Attached files
file | filename |
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EX-32.1 - EX-32.1 - CHINDEX INTERNATIONAL INC | w82691exv32w1.htm |
EX-31.3 - EX-31.3 - CHINDEX INTERNATIONAL INC | w82691exv31w3.htm |
EX-32.2 - EX-32.2 - CHINDEX INTERNATIONAL INC | w82691exv32w2.htm |
EX-32.3 - EX-32.3 - CHINDEX INTERNATIONAL INC | w82691exv32w3.htm |
EX-31.2 - EX-31.2 - CHINDEX INTERNATIONAL INC | w82691exv31w2.htm |
EX-31.1 - EX-31.1 - CHINDEX INTERNATIONAL INC | w82691exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2011
Commission file number 0-24624
CHINDEX INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE (State or other Jurisdiction of Incorporation or Organization) |
13-3097642 (I.R.S. Employer Identification Number) |
|
4340 East West Highway, Suite 1100, Bethesda, Maryland (Address of principal executive offices) |
20814 (Zip Code) |
(301) 215-7777
(Registrants telephone number)
(Registrants telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to the filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate website, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
Large accelerated filer o | Accelerated filer þ | Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting Company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
The number of shares outstanding of each class of the registrants common equity, as of May 8,
2011, was 15,323,041 shares of Common Stock and 1,162,500 shares of Class B Common Stock.
CHINDEX INTERNATIONAL, INC.
INDEX
FORM 10-Q
2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share data)
(in thousands except share data)
(Unaudited)
March 31, 2011 | December 31, 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 42,600 | $ | 32,007 | ||||
Restricted cash |
300 | 300 | ||||||
Investments |
37,074 | 37,631 | ||||||
Accounts receivable, less allowance for doubtful accounts of $7,253
and $6,748, respectively |
11,019 | 11,601 | ||||||
Receivables from affiliates |
1,270 | 9,330 | ||||||
Inventories, net |
1,432 | 1,413 | ||||||
Deferred income taxes |
3,574 | 3,242 | ||||||
Other current assets |
2,785 | 3,856 | ||||||
Total current assets |
100,054 | 99,380 | ||||||
Restricted cash and sinking funds |
990 | 980 | ||||||
Investments |
1,329 | 2,439 | ||||||
Investment in unconsolidated affiliate |
32,107 | 31,756 | ||||||
Property and equipment, net |
38,437 | 37,099 | ||||||
Noncurrent deferred income taxes |
160 | 108 | ||||||
Other assets |
2,449 | 2,411 | ||||||
Total assets |
$ | 175,526 | $ | 174,173 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 2,710 | $ | 4,038 | ||||
Payable to affiliates |
1,181 | | ||||||
Accrued expenses |
9,343 | 8,541 | ||||||
Other current liabilities |
3,521 | 3,874 | ||||||
Income taxes payable |
1,890 | 2,147 | ||||||
Total current liabilities |
18,645 | 18,600 | ||||||
Long-term debt and convertible debentures |
23,231 | 23,070 | ||||||
Long-term deferred tax liability |
431 | 431 | ||||||
Total liabilities |
42,307 | 42,101 | ||||||
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 15,323,041 and 15,310,426 shares issued and
outstanding at March 31, 2011 and December 31, 2010,
respectively |
153 | 153 | ||||||
Class B stock 1,162,500 shares issued and outstanding at
March 31, 2011 and December 31, 2010, respectively |
12 | 12 | ||||||
Additional paid-in capital |
117,268 | 115,815 | ||||||
Accumulated other comprehensive income |
5,726 | 4,802 | ||||||
Retained earnings |
10,060 | 11,290 | ||||||
Total stockholders equity |
133,219 | 132,072 | ||||||
Total liabilities and stockholders equity |
$ | 175,526 | $ | 174,173 | ||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
3
Table of Contents
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands except share and per share data)
(Unaudited)
(Unaudited)
Three months ended March 31, | ||||||||
2011 | 2010 | |||||||
Revenue |
||||||||
Healthcare services revenue |
$ | 24,185 | $ | 21,168 | ||||
Product sales |
| 20,088 | ||||||
Total revenue |
24,185 | 41,256 | ||||||
Operating expenses |
||||||||
Healthcare services: |
||||||||
Salaries, wages and benefits |
14,755 | 12,378 | ||||||
Other operating expenses |
4,319 | 3,298 | ||||||
Supplies and purchased medical services |
2,635 | 2,120 | ||||||
Bad debt expense |
432 | 339 | ||||||
Depreciation and amortization |
1,137 | 880 | ||||||
Lease and rental expense |
1,200 | 976 | ||||||
24,478 | 19,991 | |||||||
Products: |
||||||||
Product sales costs |
| 14,553 | ||||||
Product selling and other operating expenses |
| 5,579 | ||||||
| 20,132 | |||||||
Total operating expenses |
24,478 | 40,123 | ||||||
(Loss) income from operations |
(293 | ) | 1,133 | |||||
Other income and (expenses) |
||||||||
Interest income |
142 | 137 | ||||||
Interest (expense) |
(103 | ) | (199 | ) | ||||
Equity in loss of unconsolidated affiliate |
(147 | ) | | |||||
Miscellaneous (expense) income net |
(42 | ) | 235 | |||||
(Loss) income before income taxes |
(443 | ) | 1,306 | |||||
Provision for income taxes |
(787 | ) | (791 | ) | ||||
Net (loss) income |
$ | (1,230 | ) | $ | 515 | |||
Net (loss) income per common share basic |
$ | (.08 | ) | $ | .04 | |||
Weighted average shares outstanding basic |
16,075,847 | 14,721,901 | ||||||
Net (loss) income per common share diluted |
$ | (.08 | ) | $ | .04 | |||
Weighted average shares outstanding diluted |
16,075,847 | 16,188,973 | ||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
4
Table of Contents
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(in thousands)
(Unaudited)
Three months ended March 31, | ||||||||
2011 | 2010 | |||||||
OPERATING ACTIVITIES |
||||||||
Net (loss) income |
$ | (1,230 | ) | $ | 515 | |||
Adjustments to reconcile net income to net cash provided by
operating activities: |
||||||||
Depreciation and amortization |
1,137 | 980 | ||||||
Provision for demonstration inventory |
| 137 | ||||||
Inventory write down |
(1 | ) | 83 | |||||
Provision for doubtful accounts |
432 | 495 | ||||||
Loss on disposal of property and equipment |
49 | 20 | ||||||
Equity in loss of unconsolidated affiliate |
147 | | ||||||
Deferred income taxes |
(354 | ) | 548 | |||||
Stock based compensation |
1,202 | 854 | ||||||
Foreign exchange (gain) loss |
(19 | ) | 825 | |||||
Amortization of debt issuance costs |
2 | 2 | ||||||
Amortization of debt discount |
63 | 62 | ||||||
Non-cash charge for change in fair value of warrants |
| (224 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Restricted cash |
| (340 | ) | |||||
Accounts receivable |
264 | 6,476 | ||||||
Accounts receivable from affiliates |
8,060 | | ||||||
Inventories |
(3 | ) | (1,188 | ) | ||||
Other current assets and other assets |
1,070 | 431 | ||||||
Accounts payable, accrued expenses, other current
liabilities and deferred revenue |
5,001 | (131 | ) | |||||
Accounts payable to affiliates |
1,181 | | ||||||
Income taxes payable |
(278 | ) | (721 | ) | ||||
Net cash provided by operating activities |
16,723 | 8,824 | ||||||
INVESTING ACTIVITIES |
||||||||
Purchases of short-term investments and CDs |
(20,265 | ) | | |||||
Proceeds from redemption of CDs |
21,987 | 20,800 | ||||||
Purchases of property and equipment |
(8,064 | ) | (3,243 | ) | ||||
Net cash (used in) provided by investing activities |
(6,342 | ) | 17,557 | |||||
FINANCING ACTIVITIES |
||||||||
Proceeds from debt, vendor financing and convertible debentures |
| (83 | ) | |||||
Repayment of debt, sinking fund deposits and vendor financing |
| (212 | ) | |||||
Repurchase of restricted stock for income tax withholding |
| (1 | ) | |||||
Proceeds from exercise of stock options and warrants |
114 | 90 | ||||||
Net cash provided by (used in) financing activities |
114 | (206 | ) | |||||
Effect of foreign exchange rate changes on cash and cash equivalents |
98 | 719 | ||||||
Net increase in cash and cash equivalents |
10,593 | 26,894 | ||||||
Cash and cash equivalents at beginning of period |
32,007 | 20,293 | ||||||
Cash and cash equivalents at end of period |
$ | 42,600 | $ | 47,187 | ||||
Supplemental disclosures of cash flow information: |
||||||||
Cash paid for interest |
$ | | $ | 641 | ||||
Cash paid for taxes |
$ | 1,418 | $ | 4,770 | ||||
Non-cash investing and financing activities consist of the following: |
||||||||
Property and equipment additions included in accounts payable |
$ | 5,921 | $ | 532 | ||||
Cashless exercise of warrants at fair value |
$ | | $ | 800 | ||||
Exercise of warrants at fair value |
$ | | $ | (201 | ) |
The accompanying notes are an integral part of these consolidated condensed financial statements.
