Chindex International, Inc. (Chindex) has reported total revenues of $41.6 million for the third quarter of fiscal 2009, up 16%, compared with the total revenues of $36 million in the year-ago quarter. It has reported a net income of $0.84 million, or $0.05 per diluted share, for the third quarter of fiscal 2009, compared with the net income of $3.9 million, or $0.28 per diluted share, in the year-ago quarter.
Revenue from the healthcare services division increased 16% to $20.5 million from $17.7 million in the third quarter of fiscal year 2008, and revenue from the medical products division increased 15% to $21.1 million from $18.3 million in the prior year period.
During the quarter, the company recorded income from operations of $1.9 million, compared to income from operations of $3.9 million in the same quarter last year. Total operating costs and expenses for the third quarter of fiscal year 2009 increased 24% to $39.7 million as against $32.1 million in the prior period. Increased operating costs reflect $662,000 of development and startup expenses for new clinics, as well as costs for the renewal of multi-year physician contracts, additional medical personnel in our Beijing and Shanghai hospitals, increased direct patient care costs and increased medical products selling activities.
Roberta Lipson, president and chief executive officer of Chindex, commented, “We made substantial progress this quarter in our KfW and U.S. Export-Import Bank contracts and remain confident that we can complete deliveries of the remaining $18.4 million by the end of this fiscal year. We are also keeping a close eye on the healthcare reform in China and continue to believe that Chindex is well positioned to benefit from these efforts over the long term.”
As earlier disclosed, in October 2008, the company redeemed variable- return CDs and reinvested the funds in traditional deposits with guaranteed returns, given the unfavorable economic outlook. This change was made to minimize the effect of the significant disruptions in the world financial and credit markets. In connection with this, the company recognized a pretax expense of $653,000, or $0.03 per diluted share, reflecting the early redemption of the CDs and related write offs and tax benefit.
The company recorded a $658,000 provision for taxes, or an effective tax rate of 43.7%, in the three months ended December 31, 2008 as compared to a provision for taxes of $76,000, or an effective tax rate of 1.9%, for the three months ended December 31, 2007.
The current period tax expense includes the negative effect of losses in entities for which Chindex cannot recognize a benefit in accordance with SFAS 109, “Accounting for Income Taxes.” The company’s effective tax rate was low in the prior year period due to an increase in its net deferred tax assets resulting from an increase in the projected profitability in future periods of entities in the US and China.
Net income in the third quarter of fiscal 2009 includes $662,000 of expenses, or $0.03 per diluted share, related to development expenses for expansion of the United Family Healthcare network, as well as $653,000, or $0.03 per diluted share, in connection with variable-return CDs described above.
Fiscal 2009 guidance:
Lipson stated, “We continue to expect Medical Products revenue of $50-$55 million for the second half of fiscal 2009, as we should see considerable product shipments in the fourth quarter. For Healthcare Services, we anticipate that our full year revenue growth should be in the mid-twenty percent range. We are adjusting our growth rate expectation to account for the delay in opening the Shanghai Pudong Clinic and the later than expected start up of our Guangzhou clinic.”
“Demand for our products and services remains strong and we have not seen an impact as a result of the world-wide financial crisis. Given the policies implemented by China in response to the crisis, we are optimistic that our business growth opportunities will not be substantially impacted by the current situation.”