Chindex International, Inc. Reports Fourth Quarter and Full Year 2012 Financial Results

BETHESDA, Md., March 14, 2013 /PRNewswire/ -- Chindex International, Inc. (NASDAQ: CHDX), an American health care company providing health care 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 2012 ended December 31, 2012.

Fourth Quarter 2012 Financial Highlights

• Revenue from healthcare services increased 36% to $43.5 million from $31.9 million in the prior year period.
• Adjusted EBITDA rose by 45% to $9.0 million from $6.2 million in the prior year period.
• Development, pre-opening and start-up expense was $2.8 million compared to $2.6 million in the prior year period.
• Income from operations increased 90% to $4.0 million from $2.1 million in the prior year period.
• Net income increased 196% to $3.5 million, or $0.20 per diluted share, compared to net income of $1.2 million, or $0.07 per diluted share, in the prior year period.

Roberta Lipson, President and CEO of Chindex, commented, "UFH's expanding capacity allowed us to accommodate increased seasonal traffic at the onset of winter as well as better serve scheduled treatments and surgeries, resulting in exceptionally strong quarterly top-line growth of 36%. Throughout 2012, we focused on strengthening our market positioning and ramping up new facilities and service lines. This level of revenue growth along with a 45% jump in adjusted EBITDA profitability testify to the merits of our strategy."

"Since the fourth quarter, we have seen important progress in development projects throughout our network. The Beijing United Family Rehabilitation Hospital has entered the final stage of licensing and regulatory approvals and is expected to begin limited operations within the first half of 2013. The recently opened Beijing United CBD Clinic has been caring for patients since the beginning of 2013, extending the platform of our international-standard patient-centric services to Beijing's busiest commercial and cultural hub. In Shanghai, based on encouraging market response to our hospital and clinic facilities there, we are working on a significant expansion of the affiliated clinic we opened last year."

"Throughout 2013, we intend to continue to focus on expanding geographically and across service lines. In line with this strategy, we plan to bolster operating infrastructure and technology platforms to support growth, service efficiency and quality, and solidify a basis for sustainable long-term shareholder returns. In 2013, we expect full year revenue growth to be in the mid to high-twenties level driven by strong demand in existing facilities as well as growing contribution from new facility openings. We expect adjusted EBITDA growth to be in the mid to high-teens. We once again stress that we believe adjusted EBITDA performance to be the best metric to measure our operational achievements as we carry out our network expansion across multiple fronts which include unprecedented, pioneering projects in China's healthcare sector. Development, preopening and start-up expenses are expected to be approximately $14 million primarily driven by our new Beijing United Family Rehabilitation Hospital and Tianjin United Family Hospital's second year of operations. Lastly, equity contribution from our medical technology joint venture, Chindex Medical Limited ("CML"), is expected to provide a positive contribution to earnings in the same general range as we have seen in 2012 and 2011."

Fourth Quarter 2012 Financial Results

Fourth quarter 2012 revenue from healthcare services increased 36% to $43.5 million from $31.9 million in the prior year period. These results reflect continued growth of in-patient and out-patient volume across the United Family Healthcare network as well as increasing contributions from the phased expansion of the Company's flagship hospital in Beijing. Out-patient services contributed 55% and in-patient services contributed 45% of revenue, compared with 58% and 42%, respectively, in the prior year period. By service line, surgical services contributed 19.9%, OB/GYN contributed 16.7%, pediatrics contributed 9.4%, ancillary services contributed 31.1% and other clinical service lines contributed 22.8% of revenue.