5
Table of Contents
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS EQUITY
For the three months ended March 31, 2011
(in thousands except share data)
(Unaudited)
For the three months ended March 31, 2011
(in thousands except share data)
(Unaudited)
Accumulated Other | ||||||||||||||||||||||||||||||||
Common Stock | Common Stock Class B | Additional Paid In | Retained | Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Earnings | Income | Total | |||||||||||||||||||||||||
Balance at December 31, 2010 |
15,310,426 | $ | 153 | 1,162,500 | $ | 12 | $ | 115,815 | $ | 11,290 | $ | 4,802 | $ | 132,072 | ||||||||||||||||||
Net (loss) income |
| | | | | (1,230 | ) | | (1,230 | ) | ||||||||||||||||||||||
Foreign currency translation adjustment |
| | | | | | 563 | 563 | ||||||||||||||||||||||||
Share of other comprehensive income of
unconsolidated affiliate |
| | | | | | 361 | 361 | ||||||||||||||||||||||||
Comprehensive loss |
| | | | | | | (306 | ) | |||||||||||||||||||||||
Stock based compensation |
| | | | 1,339 | | | 1,339 | ||||||||||||||||||||||||
Options exercised and issuance of restricted stock |
12,615 | | | | 114 | | | 114 | ||||||||||||||||||||||||
Balance at March 31, 2011 |
15,323,041 | $ | 153 | 1,162,500 | $ | 12 | $ | 117,268 | $ | 10,060 | $ | 5,726 | $ | 133,219 | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated condensed financial statements.
6
Table of Contents
CHINDEX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Unaudited)
Note 1. BASIS OF PRESENTATION
Chindex International, Inc. (the Company), founded in 1981, is an American health care
company providing health care services in China through the operations of United Family Healthcare,
a network of private care hospitals and affiliated ambulatory clinics. United Family Healthcare
(UFH) currently operates in Beijing, Shanghai and Guangzhou.
The accompanying unaudited consolidated condensed financial statements of Chindex
International, Inc. have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the three
months ended March 31, 2011 are not necessarily indicative of the results that may be expected for
the year. For further information, refer to the consolidated financial statements and footnotes
thereto included in our Transition Report on Form 10-K for the nine months ended December 31, 2010.
Change in fiscal yearend
The Company changed its fiscal yearend from March 31 to December 31 each year, effective
December 31, 2010.
Policies and procedures
Consolidation
The consolidated condensed financial statements include the accounts of the Company, its
subsidiaries in which the Company has greater than 50 percent ownership, and variable interest
entities. All intercompany balances and transactions are eliminated in consolidation. Entities in
which the Company has less than 50 percent ownership or does not have a controlling financial
interest but is considered to have significant influence are accounted for on the equity method.
On December 31, 2010, the Companys Medical Products division was contributed to Chindex
Medical Limited (CML), a newly formed entity in which the Company has a 49% ownership interest (see
Note 4). Until December 31, 2010, the Company operated in two business segments, the Healthcare
Services division and the Medical Products division. On December 31, 2010, the Company
deconsolidated the Medical Products division upon the formation of CML, a newly formed entity
consisting of certain medical device businesses contributed by Chindex and Shanghai Fosun
Pharmaceutical (Group) Co., Ltd. (FosunPharma). The investment in CML is recorded using the
equity method of accounting, effective December 31, 2010, with Chindexs 49% interest in the
earnings of CML beginning January 1, 2011.
Due to the deconsolidation of the Medical Products division on December 31, 2010, the Company
now operates in only one reportable segment based on the way the Company manages its business.
Major decisions, including capital resource allocations, are made at the corporate level by the
Chief Operating Decision Maker team, not at the regional market or hospital level.
7
Table of Contents
Use of Estimates
The preparation of the consolidated condensed financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates, judgments, and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated condensed financial statements and the
reported amounts of revenue and expenses during the reporting period. Because of the use of
estimates inherent in the financial reporting process, actual results could differ from those
estimates. Areas in which significant judgments and estimates are used include revenue recognition,
receivable collectibility, and deferred tax valuation allowances.
Revenue Recognition
The Company earns revenue from providing healthcare services and, in the prior year, sales of
products.
Revenue related to services provided by the Healthcare Services division is net of contractual
adjustments or discounts and is recognized in the period services are provided. The Healthcare
Services division makes an estimate at the end of the month for certain inpatients who have not
completed service. This estimate reflects only the cost of care up to the end of the month.
In the Healthcare Services business, our revenue is dependent on seasonal fluctuations related
to epidemiology factors and the life styles of the expatriate community. As a result of these
factors impacting the timing of revenues, our operating results have varied and are expected to
continue to vary from period to period and year to year.
Reclassifications
Certain balances in the 2010 consolidated condensed financial statements have been
reclassified to conform to the 2011 presentation. The changes primarily relate to the Statement of
Operations. Due to the deconsolidation of the Companys previous Medical Products business, the
captions in the Statement of Operations have been revised to reflect a presentation more common for
companies in the hospital and healthcare services businesses.
Note 2. INVESTMENTS
The following table summarizes the Companys investments, including accrued interest, as of
March 31, 2011 and December 31, 2010 (in thousands):
March 31, 2011 | December 31, 2010 | |||||||
Current investments: |
||||||||
Certificates of deposit |
$ | 32,458 | $ | 34,037 | ||||
U.S. Government Sponsored Enterprises |
401 | 500 | ||||||
Corporate bonds |
4,215 | 3,094 | ||||||
Total current investments |
$ | 37,074 | $ | 37,631 | ||||
Noncurrent investments: |
||||||||
Corporate bonds |
$ | 1,329 | 2,439 | |||||
Total noncurrent investments |
$ | 1,329 | $ | 2,439 | ||||
The Companys current investments as of March 31, 2011 include $32,458,000 of
Certificates of Deposit, with fixed interest rates between 0.05% and 2.25% issued by HSBC, a large
international financial institution, and by large financial institutions in China. The Companys
investments in Certificates of Deposit are intended to be held to maturity. Other than Certificates
of Deposit, the Companys current investments also include available-for-sale securities at fair
8
Table of Contents
value, which approximates cost, of $401,000 issued by U.S. Government-sponsored enterprises and
corporate bonds of $4,215,000, which mature within one year from the date of purchase. The
Companys current investments are recorded at fair value, and the difference between fair value and
amortized cost as of March 31, 2011 was de minimis. The Companys noncurrent investments of
$1,329,000 as of March 31, 2011, consist of corporate bonds which mature in 23 to 33 months.
The Companys current investments as of December 31, 2010 include $34,037,000 of Certificates
of Deposit, with fixed interest rates between 0.05% and 2.25% issued by HSBC, a large international
financial institution, and by large financial institutions in China. The Companys investments in
Certificates of Deposit are intended to be held to maturity. Other than Certificates of Deposit,
the Companys current investments also include available-for-sale securities at fair value, which
approximates cost, of $500,000 issued by U.S. Government-sponsored enterprises and corporate bonds
of $3,094,000, which mature within one year from the date of purchase. The Companys current
investments are recorded at fair value, and the difference between fair value and amortized cost as
of December 31, 2010 was de minimis. The Companys noncurrent investments of $2,439,000 as of
December 31, 2010, consist of corporate bonds which mature in 13 to 21 months.
Note 3. INVENTORIES, NET
Inventories consist of medical supplies and pharmaceuticals in the amounts of
$1,432,000 at March 31, 2011 and $1,413,000 at December 31, 2010, respectively.
Note 4. INVESTMENT IN UNCONSOLIDATED AFFILIATE
On December 31, 2010, Chindex International, Inc. (Chindex) and Shanghai Fosun
Pharmaceutical (Group) Co., Ltd. (FosunPharma), a leading manufacturer and distributor of Western
and Chinese medicine and devices in China, completed the first closing of the formation of a joint
venture to independently operate certain combined medical device businesses, including Chindexs
Medical Products division (MPD). The formation of the joint venture represents a basis of the
strategic alliance between the two companies, which aims to capitalize on the long-term opportunity
presented by medical product sectors in China. The joint venture entity, Chindex Medical Limited
(the joint venture or CML), a Hong Kong entity, is focused on marketing, distributing, selling
and servicing medical devices in China, including in Hong Kong, as well as activities in R&D and
manufacturing of medical devices for the Chinese and export markets. CML is owned 51% by
FosunPharma and 49% by Chindex.
