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BETHESDA,
Maryland, August 16, 2004 -- Chindex International, Inc. (NASDAQ: CHDX), an independent American provider of Western healthcare products and medical services in the People's Republic of China, today announced results for the quarter ended June 30, 2004. The Company will report a 31% increase in revenues over the same quarter of the prior fiscal year, including increased revenue in each of its three divisions. The Company will also report a more than $2 million improvement in its income from operations over the periods.
Revenue for the quarter ended June 30, 2004 was $26.7 million with income from operations of $503,000 and net income of $244,000, or earnings per share of $0.05. This compares to revenue of $20.4 million with a loss from operations of $1.73 million and a net loss of $1.34 million, or a loss per share of $0.36, for the quarter ended June 30, 2003.
Roberta Lipson, President and CEO of Chindex commented from Beijing: "During the recent quarter we saw a return to our expected growth and profitability in contrast to our prior period results, which had been depressed primarily as a result of the SARS epidemic. The recent results show strong operating income and improved bottom line results."
The Healthcare Services division was a major contributor of operating income in the recent quarter. Revenue during the quarter for healthcare services in Beijing grew 62% over revenue for the same quarter of the prior year, primarily as a result of increased patients at our United Family Hospital operations in Beijing. Our hospital development activities in Shanghai continued during the recent quarter. We are currently finishing the interior of the Shanghai United Family Hospital facility and receiving and installing equipment. We expect the facility to be completed and opened in the fall. In addition, we are in the process of planning for our next proposed United Family Hospital, in Xiamen, including developing a feasibility study that is required for approval by the Chinese government.
The Medical Capital Equipment division also contributed significantly to our operating income in the recent quarter based on a 56% increase in revenue over the prior quarter. The division experienced an improved profit margin of 26% as compared with 18% in the prior quarter, which was adversely affected by SARS, among other things. Revenue growth is based on our development of new sales channels for our capital medical equipment, involving greater use of local Chinese sub-distributors. These sub-distributors allowed us to sell an expanded product portfolio, including in particular a new range of ultrasound products. We also reduced expenses during the recent quarter as a result of improved resource allocation, including increased productivity of our staff through improved management and greater use of regionally-based sales representatives. The framework trade agreements between the U.S. and Chinese governments, which are required for government-supported loan programs are still being negotiated. We believe that there has been substantial progress in the bilateral negotiations over the past several months and expect a final agreement in the near future.
The Healthcare Products Distribution division reported a loss on operations during the recent quarter. As planned, revenues from third party logistics services continued to decline, while personal healthcare products and medical consumable sales increased significantly as compared with the prior period. As recently announced, the division has launched its "United Family Baby Care" brand of products in select retail pharmacies in Beijing and Shanghai. This is the first Chindex wholly-owned brand to be brought to market. This launch is part of our transition away from lower margin logistical services to higher margin business. The division currently has several additional United Family product lines under development.
Chindex is an American company operating in several healthcare sectors of the Chinese marketplace, including Hong Kong. It provides representative and distribution services to a number of major multinational companies including Siemens AG (ultrasound systems), and Guidant (interventional cardiology products including stents, balloon catheters and guide wires). Its distribution channels to the retail pharmacy industry in China have been developed through a relationship with a major multinational cosmetics manufacturer. It also provides healthcare services through the operations of its private hospital corporation in China. With twenty-three years of experience, over 700 employees, and operations in the United States, China and Hong Kong, the Company's strategy is to expand its cross-cultural reach by providing leading edge technologies, quality products and services to Greater China's professional communities. Further company information may be found at the Company's websites, www.chindex.com and www.unitedfamilyhospitals.com.
Some of the information in this release may contain statements regarding future expectations, plans, prospects for performance of the Company that constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. The Company cannot guarantee future results, levels of activity, performance or achievements. The numbers discussed in this release also involve risks and uncertainties. The following factors, among others, could cause actual results to differ materially from those described by such statements: our ability to manage our growth and maintain adequate controls, the loss of services of key personnel, general market conditions including inflation or foreign currency fluctuations , our dependence on relationships with suppliers, the timing of our revenues and fluctuations in financial performance, the availability to our customers of third-party financings, product liability claims and product recalls, competition, hiring and retaining qualified sales and service personnel, management of inventory, relations with foreign trade corporations, dependence on sub-distributors and dealers, completion and opening of healthcare facilities, attracting and retaining qualified physicians and other hospital personnel, regulatory compliance, the cost of malpractice insurance , our dependence on our information systems, the economic policies of the Chinese government, the newness and undeveloped nature of the Chinese legal system, the regulation of the conversion of Chinese currency, future epidemics in China such as SARS, the control over our operation by insiders, and those other factors contained in the section titled "Risk Factors" as set forth on page 7 of the Company's Registration Statement on Form S-1 (File No. 333-114299) declared effective by the Securities and Exchange Commission on July 30, 2004, as well as other documents that may be filed by the Company from time to time with the Securities and Exchange Commission. The forward-looking statements and numbers contained herein represent the judgment of the Company, as of the date of this release, and the Company disclaims any intent or obligation to update such forward-looking statements to reflect any change in the Company's expectations with regard thereto or any change in events, conditions, circumstances on which such statements are based.
