Chindex International, Inc. Reports Third Quarter Fiscal Year 2010 Financial Results
BETHESDA, Md., Feb. 8 /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 and first nine months of fiscal year 2010.
Financial Highlights: -- Revenue in the third quarter of fiscal year 2010 increased 12% year over year to $46.5 million; -- Net income for the third quarter of fiscal 2010 increased to $3.9 million, or $0.24 per diluted share, from $846,000, or $0.05 per diluted share in the prior year period; -- The Company received a refund of $3.3 million for business tax paid since January 1, 2009 in the Healthcare Services division, equivalent to approximately $0.15 per diluted share; -- Revenue in the first nine months of 2009 increased 16.2% year over year to $129.9 million; -- Net income for the first nine months of 2009 increased to $7.7 million, or $0.48 per diluted share, from $1.5 million, or $0.10 per diluted share in the prior year period.
Roberta Lipson, President and CEO of Chindex, commented, "We are pleased with our profitability and year to date performance which reflect substantial improvements over last year. In the Healthcare Services division we are in a development cycle with operations in the Beijing market experiencing capacity limitations as we build out the expansion facilities. At the same time, operations in the Shanghai and Guangzhou markets continue along expected growth trajectories. The Medical Products division is always subject to quarterly fluctuations, and although we are seeing significant improvements over last year, we are experiencing regulatory delays on high-value medical equipment purchases. Nevertheless, there continues to be significant excitement in the marketplace for our products, particularly for the daVinci surgical robot and the new S/SC 2000 ultrasound platform. As we enter the fourth quarter, and look forward into our next fiscal year, we remain extremely well-positioned to capitalize on China's premium-quality healthcare services market, continued economic vibrancy and opportunities created by healthcare reform."
Revenue in the third quarter of fiscal year 2010 increased 12% to $46.5 million from $41.6 million in the third quarter of fiscal year 2009. Revenue from the Healthcare Services division increased 5% to $21.6 million from $20.5 million in the third quarter of fiscal year 2009, and reflected growing inpatient and outpatient volume offset by disruption due to construction of the expanded facility in Beijing. The Company expects the negative impact of the expansion work to continue through the opening of the expanded facilities, currently planned for the fall of 2010. Revenue from the Medical Products division increased 18% to $24.9 million from $21.1 million in the prior year period, reflecting the increase in sales of women's health imaging products and the delivery of two robotic surgical systems. During this quarter, the Company also recorded revenues of approximately $3.2 million under its current KfW Development Bank contracts.
During the quarter, the Company recorded income from operations of $6.6 million, compared to income from operations of $1.9 million in the same quarter last year. Income from operations includes the benefit of a $3.3 million business tax refund related to the Healthcare Services division. This tax refund is equivalent to approximately $0.15 per diluted share. Total operating costs and expenses for the third quarter of fiscal year 2010 were flat on a year over year basis and included $269,000 of development and startup expenses for new clinics, equivalent to $0.02 per diluted share, and non-cash stock compensation expense of $888,000, or $0.05 per diluted share. In the prior period, the Company's development and startup expense were $662,000, or $0.04 per diluted share, and non-cash stock compensation expense was $810,000, or $0.05 per diluted share.
The Company recorded a $2.7 million provision for taxes, or an effective tax rate of 41.1%, in the third quarter of fiscal year 2010 as compared to a provision for taxes of $658,000, or an effective tax rate of 43.7%, in the prior year period. The tax rate reflects losses in entities for which the Company cannot yet recognize a benefit.
Net income for the quarter ended December 31, 2009 was $3.9 million, or $0.24 per diluted share. Excluding the tax refund explained above, net income for the third quarter of fiscal year 2010 would be $1,497,000, or $0.09 per diluted share. This compares to net income of $846,000, or $0.05 per diluted share, in the prior year period.
Healthcare Services division business results:
For the third quarter of fiscal year 2010, revenue increased 5% to $21.6 million from $20.5 million for the prior year quarter. The increase reflected growing inpatient and outpatient volume offset by disruption due to construction of the expanded facility in Beijing.
Excluding the $3.3 million tax benefit discussed above, operating costs increased by 5% to $19.3 million, and income from operations before foreign exchange gains increased to $5.6 million from $2.1 million in the prior year period.
Lipson continued, "We were pleased to see our revenue increase sequentially and on a year over year basis despite the temporary disruption at our BJU facility, which should more than double our capacity by calendar year-end. We were also particularly excited to receive a $3.3 million business tax rebate and receive a business tax exemption going forward. We believe this treatment from authorities in the for-profit hospital sector, is evidence that healthcare reform efforts in China will continue to drive growth throughout the sector and further enhance our position as the leading, private sector provider in the premium-care market."
Medical Products division business results:
For the third quarter of fiscal year 2010, revenue increased 18% to $24.9 million from $21.1 million in the prior year quarter. Revenue performance mainly reflected increases in sales of women's health imaging products and delivery of two robotic surgical systems.
Revenue performance year to date also reflects continued delays in the order cycle for high value capital medical equipment, particularly for robotic surgical systems, resulting from the Chinese government's review of these technologies as well as the overall timing of the tender process in China. Sales excluding daVinci were lower than the prior year period, reflecting the introduction of a new generation of technology in diagnostic ultrasound which replaced the previous market leading product. During this quarter, the Company also recorded revenues of approximately $3.2 million under its current KfW Development Bank contracts.