CML owns the Chindex-contributed businesses (principally the Medical Products division) and is
entitled to a pending and obligatory final investiture of the FosunPharma-contributed businesses.
The FosunPharma-contributed businesses have been segregated and, until such investiture, are being
operated and managed by the joint venture under an entrustment arrangement. Such investiture will
be finished once all requisite governmental and other approvals and other closing conditions have
been satisfied.
FosunPharma has a controlling financial interest in CML. Accordingly, Chindex deconsolidated
its Medical Products Division from its consolidated balance sheet, effective December 31, 2010.
Beginning with the commencement of CML operations on January 1, 2011, Chindex follows the equity
method of accounting to recognize its 49% interest in the net assets and the net earnings of CML on
an on-going basis.
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Summarized financial information for the unconsolidated CML affiliate for which the equity
method of accounting is used is presented below on a 100 percent basis. The assets and liabilities
of CML as of March 31, 2011 including provisional fair value adjustments are as follows (in
thousands):
March 31, 2011 | December 31, 2010 | |||||||
Current assets |
$ | 84,481 | $ | 94,083 | ||||
Noncurrent assets |
15,980 | 17,543 | ||||||
Total assets |
$ | 100,461 | $ | 111,626 | ||||
Current liabilities |
$ | 42,024 | $ | 53,551 | ||||
Noncurrent liabilities |
1,062 | 1,064 | ||||||
Total liabilities |
43,086 | 54,615 | ||||||
Stockholders
equity |
57,375 | 57,011 | ||||||
Total
liabilities and stockholders equity |
$ | 100,461 | $ | 111,626 | ||||
Three months ended | ||||
March 31, 2011 | ||||
Revenue |
$ | 26,087 | ||
Income before income taxes |
244 | |||
Net loss |
(37 | ) |
CML is a 51%-owned subsidiary of FosunPharma. The assets, liabilities and stockholders
equity in the summarized financial data table presented above for CML have been prepared on a
stand-alone basis, with the assets and liabilities of the entities contributed to CML by FosunPharma reported on a historical cost basis, while the assets and liabilities acquired from Chindex
have been recorded on a fair value basis. In reporting its 49% interest in the net assets and net
earnings of CML using the equity method of accounting, Chindex includes its 49% interest in the
stand-alone financial statements of CML, and also records adjustments to reflect the amortization
of basis differences attributable to the fair values in excess of net book values of identified
tangible and intangible assets contributed by FosunPharma to CML at its formation date. In
addition, certain employees of CML participate in Chindex stock-based compensation programs. The
expense for these stock options or restricted stock is recognized by CML as the services are
provided. The total stock-based compensation expense recognized by CML in the three months ended
March 31, 2011 was $279,000.
For the three months ended March 31, 2011, Chindex recognized a loss of $147,000 for its 49%
equity in the operating results of CML, which consisted of a loss of $18,000 for the stand-alone
loss of CML (after recognition of stock-based compensation expense) and $129,000 for the
amortization of basis differences attributable to acquired intangibles.
As of March 31, 2011, Chindex had a receivable from CML of $1,270,000 and a payable to CML of
$1,181,000.
As of December 31, 2010, Chindex had a net receivable from CML of $9,330,000. This amount was
substantially settled by cash payment in January 2011.
10
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Note 5. PROPERTY AND EQUIPMENT, NET
(in thousands)
March 31, 2011 | December 31, 2010 | |||||||
Property and equipment, net consists of the following: |
||||||||
Furniture and equipment |
$ | 17,867 | $ | 17,592 | ||||
Vehicles |
231 | 170 | ||||||
Construction in progress |
14,090 | 12,224 | ||||||
Leasehold improvements |
18,183 | 17,988 | ||||||
50,371 | 47,974 | |||||||
Less: accumulated depreciation and amortization |
(11,934 | ) | (10,875 | ) | ||||
$ | 38,437 | $ | 37,099 | |||||
Construction in progress relates to the development of the United Family Healthcare
network of private hospitals and health clinics in China, including facilities and systems
development. Construction costs incurred during the three months ended March 31, 2011 primarily
related to the expansion of the Companys existing Beijing hospital campus including facilities
which will provide neurosurgical and orthopedic surgery services and initial construction of the
women and childrens hospital in Tianjin. Capitalized interest on construction in progress was
$122,000 and $25,000 during the three months ended March 31, 2011 and 2010, respectively.
Depreciation and amortization expense for property and equipment for the three months ended March
31, 2011 was $1,137,000 and was $980,000 for the three months ended March 31, 2010, which included
$100,000 related to the Medical Product business.
Note 6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
(in thousands):
March 31, 2011 | December 31, 2010 | |||||||
Accrued expenses: |
||||||||
Accrued expenses- healthcare services |
$ | 3,573 | $ | 3,331 | ||||
Accrued compensation |
4,561 | 3,531 | ||||||
Accrued expenses- other |
1,209 | 1,679 | ||||||
$ | 9,343 | $ | 8,541 | |||||
Other current liabilities: |
||||||||
Accrued other taxes payable- non-income |
$ | 576 | $ | 698 | ||||
Customer deposits |
2,386 | 2,609 | ||||||
Other current liabilities |
559 | 567 | ||||||
$ | 3,521 | $ | 3,874 | |||||
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Note 7. DEBT
The Companys short-term and long-term debt balances are: (in thousands)
March 31, 2011 | December 31, 2010 | |||||||||||||||
Short term | Long term | Short term | Long term | |||||||||||||
Long term loan |
$ | | $ | 9,896 | $ | | $ | 9,797 | ||||||||
Convertible notes, net of debt discount |
| 13,335 | | 13,273 | ||||||||||||
$ | | $ | 23,231 | $ | | $ | 23,070 | |||||||||
Long term loan- IFC 2005
In October 2005, Beijing United Family Hospital (BJU) and Shanghai United Family Hospital
(SHU), majority-owned subsidiaries of the Company, obtained long-term debt financing under a
program with the International Finance Corporation (IFC) (a division of the World Bank) for
64,880,000 Chinese Renminbi (approximately $8,000,000). The term of the loan is 10 years at an
initial interest rate of 6.73% with the borrowers required to make annual payments into a sinking
fund beginning with the first payment in September 2010. Deposits into the sinking fund will
accumulate until a lump sum payment is made at maturity of the debt in October 2015. The interest
rate will be reduced to 4.23% for any amount of the outstanding loan on deposit in the sinking
fund. The loan program also includes certain other covenants which require the borrowers to achieve
and maintain specified liquidity and coverage ratios in order to conduct certain business
transactions such as pay intercompany management fees or incur additional indebtedness. As of March
31, 2011, the Company was in compliance. Chindex International, Inc. guaranteed repayment of this
loan. In terms of security, IFC has, among other things, a lien over the equipment owned by the
borrowers and over their bank accounts. In addition, IFC has a lien over Chindex bank accounts not
already pledged, but not over other Chindex assets. As of March 31, 2011, the outstanding balance
of this debt was 64,880,000 Chinese Renminbi (current translated value of $9,896,000, see Foreign
Currency Exchange and Impact of Inflation) classified as long-term. As the annual deposits into
the sinking fund do not extinguish a portion of the long-term debt liability, the entire loan is
expected to be classified as long-term until a financial reporting date that is less than one year
from final maturity. The balance sheet classification of the sinking fund assets is similarly
noncurrent, until a date that is less than one year from the lump sum payment. As of March 31,
2011, sinking fund assets of 6,488,000 Chinese Renminbi (current translated value of $990,000) were
included in Restricted Cash and Sinking Funds on the Companys consolidated condensed balance
sheets.
Convertible Notes- JPM
On November 7, 2007, the Company entered into a securities purchase agreement with Magenta
Magic Limited, a wholly owned subsidiary of J.P. Morgan Chase & Co organized under the laws of the
British Virgin Islands (JPM), pursuant to which the Company agreed to issue and sell to JPM: (i)
538,793 shares (the Tranche A Shares) of the Companys common stock; (ii) the Companys Tranche B
Convertible Notes due 2017 in the aggregate principal amount of $25 million (the Tranche B Notes)
and (iii) the Companys Tranche C Convertible Notes due 2017 in the aggregate principal amount of
$15 million (the Tranche C Notes and, with the Tranche B Notes, the Notes) at a price of $18.56
per Tranche A Share (for an aggregate price of $10 million for the Tranche A Shares) and at face
amount for the Notes for a total purchase price of $50 million in gross proceeds (the JPM
Financing).
