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Chindex International, Inc. Reports Financial Results for the Third Quarter and First Nine Months of 2012

3Q12 Revenue up 29% to $37.3 Million

BETHESDA, Md., Nov. 7, 2012 /PRNewswire/ -- 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 third quarter and first nine months of 2012 ended September 30, 2012.

Third Quarter 2012 Financial Highlights

  • Revenue from healthcare services increased 29% to $37.3 million from $28.8 million in the prior year period.
  • Adjusted EBITDA rose by 40% to $6.0 million, from Adjusted EBITDA of $4.3 million in the prior year period.
  • Development, pre-opening and start-up expense was $2.7 million compared to $2.4 million in the prior year period.
  • Income from operations was $1.5 million, compared to $490,000 in the prior year period.
  • Net loss was $664,000, or $(0.04) per diluted share, compared to net income of $315,000, or $0.02 per diluted share, in the prior year period.

Roberta Lipson, President and CEO of Chindex, commented, "We are pleased to see continuously strong momentum on the top line and adjusted EBITDA as Beijing and Shanghai markets recorded robust growth in patient volumes. Revenue grew 29% year-over-year to $37.3 million--a record for the generally slower third quarter and putting us well on track to deliver high twenties to low thirties revenue growth for the full year. Adjusted EBITDA grew 40% year-over-year to $6.0 million, representing a 16% margin. This quarter, our GAAP bottom line was affected by not only continuously high development expenses and provision of income tax, but also a loss from our equity investment in Chindex Medical Limited.

"During the third quarter, we continued to move development projects forward across the Beijing, Shanghai and Tianjin markets. Construction remains on schedule for Beijing Rehabilitation Hospital and should be complete by the first quarter of 2013. Our new clinic in Beijing's Central Business District (CBD), where many high-income Chinese and expatriate professionals work and live, is nearing completion and is expected to start operations by the end of this year. We have also been broadening and deepening our human resources to support growth in revenues and capabilities. For example, we recently welcomed Dr. Hu Dayi, one of China's most renowned cardiologists and medical academics, and Dr. Ling Feng, a world-famous neurosurgeon and a pioneer of interventional neuroradiology, to join UFH's world-class medical team. The unique and expanding quality and abilities of UFH's staff is not only supporting our rapid growth but reinforcing our competitive positioning as well.

"Looking forward to the remainder of the year, we anticipate growing market demand and expanded facilities and services to continue driving robust revenue growth," Ms. Lipson continued. "We reaffirm previous guidance for revenue expansion and EBITDA margin for the full year of 2012. We expect our topline to reach to approximately $145 to $152 million, representing a year-over-year percentage growth rate in the high-twenties to mid-thirties. Adjusted EBITDA margin is expected to remain in the upper-teens range. We expect strong performance from CML in the fourth quarter as it recognizes delayed sales revenue and can act on increased sales opportunities. This, in turn, should offset losses in the third quarter and result in a contribution from the venture for the full year. We expect development expense to grow to approximately $11 to $12 million."

Third Quarter 2012 Financial Results

Third quarter 2012 revenue from healthcare services increased 29% to $37.3 million from $28.8 million in the prior year period. These results reflect continued growth of inpatient and outpatient volume across the United Family Healthcare network as well as increasing contributions from the phased expansion of the Company's flagship hospital in Beijing. Outpatient services contributed 56% and inpatient services contributed 44% of revenue, compared with 58% and 42%, respectively, in the prior year period. By service line, surgical services contributed 20.0%, OB/GYN contributed 16.1%, pediatrics contributed 7.6%, ancillary services contributed 30.4% and other clinical service lines contributed 25.9% of revenue.

Operating expenses in the third quarter of 2012 increased 27% to $35.8 million from $28.3 million in the prior year period. These costs were primarily driven by the Company's recently opened expansions as well as development of new facilities. Salaries, wages and benefits in the third quarter of 2012 increased 28% to $21.1 million from $16.5 million in the prior year period, reflecting a 38% increase in headcount to support revenue growth and development activities, including newly recruited staff now on-board in anticipation of the opening of the Company's Rehabilitation Hospital. Development, pre- and post-opening and start-up expenses were $2.7 million this quarter, compared to $2.4 million for the prior year period. These expenses were driven by development projects across all markets, including particularly the Beijing Rehabilitation Hospital and the ramp-up of Tianjin United Family Hospital. Operating expenses also included certain non-cash expenses including $904,000 of stock-based compensation expense compared to $878,000 for the prior year period.

