Concord Medical Announces First Quarter 2010 Financial Results
BEIJING, May 27, 2010 /PRNewswire via COMTEX/ --Concord Medical Services Holdings Limited ("Concord Medical" or the "Company") (NYSE: CCM), the operator of the largest network of radiotherapy and diagnostic imaging centers in China, today announced its unaudited financial results for the first quarter ended March 31, 2010(1).
First Quarter Fiscal 2010 Highlights -- Total net revenues in the first quarter of 2010 were RMB76.2 million ($11.2 million), a 36.6% increase from the corresponding period in 2009. -- Gross profit in the first quarter of 2010 was RMB49.1 million ($7.2 million), a 30.4% increase from the corresponding period in 2009. -- Non-GAAP Net income(2) in the first quarter of 2010 was RMB24.2 million ($3.5 million), a 10.7% increase from the corresponding period in 2009. -- Both Non-GAAP basic and diluted earnings per American Depository Share ("ADS")(3) for the first quarter of 2010 were RMB0.49 ($0.07). -- Adjusted EBITDA(4) (non-GAAP) in the first quarter of 2010 was RMB57.9 million ($8.5 million), a 19.8% increase from the corresponding period in 2009. -- Concord Medical opened one center in the first quarter of 2010, bringing the total number of centers in operation to 89 across 37 cities in China, as of March 31, 2010. To date, the Company has entered into agreements to establish 38 new centers. -- The number of treatment patient cases and diagnostic patient cases was 6,868 and 26,562 during the first quarter of 2010, respectively. Treatment patient cases increased by 18.2% from the corresponding period in 2009. Diagnostic patient cases increased by 100.8% from the corresponding period in 2009. (1) This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB6.8258 to US$1.00, the effective noon buying rate as of March 31, 2010 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. (2) Non-GAAP net income is defined in this announcement as net income excluding share-based compensation expenses, which amounted to RMB2.6 million ($0.4 million) for the first quarter of 2010. The Company did not incur share-based compensation expenses for the first quarter of 2009. (3) Each ADS represents three ordinary shares of the Company. (4) Adjusted EBITDA is defined in this announcement as net income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include change in fair value of convertible notes, foreign exchange loss and other income.
"We are pleased with our solid financial results for the first quarter despite the usual seasonality factor associated with the Chinese New Year holiday," said Dr. Jianyu Yang, director, president and chief executive officer of Concord Medical. "In addition, we made good progress toward our goal of operating at least 200 radiotherapy and diagnostic imaging centers by 2012. We opened one new center in the first quarter, acquired four centers in April, and our first specialty hospital, the Chang'an CMS International Cancer Center, is on track to begin operations in June 2010. Looking forward, we will continue to grow both organically and through acquisitions. On top of the four centers acquired in April, we also expect to open eight to ten centers organically in the second quarter, and will continue to explore additional acquisition targets for 2010."
Dr. Yang added, "We continue to receive encouraging signals from industry regulators. On May 7, 2010, the Chinese State Council issued a new statement reiterating its intention to enhance the scope and quality of healthcare services by attracting more private investments. As the operator of the largest network of radiotherapy and diagnostic imaging centers in China, we are confident that Concord Medical is well positioned to benefit from the favorable market environment supported by medical reform policies and increasing consumer demand for world-class cancer treatment."
Mr. Boxun Zhang, Concord Medical's corporate vice president, commented, "In the first quarter of 2010, we achieved strong top line growth and made good progress toward our full year operational and financial targets. For the rest of the year, we will continue to enhance operational and financial efficiency while supporting our network expansion with our strong financial resources. As a newly listed company, we are also committed to fulfilling the requirements of Sarbanes Oxley Section 404, and we are in the process of reviewing our internal control mechanisms accordingly."
First Quarter Fiscal 2010 Results
Concord Medical reported total net revenues of RMB76.2 million ($11.2 million) for the first quarter of 2010, representing a 36.6% increase from the corresponding period in 2009, primarily due to patient volume growth from established centers as well as from new centers opened in 2009.
Cost of revenues in the first quarter of 2010 was RMB27.0 million ($4.0 million), a 49.8% increase from the corresponding period in 2009, primarily due to increased depreciation expenses related to new centers opened in 2009.