The Tranche B Notes had a ten-year maturity, bore no interest of any kind and provided for
conversion into shares of the Companys common stock at an initial conversion price of $18.56 per
share at any time and automatic conversion upon the Company entering into one or more newly
committed financing facilities (the Facilities) making available to the Company at least $50
million, pursuant to which Facilities all conditions precedent (with certain exceptions) for
initial disbursement had been satisfied, subject to compliance with certain JPM Financing
provisions. The Facilities as required for conversion of the Tranche B Note had to have a minimum
final maturity of 9.25 years from the date of initial drawdown, a minimum moratorium on principal
repayment of three years from such date, principal payments in equal or stepped up amounts no more
frequently than twice in each 12-month period, no sinking fund obligations, other covenants and
conditions, and also limit the purchase price of any equity issued under the Facilities to
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at least equal to the initial conversion price of the Notes or higher amounts depending on the date
of issuance thereof. In January 2008, the Tranche B Notes were converted into 1,346,984 shares of
our common stock.
The Tranche C Notes have a ten-year maturity, bear no interest of any kind and are convertible
at the same conversion price as the Tranche B Notes at any time and will be automatically converted
upon the completion of two proposed new and/or expanded hospitals in China in Beijing and Guangzhou
(the JV Hospitals), subject to compliance with certain JPM Financing provisions. Notwithstanding
the foregoing, the Notes would be automatically converted after the earlier of 12 months having
elapsed following commencement of operations at either of the JV Hospitals or either of the JV
Hospitals achieving break-even earnings before interest, taxes, depreciation and amortization for
any 12-month period ending on the last day of a fiscal quarter, subject to compliance with certain
JPM Financing provisions.
The JPM Financing was completed in two closings. At the first closing, which took place on
November 13, 2007, the Company issued (i) the Tranche A Shares, (ii) the Tranche B Notes and (iii)
an initial portion of the Tranche C Notes in the aggregate principal amount of $6 million, with the
closing of the balance of the Tranche C Notes in the aggregate principal amount of $9 million
subject to, among other things, the approval of the Companys stockholders. At the second closing,
which took place on January 11, 2008, following such stockholder approval, the Company issued such
balance of the Tranche C Notes.
In connection with the issuance of the Notes, the Company incurred issuance costs of $314,000,
which primarily consisted of legal and other professional fees. Of these costs, $61,000 is
attributable to the Tranche A shares, $159,000 is attributable to Tranche B Notes which converted
in January 2008 and the remaining of $94,000 is attributable to the Tranche C Notes and has been
capitalized to be amortized over the life of the Notes. As of March 31, 2011 and December 31, 2010,
the unamortized financing cost was $61,000 and $64,000, respectively, and is included in Other
Assets in the consolidated condensed balance sheets.
The Company accounts for convertible debt in accordance with ASC 470-20. Accordingly, the
Company recorded, as a discount to convertible debt, the intrinsic value of the conversion option
based upon the differences between the fair value of the underlying common stock at the commitment
date and the effective conversion price embedded in the note. Debt discounts under these
arrangements are usually amortized over the term of the related debt to their stated date of
redemption. So, in respect to the Notes, this debt discount would be amortized through interest
expense over the 10 year term of the Notes unless earlier converted or repaid. In fiscal 2008,
under this method, the Company recorded (i) a discount on the Tranche B Notes of $2,793,000 against
the entire principal amount of the Notes; and (ii) a discount on the Tranche C Notes of $2,474,000
against the entire principal amount of the Notes.
The debt discount pursuant to the Notes as of March 31, 2011 and December 31, 2010 and was
$1,664,000 and, $1,727,000, respectively. Amortization of the discount was approximately $63,000
for the three months ended March 31, 2011 and March 31, 2010, respectively.
Loan Facility- IFC 2007
The Company had entered into a loan agreement with IFC (the IFC Facility), designed to
provide for loans (the IFC Loans) in the aggregate amount of $25 million to expand the Companys
United Family Hospitals and Clinics network of private hospitals and clinics in China, subject to
the satisfaction of certain disbursement conditions, including the establishment of two new Joint
Venture entities in Beijing and Guangzhou (the Joint Ventures) qualified to undertake the
construction, equipping and operation of the proposed healthcare facilities, minimum Company
ownership and control over the Joint Ventures, the availability to IFC of certain information
regarding the Joint Ventures and other preconditions. The IFC Loans were designed to fund a portion
of the Companys financing for the expansion program. There can be no assurances that the
preconditions to disbursements under the IFC Facility will be satisfied or that, in any event,
disbursements under the IFC Facility will be achieved. As of March 31, 2011, the IFC Facility was
not available.
The IFC Loans would be made directly to the Joint Ventures. We have experienced delays in the
development timeline due to certain changes in project scope for the proposed healthcare facilities
and the fluctuations and uncertainties in the real estate markets in China resulting from the
global economic downturn and as a result the process
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to approve both of the Joint Ventures has taken longer than originally expected. However, in
July 2010, we received formal approval of the new Joint Venture for the Beijing expansion project
from the Chinese authorities. Accordingly, we are currently in discussion with IFC regarding the
remaining preconditions to the first disbursement under the IFC Facility. We previously entered
into an amendment to the IFC Loans in July 2010 extending the initial draw down date to October 1,
2010 or such later date as the parties agree. As of the date of this report, the parties have not
established a specific date by which time the first disbursement would be required. Draws under the
IFC facility remain subject to lender agreement as to project scope, collateral and other
provisions. As initially negotiated, the term of the IFC Loans would be 9.25 years and would bear
interest equal to a fixed base rate determined at the time of each disbursement of LIBOR plus 2.75%
per annum. The interest rate may be reduced to LIBOR plus 2.0% upon the satisfaction of certain
conditions. The loans would include certain other covenants that require the borrowers to achieve
and maintain specified liquidity and coverage ratios in order to conduct certain business
transactions such as pay intercompany management fees or incur additional indebtedness. Mutual
agreement or amendment of these terms will be required in addition to the formation and approval of
the second of the new Joint Ventures and finalization of conditions precedent, as to which there
can be no assurances.
The obligations of each borrowing Joint Venture under the IFC Facility would be guaranteed by
the Company pursuant to a guarantee agreement with IFC, would be secured by a pledge by the Company
of its equity interests in the borrowing Joint Ventures pursuant to a share pledge agreement by the
Company with IFC and would be secured pursuant to a mortgage agreement between each borrowing Joint
Venture and IFC.
The IFC Facility contains customary financial covenants, including maintenance of a maximum
ratio of liabilities to tangible net worth and a minimum debt service coverage ratio, and covenants
that, among other things, place limits on the Companys ability to incur debt, create liens, make
investments and acquisitions, sell assets, pay dividends, prepay subordinated debt, merge with
other entities, engage in transactions with affiliates, and make capital expenditures. The IFC
Facility also contains customary events of default. As of March 31, 2011, the Company was in
compliance with the loan covenants as amended.
Loan Facility- DEG 2008
Chindex China Healthcare Finance, LLC (China Healthcare), a wholly-owned subsidiary of the
Company, had entered into a Loan Agreement with DEG-Deutsche Investitions und
Entwicklungsgesellschaft (DEG) of Cologne, Germany, a member of the KfW banking group, designed to
provide for loans (the DEG Loans) in the aggregate amount of $20 million to expand the Companys
United Family Hospitals and Clinics network of private hospitals and clinics in Beijing and
Guangzhou, China (the DEG Facility), subject to substantially the same disbursement conditions as
contained in the IFC Facility. The DEG Loans were designed to fund a portion of the Companys
financing for the expansion program. There can be no assurance that the preconditions to
disbursements under the DEG Facility will be satisfied or that, in any event, disbursements under
the DEG Facility will be achieved. As of March 31, 2011, the DEG Facility was not available.
The DEG Loans would be made directly to the two Joint Ventures. We have experienced delays in
the development timeline due to certain changes in project scope for the proposed healthcare
facilities and the fluctuations and uncertainties in the real estate markets in China resulting
from the global economic downturn and as a result the process to approve both of the Joint Venture
entities has taken longer than originally expected. However, in July 2010, we received formal
approval of the new Joint Venture for the Beijing expansion project from the Chinese authorities.
Accordingly, we are currently in discussion with DEG regarding the remaining preconditions to the
first disbursement under the DEG Facility. We previously entered into an amendment to the DEG Loans
in July 2010 extending the initial draw down date to October 1, 2010 or such later date as the
parties agree. As of the date of this report, the parties have not established a specific date by
which time the first disbursement would be required to be made. Draws under the DEG Facility remain
subject to lender agreement as to project scope, collateral and other provisions. As initially
negotiated, the DEG Loans are substantially identical to the IFC Loans, having a 9.25-year term and
an initial interest rate set at LIBOR plus 2.75%. Mutual agreement on or amendment of these terms
will be required in addition to the formation and approval of the second of the new Joint Ventures
and finalization of conditions precedent, as to which there can be no assurances.
