UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 31, 2003
Commission file number 0-24624
CHINDEX INTERNATIONAL, INC.
| DELAWARE | 13-3097642 | |
| (State or other Jurisdiction of | (I.R.S. Employer | |
| Incorporation or Organization) | Identification Number) | |
| 7201 Wisconsin Avenue, Bethesda, Maryland | 20814 | |
| (Address of principal executive offices) | (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 þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o No þ
The number of shares outstanding of each of the issuer’s class of common equity, as of February 3, 2004, was 3,043,428 shares of Common Stock and 775,000 shares of Class B Common Stock.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
| December 31, 2003
|
March 31, 2003
|
|||||||
| ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 4,952,000 | $ | 5,956,000 | ||||
Trade
accounts receivable, less allowance for doubtful accounts of $1,462,000 and $1,001,000, respectively |
14,205,000 | 15,030,000 | ||||||
Inventories, net |
9,567,000 | 10,886,000 | ||||||
Income taxes receivable |
0 | 133,000 | ||||||
Deferred tax |
1,742,000 | 892,000 | ||||||
Other current assets |
2,218,000 | 1,523,000 | ||||||
Total current assets |
32,684,000 | 34,420,000 | ||||||
Property and equipment, net |
8,869,000 | 7,285,000 | ||||||
Other |
570,000 | 635,000 | ||||||
Total assets |
$ | 42,123,000 | $ | 42,340,000 | ||||
| LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 21,756,000 | $ | 22,865,000 | ||||
Accrued contract training |
804,000 | 930,000 | ||||||
Short term loan payable |
6,499,000 | 696,000 | ||||||
Income taxes payable |
112,000 | 0 | ||||||
Total current liabilities |
29,171,000 | 24,491,000 | ||||||
Long term loan payable |
154,000 | 3,734,000 | ||||||
Total liabilities |
29,325,000 | 28,225,000 | ||||||
Minority interest |
10,000 | 71,000 | ||||||
Stockholders’ equity: |
||||||||
Preferred stock, $.01 par value, authorized 500,000 none issued |
— | — | ||||||
Common stock, $.01 par value, 6,800,000 shares authorized, including 800,000
designated Class B: |
||||||||
Common stock — 3,043,428 and 2,933,232 shares
issued and outstanding at December 31 and March 31,
respectively |
30,000 | 29,000 | ||||||
Class B stock — 775,000 shares issued and
outstanding at December 31 and March 31,
respectively |
8,000 | 8,000 | ||||||
Additional capital |
17,602,000 | 17,366,000 | ||||||
Accumulated other comprehensive income |
9,000 | 9,000 | ||||||
Accumulated deficit |
(4,861,000 | ) | (3,368,000 | ) | ||||
Total stockholders’ equity |
12,788,000 | 14,044,000 | ||||||
Total liabilities,
minority interest and
stockholders’ equity |
$ | 42,123,000 | $ | 42,340,000 | ||||
The accompanying notes are an integral part of the financial statements. Share information retroactively adjusted to give effect to the stock splits, each in the form of a 100% stock dividend, announced by the Company on August 6, 2003 and December 29, 2003.
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| Three months ended | Nine months ended | |||||||||||||||
| December 31,2003
|
December 31,2002
|
December 31,2003
|
December 31,2002
|
|||||||||||||
Total sales and service revenue |
$ | 21,630,000 | $ | 22,270,000 | $ | 63,159,000 | $ | 55,039,000 | ||||||||
Cost and Expenses |
||||||||||||||||
Cost of goods and services sold |
14,124,000 | 15,192,000 | 42,831,000 | 36,627,000 | ||||||||||||
Salaries and payroll taxes |
4,325,000 | 3,573,000 | 12,541,000 | 10,420,000 | ||||||||||||
Travel and entertainment |
