BEIJING, Aug. 18 Concord Medical ServicesHoldings Limited ("Concord Medical" or the "Company") (NYSE: CCM), theoperator of the largest network of radiotherapy and diagnostic imaging centersin China, today announced its unaudited financial results for the secondquarter ended June 30, 2010(1).
"We saw another quarter of solid growth driven by healthy revenueincreases in both existing and newly added centers," said Dr. Jianyu Yang,director, president and chief executive officer of Concord Medical. "In linewith our expansion plan, we opened seven new centers and acquired four centersduring the quarter. With a healthy acquisition pipeline and existing contractsfor the opening of new centers, we remain confident to meet our target ofadding 34 to 39 centers in 2010."
"We continue to build Concord Medical's brand awareness and reputationthrough high-profile marketing and academic activities," continued Dr. Yang."In June, we hosted the largest cancer treatment and diagnosis forum in ourhistory, attracting more than 350 established professionals. During the forum,we were proud to announce the publication of Concord Medical's clinicaltextbook on stereotactic body radiation therapy using the body gamma knife, afirst in China."
"With a favorable regulatory environment and increasing consumer demand,the cancer treatment and diagnostic market in China continues to be verystrong. We will continue to work to extend our leadership, educate the marketand differentiate the Concord Medical brand. I am confident that ConcordMedical is well positioned to maximize our potential in this rapidlydeveloping 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 firstquarter, 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 operationalefficiency while strategically investing in network expansion to supportprofitable growth. We also continue to progress according to our schedule forfulfilling Sarbanes Oxley requirements."
Recent Business Update
In July, Concord Medical began preliminary operations of its firstspecialty cancer treatment hospital under a joint venture agreement with theChang'An Hosptal. Also in July, the Company's second specialty cancertreatment hospital, the Beijing Proton Medical Center, received approval fromthe Ministry of Health and is in the process of completing the remainingapplication process.
Second Quarter Fiscal 2010 Results
Concord Medical reported total net revenues of RMB99.4 million ($14.7million) for the second quarter of 2010, representing a 38.3% increase fromthe corresponding period in 2009, primarily due to patient volume growth fromestablished centers as well as from new centers added through organicdevelopment and acquisitions in 2009 and the first half of 2010.
Cost of revenues in the second quarter of 2010 was RMB30.2 million ($4.5million), a 36.2% increase from the corresponding period in 2009, primarilydue to the higher depreciation cost associated with the new equipmentpurchases in 2009 and the first half of 2010.
Gross profit margin in the second quarter of 2010 was 69.7% as compared to69.2% in the corresponding period in 2009.
Operating expenses, consisting of selling expenses and general andadministrative expenses, were RMB22.2 million ($3.3 million) in the secondquarter of 2010, compared to RMB7.4 million in the corresponding period in2009. The increase was largely due to the expanded business size andadditional 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 excludingshare-based compensation expenses (non-GAAP) was RMB49.7 million ($7.3million), a 17.3% increase from the corresponding period in 2009.
Income tax expense was RMB12.9 million ($1.9 million), compared to anincome tax expense of RMB8.8 million in the corresponding period in 2009. Theeffective tax rate for the second quarter of 2010 was 28.5% as compared to28.3% 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 dilutedearnings per ADS for the second quarter of 2010 were RMB0.66 ($0.10).
Net income excluding share-based compensation expenses (non-GAAP) wasRMB34.9 million ($5.1 million), a 5.8% increase from the corresponding periodin 2009. Both Basic and diluted earnings per ADS excluding share-basedcompensation 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 thesecond quarter of 2010, representing a 22.6% increase from the correspondingperiod in 2009.
Capital expenditure for the second quarter of 2010 was RMB130.9 million($19.3 million). Total depreciation expenses were RMB19.8 million ($2.9million). In addition, amortization of acquired intangibles was RMB6.7 million($1.0 million). The Company expects amortization of acquired intangibles to beapproximately RMB28.5 million ($4.2 million) in 2010, assuming no additionalintangibles are acquired through potential acquisitions during the year.
As of June 30, 2010, the Company had total fixed assets with a net bookvalue of RMB677.1million ($99.9 million) and cash of RMB863.4 million ($127.3million). The decline was mainly due to the increased fixed assets balance andprepayment for equipment purchase for our network expansion.
