UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| /X/ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
OR
| / / |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2003
Commission file number 0-24624
CHINDEX INTERNATIONAL, INC.
| DELAWARE (State or other Jurisdiction of Incorporation or Organization) |
13-3097642 (I.R.S. Employer Identification Number) |
|
| 7201 Wisconsin Avenue, Bethesda, Maryland (Address of principal executive offices) |
20814 (Zip Code) |
(301) 215-7777
(Registrant’s telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ ] No [x]
The number of shares outstanding of each of the issuer’s class of common equity, as of November 3, 2003, was 1,487,878 shares of Common Stock and 387,500 shares of Class B Common Stock.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
| September 30, 2003 | March 31, 2003 | |||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
$ | 6,494,000 | $ | 5,956,000 | ||||||||
Trade accounts receivable, less allowance for doubtful accounts of $1,262,000 and $1,001,000,
respectively |
14,335,000 | 15,030,000 | ||||||||||
Inventories, net |
9,610,000 | 10,886,000 | ||||||||||
Income taxes receivable |
597,000 | 133,000 | ||||||||||
Deferred tax |
870,000 | 892,000 | ||||||||||
Other current assets |
2,122,000 | 1,523,000 | ||||||||||
Total current assets |
34,028,000 | 34,420,000 | ||||||||||
Property and equipment, net |
7,390,000 | 7,285,000 | ||||||||||
Other |
519,000 | 635,000 | ||||||||||
Total assets |
$ | 41,937,000 | $ | 42,340,000 | ||||||||
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Accounts payable and accrued expenses |
$ | 20,940,000 | $ | 22,865,000 | ||||||||
Accrued contract training |
933,000 | 930,000 | ||||||||||
Short term loan payable |
6,774,000 | 696,000 | ||||||||||
Total current liabilities |
28,647,000 | 24,491,000 | ||||||||||
Long term accounts payable |
182,000 | 3,734,000 | ||||||||||
Total liabilities |
28,829,000 | 28,225,000 | ||||||||||
Minority interest |
71,000 | 71,000 | ||||||||||
Stockholders’ equity: |
||||||||||||
Preferred stock, $.01 par value, authorized 5,000 none issued |
— | — | ||||||||||
Common stock, $.01 par value, 6,800,000 shares authorized, including 800,000
designated Class B: |
||||||||||||
Common
stock – 1,487,878 and 1,466,616 shares issued
and outstanding at September 30 and March 31,
respectively |
15,000 | 15,000 | ||||||||||
Class B
stock – 387,500 shares issued and
outstanding at September 30 and March 31 |
4,000 | 4,000 | ||||||||||
Additional capital |
17,497,000 | 17,384,000 | ||||||||||
Accumulated other comprehensive income |
9,000 | 9,000 | ||||||||||
Accumulated deficit |
(4,488,000 | ) | (3,368,000 | ) | ||||||||
Total stockholders’ equity |
13,037,000 | 14,044,000 | ||||||||||
Total liabilities,
minority interest and
stockholders’ equity |
$ | 41,937,000 | $ | 42,340,000 | ||||||||
The accompanying notes are an integral part of the financial statements. Share information retroactively adjusted to give effect to the stock split, in the form of a stock dividend, announced by the Company on August 6, 2003 and having a record date of August 18, 2003.
