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Chindex International, Inc. Reports Financial Results for Fourth Quarter and Full Year of 2013

BETHESDA, Md., March 17, 2014 /PRNewswire/ -- Chindex International, Inc. (NASDAQ: CHDX), an American healthcare company providing premium quality healthcare services in China through the operations of United Family Healthcare ("UFH"), a network of private primary care hospitals and affiliated ambulatory clinics, today announced financial results for the fourth quarter and full year of 2013 ended December 31, 2013.

Fourth Quarter 2013 Financial Highlights

  • Revenue from healthcare services increased 12% to $48.8 million from $43.5 million in the prior year period.
  • Adjusted EBITDA increased 4% to $9.4 million from $9.0 million in the prior year period.
  • Development, pre-opening and start-up expense was $4.1 million, compared to $2.8 million in the prior year period.
  • Income from operations was $976,000, compared to income from operations of $4.0 million in the prior year period.
  • Net loss was $2.1 million, or $(0.12) per diluted share, compared to net income of $3.5 million, or $0.20 per diluted share, in the prior year period.

Roberta Lipson, President and CEO of Chindex, commented, "We are proud of our operational and financial achievements for the fourth quarter and full year of 2013.  We grew across key financial and operating metrics, despite regulatory factors that carried over from the previous quarter.  The delayed openings at our Beijing Rehabilitation Hospital and Shanghai Quankou Clinic have shifted their respective timelines for significant revenue generation to 2014. We also continued to assist new physicians at our Shanghai United Family Hospital develop their patient base.  However, overall we finished the year with an expanded network, more comprehensive services, a more expansive team of specialized medical professionals, and a stronger platform for growth." 

"The past few months mark the beginning of another exciting period for Chindex.  On top of steady operational execution, we announced a strategic merger agreement to take our Company to a new phase. We are excited about the opportunities this major initiative can offer Chindex and the UFH network," concluded Lipson.

Business Updates

On February 17, 2014, the Company announced that it has entered into a definitive merger agreement (the "Merger") with a buyer consortium (the "Buyer Consortium") of an affiliate of TPG (together with its affiliates, "TPG"), an affiliate of Shanghai Fosun Pharmaceutical (Group) Co., Ltd. ("Fosun"), and Ms. Roberta Lipson, the CEO of the Company, in a transaction having an implied equity value of approximately $369 million.

Fourth Quarter 2013 Financial Results

Fourth quarter 2013 revenue from healthcare services increased 12% to $48.8 million from $43.5 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 expansion of the Company's flagship hospital in Beijing. Overall, outpatient services contributed 58% and inpatient services contributed 42% of revenue, compared with 55% and 45%, respectively, in the prior year period. By service line, surgical services contributed 18.8%, OB/GYN contributed 13.9%, pediatrics contributed 9.8%, ancillary services contributed 28.5%, internal medicine contributed 3.3%, emergency room contributed 3.2%, dental contributed 1.8%, family medicine 2.0% and other clinical service lines contributed 18.7% of revenue.

Operating expenses in the fourth quarter of 2013 increased 21% to $47.8 million from $39.5 million in the prior year period. The increase was primarily driven by other operating expenses including the fees for the legal and professional services related to the Company's February merger announcement. Salaries, wages and benefits in the fourth quarter of 2013 increased 22% to $27.2 million from $22.3 million in the prior year period, reflecting a 19% increase in headcount to support revenue growth and development activities, including newly recruited staff for the Company's Beijing United Family Rehabilitation Hospital, United Family Quankou Clinic in Shanghai, and Tianjin United Family Hospital. Development, pre- and post-opening and start-up expenses were $4.1 million this quarter, compared to $2.8 million for the prior year period.  These expenses were driven by the aforementioned development projects as well as the fees for legal and other professional services of $1.3 million related to the merger announcement. Operating expenses also included certain non-cash expenses including $948,000 of stock-based compensation expense compared to $857,000 for the prior year period.

Adjusted EBITDA in the fourth quarter of 2013 increased 4% to $9.4 million, compared to $9.0 million in the prior year period. The Adjusted EBITDA results reflected a slower growth cycle associated with the delayed opening of the Beijing United Family Rehabilitation Hospital, the Quankou clinic and expanded investment in network infrastructure projects.  

Income from operations was $976,000, compared to income from operations of $4.0 million in the prior year period.

The Company recorded a $1.9 million provision for taxes in the fourth quarter of 2013, compared to the tax provision of $2.3 million in the prior year period. As in past quarters, the current period provision continued to be impacted by losses in development and start-up entities for which the Company cannot currently recognize tax benefits.

Net loss for the quarter ended December 31, 2013 was $2.1 million, or $(0.12) per diluted share, compared to net income of $3.5 million, or $0.20 per diluted share, in the prior year period. This included income from our minority interest in CML of $81,000 this year compared to an income of $1.6 million in the prior year period. For the fourth quarter of 2013, weighted average diluted shares outstanding were 17.4 million.

