Chindex International, Inc. Reports Financial Results for the Fourth Quarter and Full Year of 2011
Published: Mar 12, 2012
BETHESDA, Md., March 9, 2012 /PRNewswire-Asia/ -- 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 fourth quarter and full year of 2011 ended December 31, 2011.
Fourth Quarter 2011 Financial Highlights
- Revenue from healthcare services increased 22% to $31.9 million from $26.1 million in the prior year period.
- Adjusted EBITDA rose to $6.2 million, compared to Adjusted EBITDA of $4.3 million in the prior year period.
- Income from operations was $2.1 million compared to $2.8 million in the prior year period, primarily due to ramp up of new services and facilities.
- Net income was $1.2 million, or $0.07 per diluted share, compared to net income of $1.7 million, or $0.10 per diluted share, in the prior year period.
- Development, pre-opening and start-up expense was $2.6 million compared to $675,000 in the prior year period.
Roberta Lipson, President and CEO of Chindex, commented, "We had a strong fourth quarter of 2011, with revenue growing 22% to $31.9 million year over year. Adjusted EBITDA increased 44% in the quarter to $6.2 million, representing a 19% adjusted EBITDA margin. For the full year of 2011, we are pleased to deliver 20% year over year growth during our first year as a pure play healthcare services company. This has been a year focused on expansion through strengthening traffic at our existing facilities and building out new facilities. Our revenue performance has begun to reflect contribution from our efforts, with growth rates rising in the second half of 2011 to the mid-teens and low-twenties."
"Looking forward to 2012, Chindex will remain dedicated to bringing our unique experience of premium, private healthcare to more consumers, across more service offerings and in more locations throughout China. We expect revenue growth to further accelerate to the mid-twenties, driven by strong demand in existing facilities as well as growing contribution from new facility openings, and adjusted EBITDA margin to remain stable in the mid-teens. Again, we stress that we believe our adjusted EBITDA performance is the best metric for judging our operational performance throughout this period of intensive hospital network expansion."
"Overall, the UFH network is well-positioned as a leading provider of premium healthcare services in Beijing, Shanghai, Tianjin and Guangzhou. These affluent metropolitan cities with rapid economic development, growing international populations and widening target patient bases offer significant room for expansion. Moreover, we believe our plans are well-timed with increasingly favorable policies and growing market demand to achieve increasing top-line growth and steady profitability."
"We would like to also help investors better understand contributions from our Chindex Medical Limited joint venture. Late in the fourth quarter, CML shipped a daVinci surgical robot system which could not be recognized as revenue in 2011 under CML's accounting policy for equipment sales. The associated revenue and gross margin will not be recognized until 2012 when the system is installed. As a result, contribution from CML during the fourth quarter was immaterial. Nevertheless, we are pleased with CML's first year of operations, which contributed significantly to our bottom line. In the coming year, we believe CML's progress in obtaining SFDA approval and initiating marketing activities for new imaging products for sale in the China market and expansion of its manufacturing base through strategic capital investments in its dental business will continue to drive growth. For the near term, however, we expect our contribution from CML to remain steady but moderate in growth."
Fourth Quarter 2011 Financial Results
Fourth quarter 2011 revenue from healthcare services increased 22% to $31.9 million from $26.1 million in the prior year period, reflecting continued growth of inpatient and outpatient volume across the United Family Healthcare network as well as nascent contributions from the phased opening of the expansion of the Company's flagship hospital in Beijing. Outpatient services contributed 58% of revenue and inpatient services contributed 42% of revenue in the fourth quarter of 2011, compared to 59% and 41%, respectively, in the prior year period. By service line, for the fourth quarter ended December 31, 2011, surgical services contributed 19%, OB/GYN contributed 16%, pediatrics contributed 9%, ancillary services contributed 33% and other services contributed 23% of revenue.
Operating expenses for the three months ended December 31, 2011 increased 22% to $29.8 million from $24.4 million in the prior year period primarily reflecting the Company's ongoing expansion efforts. Salaries, wages and benefits in the fourth quarter of 2011 increased 23% to $17.3 million from $14.1 million in the prior year period reflecting a growth in headcount to drive revenue growth and support development activities. Development, pre- and post-opening and start up expenses for the Beijing United expansion, Shanghai Pudong expansion, Tianjin United Family ramp up and Beijing United Family Rehabilitation Hospital were $2.6 million this quarter, compared to $675,000 for the prior year period. Operating expenses also included certain non-cash expenses including $630,000 of stock compensation expense compared to $1.0 million for the prior year period.
Adjusted EBITDA in the fourth quarter of 2011 increased to approximately $6.2 million, representing a 19% adjusted EBITDA margin, compared to $4.3 million in the prior year period driven by consistent profitability of existing facilities.
Income from operations was $2.1 million compared to $2.8 million in the prior year period reflecting the deconsolidation of the medical products division.
The Company recorded a $835,000 provision for taxes in the fourth quarter of 2011 compared to a provision for taxes of $979,000 in the prior year period.
Net income for the quarter ended December 31, 2011 was $1.2 million, or $0.07 per diluted share, compared to $1.7 million, or $0.10 per diluted share, in the prior year period. For the fourth quarter of 2011, weighted average diluted shares outstanding were 17.2 million.
Full year 2011 Financial Results
During the full year ended December 31, 2011, revenue from healthcare services increased 20% to $114.4 million from $95.4 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 for the full year of 2011, compared to 60% and 40%, respectively, in the year ago period. By service line, surgical services contributed 18%, OB/GYN contributed 15%, pediatrics contributed 8%, ancillary services contributed 33% and other services contributed 26% of revenue for the year ended December 31, 2011.
Operating expenses for the full year 2011 increased 25% to $108.7 million from $87.1 million in the prior year period primarily due to increased staffing, office and administrative supplies associated with the Company's ongoing development and expansion plans. Development, pre-opening and start up expenses, including post-opening expenses, rose to $7.8 million from $2.1 million 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 $3.1 million of non-cash stock compensation expense.
Adjusted EBITDA was approximately $19.0 million compared to $14.1 million in the prior year period.
Income from operations was $5.7 million compared to income from operations of $10.7 million in the prior year period reflecting the deconsolidation of the medical products division.
Provision for taxes was $3.7 million compared to $4.3 million in the prior year period.
Net income was $3.2 million, or $0.20 per diluted share, compared to net income of $6.3 million, or $0.40 per diluted share, in the prior year period. For the full year ended December 31, 2011, weighted average diluted shares outstanding were 17.4 million.
As of December 31, 2011, the Company had $60.3 million in unrestricted cash, cash equivalents and investments.
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.
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.
For the fourth quarter of 2011, the Company recognized immaterial income from its equity interest reflecting the deferral of revenue related to CML's sale of a daVinci surgical robot system. For the full year ended December 31, 2011, the Company recognized $1.1 million for its equity interest in CML. In recognizing its 49% interest in the net income of CML for these periods, Chindex also included additional expenses for amortization of certain fair value adjustments made in connection with the formation of the joint venture.
Management will host a conference call at 8:00 am ET Monday morning on March 12, 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 telephone replay will be available from the day of the call until March 19, 2012 by dialing (U.S. domestic) 1-855-859-2056 or (international) 1-404-537-3406, passcode 54338362. 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, 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 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.