Attached files

file filename
8-K - LIVE FILING - CHINDEX INTERNATIONAL INChtm_42636.htm
EX-99.2 - EX-99.2 - CHINDEX INTERNATIONAL INCexhibit2.htm

FOR RELEASE August 8, 2011

Contact: ICR, Inc.

Ashley De Simone

(646) 277-1227

Chindex International, Inc. Reports Financial Results for the
Second Quarter and First Half of 2011

Bethesda, Maryland – August 8, 2011 - Chindex International, Inc. (NASDAQ: CHDX), an American health care company providing health care services in China through the operations of United Family Healthcare, a network of private primary care hospitals and affiliated ambulatory clinics, today announced financial results for the second quarter and first half of 2011 ended June 30, 2011.

Second Quarter 2011 Financial Highlights

    Revenue from healthcare services increased 19.4% to $29.5 million from $24.7 million in the prior year period.

    Income from operations was $3.4 million compared to $1.9 million in the prior year period.

    Net income was $2.9 million, or $0.17 per diluted share, compared to net income of $0.84 million, or $0.06 per diluted share, in the prior year period.

    Adjusted EBITDA was $6.0 million, compared to adjusted EBITDA of $4.4 million in the prior year period.

    Development, pre-opening and start-up expense was $1.2 million compared to $388,000 in the prior year period.

Roberta Lipson, President and CEO of Chindex, commented, “Second quarter financial performance reflects continued revenue growth driven by steady inpatient and outpatient demand across our network. Our operating results were also favorable this quarter with strong improvements in net income and adjusted EBITDA on a year over year basis. Additionally, we remain optimistic that our goals for capacity build-out are nicely aligned with the favorable environment for the growth of private healthcare in China. We are on-track with the phased opening of our Beijing UFH hospital expansion and we continue to expect completion of the project by the end of the year.”

Second Quarter 2011 Financial Results
Second quarter 2011 revenue from healthcare services increased 19.4% to $29.5 million from $24.7 million in the prior year period, reflecting growing inpatient and outpatient volume across the United Family Healthcare network. Outpatient services contributed 59% of revenue and inpatient services contributed 41% of revenue in the second quarter of 2011, in line with the prior year period. By service line, surgical services contributed 18.1%, OB/GYN contributed 14.1%, pediatrics contributed 8.4%, ancillary services contributed 32.6% and other services contributed 26.8% of revenue.

Operating expenses for the three months ended June 30, 2011 increased to $26.1 million from $21.7 million in the prior year period. Development, pre-opening and start up expenses were $1.2 million this quarter including expenses for the Beijing United expansion, development expenses for the Tianjin United project and lease expense for the United Family Rehabilitation Hospital in Beijing.

Operating expenses also included certain non-cash expenses including $466,000 of stock compensation expense compared to $664,000 for the prior year period. Due to the change in business organization the Company also incurred an increase in corporate overhead costs of approximately $325,000 per quarter compared to the prior year period. As previously disclosed, moving forward, these corporate overhead expenses previously shared with the medical products division will continue to be recognized by the Company.

Adjusted EBITDA in the second quarter of 2011 increased to approximately $6.0 million compared to $4.4 million in the prior year period.

Income from operations was $3.4 million compared to income from operations of $1.9 million in the prior year period.

The Company recorded a $1.3 million provision for taxes in the second quarter of 2011 compared to a provision for taxes of $1.0 million in the prior year period.

Net income for the quarter ended June 30, 2011 was $2.9 million, or $0.17 per diluted share, compared to $836,000, or $0.06 per diluted share, in the prior year period. For the second quarter of 2011, weighted average diluted shares outstanding were 17.5 million.

As of June 30, 2011, the Company had $77.3 million in cash and cash equivalents and investments.

First Half 2011 Financial Results
During the first half of 2011, revenue from healthcare services increased 17.0% to $53.7 million from $45.9 million in the prior year period, reflecting growing inpatient and outpatient volume across the United Family Healthcare network. Outpatient services contributed 60% of revenue and inpatient services contributed 40% of revenue in the first half of 2011 compared to 59% and 41%, respectively, in the year ago period. By service line, surgical services contributed 18.0%, OB/GYN contributed 14.5%, pediatrics contributed 8.0%, ancillary services contributed 33.0% and other services contributed 26.5% of revenue.

