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First Quarter 2011 Financial Results
Revenue in the first quarter of fiscal 2011 reflected continued growth inthe Healthcare Services division offset by lower year over year revenueperformance in the Medical Products division. Revenue from the HealthcareServices division increased 12.3% to $24.7 million from $22.0 million in theprior year period, and reflects growing inpatient and outpatient volume acrossthe United Family Healthcare network. Revenue from the Medical Productsdivision was down 28.3% to $16.7 million from $23.3 million in the prior yearperiod. Total revenue decreased 8.4% to $41.5 million from $45.3 million inthe first quarter of fiscal year 2010. The Company believes that the Class Areview process in China, along with annual hospital budgeting cycles and ageneral uncertainty about healthcare reform and expenditure, continued toimpact this division's performance in the first quarter of fiscal 2011.
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Roberta Lipson, President and CEO of Chindex, commented, "Our strongrevenue performance in the Healthcare Services division reflects continueddemand for our services across the UFH network. We are focused on the furtherbuild out of our network of premium care hospitals and clinics, and remainoptimistic about the future as we more than double capacity in Beijing, rampup patient volume in Shanghai and Guangzhou, and make progress with newfacilities in other growing Chinese cities. In our Medical Products division,the review process for Class A medical equipment continued to hinder daVincisales, and purchasing behavior demonstrated the seasonally slower firstquarter in line with annual budgeting processes. However, demand forhigh-value medical equipment remains strong in China and we arewell-positioned to capitalize on the market for these products in the future."
Income from operations in the first quarter of fiscal 2011 was $1.9million, compared to income from operations of $5.3 million in the samequarter last year. Total operating costs and expenses for the first quarter offiscal 2011 were roughly flat at $40.0 million compared to $40.1 million inthe prior year period, primarily reflecting a decrease in product sales costsoffset by general and administration cost increases commensurate with revenuegrowth in the Healthcare Services division.
Operating expenses in the first quarter of fiscal 2011 include the impactof a $1.2 million unrealized foreign exchange loss, equivalent to a loss of$0.07 per diluted share, compared to a $906,000 unrealized foreign exchangegain, equivalent to a gain of $0.06 per diluted share, in the same quarter ofthe prior year. The unrealized exchange loss was incurred as a result of thesubstantial weakening of the Euro against the U.S. Dollar during the periodwhich impacted the translated value of intercompany debt owed from theCompany's German subsidiary to the U.S parent company. In the prior year theCompany experienced the opposite circumstance.
Operating expenses also included $664,000 of non-cash stock compensationexpense, equivalent to $0.04 per diluted share compared to $689,000, or $0.04per diluted share in the prior year. Development, startup, and post-openingexpenses in the Healthcare Services division were $388,000 or $0.02 perdiluted share in the period compared to $329,000, or $0.02 per diluted sharein the prior year.
Income from operations before foreign exchange in the first quarter offiscal 2011 was $3.1 million, compared to $4.4 million in the prior yearperiod.
The Company recorded a $1.0 million provision for taxes, an effective taxrate of 54.8%, in the first quarter of fiscal 2011 as compared to a provisionfor taxes of $1.6 million, or an effective tax rate of 32.6%, in the prioryear period. The effective tax rate in the current period reflects increasedlosses in entities for which the Company cannot yet recognize a tax benefit.
Net income for the quarter ended June 30, 2010 was $836,000, or $0.06 perdiluted share. This compares to net income of $3.3 million, or $0.20 perdiluted share, in the prior year period.
Healthcare Services division business results:
In the first quarter of fiscal year 2011, revenue increased 12.3% to $24.7million from $22.0 million in the prior year period. The increase reflectsgrowing inpatient and outpatient volume across the Company's United FamilyHealthcare network.
In the first quarter of fiscal 2011, operating costs increased 12.3% to$20.1 million, a rate proportional to revenue growth and inclusive ofadditional staffing efforts. Income from operations before foreign exchangeincreased 14.6% to $4.7 million from $4.1 million in the prior year period.
Lipson continued, "Our growth this quarter reflects continued demand forservices across our network. We are pleased to see more and more patients relyon us to treat increasingly acute indications in Beijing, while volumes inShanghai and Guangzhou continued to validate that we are replicating the UFHbrand in these newer locations. Additionally, the Beijing hospital expansionis on-track to more than double our capacity by calendar year-end."
Medical Products division business results:
For the first quarter of fiscal 2011, revenue was $16.7 million, down28.3% from $23.3 million in the prior year period. Revenue performancereflects increased sales from women's health imaging and ultrasound products,offset by a reduction in revenue from government-backed loan programs and lackof daVinci sales versus the prior year period. Overall, revenue performancereflects the Class A review process and timing, which impacts daVinci orderflow, along with anticipated hospital budgeting cycles and a generaluncertainty around healthcare reform and expenditure, which impacts demand andorder flow for medical devices.
Gross profit for the Medical Products division was $5.1 million, comparedto $5.8 million in the prior year period. Gross margin was 30.4% compared to25.0% in the prior year period, in line with historical averages and revenuemix. Selling, marketing, general and administrative expenses for the MedicalProducts division increased to $6.7 million from $5.6 million in the firstquarter of the prior year. The division had a loss from operations beforeforeign exchange of $1.6 million for the three months ended June 30, 2010,compared with income from operations before foreign exchange of $243,000 forthe three months ended June 30, 2009.