Gross profit margin in the first quarter of 2010 was 64.5% as compared to 67.6% in the corresponding period in 2009. The marginal decrease was primarily due to new centers opened in the second half of 2009 having lower gross profit margin in their ramp-up periods comparing to established centers.
Operating expenses, consisting of selling expenses and general and administrative expenses, were RMB17.6 million ($2.6 million) in the first quarter of 2010, compared to RMB13.3 million in the previous quarter and RMB7.1 million in the corresponding period in 2009. The increase in operating expenses was mainly due to additional accrued expenses associated with post- IPO professional service charges, such as legal and auditing fees, and share- based compensation expenses, which are amortized through the year using the straight line method.
Operating Income was RMB31.5 million ($4.6 million), representing a 2.9% increase from the corresponding period in 2009. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB34.1 million ($5.0 million), an 11.4% increase from the corresponding period in 2009.
Income tax expense was RMB8.5 million ($1.2 million), compared to an income tax expense of RMB6.7 million in the corresponding period in 2009. The effective tax rate for the first quarter of 2010 was 28.3% as compared to 22.9% in the previous quarter and 23.5% in the corresponding period in 2009. The increase in the effective tax rate was in relation to share-based compensation expenses and professional service expenses paid by off-shore subsidiaries being not directly tax deductable at on-shore entities.
Net income was RMB21.6 million ($3.2 million), representing a 1.2% decrease from the corresponding period in 2009. Both basic and diluted earnings per ADS for the first quarter of 2010 amounted to RMB0.44($0.06).
Net income excluding share-based compensation expenses (non-GAAP) was RMB24.2 million ($3.5 million), a 10.7% increase from the corresponding period in 2009. Both Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) for the first quarter of 2010 amounted to RMB0.49($0.07).
Adjusted EBITDA (non-GAAP), was RMB57.9 million ($8.5 million) for the first quarter of 2010, representing a 19.8% increase from the corresponding period in 2009.
Capital expenditure for the first quarter of 2010 was RMB81.4 million ($11.9 million). Total depreciation expenses were RMB17.1 million ($2.5 million). In addition, amortization of acquired intangibles was RMB6.7 million ($1.0 million). The Company expects amortization of acquired intangibles to be approximately RMB26.8 million ($3.9 million) in 2010, assuming no additional intangibles are acquired through potential acquisitions.
As of March 31, 2010, the Company had total fixed assets with a net book value of RMB592.3 million ($86.8 million) and cash of RMB993.6 million ($145.6 million).
As of March 31, 2010, the Company had bank credit lines totaling RMB2.1 billion (US$314.2 million).
Accounts receivable was RMB112.5 million ($16.5 million) as of March 31, 2010, similar to RMB111.3 million as of December 31, 2009.
Outlook for Fiscal Year 2010
Taking into consideration the projected contribution from the four recently acquired centers, Concord Medical raises the estimated range of total net revenues for 2010 to RMB367 million to RMB398 million, which would represent a 25.5% to 36.1% increase from 2009.
Also as a result of the recent acquisition, the Company raises its network expansion target to 34 to 39 radiotherapy and diagnostic imaging centers in 2010, and the range of expected total capital expenditures related to these new centers to RMB400 million to RMB450 million.
This forecast reflects Concord Medical's current and preliminary view, which is subject to change.
Conference Call Information
Concord Medical's management will hold an earnings conference call at 8 AM on May 27, 2010 U.S. Eastern Time (8 PM on May 27, 2010Beijing/Hong Kong time).
Dial-in details for the earnings conference call are as follows: US: +1 866.730.5766 China: + 10.800.152.1490 (North) / 10.800.130.0399 (South) Hong Kong: + 800.96.3844 International: +1 857.350.1590 Passcode: 87425784
A replay of the conference call may be accessed by phone at the following number until June 3, 2010:
US: + 1.888.286.8010 International: + 1.617.801.6888 Passcode: 58084651
Additionally, a live and archived webcast of this conference call will be available at http://ir.cmsholdings.com/ .
