Chindex International, Inc. Reports Fourth Quarter and Full Year Fiscal 2010 Financial Results
Roberta Lipson, President and CEO of Chindex, commented, "We are pleasedwith our fiscal year 2010 financial results in which we demonstrated steadygrowth in Healthcare Services of 8% and increased profitability for the firmas a whole. We remain enthusiastic about the healthcare services and medicaldevice market opportunity in China, particularly with the confluence we see inChina right now, specifically economic development, government support forleading providers and consumer demand for premium care."
Fourth Quarter 2010 Financial Results
Revenue in the fourth quarter of fiscal year 2010 decreased 30.9% to $41.3million from $59.7 million in the fourth quarter of fiscal year 2009,reflecting continued growth in Healthcare Services offset by revenueperformance in the Medical Products division. Revenue from the HealthcareServices division increased 4.9% to $21.2 million from $20.2 million in thefourth quarter of fiscal year 2009, and reflected growing inpatient andoutpatient volume across the network despite construction-related disruptionat the Company's Beijing facility. Consistent with prior quarters, Chindexexpects the impact of the expansion work to continue through the opening ofthe expanded facilities, currently planned for the fall of 2010. Revenue fromthe Medical Products division was down 49.1% to $20.1 million from $39.5million in the prior year period. The Company believes that the Ministry ofHealth Class A review process and timing, along with a general uncertaintyaround healthcare reform and expenditure, undermined this division'sperformance in the fourth quarter of fiscal 2010.
Income from operations in the fourth quarter of fiscal year 2010 was $1.1million, compared to income from operations of $3.9 million in the samequarter last year. Total operating costs and expenses for the fourth quarterof fiscal year 2010 decreased 28.1% to $40.1 million from $55.8 million in theprior year period, primarily reflecting the decrease of 52.2% in product salescosts to $14.6 million in the fourth quarter of 2010. Operating costs alsoincluded $236,000 of development and startup expenses for new clinics,equivalent to $0.01 per diluted share, and non-cash stock compensation expenseof $853,000 or $0.05 per diluted share. In the prior year period, theCompany's development and startup expense were $536,000, or $0.03 per dilutedshare, and non-cash stock compensation expense was $848,000, or $0.05 perdiluted share.
The Company recorded a $791,000 provision for taxes, an effective tax rateof 60.6%, in the fourth quarter of fiscal year 2010 as compared to a provisionfor taxes of $615,000, or an effective tax rate of 15.3%, in the prior yearperiod. The tax rate reflects losses in entities for which the Company cannotyet recognize a benefit.
Net income for the quarter ended March 31, 2010 was $515,000, or $0.04 perdiluted share. This compares to net income of $3.4 million, or $0.22 perdiluted share, in the prior year period.
Healthcare Services division business results:
In the fourth quarter of fiscal year 2010, revenue increased 4.9% to $21.2million from $20.2 million in the prior year period. The increase reflectsgrowing inpatient and outpatient volume across the Company's network offset bynear-term disruption related to expansion construction in Beijing.
In the fourth quarter of fiscal year 2010, operating costs were flat on ayear over year basis at $18.8 million, and income from operations beforeforeign exchange loss increased 75.4% to $2.4 million from $1.3 million in theprior year period.
Lipson continued, "Our growth this quarter was consistent with ourexpectations and reflects continued demand for services across our network,offset slightly by construction-related disruption at our Beijing facility,where we are more than doubling our capacity by calendar year-end. We movedseveral exciting projects forward this quarter including officially launchingthe New Hope Oncology Center, entering design phase for the new facility inTianjin, as well as meeting further demand for our services in Shanghai andGuangzhou. Overall, we remain uniquely positioned as a leading premiumprovider in China's healthcare services space and we are looking forward tomore progress in the fiscal year ahead."
Medical Products division business results:
For the fourth quarter of fiscal year 2010, revenue was $20.1 million,down 49.1% from $39.5 million in the prior year period. Revenue performancemainly reflects the Ministry of Health's Class A review process and timing,which impacts daVinci order flow, along with a general uncertainty aroundhealthcare reform and expenditure, which impacts overall demand and order formedical devices.
Gross profit for the Medical Products division was $5.5 million, comparedto $9.0 million in the prior year period. Gross margin was 28% compared to 23%in the prior year period, in line with historical averages and revenue mix.Selling, marketing, general and administrative expenses for the MedicalProducts division decreased to $5.9 million from $6.3 million in the fourthquarter of the prior year.
Revenue from the Medical Products division was $85.4 million in the fiscalyear 2010, a decrease of 7.2% from $92.1 million in the prior year. Grossprofit in the division was $23.4 million, which yielded a gross margin of 27%,compared to $23.1 million, which yielded a gross margin of 25%, in the fiscalyear 2009. Selling, marketing, general and administrative expenses for theMedical Products division increased 5.2% to $23.7 million from $22.6 millionin the prior year, reflecting the increased selling activity.
Lipson added, "Despite the temporary challenges in our Medical Productsdivision, we believe the medical device market in China remains extremelycompelling. We believe order and shipment delays related to the regulatoryreview of high-value technologies is a temporary reality which substantiatesthe overall demand in the market for these products. Additionally, we aredelighted to announce today our strategic partnership with FosunPharmaceuticals, a transformative event for Chindex and for our MedicalProducts division in particular."
Full Year 2010 Financial Results
During the fiscal year 2010, revenue remained flat on a year over yearbasis at $171.2 million, compared to $171.4 million in the prior year. Revenuefrom the Healthcare Services division increased 8.1% to $85.8 million from$79.4 million in fiscal year 2009. Revenue from the Medical Products divisionwas $85.4 million, down 7.2% from $92.1 million in the prior year.
Income from operations increased 76.6% to $14.4 million for the full yearended March 31, 2010, from $8.2 million in the prior year. Total operatingcosts and expenses for the fiscal year 2010 decreased 4.0% to $156.8 millionfrom $163.3 million in the prior year.
The Company recorded a $6.1 million provision for taxes, or an effectivetax rate of 42.6%, in the fiscal year 2010, compared to a provision for taxesof $2.7 million, or an effective tax rate of 35.1%, for the fiscal year 2009.
In the fiscal year 2010, net income increased 65.3% to $8.2 million, or$0.52 per diluted share, from $5.0 million, or $0.31 per diluted share, in theprior year. Non-cash stock compensation expense was $3.3 million during thefiscal year 2010 compared to $2.9 million in the prior year.
Fourth Quarter Fiscal 2010 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 andavailable for replay through June 28, 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, 2009, 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.Financial Highlights: -- Revenue of $171.2 million in the fiscal year 2010 -- Operating income up 76.6% year over year to $14.4 million in the fiscal year 2010 -- Net income up 65% year over year to $8.2 million in the fiscal year 2010, or $0.52 per diluted share, from $5.0 million, or $0.31 per diluted share in the prior year
SOURCE Chindex International, Inc.
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