Adjusted EBITDA in the third quarter of 2012 increased 40% to approximately $6.0 million from $4.3 million in the prior year period. The Adjusted EBITDA margin in the current period was 16%. The Adjusted EBITDA results illustrate the consistent profitability and expanding earnings base of existing UFH facilities.

Income from operations increased to $1.5 million from $490,000 in the prior year period.

The Company recorded a $1.5 million provision for taxes in the third quarter of 2012 compared to $791,000 in the prior year period. As in past quarters, the current period provision continued to be heavily impacted by losses in development and start-up entities for which the Company cannot currently recognize tax benefits.

Net loss for the quarter ended September 30, 2012 was $664,000, or $(0.04) per diluted share, compared to net income of $315,000, or $0.02 per diluted share, in the prior year period. For the third quarter of 2012, weighted average diluted shares outstanding were 16.4 million.

As of September 30, 2012, the Company had $27.5 million in unrestricted cash, cash equivalents and investments.

First Nine months 2012 Financial Results

During the first nine months of 2012, revenue from healthcare services increased 32% to $108.9 million from $82.5 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 first nine months of 2012 unchanged from the ratios of the first nine months of 2011. By service line, surgical services contributed 20.1%, OB/GYN contributed 14.8%, pediatrics contributed 7.5%, ancillary services contributed 32.0% and other services contributed 25.6% of revenue.

Operating expenses for the first nine months of 2012 increased 31% to $103.4 million from $78.9 million in the prior year period. Development, pre-opening and start up expenses rose to $8.5 million from $5.2 million in the prior year period primarily as a result of expenses related to the Company's Beijing and Tianjin projects. Operating expenses also included certain non-cash expenses including $2,505,000 of non-cash stock compensation expense compared to $2,547,000 for the prior year. Income from operations increased 53% to $5.5 million compared to income from operations of $3.6 million in the prior year period. Adjusted EBITDA was approximately $19.2 million compared to $12.8 million in the prior year period reflecting a 18% margin, meeting the Company's upper teens target for the year.

Provision for taxes was $4.5 million compared to $2.9 million in the prior year period. Net income was $615,000, or $0.05 per diluted share, compared to net income of $2.0 million, or $0.13 per diluted share, in the first nine months of 2011. For the first nine months of 2012 ended September 30, 2012, weighted average diluted shares outstanding were 17.6 million.

Chindex Medical Limited

For Chindex Medical Limited, a joint venture (CML) between Shanghai Fosun Pharmaceutical (Group) Co., Ltd. ("Fosun Pharma") and Chindex International, Chindex recognizes its 49% interest in CML's net income using the equity method of accounting. In the third quarter and first nine months of 2012 ended September 30, 2012, Chindex recognized loss of $785,000 and $573,000, respectively, for its 49% equity in the operating results of CML. This consisted of losses of $1,339,000 and $381,000, respectively, for the stand-alone net income (loss) of CML (after recognition of stock-based compensation expense) and after deducting $129,000 and $387,000, respectively, for the amortization of basis differences attributable to acquired intangibles. The Company expects a CML to have a strong fourth quarter which is expected to offset losses in the third quarter and result in a contribution from the venture for the full year.

Non-GAAP Measures

The Company presents Adjusted EBITDA to better illustrate ongoing operational results. Adjusted EBITDA is defined as income (loss) before interest expense, interest and other income, 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 EBITDA 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.

Conference Call

Management will host a conference call at 8:00 am ET Thursday morning on November 8, 2012 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 webcast and replay of the earnings call will be accessible via Chindex's website at

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, Tianjin 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 more than 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

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 Annual Report on Form 10-K for the twelve months ended December 31, 2011, 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.


