The results dovetail with the company’s expectation of 29 to 31 cents. Net income shot up 22% year over year to $20.6 million (or 26 cents a share), pushed by higher sales.
Revenues
Revenues spiked 7.9% (7.6% in constant currency) year over year to $136.4 million, narrowly missing the Zacks Consensus Estimate of $137 million. Revenues were impacted by an unfavorable foreign currency translation.
Segment Analysis
By business segments, Men’s Health sales leapt 7.7% year over year to $61.4 million, boosted by higher demand for the erectile restoration and male continence product lines. BPH Therapy segment revenues were up 3.9% year over year to $29.2 million. The company has expanded its BPH therapy range during the quarter with the launch of GreenLight XPS laser therapy system. It has also received the 510 (k) approval for its next-generation BPH therapy system, MoXy Liquid Cooled Fiber.
American Medical’s Women’s Health business continues to post mid-to-high teen revenue growth with sales cruising 15.7% year over year to $44.5 million. This healthy growth is attributed to higher sales of pelvic floor repair products buoyed by the success of Elevate anterior and Elevate posterior.
The female continence product line achieved mid-single digit sales growth in the quarter. American Medical is on track to launch (expected in third-quarter) the novel MiniArc Precise single-incision sling system for the treatment of female stress urinary incontinence (SUI).
Geographically, the U.S. sales (up 10.4% year over year) contributed 71% to total sales while international revenues (up 6.8%) accounted for the balance.
Margins
American Medical continues to succeed in expanding margins. Gross margin rose narrowly year-over-year to 83.3% while operating margin expanded to 28.4% from 26.7% a year-ago. Margins were boosted by the impressive top-line growth.
Balance Sheet and Cash Flow
American Medical exited first-half fiscal 2010 with a solid balance sheet with cash and short-term investments increasing 38% year over year and 14% sequentially to $68.1 million. The company remains committed to de-leveraging as total outstanding debt and other long-term liabilities declined 28% year over year and 5% sequentially to $370.2 million. American Medical generated $49.9 million in cash from operations during the first-half, an annualized decline of roughly 17%.
Outlook
American Medical has released third quarter guidance and has reaffirmed its fiscal 2010 outlook. For the third quarter, the company expects total revenues to range between $128 and $132 million. Adjusted earnings have been forecasted in the range of 26 to 29 cents per share.
For fiscal 2010, American Medical continues to expect total revenues in the range of $544 to $560 million and adjusted earnings between $1.19 and $1.27 a share. The current Zacks Consensus Estimate for EPS and revenues for fiscal 2010 are $1.26 and $554 million, respectively.
Minnesota-based American Medical is a world leader in manufacturing medical devices and procedures for treating health problems of both men and women. The company has a roughly 35% world market share in female continence products, ahead of its nearest rivals, Johnson & Johnson (JNJ) and Boston Scientific Corporation (BSX). We currently have a Neutral recommendation on American Medical.
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