Operating expenses for the first half of 2011 increased 21.6% to $50.6 million from $41.6 million in the prior year period. Development, pre-opening and start up expenses rose to $2.0 million from $801,000 in the prior year period primarily as a result of expenses related to the Company’s Beijing, Pudong and Tianjin projects. Operating expenses also included certain non-cash expenses including $1.7 million of non-cash stock compensation expense and increased corporate cost allocations of approximately $650,000 due to the change in business organization when compared to the prior year. Income from operations was $3.1 million compared to income from operations of $3.0 million in the prior year period. Adjusted EBITDA was approximately $8.4 million compared to $6.9 million in the prior year period.

Provision for taxes was $2.1 million compared to $1.8 million in the prior year period. Net income was $1.7 million, or $0.11 per diluted share, compared to net income of $1.4 million, or $0.09 per diluted share, in the prior year period. For the first half of 2011 ended June 30, 2011, weighted average diluted shares outstanding were 17.4 million.

Non-GAAP Measures

The Company presents Adjusted EBITDA to better illustrate ongoing operational results. Adjusted EBITDA is defined as income (loss) before interest expense, income taxes, depreciation and amortization, and also excludes development, pre-opening and start-up expenses related to new and pending hospitals and clinics, equity in earnings (loss) income of unconsolidated affiliate, non-recurring charges for Chindex Medical Limited (CML) joint venture formation and effect of change in corporate cost allocations. The Company anticipates recurring development, pre-opening and start-up expense and notes that such expense is a basic element of the long term growth plan. Management believes that providing an Adjusted EBIDTA analysis to investors is a helpful metric to better illustrate the Company’s operations, including development plans, and changes in presentation from historical periods. The Company uses Adjusted EBITDA for business planning and other purposes. Other companies may calculate Adjusted EBITDA differently, and therefore Chindex’s Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and should not be considered in isolation or as an alternative to net income (loss), cash flows from operating activities and other measures determined in accordance with GAAP. Items excluded from Adjusted EBITDA are significant and necessary components to the operations of the Company’s business, and, therefore, Adjusted EBITDA should only be used as a supplemental measure of operating performance.

Chindex Medical Limited
The Chindex Medical Limited joint venture (CML) between FosunPharma and Chindex International began operations on January 1, 2011. The strategic venture merged the former Medical Products division of Chindex International and select medical device companies of FosunPharma. FosunPharma owns 51% and Chindex owns 49% of the CML joint venture. Chindex recognizes its 49% interest in CML’s net income using the equity method of accounting.

Accordingly, in the second quarter of 2011, other income and expenses includes $729,000 of income for Chindex’s 49% share of CML. In recognizing its 49% interest in the net income of CML for the quarter, Chindex also included additional expenses for amortization of certain fair value adjustments made in connection with the formation of the joint venture.

Conference Call
Management will host a conference call at 8:00 am ET on August 9, 2011, to discuss financial results. To participate in the conference call, U.S. domestic callers may dial 1-877-303-9231 and international callers may dial 1-760-666-3567 approximately 10 minutes before the conference call is scheduled to begin. A telephone replay will be available from the day of the call until August 16, 2011, by dialing (U.S. domestic) 1-855-859-2056 or (international) 1-404-537-3406, passcode 86670003. A webcast of the earnings call will be accessible via Chindex’s website at http://ir.chindex.com/events.cfm.

About Chindex International, Inc.
Chindex is an American health care company providing health care services in China through the operations of United Family Healthcare, a network of private primary care hospitals and affiliated ambulatory clinics. United Family Healthcare currently operates in Beijing, Shanghai and Guangzhou. The Company also provides medical capital equipment and products through Chindex Medical Ltd., a joint venture company with manufacturing and distribution businesses serving both domestic China and export markets. With thirty years of experience, the Company’s strategy is to continue its growth as a leading integrated health care provider in the Greater China region. Further company information may be found at the Company’s website at http://www.chindex.com.

