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Chindex International Inc. (CHDX)

Q4 2007 Earnings Call

February 8, 2008 10:00 am ET


Roberta Lipson – Co-founder, CEO, Pres

Larry Pemble – CFO


Eugene Teel – Private Investor

Hamed Khorsand - BWS Financial

Anthony Petrone - Maxim Group


Roberta Lipson

It is my pleasure to welcome you to this conference call in which we will discuss the Chindex International Fiscal Year 2008 Third Quarters results. As in the past, we have prerecorded our initial comments, which will be followed by live Q&A session.

Joining me on the call today is Larry Pemble, our CFO.

Before we proceed to the summary of operating results for the period and an update on recent events, I will like Larry to read the Safe Harbor Statement and then we will turn to Q&A. Larry, please read the Safe Harbor Statement.

Larry Pemble

Thank you, Roberta and good morning everyone. Statements made in this conference call 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 anticipated due to a number of factors, which include, but are not limited to, the factors set forth and documents filed by us with Securities and Exchange Commission from time to time including without limitation in our annual report on Form 10-K for the year ended March 31, 2007, and interim reports on Form 10-Q. 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 we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We have no obligation to update these forward- looking statements.

Roberta Lipson

We announced our December 31, 2007 results in the press release this morning which included our full income statement, balance sheet and divisional results for the period. Please refer to the press release for the specific numbers. As in the past, I will use this call to summarize operational results for the quarter and give updates on the current and upcoming issues in each division of the business.

Our consolidated performance for the Third Quarter Fiscal 2008 was really excellent. Re reported 19% consolidated top-line growth, 473% increase in net income and 400% increase in basic earnings per share. Our consolidated performance for the nine-month period was also excellent. We reported 17% consolidated top-line growth, 206% increase in net income and 150% increase in basic earnings per share. A portion of the improvement net income and EPS relates to our tax provisions for the period which Larry will comment on in more detail in a moment.

Most divisions performed well in the third quarter and we are gratified to report profitable performance in the medical products division for the second quarter in a row. Our objectives for fiscal 2008 are to continue strong same historical growth and revenues, and increase profitability in the healthcare services division while initiating a new generation of future growth through major expansion of the UFH network and to regain historical growth rate and profitable operations in the medical products division through the existing business platforms and strategic partnerships.

I am pleased to report that we are on track to meet our objectives for the year in both divisions.

We reported another good quarter in the healthcare services division, which were increased in operating profits of over $3.2 million on revenues of $17.7 million. Revenue growth was 39% increase over the prior period. The increase in operating income was a tremendous 187%. Expenses increased 25% quarter-on-quarter and we continued to improve against the expected operating standards for hospitals of our size and staffing model.

At our last earnings call, we were very happy to announce a major strategic investment program with JP Morgan. Since that time, we have completed a series of equity and debt financing as well including the JP Morgan transaction and equity and debt transaction with IFC and a debt transaction with DEG that will provide us with a total of $105 million and financing. Larry will have some comments on the details of these transactions in a moment.

As you know, the purpose of the financing is to provide funds for the expansion of our healthcare system in China, including two new joint venture hospitals, one in Beijing and one in Guangzhou. Since finalizing these transactions, we have turned our focus to moving forward on these projects. There are many steps in the process of securing the necessary government approvals to build foreign-invested hospitals in China. We are at the very beginning of the process in each project. I will have operating updates for you in future quarters. At this stage, together with our intended JV partners in the process of finalizing land use rights.

During the third quarter, we have made significant progress on new clinic facilities for United Family Outpatient Centers in the Pudong side of Shanghai and in Guangzhou. We are planning for both clinics to open in June 2008. The Wuxi United Family International Healthcare Center, which we have been contracted to manage is close to opening. We view this facility as both a further expansion of our footprint in Eastern China, a theater-clinic which will bring new inpatient business to our Shanghai Hospital as well as an opportunity to explore the model of the United Family Management of Non-Owned Facilities.

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