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The obligations under the DEG Facility would be guaranteed by the Company and would be senior
and secured, ranking pari passu in seniority with the IFC Facility and sharing pro rata with the
IFC in the security interest granted over the Companys equity interests in the Joint Ventures, the
security interests granted over the assets of the Joint Ventures and any proceeds from the
enforcement of such security interests.
The Companys guarantee of the DEG Facility contains customary financial covenants, including
maintenance of a maximum ratio of liabilities to tangible net worth and a minimum debt service
coverage ratio, and covenants that, among other things, place limits on the Companys ability to
incur debt, create liens, make investments and acquisitions, sell assets, pay dividends, prepay
subordinated debt, merge with other entities, engage in transactions with affiliates, and make
capital expenditures. The DEG Facility contains customary events of default. As of March 31, 2011,
the Company was in compliance with the loan covenants as amended.
In connection with the issuance of the IFC and DEG Facilities, the Company incurred issuance
costs of $1,019,000, which primarily consisted of legal and other professional fees. These issuance
costs have been capitalized and will be amortized over the life of the debt. As of March 31, 2011
and December 31, 2010, the balance of the unamortized financing costs was $1,019,000 and is
included in other assets in the consolidated condensed balance sheets.
Debt Payments Schedule and Restricted Cash
The following table sets forth the Companys debt obligations and sinking fund requirements as
of March 31, 2011:
(In thousands)
Total | 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | ||||||||||||||||||||||
Long term loan less |
||||||||||||||||||||||||||||
sinking fund deposits |
$ | 8,906 | $ | 990 | $ | 1,979 | $ | 1,979 | $ | 1,979 | $ | 1,979 | $ | | ||||||||||||||
Convertible notes |
15,000 | | | | | | 15,000 | |||||||||||||||||||||
Total |
$ | 23,906 | $ | 990 | $ | 1,979 | $ | 1,979 | $ | 1,979 | $ | 1,979 | $ | 15,000 | ||||||||||||||
Restricted cash of $1,290,000 as of March 31, 2011, consists of $990,000 for the sinking
fund deposits related to the IFC loan and $300,000 for a performance bond. Restricted cash of
$1,280,000 as of December 31, 2010, consists of $980,000 for the sinking fund deposits related to
the IFC loan and $300,000 for a performance bond.
Note 8. TAXES
We recorded a $787,000 provision for taxes in the three months ended March 31, 2011 as
compared to a provision for taxes of $791,000 for the three months ended March 31, 2010. The
effective tax rate was calculated in accordance with ASC 740-270. Our tax expense includes the
effect of losses in entities for which we cannot recognize a benefit in accordance with the
provisions of ASC 270, Interim Reporting and ASC 740-270 and the effect of valuation allowance
for deferred tax assets.
We recognize interest and penalties related to uncertain tax positions in income tax
expense. As of March 31, 2011 and December 31, 2010, we had no accrued interest or penalties
related to uncertain tax positions.
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Note 9. EARNINGS PER SHARE
The Company follows ASC 260, Earnings Per Share, whereby basic earnings per share excludes
any dilutive effects of options, restricted stock, warrants and convertible securities and diluted
earnings per share includes such effects. The Company does not include the effects of stock
options, restricted stock, warrants and convertible securities for periods when such an effect
would be antidilutive.
The following is a reconciliation of the numerators and denominators of the basic and diluted
Earnings per Share (EPS) computations for net income (loss) and other related disclosures:
Three months ended March 31, | ||||||||
2011 | 2010 | |||||||
Basic net (loss) income per share computation: |
||||||||
Numerator: |
||||||||
Net (loss) income |
$ | (1,230 | ) | $ | 515 | |||
Denominator: |
||||||||
Weighted average shares outstanding- basic |
16,075,847 | 14,721,901 | ||||||
Net (loss) income per common share basic: |
$ | (.08 | ) | $ | .04 | |||
Diluted net income per share computation: |
||||||||
Numerator: |
||||||||
Net (loss) income |
$ | (1,230 | ) | $ | 515 | |||
Interest expense for convertible notes |
63 | 62 | ||||||
Numerator for diluted earnings per share |
$ | (1,167 | ) | $ | 577 | |||
Denominator: |
||||||||
Weighted average shares outstanding- basic |
16,075,847 | 14,721,901 | ||||||
Effect of dilutive securities: |
||||||||
Shares issuable upon exercise of dilutive outstanding |
||||||||
stock options, conversion of convertible debentures, |
||||||||
vesting of restricted stock and exercise of warrants: |
| 1,467,072 | ||||||
Weighted average shares outstanding-diluted |
16,075,847 | 16,188,973 | ||||||
Net (loss) income per common share diluted: |
$ | (.08 | ) | $ | .04 | |||
For the three months ended March 31, 2011 and 2010, there were 1,384,304 and 673,591
shares, respectively, which were not included in the calculation of diluted net income (loss) per
share as the effect would have been antidilutive.
Note 10. STOCKHOLDERS EQUITY
Stock-Based Compensation
The
Company incurred stock based compensation expense of $1,202,000 for the three months ended
March 31, 2011, consisting of $1,060,000 for Chindex employees and outside directors and $142,000
for personnel providing services to CML.
Employees
Compensation costs related to equity compensation for employees, including stock options and
restricted stock, for the three months ended March 31, 2011 were $1,060,000 and for the three
months ended March 31, 2010 were $854,000. No amounts relating to the share-based payments have
been capitalized in either the recent or prior periods.
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The Company generally grants stock options that vest over a three or four year period to
senior, long-term employees. Option awards are granted with an exercise price equal to the market
price of the Companys stock on the date of grant. Stock options have up to 10-year contractual
terms. The Company recognizes expense ratably over the vesting period of the stock options or
restricted stock, net of estimated forfeitures. The Company will record additional expense if the
actual forfeitures are lower than estimated and will record a recovery of prior expense if the
actual forfeitures are higher than estimated.
The Company calculates grant-date fair values using the Black-Scholes option pricing model. To
calculate fair market value, this model utilizes certain information, such as the interest rate on
a risk-free security maturing generally at the same time as the expected life of the option being
valued and the exercise price of the option being valued. It also requires certain assumptions,
such as the expected amount of time the option will be outstanding until it is exercised or it
expires and the expected volatility of the Companys common stock over the expected life of the
option.
There were no options or restricted stock granted during the three months ended March 31, 2011
and 2010.
The following table summarizes the stock option activity during the three months ended March
31, 2011:
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number of | Exercise | Contractual | Intrinsic Value (in | |||||||||||||
Shares | Price | Term (Years) | thousands)* | |||||||||||||
Options outstanding at December 31, 2010 |
1,256,889 | $ | 10.03 | |||||||||||||
Granted |
| | ||||||||||||||
Exercised |
(13,175 | ) | 8.66 | |||||||||||||
Canceled |
| | ||||||||||||||
Expired |
(1,875 | ) | 13.44 | |||||||||||||
Options outstanding at March 31, 2011 |
1,241,839 | $ | 10.04 | 6.10 | $ | 7,736 | ||||||||||
Options exercisable at March 31, 2011 |
896,458 | $ | 8.80 | 5.45 | $ | 6,676 | ||||||||||
* | The aggregate intrinsic value on this table was calculated based on the positive difference between the closing market price of the Companys common stock on March 31, 2011 ($16.05) and the exercise price of the underlying options. |
During the three months ended March 31, 2011 and 2010, the total intrinsic value of stock
options exercised was $112,000 and $21,000 respectively, and the actual cash received upon exercise
of stock options was $114,000 and $90,000 respectively. The unamortized fair value of the stock
options as of March 31, 2011 was $1,488,000, the majority of which is expected to be expensed over
the weighted-average period of 0.9 years.
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The following table summarizes activity relating to restricted stock for the three months
ended March 31, 2011:
Aggregate Intrinsic | ||||||||
Number of shares | Value of Restricted | |||||||
underlying | Stock (in | |||||||
restricted stock | thousands) * | |||||||
Outstanding at December 31, 2010 |
412,774 | |||||||
Granted |
| |||||||
Vested |
(56,000 | ) | ||||||
Forfeited |
(560 | ) | ||||||
Outstanding at March 31, 2011 |
356,214 | $ | 5,717 | |||||
Expected to vest |
340,552 | $ | 5,466 | |||||
* | The aggregate intrinsic value on this table was calculated based on the closing market price of the Companys common stock on March 31, 2011 ($16.05). |
The weighted average remaining contractual term of the restricted stock, calculated based on
the service-based term of each grant, is approximately two years. As of March 31, 2011, the
unamortized fair value of the restricted stock was $3,760,000. This unamortized fair value is
expected to be expensed over the weighted-average period of 2.9 years. Restricted stock is valued
at the stock price on the date of grant.