As of June 30, 2010, the Company had bank credit lines totaling RMB2.0billion (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 averageturnover days was 113 days as of June 30, 2010, as compared to 119 days as ofDecember 31, 2009.
Outlook for Fiscal Year 2010
Concord Medical reaffirms that its estimated range of total net revenuesfor 2010 is RMB367 million to RMB398 million, which would represent a 25.5% to36.1% increase from 2009.
The Company reaffirms that it expects to add 34 to 39 radiotherapy anddiagnostic imaging centers in 2010, and the range of expected total capitalexpenditures related to these new centers is approximately RMB400 million toRMB450 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 AMon August 18, 2010 U.S. Eastern Time (8 PM on August 18, 2010 Beijing/HongKong time).
A replay of the conference call may be accessed by phone at the followingnumber until August 25, 2010:
Additionally, a live and archived webcast of this conference call will beavailable at http://ir.cmsholdings.com/ .
About Concord Medical
Concord Medical operates the largest network of radiotherapy anddiagnostic imaging centers in China in terms of revenues and the total numberof centers in operation per available statistics. The Company currentlyoperates a network of more than 100 centers spanning 39 cities and 22provinces and administrative regions in China. Under long-term arrangementswith top-tier hospitals in China, the Company provides radiotherapy anddiagnostic imaging equipments and manages the daily operations of thesecenters located on its hospital partners' premises. The Company also providesongoing training to doctors and other medical personnel in its network ofcenters to ensure a high level of clinical care for patients.
Safe Harbor Statement
This press release contains forward-looking statements. These statementsconstitute "forward-looking" statements within the meaning of Section 21E ofthe Securities Exchange Act of 1934, as amended, and as defined in the U.S.Private Securities Litigation Reform Act of 1995. These forward-lookingstatements 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 lookingstatements are based upon management's current views and expectations withrespect to future events and are not a guarantee of future performance.Furthermore, these statements are, by their nature, subject to a number ofrisks and uncertainties that could cause actual performance and results todiffer materially from those discussed in the forward-looking statements as aresult of a number of factors. Such factors include: the number of newradiotherapy and diagnostic imaging centers opened; the increase in the numberof patients in existing centers; the establishment of specialty cancerhospitals; changes in the healthcare industry in China, including changes inthe healthcare policies and regulations of the PRC government; andtechnological or therapeutic changes affecting the field of cancer treatmentand diagnostic imaging. Further information regarding these and other risks isincluded in the Company's filings with the U.S. Securities and ExchangeCommission at http://www.sec.gov . The Company does not undertake anyobligation to update any forward-looking statement, except as required underapplicable law.
About Non-GAAP Financial Measures
To supplement the consolidated financial statements presented inaccordance with United States Generally Accepted Accounting Principles (GAAP),Concord Medical uses certain non-GAAP measures. The Company presents certainof its financial information that is adjusted from results based on GAAP toexclude the impact of share-based compensation expense. The Company believesexcluding share-based compensation expense from its non-GAAP financialmeasures is useful for its management and investors to assess and analyze theCompany's core operating results as such expense is not directly attributableto the underlying performance of the Company's business operations and do notimpact its cash earnings. Concord Medical also believes these non-GAAPmeasures excluding share-based compensation expense are important in helpinginvestors to understand the Company's current financial performance and futureprospects and to compare business trends among different reporting periods ona consistent basis. In addition, Concord Medical also presents the non-GAAPmeasure of Adjusted EBITDA, which is defined in this announcement as netincome plus interest, taxes, depreciation and amortization, share-basedcompensation expenses and other adjustments. Other adjustments include changein fair value of convertible notes, foreign exchange loss and other income.Furthermore, Adjusted EBITDA eliminates the impact of items that the Companydoes not consider indicative of the performance of its network of centers. TheCompany believes investors will similarly use Adjusted EBITDA as one of thekey metrics to evaluate its financial performance and to compare its currentoperating results with corresponding historical periods and with othercompanies in the healthcare services industry. The presentation of theseadditional measures should not be considered a substitute for or superior toGAAP results or as being comparable to results reported or forecasted by othercompanies. The non-GAAP measures have been reconciled to GAAP measures in theattached financial statements.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.
SOURCE Concord Medical Services Holdings Co., Ltd.