$0.05 Diluted EPS Includes Impact of CD Redemption and Ongoing Investment in UFH Network;
$18.4 Million in KfW and Exim Contracts Outstanding
BETHESDA, Md., Feb. 9 /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 third quarter of fiscal year 2009.
Revenue in the third quarter of fiscal year 2009 increased 16% to $41.6 million from $36.0 million in the third quarter of fiscal year 2008. Revenue from the healthcare services division increased 16% to $20.5 million from $17.7 million in the third quarter of fiscal year 2008, and revenue from the medical products division increased 15% to $21.1 million from $18.3 million in the prior year period. Revenue performance reflects growth in inpatient and outpatient revenues in the hospital division and increasing demand for medical equipment products and services, partially offset by delays in openings of new clinics in Shanghai and Guangzhou as well as the delay until the fourth quarter in the recognition of revenue for certain medical equipment shipped as part of a development bank equipment supply contract.
During the quarter, the Company recorded income from operations of $1.9 million, compared to income from operations of $3.9 million in the same quarter last year. Total operating costs and expenses for the third quarter of fiscal year 2009 increased 24% to $39.7 million as compared with $32.1 million in the prior period. Increased operating costs reflect $662,000 of development and startup expenses for new clinics, as well as costs for the renewal of multi-year physician contracts, additional medical personnel in our Beijing and Shanghai hospitals, increased direct patient care costs and increased medical products selling activities.
Roberta Lipson, President and CEO of Chindex, commented, "We made substantial progress this quarter in our KfW and U.S. Export-Import Bank contracts and remain confident that we can complete deliveries of the remaining $18.4 million by the end of this fiscal year. We are also keeping a close eye on the healthcare reform in China and continue to believe that Chindex is well positioned to benefit from these efforts over the long term."
As previously disclosed, in October 2008, the Company redeemed variable-return CDs and reinvested the funds in traditional deposits with guaranteed returns, given the unfavorable economic outlook. This change was made to minimize the effect of the significant disruptions in the world financial and credit markets. In connection with this, the Company recognized a pretax expense of $653,000, or $0.03 per diluted share, reflecting the early redemption of the CDs and related write offs and tax benefit.
The Company recorded a $658,000 provision for taxes, or an effective tax rate of 43.7%, in the three months ended December 31, 2008 as compared to a provision for taxes of $76,000, or an effective tax rate of 1.9%, for the three months ended December 31, 2007. The current period tax expense includes the negative effect of losses in entities for which Chindex cannot recognize a benefit in accordance with SFAS 109, "Accounting for Income Taxes." The Company's effective tax rate was low in the prior year period due to an increase in its net deferred tax assets resulting from an increase in the projected profitability in future periods of entities in the U.S. and China.
Net income for the quarter ended December 31, 2008 was $846,000, or $0.05 per diluted share. This compares to net income of $3.9 million, or $0.28 per diluted share, for the quarter ended December 31, 2007.
Net income in the third quarter of fiscal 2009 includes $662,000 of expenses, or $0.03 per diluted share, related to development expenses for expansion of the United Family Healthcare network, as well as $653,000, or $0.03 per diluted share, in connection with variable-return CDs described above.
Medical Products division business results:
For the third quarter of fiscal year 2009, revenue increased 15% to $21.1 million from $18.3 million in the prior year quarter. As of December 31, 2008, deferred revenue increased to $3.8 million, which mainly reflects $2.4 million of deferred revenue recorded in the fiscal third quarter of 2009 related to the execution of one of the KfW Development Bank contracts.
Gross profit for the Medical Products division increased to $5.6 million from $5.2 million in the prior year's third quarter, representing a decrease in gross profit margin to 26% from 28% in the year over year period. A 2% variance in gross profit margin is in line with historical averages.
Selling, marketing, general and administrative expenses for the Medical Products division increased 24% to $6.2 million from $5.0 million in the third quarter of the prior year. Increased expenses during the period were a result of increased selling activity in advance of expected sales increases.
Lipson added, "Our Medical Products division continues to be well positioned to capitalize on the increased need for high end, high margin medical products in China. We approach this division with a long-term view. While our costs did not increase substantially in this division versus the second quarter of fiscal 2009, results were impacted by timing of revenue recognition."
Healthcare Services division business results:
For the third quarter of fiscal year 2009, revenue increased 16% to $20.5 million from $17.7 million for the prior year quarter. The increase in revenue is attributable to growth in both inpatient and outpatient revenues provided in the Beijing and Shanghai markets, but which was less than expected.
During the period, operating costs increased by 27% to $18.4 million from $14.5 million in the prior year quarter. The increase in costs was primarily due to an increase in salary expense, resulting from the renegotiation of multi-year physician contracts and the ramp-up in the number of personnel needed to meet the increasing demand for services in Beijing and Shanghai, as well as development and post-opening operating expenses related to the new clinic in Guangzhou, the pending clinic in Shanghai as well as increased direct patient care costs, costs allocated from the parent company and higher excise taxes.
Fiscal 2009 Outlook:
Lipson stated, "We continue to expect Medical Products revenue of $50-$55 million for the second half of fiscal 2009, as we should see considerable product shipments in the fourth quarter. For Healthcare Services, we anticipate that our full year revenue growth should be in the mid-twenty percent range. We are adjusting our growth rate expectation to account for the delay in opening the Shanghai Pudong Clinic and the later than expected start up of our Guangzhou clinic."
"Demand for our products and services remains strong and we have not seen an impact as a result of the world-wide financial crisis. Given the policies implemented by China in response to the crisis, we are optimistic that our business growth opportunities will not be substantially impacted by the current situation."
Fiscal 2009 Third Quarter 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 dial +1-719-325-4757 and domestic callers dial 1-877-874-1568 approximately 10 minutes before the conference call is scheduled to begin.