ICR, Inc.
Robert Koepp
(+86) 10-6583-7516
(646) 328-2510 




(in thousands except share and per share data)

Three months ended September 30,

Nine months ended September 30,





Healthcare services revenue

$     37,299

$     28,815

$    108,928

$     82,465

Operating expenses

Salaries, wages and benefits





Other operating expenses





Supplies and purchased medical services





Bad debt expense





Depreciation and amortization





Lease and rental expense









Income from operations 





 Other income and (expenses)

Interest income





Interest expense





Equity in (loss) income of unconsolidated affiliate





Miscellaneous expense - net





Income before income taxes





Provision for income taxes





Net (loss) income

$       (664)

$          315

$          615

$      2,028

Net (loss) income per common share - basic





Weighted average shares outstanding - basic





Net (loss) income per common share - diluted





Weighted average shares outstanding - diluted







                                              CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30, 2012

December 31, 2011


Current assets:

Cash and cash equivalents

$          27,479

$          33,755

Restricted cash






Accounts receivable, less allowance for doubtful accounts of $10,502

     and $8,300, respectively



Receivables from affiliates



Inventories of supplies, net



Deferred income taxes



Other current assets



        Total current assets



Restricted cash and sinking funds 






Investment in unconsolidated affiliate



Property and equipment, net



Noncurrent deferred income taxes



Other assets



        Total assets

$        210,727

$        199,392


Current liabilities:

Accounts payable 

$            7,441

$            3,957

Payable to affiliates



Accrued expenses



Other current liabilities



Income taxes payable 



        Total current liabilities



Long-term debt and convertible debentures



Long-term deferred tax liability



        Total liabilities



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 – 15,881,748 and  15,652,917 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively





             Class B stock – 1,162,500 shares
             issued and outstanding at September
             30, 2012 and December 31, 2011,





Additional paid-in capital



Retained earnings 



Accumulated other comprehensive income



       Total stockholders' equity



           Total liabilities and stockholders' equity

$        210,727

$        199,392




(in thousands)

Nine months ended September 30,




Net income

$              615

$         2,028

Adjustments to reconcile net income to net cash provided by 

operating activities:  

Depreciation and amortization



Inventory write down



Provision for doubtful accounts



Loss on disposal of property and equipment



Equity in (loss) income of unconsolidated affiliate



Deferred income taxes



Stock based compensation



Foreign exchange loss (gain)



Amortization of debt issuance costs



Amortization of debt discount



Changes in operating assets and liabilities:

Restricted cash



Accounts receivable



Receivables from affiliates



Inventories of supplies



Other current assets and other assets



Accounts payable, accrued expenses, other current

 liabilities and deferred revenue



Payable to affiliates



Income taxes payable



Net cash provided by operating activities




Purchases of short-term investments and CDs



Proceeds from redemption of CDs



Purchases of property and equipment



Net cash provided by (used in) investing activities




Restricted cash for IFC RMB loan sinking funds



Restricted cash for Exim loan collateral



Repurchase of restricted stock for income tax withholding



Proceeds from exercise of stock options



Net cash (used in) provided by financing activities



Effect of foreign exchange rate changes on cash and cash equivalents



Net decrease in cash and cash equivalents



Cash and cash equivalents at beginning of period



Cash and cash equivalents at end of period

$          27,479

$        27,554

Supplemental disclosures of cash flow information:

Cash paid for interest

$                546

$             649

Cash paid for taxes

$             4,626

$          4,433

Non-cash investing and financing activities consist of the following:

Change in property and equipment purchases included in accounts payable

$             4,118

$          6,304


The table below reconciles our consolidated net income to Adjusted EBITDA (in thousands)

Three months ended September 30,

Nine months ended September 30,





Consolidated net (loss) income 






          Depreciation and amortization





          Provision for income taxes





          Interest expense





          Interest and other income, net





          Development, pre-opening and start-up expense





          Equity in loss (income) of unconsolidated affiliate





          Non-recurring charges for CML JV formation









Adjusted EBITDA





SOURCE Chindex International, Inc.

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