    
    Total liabilities                         290,117      332,649     49,051
    
    Commitments and contingencies
    
    Shareholders' equity
    Ordinary shares                               108          108         16
    Additional paid-in capital              2,671,910    2,674,496    394,381
    Accumulated other comprehensive loss       (3,987)      (4,744)      (700)
    Accumulated deficit                      (514,283)    (460,461)   (67,900)
    
    Total shareholders' equity              2,153,748    2,209,399    325,797
    
    Total liabilities and shareholders'  
     equity                                 2,443,865    2,542,048    374,848
    
    * Amounts for the year ended December 31, 2009 were derived from the       
      December 31, 2009 audited consolidated financial statements.


Concord Medical Services Holdings Co., Ltd.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per ADS data)

                                                For The Three Months Ended 
                                           June 30, 2009     June 30, 2010   
                                                RMB         RMB         US$
    Revenue, net
    Lease and management services              66,696      92,680      13,667
    Management services                         5,084       4,355         642
    Other, net                                    137       2,407         355
    Total net revenues                         71,917      99,442      14,664
    
    Cost of revenues
    Lease and management services             (15,270)    (23,384)     (3,448)
    Amortization of acquired intangibles       (6,882)     (6,704)       (989)
    Management services                            (4)        (91)        (13)
    Total cost of revenues                    (22,156)    (30,179)     (4,450)
    
    Gross profit                               49,761      69,263      10,214
    
    Operating expenses
    
    Selling expenses                           (1,671)     (2,985)       (440)
    General and administrative expenses        (5,722)    (19,168)     (2,827)
    
    Operating income                           42,368      47,110       6,947
    Interest expense                           (1,571)     (2,054)       (303)
    Foreign exchange gain (loss)                  542        (971)       (143)
    Gain from disposal of equipment                --          81          12
    Interest income                               423         935         138
    
    Income before income taxes                 41,762      45,101       6,651
    Income tax expense                         (8,826)    (12,857)     (1,896)
    Net income                                 32,936      32,244       4,755
    
    Accretion of  Series A contingently   
     redeemable convertible preferred     
     shares                                    (7,951)         --          --
    Accretion of Series B contingently    
     redeemable convertible preferred     
     shares                                   (12,796)         --          --
    
    Net income attributable to ordinary   
     shareholders                              12,189      32,244       4,755
    
    Earnings per ADS
    Basic /Diluted                               0.52        0.66        0.10
    
    
    Weighted average number of ADS        
     outstanding:
    Basic /Diluted                         23,476,033  49,151,833  49,151,833



Reconciliations of non-GAAP results of operations measures to the nearest
comparable GAAP measures (*) (in RMB thousands, unaudited)
    
                                  Three months ended     Three months ended 
                                     June 30, 2009         June 30, 2010
                                        Adjust- Non-           Adjust-  Non-            
                                  GAAP   ment   GAAP     GAAP   ment    GAAP
                                 Result        Results  Result         Results
    Operating profit             42,368    --  42,368   47,110  2,600  49,710
    Net income                   32,936    --  32,936   32,244  2,600  34,844
    Net income attributable to     
     ordinary shareholders
    
    Basic earning per ADS          0.52    --    0.52     0.66   0.05    0.71
    Diluted earning per ADS        0.52    --    0.52     0.66   0.05    0.71
    
    (*) The adjustment is only for share-based compensation.



Reconciliation from net income to adjusted EBITDA(*)
(in RMB thousands, unaudited)
        
                                         Three months ended Three months ended
                                            June 30, 2009     June 30, 2010
    Net income                                   32,936            32,244
       Interest expense, net                      1,149             1,119
       Income taxes expense                       8,826            12,857
       Depreciation and amortization             18,604            26,508
       Share-based compensation                      --             2,600
       Other adjustments                            663               890
    
    Adjusted EBITDA                              62,177            76,218
    
   (*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net     
       income plus interest, taxes, depreciation and amortization, share-based  
       compensation and other adjustments. Other adjustments include changes 
       in fair value of convertible notes, foreign exchange gain (loss) and 
       other income.

Source: Concord Medical Services Holdings Co., Ltd.
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