Lipson added, "We continue to believe order and shipment delays related tothe regulatory review of high-value technologies is a temporary reality, whichsubstantiates the overall demand in the market for these products. We take along-term view that the medical device market in China is extremely compellingdespite the current regulatory challenges, and we look forward to pursuingthis large addressable market in the coming years."
First Quarter Fiscal 2011 Conference Call
Management will host a conference call today at 8:00 am ET to discussfinancial results.
To participate in the conference call, international callers should dial1-760-666-3567 and domestic callers should dial 1-877-303-9231 approximately10 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, passcode79429622.
This call is also being webcast and will be accessible at Chindex'swebsite:http://ir.chindex.com/events.cfm . The event will be archived and availablefor replay through August 16, 2010.
About Chindex International, Inc.
Chindex is an American healthcare company that provides healthcareservices and supplies medical capital equipment, instrumentation and productsto the Chinese marketplace, including Hong Kong. Healthcare services areprovided through the operations of its United Family Hospitals and Clinics, anetwork of private primary care hospitals and affiliated ambulatory clinics inChina. The Company's hospital network currently operates in Beijing, Shanghai,Guangzhou and Wuxi. The Company sells medical products manufactured by variousmajor multinational companies, including Siemens AG and Intuitive Surgical,for which the Company is the exclusive distribution partner for the sale andservicing of color ultrasound systems and surgical robotic systemsrespectively. It also arranges financing packages for the supply of medicalproducts to hospitals in China utilizing the export loan and loan guaranteeprograms of both the U.S. Export-Import Bank and the German KfW DevelopmentBank. With twenty-seven years of experience, approximately 1,300 employees,and operations in China, Hong Kong, the United States and Germany, theCompany's strategy is to expand its cross-cultural reach by providing leadingedge healthcare technologies, quality products and services to Greater China'sprofessional communities. Further company information may be found at theCompany's websites http://www.chindex.com andhttp://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 notdescriptions of historical facts may be forward-looking statements within themeaning of Section 27A of the Securities Act of 1933, as amended (the"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, asamended (the "Exchange Act"). Forward-looking information is inherentlysubject to risks and uncertainties, and actual results could differ materiallyfrom 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, updatesand 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 ExchangeCommission from time to time. Forward-looking statements may be identified byterms 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 webelieve that the expectations reflected in the forward-looking statements arereasonable, we cannot guarantee future results, levels of activity,performance or achievements. We have no obligation to update theseforward-looking statements.
The Company operates in two businesses: Healthcare Services and MedicalProducts. The Company evaluates performance and allocates resources based onprofit or loss from operations before income taxes, not including foreignexchange gains or losses.Financial Summary Attached CHINDEX INTERNATIONAL, INC. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (in thousands except share and per share data) (Unaudited) Three months ended June 30, 2010 2009 Product sales $16,739 $23,283 Healthcare services revenue 24,749 22,048 Total revenue 41,488 45,331 Cost and expenses Product sales costs 11,644 17,469 Healthcare services costs 18,560 16,750 Selling and marketing expenses 3,768 3,160 General and administrative expenses 5,621 2,678 Income from operations 1,895 5,274 Other (expenses) and income Interest expense (208) (273) Interest income 165 472 Miscellaneous (expense) - net (4) (647) Income before income taxes 1,848 4,826 Provision for income taxes (1,012) (1,573) Net income $836 $3,253 Net income per common share - basic $.06 $.22 Weighted average shares outstanding - basic 14,785,510 14,480,484 Net income per common share - diluted $.06 $.20 Weighted average shares outstanding - diluted 16,200,544 15,943,992 CHINDEX INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands except share data) (Unaudited) June 30, 2010 March 31, 2010 ASSETS Current assets: Cash and cash equivalents $42,106 $50,654 Restricted cash 2,020 468 Investments 39,055 37,207 Accounts receivable, less allowance for doubtful accounts of $6,836 and $6,158, respectively Product sales receivables 20,696 22,760 Patient service receivables 12,431 10,357 Inventories, net 18,232 14,411 Deferred income taxes 2,988 2,843 Other current assets 3,920 3,032 Total current assets 141,448 141,732 Restricted cash 628 2,556 Investments 1,261 -- Property and equipment, net 25,587 23,678 Noncurrent deferred income taxes 137 103 Other assets 2,867 2,774 Total assets $171,928 $170,843 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt, current portion of long-term debt and vendor financing $292 $1,453 Accounts payable 15,723 13,979 Accrued expenses 12,827 14,022 Other current liabilities 4,515 3,826 Deferred revenue 2,759 2,549 Income taxes payable 1,302 2,218 Total current liabilities 37,418 38,047 Long-term debt, vendor financing and convertible debentures 22,704 22,593 Long-term accrued liabilities 72 84 Long-term deferred revenue 812 968 Long-term deferred tax liability 240 240 Total liabilities 61,246 61,932 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value, 500,000 shares authorized, none issued -- -- Common stock, $.01 par value, 28,200,000 shares authorized, including ,200,000 designated Class B: Common stock - 13,765,611 and 13,765,857 shares issued and outstanding at June 30, 2010 and March 31, 2010, respectively 138 138 Class B stock - 1,162,500 shares issued and outstanding at June 30, 2010 and March 31, 2010, respectively 12 12 Additional paid-in capital 100,930 100,269 Accumulated other comprehensive income 3,290 3,016 Retained earnings 6,312 5,476 Total stockholders' equity 110,682 108,911 Total liabilities and stockholders' equity $171,928 $170,843 CHINDEX INTERNATIONAL, INC. SEGMENT INFORMATION
SOURCE Chindex International, Inc.