Nonemployees
Compensation costs related to equity compensation for nonemployees (consisting of employees of
CML), including stock options and restricted stock, for the three months ended March 31, 2011 was
$142,000. There is no comparable expense in the three months ended March 31, 2010 as CML had not
been formed at that time.
Note 11. STOCK PURCHASE AGREEMENT FOSUNPHARMA
On June 14, 2010, the Company entered into a stock purchase agreement (the Stock Purchase
Agreement) with Fosun Industrial Co., Limited (the Investor) and Shanghai Fosun Pharmaceutical
(Group) Co., Ltd (the Warrantor). Pursuant to the Stock Purchase Agreement, the Company has
agreed to issue and sell to Investor up to 1,990,447 shares of the Companys common stock
(representing approximately 10% of all outstanding common stock after such sale, based on the
number of outstanding shares as of the date of the Stock Purchase Agreement) at a purchase price of
$15 per share, for an aggregate purchase price of $30 million, the net proceeds of which are
expected to be used, among other things, to continue expansion of the Companys United Family
Healthcare network.
The sale of the shares of common stock to Investor would be completed in two closings, each of
which would relate to approximately one-half of the shares to be purchased and be subject to
certain customary closing conditions, including that no material adverse change shall have occurred
with respect to the Company. In addition, the second closing is subject to the consummation of a
joint venture (the Joint Venture) between the parties to be comprised of the Companys Medical
Products division and certain of Investors medical device businesses in China. The initial closing
occurred on August 27, 2010, with the Investor purchasing 933,022 shares of Chindex common stock at
$15 per share, resulting in proceeds to Chindex, net of transaction costs of $13,803,000. The
occurrence of the second closing will depend on the receipt of all requisite governmental and other
approvals.
At the initial closing under the Stock Purchase Agreement, the Company, Investor and Warrantor
entered into a stockholder agreement (the Stockholder Agreement). Under the Stockholder
Agreement, until the first to occur of (i) Investor holds 5% or less of the outstanding shares of
common stock, (ii) there shall have been a change of control of the Company as defined in the
Stockholder Agreement, and (iii) the seventh anniversary of the initial closing, Investor has
agreed to vote its shares in accordance with the recommendation of the Companys Board of Directors
on any matters submitted to a vote of the stockholders of the Company relating to the election of
directors and compensation matters
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and with respect to certain proxy or consent solicitations. The Stockholder Agreement also contains
standstill restrictions on Investor generally prohibiting the purchase of additional securities of
the Company. The standstill restrictions terminate on the same basis as does the voting agreement
above, except that the 5% standard would increase to 10% upon the second closing. In addition, the
Stockholder Agreement contains an Investor lock-up restricting sales by Investor of its shares of
the Companys common stock for a period of five years following the date of the Stockholder
Agreement, subject to certain exceptions.
Upon the second closing under the Stock Purchase Agreement, Investor will have the right to,
among other things, nominate two representatives for election to the Companys Board of Directors,
which will be increased to nine members, and pledge its shares, subject to certain conditions. In
order to induce Investor to enter into the proposed transaction and without any consideration
therefor, each of the Companys chief executive, operating and financial officers, in their
capacities as stockholders of the Company, has agreed to certain limitations on his or her right to
dispose of shares of the Companys common stock and to vote for
the Investors board nominees.
The Company evaluated whether this contingent stock purchase agreement should be accounted for
as a derivative instrument or whether it qualified for a scope exception under ASC 815-10. The
Company concluded that the contract qualified for the scope exception because the contract was
indexed to the Companys own stock and was classified in stockholders equity.
Note 12. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space, warehouse space, and space for hospital and clinic operations
under operating leases. Future minimum payments under these noncancelable operating leases consist
of the following (in thousands):
Nine months ending December 31, |
||||
2011 |
$ | 2,696 | ||
Year ending December 31, |
||||
2012 |
3,204 | |||
2013 |
2,732 | |||
2014 |
2,466 | |||
2015 |
2,422 | |||
Thereafter |
16,620 | |||
Net minimum rental commitments |
$ | 30,140 | ||
The above leases require the Company to pay certain pass through operating expenses and
rental increases based on inflation.
Rental expense was approximately $1,200,000 and $976,000 for the three months ended March 31,
2011 and 2010, respectively. The prior year amount of $976,000 excludes rental expense for the
Medical Products business which is included in product selling and other operating expenses.
Note 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
On April 1, 2008, the Company adopted ASC 820, which defines fair value, establishes a
framework and gives guidance regarding the methods used for measuring fair value, and expands
disclosures about fair value measurements. It clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
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transfer a liability in an orderly transaction between market participants. As such, fair value is
a market-based measurement that should be determined based on assumptions that market participants
would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820
establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value
as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs
other than the quoted prices in active markets that are observable either directly or indirectly;
and (Level 3) unobservable inputs in which there is little or no market data, which require us to
develop our own assumptions. This hierarchy requires us to use observable market data, when
available, and to minimize the use of unobservable inputs when determining fair value.
The following table presents the balances of investment securities measured at fair value on a
recurring basis by level (in thousands):
As of March 31, 2011:
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets |
||||||||||||||||
U.S. Government Sponsored Enterprises |
$ | 401 | $ | | $ | 401 | $ | | ||||||||
Corporate Bonds |
5,544 | | 5,544 | | ||||||||||||
Total |
$ | 5,945 | $ | | $ | 5,945 | $ | | ||||||||
As of March 31, 2010:
Quoted | ||||||||||||||||
Prices in | ||||||||||||||||
Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical | Observable | Unobservable | ||||||||||||||
Assets | Inputs | Inputs | ||||||||||||||
Description | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets |
||||||||||||||||
U.S. Government Sponsored Enterprises |
$ | 500 | $ | | $ | 500 | $ | | ||||||||
Corporate Bonds |
5,533 | | 5,533 | | ||||||||||||
Total |
$ | 6,033 | $ | | $ | 6,033 | $ | | ||||||||
The carrying amounts reported in the consolidated balance sheets for cash and cash
equivalents, accounts receivable and accounts payable approximate fair value because of the
short-term maturity of these instruments.
The fair value of debt under ASC 820 is not the settlement amount of the debt, but is based on
an estimate of what an entity might pay to transfer the obligation to another entity with a similar
credit standing. Observable inputs for the Companys debt such as quoted prices in active markets
are not available, as the Companys long-term debt is not publicly-traded. Accordingly, the Company
has estimated the fair value amounts using available market information and commonly accepted
valuation methodologies. However, it requires considerable judgment in interpreting market data to
develop estimates of fair value. Accordingly, the fair value estimate presented is not necessarily
indicative of the amount that the Company or holders of the debt instruments could realize in a
current market exchange. The use of different
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assumptions and/or estimation methodologies may have a material effect on the estimated fair
values.
The fair value of the Companys convertible debt was calculated based on an estimate of the
present value of the debt payments combined with an estimate of the value of the conversion option,
using the Black-Scholes option pricing model. For the Companys other long-term debt, the fair
value was calculated based on an estimate of the present value of the debt payments. As of March
31, 2011, the carrying value of the Companys convertible debt, net of debt discount, and the
long-term debt outstanding for the IFC 2005 RMB loan was $23.2 million, and the estimated fair
value was $29.6 million. The carrying amounts of the remaining debt instruments approximate fair
value, as the instruments are subject to variable rates of interest or have short maturities.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements contained in this quarterly report on Form 10-Q 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 and in other documents filed by the Company with the
Securities and Exchange Commission from time to time, including, without limitation, the Companys
Transition Report on Form 10-K for the nine months ended December 31, 2010. 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 the Company believes that the
expectations reflected in the forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance or achievements. The Company has no
obligation to update these forward-looking statements.
Critical Accounting Policies
The preparation of the consolidated financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates, judgments, and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Because of the use of estimates inherent in the
financial reporting process, actual results could differ from those estimates. Areas in which
significant judgments and estimates are used include revenue recognition, receivable
collectability, and deferred tax valuation allowances.
RESULTS OF OPERATIONS
Quarter ended March 31, 2011 compared to quarter ended March 31, 2010
Overview of Consolidated Results
Chindex International, Inc. operates in several healthcare markets in China, including
Hong Kong. Until December 31, 2010, the Company operated in two business segments, the Healthcare
Services division and the Medical Products division. On December 31, 2010, the Company
deconsolidated the Medical Products division upon the formation of Chindex Medical Limited (CML), a
newly formed entity consisting of certain medical device businesses contributed by Chindex and
Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (FosunPharma). The investment in CML is recorded
using the equity method of accounting, effective December 31, 2010, with Chindexs 49% interest in
the equity in the earnings of CML beginning January 1, 2011.