As of December 31, 2013, the Company had $33.1 million in unrestricted cash, cash equivalents and investments.

Full Year 2013 Financial Results

During the full year of 2013, revenue from healthcare services increased 18% to $179.4 million from $152.4 million in the prior year period, reflecting growing inpatient and outpatient volume across the United Family Healthcare network. Outpatient services contributed 57% of revenue and inpatient services contributed 43% of revenue in the full year of 2013 compared with 58% and 42%, respectively, for the full year of 2012. By service line, surgical services contributed 19.6%, OB/GYN contributed 13.9%, pediatrics contributed 8.2%, ancillary services contributed 29.0%, internal medicine contributed 3.4%, emergency room contributed 3.5%, dental contributed 2.6%, family medicine 1.9% and other services contributed 17.9% of revenue.

Operating expenses for the full year of 2013 increased 24% to $176.7 million from $142.9 million in the prior year period. Development, pre-opening and start-up expenses increased to $13.4 million from $11.2 million in the prior year period primarily as a result of delayed project openings, new pipeline projects, as well as legal and other professional service fees of $2.5 million related to the Company's merger agreement. Operating expenses also included certain non-cash expenses including $4.2 million of non-cash stock compensation expense compared to $3.4 million for the prior year. Income from operations was $2.7 million, compared to income from operations of $9.5 million in the prior year period. Adjusted EBITDA was approximately $29.0 million, compared to $28.2 million in the prior year period.

Provision for taxes was $6.5 million, compared to $6.8 million in the prior year period. Net loss was $6.1 million, or $(0.36) per diluted share, compared to net income of $4.1 million, or $0.24 per diluted share, in the full year of 2012. Net loss included a loss from the Company's equity interest in CML of $1.2 million this year compared to a gain of $1.0 million in the prior year period. For the full year of 2013 ended December 31, 2013, weighted average diluted shares outstanding were 16.8 million.

Chindex Medical Limited

For Chindex Medical Limited (CML), a joint venture between Shanghai Fosun Pharmaceutical (Group) Co., Ltd. ("Fosun Pharma") and Chindex International, Chindex recognized its 30% interest in CML's net income using the equity method of accounting since the acquisition of Alma Lasers, Inc. on May 27, 2013.

In the fourth quarter of 2013, Chindex recognized $81,000 in income for its equity interest in CML. For the full year of 2013, the Company recognized a loss of $1.2 million for its equity interest in CML.

The operating results of CML in 2013 were negatively impacted by restructuring at the Ministry of Health, uncertainty surrounding proposed government reforms and the disruption to normal hospital purchasing activity due to the government campaign to improve compliance in the public hospitals' purchasing activities, all of which has led to an overall slowdown in business activity among capital medical equipment markets in China.

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 and equity in earnings (loss) of unconsolidated affiliate. 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 Monday, March 17, 2014 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. The conference ID is 8857389. A webcast and replay 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 premium quality 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 with a future facility under construction in Qingdao. 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 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 Annual Report on Form 10-K for the year ended December 31, 2013, 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 STATEMENTS OF OPERATIONS

(in thousands except share and per share data)














Three months ended December 31,

Year ended December 31,

2013

2012

2013

2012






Healthcare services revenue

$48,788

$43,514

$179,388

$152,442







Operating expenses






Salaries, wages and benefits

27,218

22,275

102,885

83,264


Other operating expenses

7,837

6,583

26,993

22,287


Supplies and purchased medical services

6,061

5,225

22,012

18,807


Bad debt expense

1,008

919

4,211

3,179


Depreciation and amortization

2,971

2,190

10,468

7,458


Lease and rental expense

2,717

2,335

10,138

7,937


47,812

39,527

176,707

142,932






(Loss) income from operations

976

3,987

2,681

9,510






Other income and (expenses)






Interest income

228

324

963

811


Interest expense

-1,500

-100

-2,252

-456


Equity in income (loss) of unconsolidated affiliate

81

1,589

-1,154

1,016


Miscellaneous income (expense) - net

-13

15

134

10

(Loss) income before income taxes

-228

5,815

372

10,891

Provision for income taxes

-1,896

-2,338

-6,505

-6,799

Net (loss) income

($2,124)

$3,477

($6,133)

$4,092







Net (loss) income per common share - basic

($0.12)

$0.21

($0.36)

$0.25

Weighted average shares outstanding - basic

17,379,221

16,479,526

16,805,718

16,374,054







Net (loss) income per common share - diluted

($0.12)

$0.20

($0.36)

$0.24

Weighted average shares outstanding - diluted

17,379,221

17,714,155

16,805,718

17,727,996

 

CHINDEX INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)








December 31, 2013

December 31, 2012

ASSETS



Current assets:



 Cash and cash equivalents

$33,107

$33,184

 Restricted cash

1,286

754

    Accounts receivable, less allowance for doubtful accounts of

        $14,338 and $10,612, respectively

23,041

19,564

    Receivables from affiliates

2,897

2,110

 Inventories of supplies, net

2,781

2,328

 Deferred income taxes

4,763

3,209

 Other current assets

3,787

3,798

Total current assets

71,662

64,947

Restricted cash and sinking funds

19,262

20,351

Investment in unconsolidated affiliate

34,178

34,847

Property and equipment, net

113,838

97,952

Noncurrent deferred income taxes

811

925

Other assets

4,817

3,428

Total assets

$244,568

$222,450

LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:



Short-term debt 

$3,648

$1,586

Accounts payable

11,705

9,520

Payable to affiliates

1,977

1,334

Accrued expenses

17,984

14,712

Other current liabilities

11,408

8,558

Income taxes payable 

3,658

2,772

Total current liabilities

50,380

38,482

Long-term debt and convertible debentures

26,715

32,812

Long-term deferred rent

1,223

828

Long-term deferred tax liability

231

262

Total liabilities

78,549

72,384

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 – 16,934,753 and 15,904,836 shares issued and

169

159

                              outstanding at December 31, 2013 and December 31, 2012, 

                              respectively

 Class B stock – 1,162,500 shares issued and outstanding at December 31, 

12

12

             2013 and December 31, 2012, respectively

   Additional paid-in capital

140,809

122,109

Retained earnings 

12,450

18,583

Accumulated other comprehensive income

12,579

9,203

            Total stockholders' equity

166,019

150,066

            Total liabilities and stockholders' equity

$244,568

$222,450

 

CHINDEX INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)




Year ended December 31,


2013


2012


OPERATING ACTIVITIES





Net income

$ (6,133)


$   4,092


Adjustments to reconcile net income to net cash provided by 





          operating activities:  





     Depreciation and amortization

10,468


7,458


     Inventory write down

105


48


     Provision for doubtful accounts

4,211


3,179


     Loss on disposal of property and equipment

46


39


     Equity in net income of unconsolidated affiliate

1,154


(1,016)


     Deferred income taxes

(1,329)


162


     Stock based compensation

4,183


3,362


     Foreign exchange (gain) loss 

(639)


373


     Amortization of debt issuance costs

272


9


     Amortization of debt discount

1,232


247


Changes in operating assets and liabilities:





     Restricted cash

-


-


     Accounts receivable

(6,994)


(8,736)


     Receivables from affiliate

(787)


8,873


     Inventories of supplies

(479)


(63)


     Other current assets and other assets

(1,500)


101


     Accounts payable, accrued expenses, other current





       liabilities and deferred revenue

1,094


11,333


     Payable to affiliate

642


(8,070)


     Income taxes payable

787


623


Net cash provided by operating activities

6,333


22,014


INVESTING ACTIVITIES





     Purchases of short-term investments and CDs

-


-


     Proceeds from redemption of CDs

-


26,535


     Purchases of property and equipment

(16,650)


(39,278)


     Net cash used in investing activities

(16,650)


(12,743)


FINANCING ACTIVITIES





     Restricted cash from (to) IFC RMB loan sinking funds

450


(11,036)


     Restricted cash from (to) China Exim debt collateral

760


(9,037)


     Proceeds from debt

11,000


11,109


     Repayment of debt

(1,584)


(802)


     Repurchase of restricted stock for income tax withholding

(1,006)


(293)


     Proceeds from exercise of stock options 

533


112


Net cash provided by (used in) financing activities

10,153


(9,947)


Effect of foreign exchange rate changes on cash and cash equivalents

87


105


Net (decrease) increase in cash and cash equivalents

(77)


(571)


Cash and cash equivalents at beginning of period

33,184


33,755


Cash and cash equivalents at end of period

$ 33,107


$ 33,184







Supplemental disclosures of cash flow information:





Cash paid for interest

$      917


$      551


Cash paid for taxes

$   7,118


$   6,094







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





Change in property and equipment additions included in accounts 





payable and payable to affiliates

$   6,822


$      529


Conversion of JPM debt to equity

$15,000


$           -


 

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














Three months ended December 31,

Year ended December 31,


2013

2012

2013

2012






Consolidated net (loss) income 

($2,124)

$3,477

($6,133)

$4,092






Adjustments:





          Depreciation and amortization

2,971

2,190

10,468

7,458

          Provision for income taxes

1,896

2,338

6,505

6,799

          Interest expense

1500

100

2,252

456

          Interest and other income, net

-215

-339

-1,097

-821

          Development, pre-opening and start-up expense

4,145

2,779

13,416

11,236

          Equity in (income) loss of unconsolidated affiliate

-81

-1,589

1,154

-1,016

          Nonrecurring transactions costs 

1,293

0

2,485

0







11,509

5,479

35,183

24,112






Adjusted EBITDA

$9,385

$8,956

$29,050

$28,204

 

Contact:

ICR, Inc.


Bill Zima


(+86) 10-6583-7511


(646) 328-2510

 

SOURCE Chindex International, Inc.

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