844,000 | 954,000 | 2,060,000 | 2,164,000 | ||||||||||||
Other |
2,858,000 | 2,069,000 | 7,522,000 | 5,440,000 | ||||||||||||
(Loss) income from operations |
(521,000 | ) | 482,000 | (1,795,000 | ) | 388,000 | ||||||||||
Minority interest |
0 | 79,000 | 0 | 50,000 | ||||||||||||
Other (expenses) and income |
||||||||||||||||
Interest expense |
(67,000 | ) | (27,000 | ) | (186,000 | ) | (50,000 | ) | ||||||||
Interest income |
10,000 | 25,000 | 39,000 | 44,000 | ||||||||||||
Miscellaneous income (expenses) -net |
76,000 | (22,000 | ) | 90,000 | (108,000 | ) | ||||||||||
(Loss) income before income taxes |
(502,000 | ) | 537,000 | (1,852,000 | ) | 324,000 | ||||||||||
Benefit from (provision for) income taxes |
119,000 | 150,000 | 349,000 | 127,000 | ||||||||||||
Net (loss) income |
$ | (383,000 | ) | $ | 687,000 | $ | (1,503,000 | ) | $ | 451,000 | ||||||
Net (loss) income per common share — basic |
$ | (0.10 | ) | $ | 0.19 | $ | (0.40 | ) | $ | 0.13 | ||||||
Weighted average shares outstanding — basic |
3,757,370 | 3,708,232 | 3,735,861 | 3,603,777 | ||||||||||||
Net (loss) income per common share — diluted |
$ | (0.10 | ) | $ | 0.19 | $ | (0.40 | ) | $ | 0.12 | ||||||
Weighted average shares outstanding — diluted |
3,757,370 | 3,713,415 | 3,735,861 | 3,654,156 | ||||||||||||
The accompanying notes are an integral part of the financial statements. Share information retroactively adjusted to give effect to the stock splits, each in the form of a 100% stock dividend. The stock splits were announced by the Company on August 6, 2003 with a record date of August 18, 2003 and on December 29, 2003 with a record date of January 10, 2004.
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine months ended December 31, | ||||||||
| 2003
|
2002
|
|||||||
OPERATING ACTIVITIES |
||||||||
Net (loss) income |
$ | (1,503,000 | ) | $ | 451,000 | |||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation |
961,000 | 772,000 | ||||||
Inventory write-down |
99,000 | 101,000 | ||||||
Provision for doubtful accounts |
461,000 | 280,000 | ||||||
Deferred tax benefits |
(850,000 | ) | (660,000 | ) | ||||
Minority interest |
0 | (50,000 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Trade receivables |
364,000 | (4,010,000 | ) | |||||
Inventories |
1,220,000 | (2,146,000 | ) | |||||
Income taxes, net |
247,000 | 348,000 | ||||||
Other current assets |
(695,000 | ) | 147,000 | |||||
Other assets |
64,000 | 71,000 | ||||||
Accounts payable and other liabilities |
(1,235,000 | ) | 4,871,000 | |||||
Net cash (used in) provided by operating activities |
(867,000 | ) | 175,000 | |||||
INVESTING ACTIVITIES |
||||||||
Purchases of property and equipment |
(2,546,000 | ) | (3,067,000 | ) | ||||
Investment in equity joint venture |
0 | (2,000 | ) | |||||
Net cash used in investing activities |
(2,546,000 | ) | (3,069,000 | ) | ||||
FINANCING ACTIVITIES |
||||||||
Proceeds of short term loan payable |
2,223,000 | 4,855,000 | ||||||
Exercise of stock options |
247,000 | 25,000 | ||||||
Funds (paid to) received from minority investor |
(61,000 | ) | 120,000 | |||||
Net cash provided by financing activities |
2,409,000 | 5,000,000 | ||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
0 | (3,000 | ) | |||||
Net (decrease) increase in cash and cash equivalents |
(1,004,000 | ) | 2,103,000 | |||||
Cash and cash equivalents at beginning of period |
5,956,000 | 4,313,000 | ||||||
Cash and cash equivalents at end of period |
$ | 4,952,000 | $ | 6,416,000 | ||||
The accompanying notes are an integral part of the financial statements.