About Concord Medical
Concord Medical operates the largest network of radiotherapy and diagnostic imaging centers in China in terms of revenues and the total number of centers in operation per available statistics. The Company currently operates a network of more than 89 centers spanning 37 cities and 21 provinces and administrative regions in China. Under long-term arrangements with top- tier hospitals in China, the Company provides radiotherapy and diagnostic imaging equipments and manages the daily operations of these centers located on its hospital partners' premises. The Company also provides ongoing training to doctors and other medical personnel in its network of centers to ensure a high level of clinical care for patients.
Safe Harbor Statement
This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "may," "plan," "project," "predict," "should" and "will" and similar expressions. These forward looking statements are based upon management's current views and expectations with respect to future events and are not a guarantee of future performance. Furthermore, these statements are, by their nature, subject to a number of risks and uncertainties that could cause actual performance and results to differ materially from those discussed in the forward-looking statements as a result of a number of factors. Such factors include: the number of new radiotherapy and diagnostic imaging centers opened; the increase in the number of patients in existing centers; the establishment of specialty cancer hospitals; changes in the healthcare industry in China, including changes in the healthcare policies and regulations of the PRC government; and technological or therapeutic changes affecting the field of cancer treatment and diagnostic imaging. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission at www.sec.gov. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
About Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles (GAAP), Concord Medical uses certain non-GAAP measures. The Company presents certain of its financial information that is adjusted from results based on GAAP to exclude the impact of share-based compensation expense. The Company believes excluding share-based compensation expense from its non-GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results as such expense is not directly attributable to the underlying performance of the Company's business operations and do not impact its cash earnings. Concord Medical also believes these non-GAAP measures excluding share-based compensation expense are important in helping investors to understand the Company's current financial performance and future prospects and to compare business trends among different reporting periods on a consistent basis. In addition, Concord Medical also presents the non-GAAP measure of Adjusted EBITDA, which is defined in this announcement as net (loss) income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include change in fair value of convertible notes, foreign exchange loss and other income. Furthermore, Adjusted EBITDA eliminates the impact of items that the Company does not consider indicative of the performance of its network of centers. The Company believes investors will similarly use Adjusted EBITDA as one of the key metrics to evaluate its financial performance and to compare its current operating results with corresponding historical periods and with other companies in the healthcare services industry. The presentation of these additional measures should not be considered a substitute for or superior to GAAP results or as being comparable to results reported or forecasted by other companies. The non-GAAP measures have been reconciled to GAAP measures in the attached financial statements.
For investor and media inquiries, please contact: China Stephanie Song Concord Medical Services Phone: +86-10-5957-5287 Email: firstname.lastname@example.org Lilian Wong Brunswick Group, LLC Phone: +86-10-6566-2256 Email: email@example.com U.S. Nicki Kahner Brunswick Group, LLC Phone: +1-212-333-3810 Email: firstname.lastname@example.org Concord Medical Services Holdings Co., Ltd. Unaudited Condensed Consolidated Balance Sheets (in thousand) December 31, March 31, 2009 2010 RMB RMB US$ ASSETS Current assets Cash 1,037,239 993,597 145,565 Restricted cash, current portion 293 593 87 Accounts receivable 111,328 112,527 16,486 Prepayment and other current assets 100,484 119,552 17,516 Deferred tax assets, current portion 3,168 2,788 408 Total current assets 1,252,512 1,229,057 180,062 Non-current assets Property, plant and equipment, net 584,869 592,265 86,769 Goodwill 300,163 300,163 43,975 