Gross profit for the Medical Products division increased to $7.3 million from $5.6 million in the prior year's third quarter, representing an increase in gross profit margin to 29% from 26% in the year over year period. The variance in gross profit margin is in line with historical averages.
Lipson concluded, "The government's review of high value technologies used in public hospitals is a routine process impacting new, big ticket medical products. We believe that the review itself substantiates the continued demand we see for premium medical technology in China, and bodes well for future sales across our portfolio despite causing disruptions to daVinci sales this quarter."
Fiscal 2010 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 should dial 1-719-325-4757 and domestic callers should 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 22, 2010.
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 22, 2010.
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 the 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 1,300 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, 2009, 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.
Financial Summary Attached 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, 2009 2008 2009 2008 Product sales $24,921 $21,070 $65,324 $52,607 Healthcare services revenue 21,563 20,530 64,610 59,171 Total revenue 46,484 41,600 129,934 111,778 Cost and expenses Product sales costs 17,652 15,493 47,506 38,576 Healthcare services costs 14,699 17,185 48,801 49,586 Selling and marketing expenses 3,841 3,867 10,609 9,590 General and administrative expenses 3,699 3,158 9,740 9,728 Income from operations 6,593 1,897 13,278 4,298 Other (expenses) and income Interest expense (230) (259) (784) (738) Interest income 477 527 1,350 1,316 Miscellaneous (expense) income - net (220) (661) (851) (1,257) Income before income taxes 6,620 1,504 12,993 3,619 Provision for income taxes (2,722) (658) (5,304) (2,073) Net income $3,898 $846 $7,689 $1,546 Net income per common share - basic $.27 $.06 $.53 $.11 Weighted average shares outstanding - basic 14,592,992 14,455,237 14,533,601 14,395,239 Net income per common share - diluted $.24 $.05 $.48 $.10 Weighted average shares outstanding - diluted 16,211,607 15,836,521 16,127,180 16,089,705 CHINDEX INTERNATIONAL, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (in thousands except share data) (Unaudited) December 31, March 31, 2009 2009 ASSETS Current assets: Cash and cash equivalents $23,760 $20,293 Restricted cash 450 1,854 Investments 57,672 51,502 Accounts receivable, less allowance for doubtful accounts of $5,661 and $5,041, respectively Product sales receivables 30,608 37,994 Patient service receivables 9,699 8,837 Inventories, net 13,444 11,346 Deferred income taxes 3,255 2,410 Other current assets 3,329 3,239 Total current assets 142,217 137,475 Restricted cash 2,402 1,437 Investments 322 -- Property and equipment, net 21,386 20,633 Noncurrent deferred income taxes 29 1,031 Other assets 2,923 2,061 Total assets $169,279 $162,637 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt, current portion of long-term debt and vendor financing $2,613 $1,631 Current portion of capitalized leases -- 22 Accounts payable 10,366 12,259 Accrued expenses 14,577 20,607 Other current liabilities 6,660 4,148 Deferred revenue 2,394 1,539 Income taxes payable 2,939 1,568 Total current liabilities 39,549 41,774 Long-term debt, vendor financing and convertible debentures 21,578 23,709 Long-term deferred revenue 1,151 595 Long-term deferred tax liability 119 119 Total liabilities 62,397 66,197 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 3,200,000 designated Class B: Common stock - 13,717,768 and 13,452,007 shares issued and outstanding at December 31, 2009 and March 31, 2009, respectively 137 135 Class B stock - 1,162,500 shares issued and outstanding at December 31, 2009 and March 31, 2009, respectively 12 12 Additional paid-in capital 98,728 95,808 Accumulated other comprehensive income 3,044 3,072 Retained earnings (accumulated deficit) 4,961 (2,587) Total stockholders' equity 106,882 96,440 Total liabilities and stockholders' equity $169,279 $162,637 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 percentages)
Healthcare Medical Services Products Total For the three months ended December 31, 2009: Sales and service revenue $21,563 $24,921 $46,484 Gross Profit n/a * 7,269 n/a Gross Profit % n/a * 29% n/a Income from operations before foreign exchange $5,637 $1,265 $6,902 Foreign exchange loss (309) Income from operations $6,593 Other income, net 27 Income before income taxes $6,620 Assets as of December 31, 2009 $106,242 $63,037 $169,279 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 Assets as of March 31, 2009 $94,675 $67,962 $162,637 Healthcare Medical Services Products Total For the nine months ended December 31, 2009: Sales and service revenue $64,610 $65,324 $129,934 Gross Profit n/a * 17,818 n/a Gross Profit % n/a * 27% n/a Income from operations before foreign exchange $12,043 $25 $12,068 Foreign exchange gain 1,210 Income from operations $13,278 Other (expense), net (285) Income before income taxes $12,993 Assets as of December 31, 2009 $106,242 $63,037 $169,279 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 Assets as of March 31, 2009 $94,675 $67,962 $162,637 * Gross profit margins are not routinely calculated in the healthcare service industry. For more information, please contact: Integrated Corporate Relations Ashley M. Ammon Tel: +1-646-277-1227
SOURCE Chindex International, Inc.