CHINDEX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Accumulated | ||||||||||||||||||||||||||||||||
| Common Stock | Common Stock-Class B | Other | ||||||||||||||||||||||||||||||
| Additional | Accumulated | Comprehensive | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Loss)/Income | Total | |||||||||||||||||||||||||
Balance
at January 1, 2002 |
657,319 | $ | 7,000 | 193,750 | $ | 2,000 | $ | 17,303,000 | ($3,693,000 | ) | ($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 |
66,664 | 0 | 0 | |||||||||||||||||||||||||||||
Options
exercised |
9,325 | 0 | 81,000 | 81,000 | ||||||||||||||||||||||||||||
Balance
at December 31, 2002 |
733,308 | $ | 7,000 | 193,750 | $ | 2,000 | $ | 17,384,000 | ($3,434,000 | ) | $ | 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) |
733,308 | $ | 7,000 | 193,750 | $ | 2,000 | $ | 17,384,000 | ($3,358,000 | ) | $ | 9,000 | $ | 14,044,000 | ||||||||||||||||||
Net
loss |
(1,503,000 | ) | (1,503,000 | ) | ||||||||||||||||||||||||||||
Foreign
currency translation adjustment |
0 | 0 | ||||||||||||||||||||||||||||||
Comprehensive
Loss |
(1,503,000 | ) | ||||||||||||||||||||||||||||||
Options
exercised |
44,907 | 1,000 | 246,000 | 247,000 | ||||||||||||||||||||||||||||
2:1
Stock Dividend 8/03 |
743,499 | 7,000 | 193,750 | 2,000 | (9,000 | ) | 0 | |||||||||||||||||||||||||
2:1
Stock Dividend 1/04 |
1,521,714 | 15,000 | 387,500 | 4,000 | (19,000 | ) | 0 | |||||||||||||||||||||||||
Balance
at December 31,2003 (unaudited) |
3,043,428 | $ | 30,000 | 775,000 | $ | 8,000 | $ | 17,602,000 | ($4,861,000 | ) | $ | 9,000 | $ | 12,788,000 | ||||||||||||||||||
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 nine-month periods ended December 31, 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 and a second stock split announced by the Company on December 29 and having a record date of January 10, 2004.
Note 2. INVENTORIES
| December 31, | March 31, | |||||||
| 2003 | 2003 | |||||||
Merchandise inventory |
$ | 6,609,000 | $ | 7,933,000 | ||||
Healthcare services
inventory |
235,000 | 221,000 | ||||||
Demonstration inventory,
net |
951,000 | 968,000 | ||||||
Parts and peripheral
inventory |
1,772,000 | 1,764,000 | ||||||
| $ | 9,567,000 | $ | 10,886,000 | |||||
Note 3. PROPERTY AND EQUIPMENT
| December 31, | March 31, | |||||||
| 2003 | 2003 | |||||||
Furniture and equipment |
$ | 7,346,000 | $ | 5,588,000 | ||||
Vehicles |
109,000 | 109,000 | ||||||
Leasehold improvements |
6,639,000 | 5,851,000 | ||||||
| 14,094,000 | 11,548,000 | |||||||
Less: accumulated
depreciation and amortization |
(5,225,000 | ) | (4,263,000 | ) | ||||
| $ | 8,869,000 | $ | 7,285,000 | |||||
Note 4. NET INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted Earnings Per Share (EPS) or Loss Per Share (LPS) for the periods indicated:
| For the three months ended December
31, 2003
|
||||||||||||
| Net Loss | Shares | Per-Share | ||||||||||
| (Numerator) | (Denominator) | Amount | ||||||||||
Net loss/Basic LPS |
$ | (383,000 | ) | 3,757,370 | $ | (0.10 | ) | |||||
Effect of dilutive securities: |
||||||||||||
Warrants and options |
* | |||||||||||
Net loss/Diluted LPS |
$ | (383,000 | ) | 3,757,370 | $ | (0.10 | ) | |||||
| For the three months ended December
31, 2002 |
||||||||||||
| Net Income | Shares | Per-Share | ||||||||||
| (Numerator) | (Denominator) | Amount | ||||||||||
Net income/Basic
EPS |
$ | 687,000 | 3,708,232 | $ | 0.19 | |||||||
Effect of dilutive
securities: |
||||||||||||
Warrants and options |
5,183 | |||||||||||
Net income/Diluted
EPS |
$ | 687,000 | 3,713,415 | $ | 0.19 | |||||||
| For the nine months ended December
31, 2003
|
||||||||||||
| Net Loss | Shares | Per-Share | ||||||||||
| (Numerator) | (Denominator) | Amount | ||||||||||
Net loss/Basic LPS |
$ | (1,503,000 | ) | 3,735,861 | $ | (0.40 | ) | |||||
Effect of dilutive securities: |
||||||||||||
Warrants and options |
* | |||||||||||
Net loss/Diluted LPS |
$ | (1,503,000 | ) | 3,735,861 | $ | (0.40 | ) | |||||
| For the nine months ended December
31, 2002
|
||||||||||||
| Net Income | Shares | Per-Share | ||||||||||
| (Numerator) | (Denominator) | Amount | ||||||||||
Net income/Basic EPS |
$ | 451,000 | 3,603,777 | $ | 0.13 | |||||||
Effect of dilutive securities: |
||||||||||||
Warrants and options |
50,379 | |||||||||||