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Corporate Backgrounder/January 2002

Statistics

Market Makers: Herzog, Heine, Geduld; Island System Corporation; Sherwood Securities Corp.; Spear, Leeds & Kellogg

Business Summary

With 20 years of "on-the-ground" presence in China, Chindex is an American company led by American executive management that is focusing its efforts exclusively on continuing its growth as the premiere American healthcare company in China. Chindex pioneered privatized healthcare services in China today, and has built a one-of-a-kind independent marketing, sales and support organization and infrastructure to provide exclusive representation and access to the Greater Chinese marketplace for certain Western manufacturers of medical equipment and selected healthcare products. Leveraging its unique position as a gateway for Western companies in China, Chindex is also developing a network of international-standard health care facilities within China to service the medical needs of an emerging class of more affluent Chinese, as well as a growing expatriate community. Focusing exclusively on the rapidly expanding Greater Chinese marketplace, including Hong Kong, the Company's national sales and technical support staff operates from its office in Beijing and regional offices in Shanghai, Guangzhou, Tianjin and Hong Kong. Regional Representatives are based in 27 cities throughout 18 provinces. Chindex has a variety of characteristics which significantly benefit its operations, including its status as a U.S. corporation doing business in China, its ownership of Chinese corporations doing business in local currency from Tianjin and Shanghai, and its Hong Kong subsidiary.

Chindex business operations are divided into two segments. The Healthcare Products segment, consisting of medical equipment, medical consumables, personal healthcare products, and supply chain logistics services accounted for approximately 87% of the Company's revenues in 2000, and approximately 84% of the Company's revenues in the first nine months of 2001. Medical equipment sales are made to the Chinese hospital system and are denominated in U.S. dollars. Sales of medical consumables, personal healthcare products, and logistics services are made to the hospital and retail pharmacy markets and are denominated in Chinese yuan.

The Company's clients include Siemens/Acuson, Becton Dickinson, Hologic, Johnson & Johnson, C.B. Fleet, Steris, and the Cosmetique Active International division of L'Oreal.

Since the mid-1990s, the Chindex distribution platform has included two wholly owned subsidiaries in Tianjin and Shanghai. These subsidiaries import, warehouse, and sell products directly to Chinese customers for local currency rather than through state-owned intermediaries. In early 1996, the Company established itself in the Hong Kong market through the formation another foreign subsidiary, Chindex Hong Kong Limited. Chindex Hong Kong provides Western manufacturers with market representation and distribution services for that market.

The Healthcare Services segment, consisting of the Company's Western-style primary care hospital, Beijing United Family Hospital, accounted for approximately 13% of the Company's revenues in 2000, and approximately 16% of the Company's revenues in the first nine months of 2001. Beijing United Family Hospital opened in late 1997 and reported its first profitable year in 2000. Chindex has received approval from the Chinese Ministry of Health for its second United Family Hospital facility, expected to open in Shanghai in late 2002.

Outlook

Healthcare Products. The Chindex growth plan is to capitalize on its longstanding expertise and unique knowledge of the inner workings of the Chinese marketplace and its expertise in administering U.S. government backed financing programs to continue to grow its traditional business of importing specialized medical equipment. Additionally, the Company will continue to grow its product distribution capabilities making use of its Shanghai and Tianjin subsidiaries. As its next generation of expansion, Chindex has already begun to design and initiate market entry strategies in home healthcare and over-the-counter healthcare products sold through China's vastly underdeveloped retail pharmacy networks.

Healthcare Services. The demand for international-standard healthcare services in China is increasing due to a growing Chinese middle class and the influx of Western people, influences and concepts, along with the increasing ability of Chinese citizens to afford, as well as demand, better healthcare services. Chindex is a recognized pioneer in the field of private healthcare services in China. As a private hospital corporation in China, Chindex plans to continue its entry into healthcare services by opening additional Western-style hospital facilities. Chindex's private hospitals will target the more than 20 million young, affluent Chinese families in the major urban centers in China. Studies have shown this quickly expanding demographic segment in China has a large and growing level of disposable income, creating an exceptional growth potential for the Chindex program.

Recent Developments

1. In mid-November, Chindex announced results for its third quarter and nine month results. Revenue for this year's third quarter was $13.4 million with net income of $109,000, or earnings per share of $0.13. This compares to revenue of $9.4 million with a net loss of $302,000 or a loss per share of $0.38 for the same period last year. Revenue for this year's nine month period was $37.3 million with a net loss of $91,000 or a loss per share of $0.11. This compares to revenue of $25.9 million with a net loss of $535,000 or loss per share of $0.67 for the same period last year.
2. In late October, Chindex announced that it has received approval of its second hospital venture from the Chinese Ministry of Health in Beijing. The new hospital will be in Shanghai.
3. In mid-August, Chindex announced results for its second quarter and six month results. Revenue for this year's second quarter was $13.2 million with a net loss of $225,000 or a loss per share of $0.26. This compares to revenue of $9.5 million with net income of $116,000 or earnings per share of $0.15 for the same period last year. Revenues for this year's six month period was $23.8 million with a net loss of $200,000 or a loss per share of $0.23. This compares to revenue of $16.5 million with a net loss of $233,000 or a loss per share of $0.29 for the same period last year.
4. In mid-May, Chindex announced results for its first quarter ended March 31, 2001, which were highlighted by a 51% increase in revenue over the same period in the prior year. Revenue for the first quarter of 2001 was $10.6 million, with a net profit of $25,000 or earnings per share of $0.03. This compares to revenue o f$7.0 million with a net loss of $349,000 or a loss per share of $0.44 for the first quarter of 2000.
5. In late March, Chindex announced results for its year end and fourth quarter ended December 31, 2000. With another year of record revenues, the Company reported $0.76 earnings per share, continuing its strong growth trend. Revenue for the year 2000 was a record $45.1 million with a net profit of $641,000, or earnings per share of $0.76. This compares to revenue for the year 1999 of $37.1 million with net profit of $392,000, or earnings per share of $0.49. Revenue for the fourth quarter 2000 was $19.1 million with a net profit of $1.2 million, or earnings per share of $1.37. This compares to revenue of $7.5 million with a net loss of $287,000, or a loss per share of $0.36 for the fourth quarter of 1999.

Financial Highlights

Corporate Information

Source of data: Nasdaq®/AMEX

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