Chindex International fiscal 2010 net income up 65.3%

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 fourth quarter and fiscal year ended March 31, 2010.

Financial Highlights: -- Revenue of $171.2 million in the fiscal year 2010 -- Operating income up 76.6% year over year to $14.4 million in the fiscal year 2010 -- Net income up 65% year over year to $8.2 million in the fiscal year 2010, or $0.52 per diluted share, from $5.0 million, or $0.31 per diluted share in the prior year

Roberta Lipson, President and CEO of Chindex, commented, "We are pleased with our fiscal year 2010 financial results in which we demonstrated steady growth in Healthcare Services of 8% and increased profitability for the firm as a whole. We remain enthusiastic about the healthcare services and medical device market opportunity in China, particularly with the confluence we see in China right now, specifically economic development, government support for leading providers and consumer demand for premium care."

Fourth Quarter 2010 Financial Results

Revenue in the fourth quarter of fiscal year 2010 decreased 30.9% to $41.3 million from $59.7 million in the fourth quarter of fiscal year 2009, reflecting continued growth in Healthcare Services offset by revenue performance in the Medical Products division. Revenue from the Healthcare Services division increased 4.9% to $21.2 million from $20.2 million in the fourth quarter of fiscal year 2009, and reflected growing inpatient and outpatient volume across the network despite construction-related disruption at the Company's Beijing facility. Consistent with prior quarters, Chindex expects the 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 was down 49.1% to $20.1 million from $39.5 million in the prior year period. The Company believes that the Ministry of Health Class A review process and timing, along with a general uncertainty around healthcare reform and expenditure, undermined this division's performance in the fourth quarter of fiscal 2010.

Income from operations in the fourth quarter of fiscal year 2010 was $1.1 million, compared to income from operations of $3.9 million in the same quarter last year. Total operating costs and expenses for the fourth quarter of fiscal year 2010 decreased 28.1% to $40.1 million from $55.8 million in the prior year period, primarily reflecting the decrease of 52.2% in product sales costs to $14.6 million in the fourth quarter of 2010. Operating costs also included $236,000 of development and startup expenses for new clinics, equivalent to $0.01 per diluted share, and non-cash stock compensation expense of $853,000 or $0.05 per diluted share. In the prior year period, the Company's development and startup expense were $536,000, or $0.03 per diluted share, and non-cash stock compensation expense was $848,000, or $0.05 per diluted share.

The Company recorded a $791,000 provision for taxes, an effective tax rate of 60.6%, in the fourth quarter of fiscal year 2010 as compared to a provision for taxes of $615,000, or an effective tax rate of 15.3%, 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 March 31, 2010 was $515,000, or $0.04 per diluted share. This compares to net income of $3.4 million, or $0.22 per diluted share, in the prior year period.

Healthcare Services division business results:

In the fourth quarter of fiscal year 2010, revenue increased 4.9% to $21.2 million from $20.2 million in the prior year period. The increase reflects growing inpatient and outpatient volume across the Company's network offset by near-term disruption related to expansion construction in Beijing.

In the fourth quarter of fiscal year 2010, operating costs were flat on a year over year basis at $18.8 million, and income from operations before foreign exchange loss increased 75.4% to $2.4 million from $1.3 million in the prior year period.

Lipson continued, "Our growth this quarter was consistent with our expectations and reflects continued demand for services across our network, offset slightly by construction-related disruption at our Beijing facility, where we are more than doubling our capacity by calendar year-end. We moved several exciting projects forward this quarter including officially launching the New Hope Oncology Center, entering design phase for the new facility in Tianjin, as well as meeting further demand for our services in Shanghai and Guangzhou. Overall, we remain uniquely positioned as a leading premium provider in China's healthcare services space and we are looking forward to more progress in the fiscal year ahead."

Medical Products division business results:

For the fourth quarter of fiscal year 2010, revenue was $20.1 million, down 49.1% from $39.5 million in the prior year period. Revenue performance mainly reflects the Ministry of Health's Class A review process and timing, which impacts daVinci order flow, along with a general uncertainty around healthcare reform and expenditure, which impacts overall demand and order for medical devices.

Gross profit for the Medical Products division was $5.5 million, compared to $9.0 million in the prior year period. Gross margin was 28% compared to 23% in the prior year period, in line with historical averages and revenue mix. Selling, marketing, general and administrative expenses for the Medical Products division decreased to $5.9 million from $6.3 million in the fourth quarter of the prior year.

Revenue from the Medical Products division was $85.4 million in the fiscal year 2010, a decrease of 7.2% from $92.1 million in the prior year. Gross profit in the division was $23.4 million, which yielded a gross margin of 27%, compared to $23.1 million, which yielded a gross margin of 25%, in the fiscal year 2009. Selling, marketing, general and administrative expenses for the Medical Products division increased 5.2% to $23.7 million from $22.6 million in the prior year, reflecting the increased selling activity.

Lipson added, "Despite the temporary challenges in our Medical Products division, we believe the medical device market in China remains extremely compelling. We believe order and shipment delays related to the regulatory review of high-value technologies is a temporary reality which substantiates the overall demand in the market for these products. Additionally, we are delighted to announce today our strategic partnership with Fosun Pharmaceuticals, a transformative event for Chindex and for our Medical Products division in particular."

Full Year 2010 Financial Results

During the fiscal year 2010, revenue remained flat on a year over year basis at $171.2 million, compared to $171.4 million in the prior year. Revenue from the Healthcare Services division increased 8.1% to $85.8 million from $79.4 million in fiscal year 2009. Revenue from the Medical Products division was $85.4 million, down 7.2% from $92.1 million in the prior year.

Income from operations increased 76.6% to $14.4 million for the full year ended March 31, 2010, from $8.2 million in the prior year. Total operating costs and expenses for the fiscal year 2010 decreased 4.0% to $156.8 million from $163.3 million in the prior year.

The Company recorded a $6.1 million provision for taxes, or an effective tax rate of 42.6%, in the fiscal year 2010, compared to a provision for taxes of $2.7 million, or an effective tax rate of 35.1%, for the fiscal year 2009.

In the fiscal year 2010, net income increased 65.3% to $8.2 million, or $0.52 per diluted share, from $5.0 million, or $0.31 per diluted share, in the prior year. Non-cash stock compensation expense was $3.3 million during the fiscal year 2010 compared to $2.9 million in the prior year.