Acquired intangible assets, net 155,345 148,641 21,776 Deposits for non-current assets 115,323 144,480 21,167 Deferred tax assets, non-current portion 19,700 20,531 3,008 Net investment in financing lease -- 23,176 3,395 Other non-current assets 11,532 50,149 7,347 Restricted cash, non-current portion 4,421 6,564 962 Total non-current assets 1,191,353 1,285,969 188,399 Total assets 2,443,865 2,515,026 368,461 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Short-term bank borrowing 11,500 27,000 3,956 Long-term bank borrowings, current portion 35,647 31,424 4,604 Accounts payable 9,759 9,822 1,439 Accrual for purchase of property, plant and equipment 12,043 10,120 1,483 Obligations under capital leases, current portion 3,582 3,582 525 Accrued expenses and other liabilities 48,663 47,486 6,957 Income tax payable 14,642 14,996 2,197 Deferred revenue, current portion 10,401 12,012 1,760 Amounts due to related parties 1,546 1,617 237 Total current liabilities 147,783 158,059 23,158 Non-current liabilities Long-term bank borrowings, non-current portion 102,755 132,009 19,340 Deferred revenue, non-current portion 5,188 12,964 1,899 Obligations under capitalized leases, non-current portion 8,074 7,412 1,086 Lease deposit 1,000 1,000 147 Deferred tax liabilities, non-current portion 25,317 25,920 3,797 Total non-current liabilities 142,334 179,304 26,269 Total liabilities 290,117 337,363 49,427 Commitments and contingencies Shareholders' equity Ordinary shares 108 108 16 Additional paid-in capital 2,671,910 2,674,496 391,822 Accumulated other comprehensive loss (3,987) (4,237) (621) Accumulated deficit (514,283) (492,704) (72,183) Total shareholders' equity 2,153,748 2,177,663 319,034 Total liabilities and shareholders' equity 2,443,865 2,515,026 368,461 *Amounts for the year ended December 31, 2009 were derived from the December 31, 2009 unaudited consolidated financial statements. Concord Medical Services Holdings Co., Ltd. Unaudited Condensed Consolidated Statements of Income (in thousand, except per ADS data) For The Three Months Ended March 31, March 31, 2009 2010 RMB RMB US$ Revenue, net Lease and management services 47,349 71,707 10,505 Management services 8,323 2,721 399 Other, net 79 1,753 257 Total net revenues 55,751 76,181 11,161 Cost of revenues Lease and management services (11,171) (20,336) (2,979) Amortisation of acquired intangibles (6,882) (6,704) (982) Management services (3) (1) (0) Total cost of revenues (18,056) (27,041) (3,962) Gross profit 37,695 49,140 7,199 Operating expenses Selling expenses (1,316) (2,093) (307) General and administrative expenses (5,754) (15,529) (2,275) Operating income 30,625 31,518 4,617 Interest expense (1,638) (1,980) (290) Foreign exchange loss (663) (776) (114) Gain from disposal of equipment -- 344 50 Interest income 224 975 143 Income before income taxes 28,548 30,081 4,407 Income tax expense (6,709) (8,503) (1,246) Net income 21,839 21,578 3,161 Accretion of Series A contingently redeemable convertible preferred shares (7,951) -- -- Accretion of Series B contingently redeemable convertible preferred shares (12,796) -- -- Net income attributable to ordinary shareholders 1,092 21,578 3,161 Earnings per ADS Basic /Diluted 0.05 0.44 0.06 Weighted average number of ADS outstanding: Basic /Diluted 23,476,033 49,151,833 49,151,833 Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures (*) (in RMB thousands, unaudited) Three months ended Three months ended March 31, 2009 March 31, 2010 GAAP Adjust- Non-GAAP GAAP Adjust- Non-GAAP Result ment Results Result ment Results Operating profit 30,625 -- 30,625 31,518 2,586 34,104 Net income 21,839 -- 21,839 21,578 2,586 24,164 Net income attributable to ordinary shareholders -- -- -- -- -- -- Basic (Loss) earning per ADS 0.05 -- 0.05 0.44 0.05 0.49 Diluted (Loss) earning per ADS 0.05 -- 0.05 0.44 0.05 0.49 (*) The adjustment is only for share-based compensation. Reconciliation from net income to adjusted EBITDA(*) (in RMB thousands, unaudited) Three months ended Three months ended March 31, 2009 March 31, 2010 Net income 21,839 21,578 Interest expense, net 1,414 1,005 Income taxes expense (benefit) 6,709 8,503 Depreciation and amortization 17,753 23,842 Share-based compensation -- 2,586 Other adjustments 663 432 Adjusted EBITDA 48,378 57,946 (*) Definition of adjusted EBITDA: Adjusted EBITDA is defined as net (loss) income plus interest, taxes, depreciation and amortization, share-based compensation expenses and other adjustments. Other adjustments include change in fair value of convertible notes, foreign exchange loss and other income.
SOURCE Concord Medical Services Holdings Limited