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CONSOLIDATED
CONDENSED STATEMENTS OF OPERATIONS
(thousands
except share and per share data)
(Unaudited)
|
|
|
Three
months ended |
|
|
|
June
30, 2004 |
June
30, 2003 |
|
|
|
|
|
Product
sales |
$20,879
|
$16,806
|
Healthcare
services revenue |
5,796
|
3,567
|
Total
revenue |
26,675
|
20,373
|
|
|
|
Cost
and expenses |
|
|
|
Product
sales costs |
16,898
|
14,343
|
|
Healthcare
services costs |
4,896
|
3,684
|
|
Selling
and marketing expenses |
2,826
|
2,512
|
|
General
and administrative |
1,552
|
1,560
|
Income
(loss) from operations |
503
|
(1,726)
|
Other
(expenses) and income |
|
|
|
Interest
expense |
(42)
|
(56)
|
|
Interest
income |
8 |
15
|
|
Miscellaneous
(expenses) income - net |
(39)
|
41
|
Income
(loss) before income taxes |
430
|
(1,726)
|
(Provision
for) benefit from income taxes |
(186)
|
388
|
Net
income (loss) |
$244
|
$
(1,338) |
Net
income (loss) per common share - basic |
$
0.05 |
$
(0.36) |
Weighted
average shares outstanding - basic |
4,995,910
|
3,713,047
|
Net
income (loss) per common share - diluted |
$0.04
|
$
(0.36) |
Weighted
average shares outstanding - diluted |
5,729,748
|
3,713,047
|
Share information has been retroactively adjusted to give effect to the stock splits, each in the form of a 100% stock dividend. The stock splits were announced by us on August 6, 2003 with a record date of August 18, 2003 and on December 29, 2003 with a record date of January 10, 2004.
CONSOLIDATED
CONDENSED BALANCE SHEETS
(thousands
except share data)
|
June
30, 2004
Unaudited
|
March
31, 2004
Audited
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ASSETS
|
Current
assets: |
| |
Cash
and cash equivalents |
$13,038
|
$
6,791 |
|
Trade
accounts receivable, less allowance for doubtful accounts of
$1,193 and $1,131, respectively |
|
|
| |
|
Equipment
sales receivables |
14,582
|
15,039
|
| |
|
Patient
service receivables |
2,920
|
2,335
|
| |
Inventories
|
10,416
|
10,363
|
| |
Deferred
income tax |
579
|
467
|
|
Other
current assets |
3,921
|
2,235
|
| |
Total
current assets |
45,456
|
37,230
|
Property
and equipment, net |
9,953
|
8,901
|
Long
term deferred income taxes |
1,334
|
1,334
|
Other
assets |
332
|
386
|
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Total
assets |
$57,075
|
$
47,851 |
LIABILITIES,
MINORITY INTEREST AND STOCKHOLDERS' EQUITY |
Current
liabilities: |
|
|
|
Accounts
payable and accrued expenses |
$25,258
|
$
23,383 |
|
Accrued
contract training |
1,040
|
1,078
|
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Short
term debt or vendor financing |
2,635
|
5,668
|
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Income
taxes payable |
446
|
381
|
|
|
Total
current liabilities |
29,379
|
30,510
|
Long
term debt or vendor financing |
3,105
|
125
|
|
|
Total
liabilities |
32,484
|
30,635
|
Minority
interest |
18
|
18
|
Stockholders'
equity: |
|
|
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Preferred
stock, $.01 par value, 500,000 shares authorized none issued
|
0
|
0
|
| |
Common stock, $.01 par value, 6,800,000 shares authorized, including 800,000 designated Class B: |
|
|
| |
|
Common stock - 4,551,152 and 3,643,152 shares issued and outstanding at June 30 and March 31, respectively |
46
|
36
|
| |
|
Class B stock - 775,000 shares issued and outstanding at June 30 and March 31 |
8
|
8
|
| |
Additional
capital |
29,632
|
22,488
|
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Accumulated
other comprehensive income |
(12)
|
11
|
| |
Accumulated
deficit |
(5,101)
|
(5,345)
|
| |
|
Total
stockholders' equity |
24,573
|
17,198
|
| |
|
Total
liabilities, minority interest and stockholders'
equity
|
$57,075
|
$
47,851 |
SEGMENT
INFORMATION
We have three
reportable segments: Medical Capital Equipment, Healthcare Products
Distribution, and Healthcare Services. We evaluate performance and
allocate resources based on profit or loss from operations before
income taxes, not including gains or losses on our investment portfolio
.
| |
Medical
Capital Equipment |
Healthcare
Products Distribution |
Healthcare
Services |
Total
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As
of June 30, 2004: |
|
|
|
|
Assets
|
$26,612,000
|
$14,020,000
|
$16,443,000
|
$57,075,000
|
For
the quarter ended June 30, 2004: |
|
|
Sales
and service revenue |
$9,662,000
|
$11,217,000
|
$5,796,000
|
$26,675,000
|
Gross
Profit |
2,553,000
|
1,428,000
|
n/a
|
n/a
|
Gross
Profit % |
26%
|
13%
|
n/a
|
n/a
|
Income
(loss) from operations |
$229,000
|
$(391,000) |
$665,000
|
$503,000
|
Other
(expense), net |
(73,000)
|
Minority
interest |
0
|
Income
before taxes |
$430,000
|
| |
Medical
Capital Equipment |
Healthcare
Products Distribution |
Healthcare
Services |
Total
|
As
of March 31,2004: |
|
|
|
|
Assets
|
$22,997,000
|
$12,515,000
|
$12,339,000
|
$47,851,000
|
For
the quarter ended June 30, 2003: |
|
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Sales
and service revenue |
$6,198,000
|
$10,608,000
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$3,567,000
|
$20,373,000
|
Gross
Profit |
1,138,000
|
1,325,000
|
n/a
|
n/a
|
Gross
Profit % |
18%
|
12%
|
n/a
|
n/a
|
Loss
from operations |
$(1,110,000)
|
$(236,000) |
$(380,000)
|
$(1,726,000)
|
Other
(expense), net |
0
|
Minority
interest |
0
|
Loss
before taxes |
$(1,726,000)
|
Inter-segment
transactions were eliminated for the three months ended June 30, 2004
and 2003.
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