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This Company operates the United Family Healthcare network of private hospitals and clinics.
United Family Healthcare currently owns and operates hospitals and affiliated clinic facilities in
the Beijing, Shanghai and Guangzhou
markets. We also operate a managed clinic in the city of Wuxi, west of Shanghai. We have
undertaken a number of market expansion projects in our current markets. In Beijing, we expect to
significantly increase service offerings and more than double our available beds progressively in
2011 through expansion at our existing hospital campus as well as from the opening of two
additional affiliated clinics during 2010. In Tianjin, a city just to the southeast of Beijing,
United Family Healthcare has begun the development of a maternity hospital facility of
approximately 25 beds which is also expected to open in 2011. In Shanghai, expansion projects are
expected to include increased services at the current hospital campus and the geographic expansion
into the Pudong district with an affiliated clinic established through a strategic joint venture
management initiative during 2010. In Guangzhou, we will increase service offerings at our current
clinic facilities in 2011 and continue our development plans to build a main hospital facility
expected to open in 2013. The Chinese Governments healthcare reform program encourages private
investment, such as Chindexs United Family Healthcare, as the primary source for development of
specialty and premium healthcare services within the Chinese healthcare system.
In connection with the expansion plans, in our operating markets of Beijing, Shanghai and
Guangzhou outlined above, over the next twelve months we have planned capital expenditures of up to
$64 million for construction, equipment and information systems. (see Liquidity and Capital
Resources). During the period ended March 31, 2011, the development, pre-opening and start up
expenses, including post-opening expenses, for these projects were $798,000 compared to $413,000 in
the prior period, reflecting primarily expenses incurred in the Beijing and Tianjin projects.
Our discussion and analysis below relates to the revenue and expenses of our healthcare
services business for the three months ended March 31, 2011 compared to the comparable period in
the prior year.
Due to the change in our business organization, the operating results for the healthcare
services business in 2011 are not completely comparable to 2010. In the prior year, the Company
operated in two reportable segments, and corporate overhead was fully allocated to the two
segments. In 2011, the Company operates in only one business and, since corporate overhead costs
are not allocated over two businesses, the healthcare services business results in 2011 include a
greater proportion of corporate overhead than in prior years.
Net
Revenue
Three months ended March 31, | ||||||||||||
2011 | 2010 | Change | ||||||||||
Healthcare services net revenue |
$ | 24,185 | $ | 21,168 | 14 | % | ||||||
Our healthcare services revenue for the three months ended March 31, 2011 was
$24,185,000, a 14% increase from the three months ended March 31, 2010 revenue of $21,168,000. The
increase in net revenue is attributable to growth in both inpatient and outpatient services.
The table below identifies the relative contribution of inpatient and outpatient services to
net revenue.
Three months ended March 31, | ||||||||
2011 | 2010 | |||||||
Inpatient/Outpatient revenue percentages |
||||||||
Inpatient services as percent of net revenue |
38 | % | 40 | % | ||||
Outpatient services as percent of net revenue |
62 | % | 60 | % | ||||
100 | % | 100 | % | |||||
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The table below identifies the primary service lines contributing to net revenue.
Three months ended March 31, | ||||||||
2011 | 2010 | |||||||
Net revenue by service line: |
||||||||
Surgical services |
17.8 | % | 17.7 | % | ||||
OB/GYN |
17.8 | % | 19.7 | % | ||||
Pediatrics |
7.6 | % | 8.8 | % | ||||
Ancillary services |
||||||||
Laboratory |
10.4 | % | 10.5 | % | ||||
Radiology |
11.3 | % | 12.1 | % | ||||
Pharmacy |
11.7 | % | 11.8 | % | ||||
All other services |
23.4 | % | 19.4 | % | ||||
100 | % | 100 | % | |||||
Operating
expenses
Three months ended March 31, | ||||||||||||
2011 | 2010 | Change | ||||||||||
Salaries, wages and benefits |
$ | 14,755 | $ | 12,378 | 19 | % | ||||||
Other operating expenses |
4,319 | 3,298 | 31 | % | ||||||||
Supplies and purchased medical services |
2,635 | 2,120 | 24 | % | ||||||||
Bad debt expense |
432 | 339 | 27 | % | ||||||||
Depreciation and amortization |
1,137 | 880 | 29 | % | ||||||||
Lease and rental expense |
1,200 | 976 | 23 | % | ||||||||
$ | 24,478 | $ | 19,991 | 22 | % | |||||||
Salaries, wages and benefits increased 19% in the current period compared to the prior
year period primarily due to the increased headcount of 12.2% associated with the revenue increases
and development activities. Increases in headcount were due to both increased activities in our
existing facilities as well as for pre-opening activities in advance of the opening of our expanded
Beijing facilities.
Other operating expenses increased by $1,021,000 or 31%, primarily due to increased
professional fees for legal and valuation services in the current period related to the formation
and startup of CML of approximately $400,000, increased corporate
cost allocations of approximately $325,000 due to the change in
business organization when compared to the prior year, and increased outside services such as house keeping,
building utilities, security services and similar hospital operating expenses.
Supplies and purchased medical services increased by $515,000 or 24%, due to increased usage
of medical supplies and pharmaceuticals related to higher patient procedures.
Bad debt expense increased by $93,000 or 27%. As percentage of net revenue, bad debt expense
was 1.8% in 2011 compared to 1.6% in the prior year period, which is in line with our historic
averages.
Depreciation and amortization expense increased by $257,000 or 29% to $1,137,000, primarily
due to the completion of the construction of the New Hope Oncology Center, which is now being
depreciated.
Lease and rental expense increased to $1,200,000 in the current period compared to $976,000 in
the prior year
period, primarily due to the increase in the total building space utilized in the expanded
operations of our hospital and clinic network.
Other Income and Expenses
Interest expense during the recent quarter was $103,000 as compared to interest expense of
$199,000 in the
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same quarter of the prior year due to decreases of short-term debt and increases of
capitalized interest due to higher construction activities.
Interest income during the recent quarter and prior period was $142,000 and $137,000,
respectively, as there were no significant changes in average investment balances or interest
rates.
Equity in loss of unconsolidated affiliates in the amount of ($147,000) represents our 49%
interest in the loss of CML for the three months ended March 31, 2011. CML was formed on December
31, 2010 and, accordingly, there is no comparable amount in the prior year period.
Miscellaneous (expense) income during the recent quarter and prior quarter was ($42,000) and
$235,000, respectively. The income in the prior period was substantially due to the gain on the
change in fair value of the warrants of $225,000.
Taxes
Although we recorded a pre-tax loss of $443,000, we recorded a provision of $787,000 for taxes
in the three months ended March 31, 2011, primarily due to losses in entities for which we can not
recognize tax benefit.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth our cash, investments, and accounts receivable as of March 31,
2011 and December 31, 2010 (in thousands):
March 31, 2011 | December 31, 2010 | |||||||
Cash and cash equivalents |
$ | 42,600 | $ | 32,007 | ||||
Investments |
37,074 | 37,631 | ||||||
Receivables from affiliates |
1,270 | 9,330 | ||||||
Accounts receivable |
11,019 | 11,601 |
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The following table sets forth a summary of our cash flows from operating activities for
the three months ended March 31, 2011 and 2010 (in thousands):
Three months ended | ||||||||
March 31, 2011 | March 31, 2010 | |||||||
OPERATING ACTIVITIES |
||||||||
Net (loss) income |
$ | (1,230 | ) | $ | 515 | |||
Non cash items |
2,658 | 3,782 | ||||||
Changes in operating assets and liabilities: |
||||||||
Restricted cash |
| (340 | ) | |||||
Accounts receivable |
264 | 6,476 | ||||||
Accounts receivable from affiliates |
8,060 | | ||||||
Inventories |
(3 | ) | (1,188 | ) | ||||
Accounts payable, accrued expenses, other
current liabilities and deferred revenue |
5,001 | (131 | ) | |||||
Accounts payable to affiliates |
1,181 | | ||||||
Other |
792 | (290 | ) | |||||
Net cash provided by operating activities |
$ | 16,723 | $ | 8,824 | ||||
Operating cash flow for the three months ended March 31, 2011 was higher than the three
months ended March 31, 2010, primarily due to the reduction in accounts receivable from our
unconsolidated affiliate. For the three months ended March 31, 2010, the cash flow activity above
includes the Medical Products division for the entire period.