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended | Six months ended | ||||||||||||||||
| September 30, 2003 | September 30, 2002 | September 30, 2003 | September 30, 2002 | ||||||||||||||
Total sales and service revenue |
$ | 21,155,000 | $ | 17,801,000 | $ | 41,529,000 | $ | 32,769,000 | |||||||||
Cost and Expenses |
|||||||||||||||||
Cost of goods and services sold |
14,003,000 | 11,440,000 | 28,707,000 | 21,435,000 | |||||||||||||
Salaries and payroll taxes |
3,883,000 | 3,392,000 | 8,217,000 | 6,847,000 | |||||||||||||
Travel and entertainment |
636,000 | 670,000 | 1,215,000 | 1,210,000 | |||||||||||||
Other |
2,180,000 | 1,796,000 | 4,664,000 | 3,371,000 | |||||||||||||
Income (loss) from operations |
453,000 | 503,000 | (1,274,000 | ) | (94,000 | ) | |||||||||||
Minority interest |
0 | (6,000 | ) | 0 | (29,000 | ) | |||||||||||
Other (expenses) and income |
|||||||||||||||||
Interest expense |
(63,000 | ) | (16,000 | ) | (119,000 | ) | (23,000 | ) | |||||||||
Interest income |
14,000 | 7,000 | 29,000 | 19,000 | |||||||||||||
Miscellaneous
(expenses) income — net |
(27,000 | ) | (88,000 | ) | 14,000 | (86,000 | ) | ||||||||||
Income (loss) before income taxes |
377,000 | 400,000 | (1,350,000 | ) | (213,000 | ) | |||||||||||
(Provision for) benefit from income taxes |
(158,000 | ) | (224,000 | ) | 230,000 | (23,000 | ) | ||||||||||
Net income (loss) |
$ | 219,000 | $ | 176,000 | $ | (1,120,000 | ) | $ | (236,000 | ) | |||||||
Net income (loss) per common share — basic |
$ | 0.12 | $ | 0.10 | $ | (0.60 | ) | $ | (0.13 | ) | |||||||
Weighted average shares outstanding — basic |
1,870,959 | 1,834,858 | 1,862,554 | 1,775,775 | |||||||||||||
Net income (loss) per common share — diluted |
$ | 0.10 | $ | 0.09 | $ | (0.60 | ) | $ | (0.13 | ) | |||||||
Weighted average shares outstanding — diluted |
2,220,125 | 1,917,460 | 1,862,554 | 1,775,775 | |||||||||||||
The accompanying notes are an integral part of the financial statements. Share information retroactively adjusted to give effect to the stock split, in the form of a stock dividend, announced by the Company on August 6, 2003 and having a record date of August 18, 2003.
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six months ended September 30, | |||||||||
| 2003 | 2002 | ||||||||
OPERATING ACTIVITIES |
|||||||||
Net loss |
$ | (1,120,000 | ) | $ | (236,000 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
|||||||||
Depreciation |
574,000 | 502,000 | |||||||
Inventory write-down |
53,000 | 88,000 | |||||||
Provision for doubtful accounts |
261,000 | 244,000 | |||||||
Changes in operating assets and liabilities: |
|||||||||
Trade receivables |
434,000 | (1,505,000 | ) | ||||||
Inventories |
1,223,000 | (909,000 | ) | ||||||
Income taxes receivable |
(440,000 | ) | (286,000 | ) | |||||
Other current assets |
(599,000 | ) | (191,000 | ) | |||||
Other assets |
114,000 | (107,000 | ) | ||||||
Accounts payable and other liabilities |
(1,923,000 | ) | (122,000 | ) | |||||
Net cash used in operating activities |
(1,423,000 | ) | (2,522,000 | ) | |||||
INVESTING ACTIVITIES |
|||||||||
Purchases of property and equipment |
(679,000 | ) | (1,347,000 | ) | |||||
Net cash used in investing activities |
(679,000 | ) | (1,347,000 | ) | |||||
FINANCING ACTIVITIES |
|||||||||
Proceeds of short term loan payable |
2,527,000 | 2,696,000 | |||||||
Exercise of stock options |
113,000 | 25,000 | |||||||
Net cash provided by financing activities |
2,640,000 | 2,721,000 | |||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
0 | (1,000 | ) | ||||||
Net increase (decrease) in cash and cash equivalents |
538,000 | (1,149,000 | ) | ||||||
Cash and cash equivalents at beginning of period |
5,956,000 | 4,313,000 | |||||||
Cash and cash equivalents at end of period |
$ | 6,494,000 | $ | 3,164,000 | |||||
The accompanying notes are an integral part of the financial statements.
