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Chindex International (CHDX)

F4Q08 Earnings Call

June 12, 2008 9:00 am ET


Roberta Lipson - Chief Executive Officer and President

Lawrence Pemble - Executive Vice President and Chief Financial Officer


Hamed Khorsand - BWS Financial

Julie Chen - CRT Capital Group

Lewis Fan - Brean Murray Carret

Unidentified Analyst

Jim Galloway



Welcome to today’s Chindex International fourth quarter earnings conference call. (Operator Instructions) At this time, I would like to turn the conference over to your host, Roberta Lipson.

Roberta Lipson

It’s my pleasure to welcome you all to this conference call in which we will discuss the Chindex International fiscal year 2008 fourth quarter and year-end results. As in the past, we have pre-recorded our initial comments, which will be followed by a live Q&A session.

Joining me today on the call is Larry Pemble, our CFO. Before we proceed with the summary of operating results for the period and an update on recent events, I will ask Larry to read the Safe Harbor statement. Then we will turn to Q&A.

Lawrence Pemble

Statements made in this conference call relating to plans, strategies, objectives, economic performance and trends and other statements that are not description of historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended the Exchange 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 in documents filed by us with the Securities and Exchange Commission from time to time, including without limitation our annual report on Form 10-K and interim reports on Form 10-Q.

Forward-looking statements may be identified by such terms as may, will, should, could, expects, plans, intends, anticipates, beliefs, 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 March 31, 2008 results in a press release this morning, which included our full income statement, balance sheet and divisional results for the year and the fourth quarter period. Assuming you have had a chance to review the press release and to refer to the specific numbers, as usual I use this call to summarize operational results for the period and give updates on the current and upcoming issues in each division of the business.

Our consolidated performance for the year was strong. We reported 23% consolidated top-line growth, income from operations increased by 80%. However, primarily due to non-recurring items in the fourth quarter, which I’ll explain below, the increase in net income was a more modest 34%.

In addition, the effects of our new share issue resulted in basic earnings per share of $0.32 versus $0.29 per share in the previous year. We believe that this is not completely reflective of our ongoing trend of substantial top and bottom-line growth.

Our consolidated performance for the fourth quarter fiscal 2008 was impacted by several unusual adjustments. We reported 40% consolidated top-line growth and a net loss from operations of $2.7 million, primarily due to a one-time interest charge related to the accounting for our JPMorgan convertible bonds. Larry will have additional comments on this in a moment.

We exceeded our objectives for the Healthcare Services division in fiscal 2008. We expected to continue strong same-store growth in revenues and increased profitability. And our annual results reflected this with a strong 37% increase in revenue and 106% increase in operating income and 29% increase in expenses year-on-year.

Our fourth quarter results showed operating profits of over $2.3 million on revenues of $17.5 million. Revenue growth was a 36% increase over the prior period. The increase in operating income was 41%. Expenses increased by 36% quarter-on-quarter and we continue to improve against expected operating standards for hospitals of our size and staffing models.

We believe strongly in the exciting future for United Family Healthcare in China, and as such we completed a major strategic investment program with JPMorgan, IFC and DEG during the year, which will provide us with a total of $105 million in financing. These funds will be used to expand the reach of the United Family Healthcare network including two new joint venture hospitals, one in Beijing and one in Guangzhou, to better meet the growing demand of our Chinese market.

Since our last call, we have been moving forward with both projects. There are many steps in the process of securing the necessary government approvals to build a foreign invested hospital in China. Over the last 90 days, we have moved well along the way toward the establishment of our joint ventures.

A critical component of that process is securing the government’s approvals for land use rights in these locations. Land rights have already been secured in Guangzhou for a choice location and are close to completion in Beijing for a location equally as favorable.

As you might imagine, this is a complex process, and we are working closely with our intended joint venture partners in each city to expedite the approvals. We are also moving forward with preliminary design work on each facility and I will continue to have operating updates for you each quarter.

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