The following table sets forth a summary of our cash flows from investing activities for the
three months ended March 31, 2011 and 2010 (in thousands):
Three months ended | ||||||||
March 31, 2011 | March 31, 2010 | |||||||
INVESTING ACTIVITIES |
||||||||
Purchases of
short-term investments and CDs |
$ | (20,265 | ) | $ | | |||
Proceeds from redemption of CDs |
21,987 | 20,800 | ||||||
Purchases of property and equipment |
(8,064 | ) | (3,243 | ) | ||||
Net cash (used in)
provided by investing activities |
$ | (6,342 | ) | $ | 17,557 | |||
Investing activities for the three months ended March 31, 2011 included acquisitions of
property and equipment in connection with our ongoing development and expansion of the United
Family Healthcare network of private hospitals and clinics.
The following table sets forth a summary of our cash flows from financing activities for the
three months ended March 31, 2011 and 2010 (in thousands):
Three months ended | ||||||||
March 31, 2011 | March 31, 2010 | |||||||
FINANCING ACTIVITIES |
||||||||
Proceeds from debt, vendor financing and convertible debentures |
$ | | $ | (83 | ) | |||
Repayment of debt, sinking fund deposits and vendor financing |
| (212 | ) | |||||
Repurchase of restricted stock for income tax withholding |
| (1 | ) | |||||
Proceeds from exercise of stock options and warrants |
114 | 90 | ||||||
Net cash provided by (used in) financing activities |
$ | 114 | $ | (206 | ) | |||
In December 2007 and January 2008, we had entered into loan agreements with IFC (the IFC
Facility) and DEG-Deutsche Investitions und Entwicklungsgesellschaft (DEG) of Cologne, Germany (a
member of the KfW banking
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group) (the DEG Facility), respectively, designed to provide for loans
in the aggregate amounts of $25 million and $20 million, respectively, directly to our future
healthcare joint ventures in Beijing and Guangzhou, China. Although as of the date of this filing,
these facilities are not available, we are currently in discussion with IFC regarding the remaining
precondition to an initial draw down under the IFC facility (see Note 7).
In October 2005, BJU and SHU obtained long-term debt financing under a program with the IFC.
As of March 31, 2011, the outstanding balance of this debt was 64,880,000 Chinese Renminbi (current
translated value of $9,896,000 and is classified as long-term). Beginning of October 2010, we began
payments to the sinking fund pursuant to the loan agreement. As of March 31, 2011, the sinking fund
assets were 6,488,000 Chinese Renminbi (current translated value of $990,000 was recorded in
long-term restricted cash). In the coming twelve months, we will make the second deposit to the
sinking fund of 6,488,000 Chinese Renminbi.
Over the past three years, there have been continuing and significant disruptions in the world
financial markets including those in China. We have not experienced significant negative impacts to
operating activities as a result of these events. We have taken steps to ensure the security of our
cash and investment holdings through deposits with highly liquid, global banking institutions and
government-backed insurance programs in the United States and elsewhere. Our daily operations in
the Healthcare Services business generate significant operating cash flows and have not been
dependent upon credit availability. Our patient base in our current facilities are by and large
considered to be in the wealthiest segment of society, for whom healthcare spending represents a
very small percentage of their income and therefore is expected to be less impacted by an economic
slowdown and to the extent their assets are affected, this will likely not impact their decision
making on healthcare purchases. The UFH development projects to establish and build hospitals in
China are expected to be funded with existing cash and credit facilities as described above,
provided that there can be no assurances that such facilities will be available or sufficient, that
the preconditions to disbursements under the facilities will be satisfied or that, in any event,
disbursements under the IFC and DEG Facilities will be achieved.
Over the next twelve months we anticipate total capital expenditures of up to $64 million
related to the maintenance and expansion of our business operations.
In
our three operating markets of Beijing, Shanghai and Guangzhou, we plan capital expenditures of up to $10 million for maintenance, development of existing
facilities and implementation of a new healthcare information system platform. In addition, the
expansion projects in the Beijing and Tianjin are planned for capital expenditures of up to $54
million for construction and equipment. These expansions will be funded through corporate capital
reserves and cash flow from operations.
In addition, as described above, we have entered into arrangements designed to provide future
debt facilities, which are currently not available, as described above, the principal purpose of
which is to fund expansion of our United Family Healthcare network. The expansion projects in the
Beijing, Shanghai, Tianjin and Guangzhou markets are underway. Due to the timing of the development
process for the planned joint venture hospital in Guangzhou, significant expenditures for that
project are not expected until fiscal 2013 and beyond. There can be no assurances that any of the
foregoing projects will be completed, that the actual costs or timing of the projects will not
exceed our expectations or that the foregoing expected sources of financing, including the IFC and
DEG debt Facilities, will be available or sufficient for any proposed capital expenditures.
TIMING OF REVENUES
The timing of our revenue is affected by several factors.
Our healthcare services revenue is dependent on seasonal fluctuations related to
epidemiological factors and the life styles of the expatriate community. For example, many
expatriate families traditionally take annual home leave outside of China during the summer months
of June through August.
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As a result of these factors impacting the timing of revenues, our operating results have
varied and are expected to continue to vary from period to period and year to year.
FOREIGN CURRENCY EXCHANGE AND IMPACT OF INFLATION
Because we receive over 100% of our revenue and generated 89% of our expenses within China, we
have foreign currency exchange risk. The Chinese currency (RMB) is not freely traded and is closely
controlled by the Chinese Government. The U.S. dollar (USD) has experienced volatility in world
markets recently. During the three month period ended March 31, 2011, the RMB appreciated
approximately 1.3% against the USD, resulted in an exchange gain of $19,000.
As part of our risk management program, we also perform sensitivity analyses to assess
potential changes in revenue, operating results, cash flows and financial position relating to
hypothetical movements in currency exchange rates. Our sensitivity analysis of changes in the fair
value of the RMB to the USD at March 31, 2011, indicated that if the USD uniformly increased in
value by 10% relative to the RMB, we would have experienced a 8% decrease in net loss. Conversely,
a 10% increase in the value of the RMB relative to the USD at March 31, 2011, would have resulted
in a 10% increase in net loss.
Based on the Consumer Price Index, for the three months ended March 31, 2011, inflation in
China was 5.1% and inflation in the United States was 1.6%. The average annual rate of inflation
over the three-year period from 2008 to 2010 was 2.8% in China and 1.7% in the United States.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company holds the majority of all cash assets in 100% principal protected AA/Aa or higher
rated accounts. Therefore, the Company believes that its market risk exposures are immaterial and
reasonable possible near-term changes in market interest rates will not result in material
near-term reductions in other income, material changes in fair values or cash flows. The Company
does not have instruments for trading purposes. Instruments for non-trading purposes are operating
and development cash assets held in interest-bearing accounts. The Company is exposed to certain
foreign currency exchange risk (see Foreign Currency Exchange and Impact of Inflation).
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable
assurance that information required to be disclosed by us in the reports that we file or submit to
the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934, as amended
(the Exchange Act), is recorded, processed, summarized and reported within the time periods
specified by the SECs rules and forms, and that information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
In accordance with Exchange Act Rules 13a-15(e) and 15d-15(e), we carried out an evaluation,
under the supervision and with the participation of management, including our Chief Executive
Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on that evaluation, our
CEO and CFO have concluded that, as of the end of the period covered by this quarterly report on
Form 10-Q, the Companys disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SECs rules and forms.
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Changes in Internal Control over Financial Reporting
Our management, including our principal executive and principal financial officers have
evaluated any changes in our internal control over financial reporting that occurred during the
three months ended March 31, 2011, and has concluded that there was no change that occurred during
the three months ended March 31, 2011 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider
the factors discussed in Part I, Item 1A. Risk Factors in our Transition Report on Form 10-K for
the nine months ended December 31, 2010, which could materially affect our business, financial
condition or future results. The risks described in our Transition Report on Form 10-K are not the
only risks facing our Company. Additional risks and uncertainties not currently known to us or that
we currently deem to be immaterial also may materially adversely affect our business, financial
condition and/or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. (RESERVED)
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
The exhibits listed below are filed as a part of this quarterly report:
31.1 | Certification of the Companys Chief Executive Officer Pursuant to Rule 13a-14(a) | |
31.2 | Certification of the Companys Chief Financial Officer Pursuant to Rule 13a-14(a) | |
31.3 | Certification of the Companys Principal Accounting Officer Pursuant to Rule 13a-14(a) | |
32.1 | Certification of the Companys Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 | |
32.2 | Certification of the Companys Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 | |
32.3 | Certification of the Companys Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CHINDEX INTERNATIONAL, INC. |
||||
Dated: May 10, 2011 | By: | /s/ Lawrence Pemble | ||
Lawrence Pemble | ||||
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
||||
Dated: May 10, 2011 | By: | /s/ Robert C. Low | ||
Robert C. Low | ||||
Vice President of Finance, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) |
||||
29