Operating expenses in the fourth quarter of 2012 increased 32% to $39.5 million from $29.8 million in the prior year period. These costs were primarily driven by the Company's recently opened expansions as well as development of new facilities. Salaries, wages and benefits in the fourth quarter of 2012 increased 29% to $22.3 million from $17.3 million in the prior year period, reflecting a 32% increase in headcount to support revenue growth and development activities, including newly recruited staff now on-board in anticipation of the opening of the Company's Beijing United Family Rehabilitation Hospital. Development, pre- and post-opening and start-up expenses were $2.8 million this quarter, compared to $2.6 million for the prior year period. These expenses were driven by development projects across all markets, including particularly the Beijing United Family Rehabilitation Hospital and the ramp-up of Tianjin United Family Hospital. Operating expenses also included certain non-cash expenses including $857,000 of stock-based compensation expense compared to $630,000 for the prior year period.

Adjusted EBITDA in the fourth quarter of 2012 increased 45% to approximately $9.0 million from $6.2 million in the prior year period. The Adjusted EBITDA margin in the fourth quarter was 21%, exceeding management's upper-teen percentage guidance. The Adjusted EBITDA results illustrate the consistent and improving profitability and expanding earnings base of existing UFH facilities.

Income from operations increased to $4.0 million from $2.1 million in the prior year period.

The Company recorded a $2.3 million provision for taxes in the fourth quarter of 2012 compared to $835,000 in the prior year period. As in past quarters, the current period provision continued to be heavily impacted by losses in development and start-up entities for which the Company cannot currently recognize tax benefits.

Net income for the quarter ended December 31, 2012 was $3.5 million, or $0.20 per diluted share, compared to net income of $1.2 million, or $0.07 per diluted share, in the prior year period. For the fourth quarter of 2012, weighted average diluted shares outstanding were 17.7 million.

As of December 31, 2012, the Company had $33.2 million in unrestricted cash, cash equivalents and investments.

Full Year 2012 Financial Results

During the full year ended December 31, 2012, revenue from healthcare services increased 33% to $152.4 million from $114.4 million in the prior year period, reflecting growing in-patient and out-patient volume across the United Family Healthcare network. Out-patient services contributed 58% of revenue and in-patient services contributed 42% of revenue for the full year of 2012, compared to 59% and 41% respectively in the year ago period. By service line, surgical services contributed 20.2%, OB/GYN contributed 15.8%, pediatrics contributed 8.3%, ancillary services contributed 32.3% and other services contributed 23.4% of revenue.

Operating expenses for the full year 2012 increased 31% to $142.9 million from $108.7 million in the prior year period. Development, pre-opening and start up expenses rose to $11.2 million from $7.8 million in the prior year period primarily as a result of expenses related to the Company's Beijing and Tianjin projects. Operating expenses also included certain non-cash expenses including $3.4 million of non-cash stock compensation expense compared to $3.2 million for the prior year.

Income from operations increased 68% to $9.5 million compared to income from operations of $5.7 million in the prior year period.

Adjusted EBITDA increased 49% to $28.2 million from $19.0 million in the prior year period, reflecting a 19% margin, meeting the Company's upper teens target for the year.

Net income was $4.1 million, or $0.24 per diluted share, compared to net income of $3.2 million, or $0.20 per diluted share, in the prior year period. For the full year ended December 31, 2012, the weighted average diluted shares outstanding were 17.7 million.

Chindex Medical Limited

For Chindex Medical Limited, a joint venture (CML) between Shanghai Fosun Pharmaceutical (Group) Co., Ltd. ("Fosun Pharma") and Chindex International, Chindex recognizes its 49% interest in CML's net income using the equity method of accounting. In the fourth quarter and full year ended December 31, 2012, Chindex recognized income of $1.6 million and $1.0 million, respectively, for its 49% equity in the operating results of CML. This consisted of income of $1.7 million and $1.5 million, respectively, for the stand-alone net income (loss) of CML (after recognition of stock-based compensation expense) and after deducting $129,000 and $515,000, respectively, for the amortization of basis differences attributable to acquired intangibles. The results are consistent with the Company's expectations.

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, equity in earnings (loss) income of unconsolidated affiliate, non-recurring charges for Chindex Medical Limited (CML) joint venture formation. 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 Thursday morning on March 14, 2013 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 98477085. 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 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 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, 2012, 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