Fourth Quarter 2009 Financial Results

Revenue for the fourth quarter, which ended March 31, 2009, increased 72% to $60.0 million from $34.6 million in the fourth quarter of fiscal year 2008. Revenue from the Medical Products division increased 130% to $39.5 million from $17.2 million in the prior year period, and revenue from the Healthcare Services division increased 16% to $20.2 million from $17.5 million in the fourth quarter of fiscal year 2008. Revenue performance reflects the recognition of revenue for certain government-backed loan programs, as well as increased medical products sales such as daVinci units, and growth in inpatient and outpatient revenues in the hospital division.

During the quarter, the Company recorded income from operations of $3.9 million, an increase of 806% from $426,000 in the same quarter of last year. Total operating costs and expenses increased 63% during the quarter to $55.8 million from $34.2 million in the prior year period.

Increased operating costs include $536,000 of development and startup expenses for new clinics, as well as non-cash stock compensation expense of $848,000, multi-year physician contracts renewed at higher rates in calendar 2008, additional medical personnel in Beijing and Shanghai hospitals, increased direct patient care costs and increased medical products selling activities.

Roberta Lipson, President and CEO of Chindex, commented, "During the fourth quarter and full year, we achieved our goals to make substantial progress on our KfW and U.S. Export-Import Bank contracts, and enhanced our revenue performance in hospital services, although patient volumes were slightly less than anticipated. Healthcare reform continues to be a key focus of ours and we continue to believe that the reform plan which includes significant investment from the PRC and emphasizes private sector investment for premium services. This should drive further market opportunity for UFH. In addition, we believe the recently announced stimulus package will augment the medical product market size over time. We continue to believe that Chindex is well positioned to benefit from these efforts over the long term."

The Company recorded a $615,000 provision for taxes, or an effective tax rate of 15.3%, in the three months ended March 31, 2009 as compared to a provision for taxes of $714,000, or an effective tax rate of 36.2%, for the three months ended March 31, 2008. The prior period tax expense includes the negative effect of losses in entities for which Chindex cannot recognize a benefit in accordance with SFAS 109, "Accounting for Income Taxes."

Net income for the quarter ended March 31, 2009 was $3.4 million, or $0.22 per diluted share. This compares to net loss of $2.7 million, or $(0.20) per diluted share, for the quarter ended March 31, 2008.

Full Year 2009 Financial Results

During the fiscal year 2009, revenue increased 32% to $171.4 million from $130.1 million for the prior year. Revenue from the Medical Products division increased 43% to $92.1 million from $64.2 million in the prior year, and revenue from the Healthcare Services division increased 21% to $79.4 million from $65.8 million in fiscal year 2008.

During the year, the Company recorded income from operations of $8.2 million, a decrease of 1.2% from $8.3 million in the 2008 fiscal year. Total operating costs and expenses for fiscal year 2009 increased 34% to $163.2 million from $121.8 million in the prior year period.

The Company recorded a $2.7 million provision for taxes, or an effective tax rate of 35.1%, in the fiscal year 2009, compared to a provision for taxes of $2.0 million, or an effective tax rate of 35.8%, for the fiscal year 2008.

In the fiscal year 2009, net income increased 36% to $5.0 million, or $0.31 per diluted share, from $3.7 million, or $0.27 per diluted share, in the prior year. Non-cash stock compensation expense was $2.9 million during the fiscal year 2009 compared to $1.3 million in the prior year.

Medical Products division business results:

For the fourth quarter of fiscal year 2009, revenue increased 130% to $39.5 million from $17.2 million in the prior year quarter. Gross profit for the Medical Products division increased to $9.0 million from $3.9 million in the prior year's fourth quarter. Gross profit margin was 23%, flat from the prior year period and in line with historical averages. Selling, marketing, general and administrative expenses for the Medical Products division increased 15% to $6.3 million from $5.5 million in the fourth quarter of the prior year. Increased expenses during the period were a result of increased selling activity year over year.

Revenue from the Medical Products division was $92.1 million in the fiscal year 2009, an increase of 43% from $64.2 million in the prior year. Gross profit in the division was $23.1 million, which yielded a gross margin of 25%, compared to $16.6 million, which yielded a gross margin of 26%, in the fiscal year 2008. Selling, marketing, general and administrative expenses for the Medical Products division increased 18% to $22.6 million from $19.2 million in the prior year, reflecting the increased selling activity.

Lipson added, "As expected, our fourth quarter performance was strong in the Medical Products division. Financial performance reflects our team's dedication through the fiscal year as we recognized revenue for products shipped during the quarter. We also saw continued demand for high-end equipment such as daVinci during the fourth quarter.