The telephone replay will be available on the day of the call at (international) +1-719-457-0820 and (domestic) 1-888-203-1112 and continue to be available through February 23, 2009.
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 February 23, 2009.
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 1,200 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, 2008, 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.
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands except share and per share data)
(Unaudited)
Three months ended Nine months ended
December 31, December 31,
2008 2007 2008 2007
Product sales $21,070 $18,316 $52,607 $47,079
Healthcare services
revenue 20,530 17,695 59,171 48,355
Total revenue 41,600 36,011 111,778 95,434
Cost and expenses
Product sales costs 15,493 13,131 38,576 34,417
Healthcare services costs 17,185 13,724 49,586 37,693
Selling and marketing
expenses 3,867 3,153 9,590 8,619
General and administrative
expenses 3,158 2,069 9,728 6,792
Income from operations 1,897 3,934 4,298 7,913
Other (expenses) and
income
Interest expense (259) (198) (738) (573)
Interest income 527 358 1,316 500
Miscellaneous income
(expense) - net (661) (124) (1,257) (171)
Income before income taxes 1,504 3,970 3,619 7,669
Provision for income taxes (658) (76) (2,073) (1,328)
Net income $846 $3,894 $1,546 $6,341
Net income per common
share - basic
Net income $0.06 $0.34 $0.11 $0.57
Weighted average shares
outstanding - basic 14,455,237 11,583,911 14,395,239 11,195,153
Net income per common
share - diluted
Net income $0.05 $0.28 $0.10 $0.49
Weighted average shares
outstanding - diluted 15,836,521 14,126,348 16,089,705 13,037,838
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share data)
December 31, 2008 March 31, 2008
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $21,669 $79,258
Restricted cash 1,979 1,123
Investments 14,055 0
Trade accounts receivable, less
allowance for doubtful accounts of
$4,605 and $3,940, respectively
Product sales receivables 16,635 12,098
Patient service receivables 9,103 9,085
Inventories, net 8,117 9,796
Deferred income taxes 2,037 1,656
Other current assets 6,212 3,294
Total current assets 79,807 116,310
Investments 39,144 0
Restricted cash 818 0
Property and equipment, net 20,510 18,428
Noncurrent deferred income taxes 104 0
Other assets 1,758 1,241
Total assets $142,141 $135,979
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt, current portion of
long-term debt and vendor financing $970 $82
Current portion of capitalized leases 31 36
Accounts payable 8,016 9,938
Accrued expenses 10,481 11,064
Other current liabilities 3,371 3,571
Deferred revenue 3,781 765
Income taxes payable 518 349
Total current liabilities 27,168 25,805
Long-term debt, vendor financing and
convertible debentures 22,930 22,556
Long-term portion of capitalized
leases 0 22
Long-term deferred tax liability 0 208
Total liabilities 50,098 48,591
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value,
500,000 shares authorized, none
issued 0 0
Common stock, $.01 par value,
28,200,000 shares authorized,
including
3,200,000 designated Class B:
Common stock - 13,452,007 and
13,074,593 shares issued and
outstanding at December 31, 2008 and
March 31, 2008, respectively 135 131
Class B stock - 1,162,500 shares
issued and outstanding at December
31, 2008 and March 31, 2008,
respectively 12 12
Additional paid in capital 94,960 92,586
Accumulated other comprehensive
income 2,941 2,210
Accumulated deficit (6,005) (7,551)
Total stockholders' equity 92,043 87,388
Total liabilities and stockholders'
equity $142,141 $135,979
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:" (in thousands except share data)
Healthcare Medical
Services Products Total
For the three months ended December
31, 2008:
Sales and service revenue $20,530 $21,070 $41,600
Gross Profit n/a * 5,577 n/a
Gross Profit % n/a * 26% n/a
Income (loss) from operations before
foreign exchange $2,142 $(630) $1,512
Foreign exchange gain 385
Income from operations $1,897
Other (expense), net (393)
Income before income taxes $1,504
As of December 31, 2008:
Assets $95,984 $46,157 $142,141
Healthcare Medical
Services Products Total
For the three months ended December
31, 2007:
Sales and service revenue $17,695 $18,316 $36,011
Gross Profit n/a * 5,185 n/a
Gross Profit % n/a * 28% n/a
Income from operations before foreign
exchange $3,220 $197 $3,417
Foreign exchange gain 517
Income from operations $3,934
Other(expense), net 36
Income before income taxes $3,970
As of March 31, 2008:
Assets $93,727 $42,252 $135,979
Healthcare Medical
Services Products Total
For the nine months ended December
31, 2008:
Sales and service revenue $59,171 $52,607 $111,778
Gross Profit n/a * 14,031 n/a
Gross Profit % n/a * 27% n/a
Income (loss) from operations before
foreign exchange $5,970 $(2,185) $3,785
Foreign exchange gain 513
Income from operations $4,298
Other (expense), net (679)
Income before income taxes $3,619
As of December 31, 2008:
Assets $95,984 $46,157 $142,141
Healthcare Medical
Services Products Total
For the nine months ended December
31, 2007:
Sales and service revenue $48,355 $47,079 $95,434
Gross Profit n/a * 12,662 n/a
Gross Profit % n/a * 27% n/a
Income (loss) from operations before
foreign exchange $8,057 $(1,003) $7,054
Foreign exchange gain 859
Income from operations $7,913
Other (expense), net (244)
Income before income taxes $7,669
As of March 31, 2008:
Assets $93,727 $42,252 $135,979
* Gross profit margins are not routinely calculated in the healthcare
industry.
For more information, please contact:
Integrated Corporate Relations
Ashley M. Ammon
Tel: +1-203-682-8200