Safe Harbor Statement
Statements made in this press release relating to plans, strategies, objectives, economic performance and trends and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking information is inherently subject to risks and uncertainties, and actual results could differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, the factors set forth under the heading “Risk Factors” in the Company’s Transition Report on Form 10-K for the nine months ended December 31, 2010, updates and additions to those “Risk Factors” in the Company’s interim reports on Form 10-Q, Forms 8-K and in other documents filed by us with the Securities and Exchange Commission from time to time. Forward-looking statements may be identified by terms such as “may,” “will,” “should,” “could,” “expects,” “plans,” “intends,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or similar terms or the negative of these terms. Although 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.

Financial Summary Attached

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands except share and per share data)

(Unaudited)

                                         
            Three months ended June 30,   Six months ended June 30,
            2011   2010   2011   2010
Revenue
                               
Healthcare services revenue
  $ 29,465     $ 24,749     $ 53,650     $ 45,917  
Product sales
    -       16,739       -       36,827  
 
                               
Total revenue
    29,465       41,488       53,650       82,744  
 
                               
 
                                       
Operating expenses
                               
   Healthcare services:
                               
   Salaries, wages and benefits
    15,473       13,268       30,228       25,646  
   Other operating expenses
    4,237       3,355       8,556       6,653  
   Supplies and purchased medical services
    3,227       2,514       5,862       4,634  
   Bad debt expense
    498       602       930       941  
   Depreciation and amortization
    1,057       927       2,194       1,807  
   Lease and rental expense
    1,599       984       2,799       1,960  
 
                                       
 
    26,091       21,650       50,569       41,641  
 
                               
Products:
                               
Product sales costs
    -       11,644       -       26,197  
Product selling and other operating expenses
    -       6,299       -       11,878  
 
                               
 
    -       17,943       -       38,075  
 
                               
Total operating expenses
    26,091       39,593       50,569       79,716  
 
                               
Income from operations
    3,374       1,895       3,081       3,028  
 
                               
Other income and (expenses)
                               
   Interest income
    218       165       360       302  
   Interest expense
    (78 )     (208 )     (181 )     (407 )
   Equity in income of unconsolidated affiliate
    729             582        
   Miscellaneous (expense) income - net
    (25 )     4       (67 )     231  
 
                                       
Income before income taxes
    4,218       1,848       3,775       3,154  
Provision for income taxes
    (1,275 )     (1,012 )     (2,062 )     (1,803 )
 
                               
Net income
  $ 2,943     $ 836     $ 1,713     $ 1,351  
 
                               
 
                                       
Net income per common share — basic
  $ .18     $ .06     $ .11     $ .09  
 
                               
Weighted average shares outstanding — basic
    16,129,328       14,785,510       16,102,735       14,753,881  
 
                               
 
                                       
Net income per common share — diluted
  $ .17     $ .06     $ .11     $ .09  
 
                               
Weighted average shares outstanding — diluted
    17,522,106       16,200,544       17,437,933       16,196,379  
 
                               

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share data)
(Unaudited)

                 
    June 30, 2011   December 31, 2010
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 38,583     $ 32,007  
Restricted cash
          300  
Investments
    37,859       37,631  
Accounts receivable, less allowance for doubtful accounts of $7,610
    13,055       11,601  
and $6,748,
               
respectively
               
Receivables from affiliates
    432       9,330  
Inventories, net
    1,711       1,413  
Deferred income taxes
    4,407       3,242  
Other current assets
    2,700       3,856  
 
               
Total current assets
    98,747       99,380  
Restricted cash
    1,003       980  
Investments
    872       2,439  
Investment in unconsolidated affiliate
    32,338       31,756  
Property and equipment, net
    46,748       37,099  
Noncurrent deferred income taxes
    465       108  
Other assets
    2,921       2,411  
 
               
Total assets
  $ 183,094     $ 174,173  
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
  $ 3,081     $ 4,038  
Payable to affiliates
    2,899        
Accrued expenses
    9,588       8,541  
Other current liabilities
    4,000       3,874  
Income taxes payable
    2,759       2,147  
 
               
Total current liabilities
    22,327       18,600  
Long-term debt, vendor financing and convertible debentures
    23,423       23,070  
Long-term deferred tax liability
    431       431  
 
               
Total liabilities
    46,181       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 – 15,643,049 and 15,310,426 shares issued and
    156       153  
outstanding at June 30, 2011 and December 31, 2010, respectively
               
Class B stock – 1,162,500 shares issued and outstanding at June 30, 2011
    12       12  
and December 31, 2010, respectively
               