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Common Stock- | Accumulated | |||||||||||||||||||||||||||||||
| Common Stock | Class B | Other | ||||||||||||||||||||||||||||||
| Additional | Accumulated | Comprehensive | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Loss)/Income | Total | |||||||||||||||||||||||||
Balance at
January 1, 2002 |
1,314,638 | $ | 13,000 | 387,500 | $ | 4,000 | $ | 17,303,000 | ($3,701,000 | ) | ($8,000 | ) | $ | 13,611,000 | ||||||||||||||||||
Net income |
259,000 | 259,000 | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 17,000 | 17,000 | ||||||||||||||||||||||||||||||
Comprehensive Income |
276,000 | |||||||||||||||||||||||||||||||
July stock dividend |
133,328 | 2,000 | (2,000 | ) | 0 | |||||||||||||||||||||||||||
Options exercised |
18,650 | 0 | 81,000 | 81,000 | ||||||||||||||||||||||||||||
| Balance at December 31, 2002 | 1,466,616 | $ | 15,000 | 387,500 | $ | 4,000 | $ | 17,384,000 | ($3,444,000 | ) | $ | 9,000 | $ | 13,968,000 | ||||||||||||||||||
Net income |
76,000 | 76,000 | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 0 | 0 | ||||||||||||||||||||||||||||||
Comprehensive Income |
76,000 | |||||||||||||||||||||||||||||||
| Balance at March 31, 2003 (unaudited) | 1,466,616 | $ | 15,000 | 387,500 | $ | 4,000 | $ | 17,384,000 | ($3,368,000 | ) | $ | 9,000 | $ | 14,044,000 | ||||||||||||||||||
Net loss |
(1,120,000 | ) | (1,120,000 | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | 0 | 0 | ||||||||||||||||||||||||||||||
Comprehensive Loss |
(1,120,000 | ) | ||||||||||||||||||||||||||||||
Options exercised |
21,262 | 0 | 113,000 | 113,000 | ||||||||||||||||||||||||||||
| Balance at September 30, 2003 (unaudited) | 1,487,878 | $ | 15,000 | 387,500 | $ | 4,000 | $ | 17,497,000 | ($4,488,000 | ) | $ | 9,000 | $ | 13,037,000 | ||||||||||||||||||
CHINDEX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements of Chindex International, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-month periods ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year.
On March 31, 2003, the Company’s Board of Directors approved a change in the Company’s fiscal year end from December 31 to March 31. The transition period began January 1, 2003 and ended March 31, 2003. The Company’s new fiscal year began April 1, 2003 and will end March 31, 2004. With this change, the Company’s new fiscal year now coincides with its material business cycle.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K and Form 10-K/A for the year ended December 31, 2002 and the transitional filing report on Form 10-QT for the period ended March 31, 2003.
The share information has been restated after giving retroactive effect to the stock split, in the form of a stock dividend, announced by the Company on August 6, 2003 and having a record date of August 18, 2003.
Note 2. INVENTORIES
| September 30, | March 31, | |||||||
| 2003 | 2003 | |||||||
Merchandise inventory |
$ | 6,312,000 | $ | 7,933,000 | ||||
Healthcare services inventory |
258,000 | 221,000 | ||||||
Demonstration inventory, net |
1,284,000 | 968,000 | ||||||
Parts and peripheral inventory |
1,756,000 | 1,764,000 | ||||||
| $ | 9,610,000 | $ | 10,886,000 | |||||
Note 3. PROPERTY AND EQUIPMENT
| September 30, | March 31, | |||||||
| 2003 | 2003 | |||||||
Furniture and equipment |
$ | 6,134,000 | $ | 5,588,000 | ||||
Vehicles |
109,000 | 109,000 | ||||||
Leasehold improvements |
5,984,000 | |||||||