Third-quarter fiscal 2010 results announced by Chindex International

Chindex International, Inc. (Nasdaq: CHDX), a leading independent American provider of Western healthcare products and services in the People's Republic of China, today announced financial results for the third quarter and first nine months of fiscal year 2010.

Financial Highlights: -- Revenue in the third quarter of fiscal year 2010 increased 12% year over year to $46.5 million; -- Net income for the third quarter of fiscal 2010 increased to $3.9 million, or $0.24 per diluted share, from $846,000, or $0.05 per diluted share in the prior year period; -- The Company received a refund of $3.3 million for business tax paid since January 1, 2009 in the Healthcare Services division, equivalent to approximately $0.15 per diluted share; -- Revenue in the first nine months of 2009 increased 16.2% year over year to $129.9 million; -- Net income for the first nine months of 2009 increased to $7.7 million, or $0.48 per diluted share, from $1.5 million, or $0.10 per diluted share in the prior year period.

Roberta Lipson, President and CEO of Chindex, commented, "We are pleased with our profitability and year to date performance which reflect substantial improvements over last year. In the Healthcare Services division we are in a development cycle with operations in the Beijing market experiencing capacity limitations as we build out the expansion facilities. At the same time, operations in the Shanghai and Guangzhou markets continue along expected growth trajectories. The Medical Products division is always subject to quarterly fluctuations, and although we are seeing significant improvements over last year, we are experiencing regulatory delays on high-value medical equipment purchases. Nevertheless, there continues to be significant excitement in the marketplace for our products, particularly for the daVinci surgical robot and the new S/SC 2000 ultrasound platform. As we enter the fourth quarter, and look forward into our next fiscal year, we remain extremely well-positioned to capitalize on China's premium-quality healthcare services market, continued economic vibrancy and opportunities created by healthcare reform."

Revenue in the third quarter of fiscal year 2010 increased 12% to $46.5 million from $41.6 million in the third quarter of fiscal year 2009. Revenue from the Healthcare Services division increased 5% to $21.6 million from $20.5 million in the third quarter of fiscal year 2009, and reflected growing inpatient and outpatient volume offset by disruption due to construction of the expanded facility in Beijing. The Company expects the negative impact of the expansion work to continue through the opening of the expanded facilities, currently planned for the fall of 2010. Revenue from the Medical Products division increased 18% to $24.9 million from $21.1 million in the prior year period, reflecting the increase in sales of women's health imaging products and the delivery of two robotic surgical systems. During this quarter, the Company also recorded revenues of approximately $3.2 million under its current KfW Development Bank contracts.

During the quarter, the Company recorded income from operations of $6.6 million, compared to income from operations of $1.9 million in the same quarter last year. Income from operations includes the benefit of a $3.3 million business tax refund related to the Healthcare Services division. This tax refund is equivalent to approximately $0.15 per diluted share. Total operating costs and expenses for the third quarter of fiscal year 2010 were flat on a year over year basis and included $269,000 of development and startup expenses for new clinics, equivalent to $0.02 per diluted share, and non-cash stock compensation expense of $888,000, or $0.05 per diluted share. In the prior period, the Company's development and startup expense were $662,000, or $0.04 per diluted share, and non-cash stock compensation expense was $810,000, or $0.05 per diluted share.

The Company recorded a $2.7 million provision for taxes, or an effective tax rate of 41.1%, in the third quarter of fiscal year 2010 as compared to a provision for taxes of $658,000, or an effective tax rate of 43.7%, in the prior year period. The tax rate reflects losses in entities for which the Company cannot yet recognize a benefit.

Net income for the quarter ended December 31, 2009 was $3.9 million, or $0.24 per diluted share. Excluding the tax refund explained above, net income for the third quarter of fiscal year 2010 would be $1,497,000, or $0.09 per diluted share. This compares to net income of $846,000, or $0.05 per diluted share, in the prior year period.

Healthcare Services division business results:

For the third quarter of fiscal year 2010, revenue increased 5% to $21.6 million from $20.5 million for the prior year quarter. The increase reflected growing inpatient and outpatient volume offset by disruption due to construction of the expanded facility in Beijing.

Excluding the $3.3 million tax benefit discussed above, operating costs increased by 5% to $19.3 million, and income from operations before foreign exchange gains increased to $5.6 million from $2.1 million in the prior year period.

Lipson continued, "We were pleased to see our revenue increase sequentially and on a year over year basis despite the temporary disruption at our BJU facility, which should more than double our capacity by calendar year-end. We were also particularly excited to receive a $3.3 million business tax rebate and receive a business tax exemption going forward. We believe this treatment from authorities in the for-profit hospital sector, is evidence that healthcare reform efforts in China will continue to drive growth throughout the sector and further enhance our position as the leading, private sector provider in the premium-care market."

Medical Products division business results:

For the third quarter of fiscal year 2010, revenue increased 18% to $24.9 million from $21.1 million in the prior year quarter. Revenue performance mainly reflected increases in sales of women's health imaging products and delivery of two robotic surgical systems.

Revenue performance year to date also reflects continued delays in the order cycle for high value capital medical equipment, particularly for robotic surgical systems, resulting from the Chinese government's review of these technologies as well as the overall timing of the tender process in China. Sales excluding daVinci were lower than the prior year period, reflecting the introduction of a new generation of technology in diagnostic ultrasound which replaced the previous market leading product. During this quarter, the Company also recorded revenues of approximately $3.2 million under its current KfW Development Bank contracts.

Gross profit for the Medical Products division increased to $7.3 million from $5.6 million in the prior year's third quarter, representing an increase in gross profit margin to 29% from 26% in the year over year period. The variance in gross profit margin is in line with historical averages.

Lipson concluded, "The government's review of high value technologies used in public hospitals is a routine process impacting new, big ticket medical products. We believe that the review itself substantiates the continued demand we see for premium medical technology in China, and bodes well for future sales across our portfolio despite causing disruptions to daVinci sales this quarter."

SOURCE Chindex International, Inc.