Additional paid-in capital
    117,594       115,815  
Accumulated other comprehensive income
    6,148       4,802  
Retained earnings
    13,003       11,290  
 
               
Total stockholders’ equity
    136,913       132,072  
 
               
Total liabilities and stockholders’ equity
  $ 183,094     $ 174,173  
 
               

1

CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)

(Unaudited)

                 
    Six months ended June 30,
    2011   2010
OPERATING ACTIVITIES
               
Net income
  $ 1,713     $ 1,351  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    2,194       1,939  
Provision for demonstration inventory
          306  
Inventory write down
    3       96  
Provision for doubtful accounts
    930       1,104  
Loss on disposal of property and equipment
    77       36  
Equity in income of unconsolidated affiliate
    (582 )      
Deferred income taxes
    (1,454 )     382  
Stock based compensation
    1,668       1,518  
Foreign exchange (gain) loss
    (257 )     2,013  
Amortization of debt issuance costs
    5       4  
Amortization of debt discount
    124       124  
Non-cash charge for change in fair value of warrants
          (224 )
Changes in operating assets and liabilities:
               
Restricted cash
    300       (198 )
Accounts receivable
    (2,101 )     4,957  
Receivable from affiliates
    8,898        
Inventories
    (260 )     (5,162 )
Other current assets and other assets
    724       (529 )
Accounts payable, accrued expenses, other current liabilities and
    339       (192 )
deferred revenue
               
Payable to affiliates
    2,899        
Income taxes payable
    570       (1,642 )
 
               
Net cash provided by operating activities
    15,790       5,883  
INVESTING ACTIVITIES
               
Purchases of short-term investments and CDs
    (21,271 )     (4,020 )
Proceeds from redemption of CDs
    22,837       21,802  
Purchases of property and equipment
    (11,157 )     (5,733 )
 
               
Net cash (used in) provided by investing activities
    (9,591 )     12,049  
FINANCING ACTIVITIES
               
Proceeds from debt, vendor financing and convertible debentures
          39  
Repayment of debt, sinking fund deposits and vendor financing
          (1,472 )
Repurchase of restricted stock for income tax withholding
          (4 )
Proceeds from exercise of stock options and warrants
    114       90  
 
               
Net cash provided by (used in) financing activities
    114       (1,347 )
Effect of foreign exchange rate changes on cash and cash equivalents
    263       1,761  
 
               
Net increase in cash and cash equivalents
    6,576       18,346  
Cash and cash equivalents at beginning of year
    32,007       23,760  
 
               
Cash and cash equivalents at end of year
  $ 38,583     $ 42,106  
 
               
Supplemental disclosures of cash flow information:
               
Cash paid for interest
  $     $ 641  
Cash paid for taxes
  $ 2,973     $ 4,770  
Non-cash investing and financing activities consist of the following:
               
Property and equipment additions included in accounts payable
  $ 100     $ 808  
Cashless exercise of warrants at fair value
  $     $ 800  
Exercise of warrants at fair value
  $     $ (201 )

The table below reconciles the Company’s consolidated net income to Adjusted EBITDA (in thousands).

                                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2011   2010   2011   2010
Consolidated net income
  $ 2,943     $ 836     $ 1,713     $ 1,351  
 
                               
Adjustments:
                               
Depreciation and amortization
    1,057       927       2,194       1,807  
Provision for income taxes
    1,275       1,012       2,062       1,803  
Interest expense
    78       208       181       407  
Interest and other incomes/expense, net
    (193 )     (161 )     (293 )     (533 )
Development, pre-opening and start-up expense
    1,249       388       2,047       801  
Equity in earnings (loss) of unconsolidated
    (729 )           (582 )      
affiliate
                               
Non-recurring charges for CML JV formation
                400        
Effect of change in corporate cost allocations
    325             650        
 
                               
 
    3,062       2,374       6,659       4,285  
Adjustments to exclude Medical Products Division:
                       
Medical Products revenue
          (16,739 )           (36,827 )
Medical Products cost of products sold
          11,644             26,197  
Medical Products selling and operating expenses
          6,299             11,878  
 
                               
 
          1,204             1,248  
 
                               
Adjusted EBITDA
  $ 6,005     $ 4,414     $ 8,372     $ 6,884  
 
                               

2