Mindray Medical International Limited (MR), a leading Chinese medical devices company, reported second-quarter 2010 adjusted (excluding one-time expenses) earnings per share of 39 cents, beating the Zacks Consensus Estimates and year-ago figures of 34 cents.
 
Revenues
 
Total revenue was $179.2 million in the reported quarter, up 12% year over year, while missing the Zacks Consensus Estimate of $187 million. Mindray posted record international sales (ex-China) of $106.8 million, up 27% year over year. Despite non-tender domestic sales expanding 9.1% year over year, government tender sales continued to decline, thereby dragging domestic revenue to $72.4 million, down 4.6%.   
 
Segment-wise Revenues
 
Patient Monitoring & Life Support Products (42.6% of total revenue) revenues increased 19.9% year over year to $82.8 million in the second quarter. In-Vitro Diagnostic Products (24.1% of total revenue) sales were $43.2 million, up 8%.  
 
Medical Imaging Systems (23.8% of total revenue) revenues stood at $42.7 million, a growth of 1.9%. Other revenues (5.9% of total revenue) increased 15.7% to $10.5 million.
 
Margins
 
Adjusted gross profit was $105.8 million in the quarter, up 13.3% year over year. Adjusted gross margin of 59.0% was higher than 58.3% in the year-ago period.
 
Adjusted selling expenses were $25.9 million, or 14.5% of total net revenues, compared with 15.5% a year ago. Adjusted general and administrative expenses were $15.1 million, or 8.4% of revenues, compared with 6.7% a year ago.  Adjusted research and development expenses stood at $13.5 million, or 7.6% of revenues, versus 8.7% in the prior-year quarter.
 
Adjusted operating income was $51.2 million in the quarter, a year-over-year increase of 16.6%. Adjusted operating margin was 28.6% compared with 27.4% a year ago.
 
Balance Sheet and Cash Flow
 
Average days sales outstanding (DSO) were 58 days in the second quarter, higher than 54 days in the year-ago quarter. Average inventory days at 93 days were above the 82 days in the second quarter of 2009. Average accounts payable days outstanding were 59 days, flat year-over-year.
 
As of June 30, 2010, Mindray had $370.2 million in cash and liquid investments, up about 30% year over year. Net cash generated from operating activities and capital expenditures during the quarter were $19.8 million and $11.3 million, respectively, compared with $34.5 million and $12.6 million a year-ago.
 
Outlook
 
Mindray provides guidance on a full year basis.  Its forecast reflects current views, which may be subject to change. The company updated its guidance and expects net revenues of $700 million for fiscal 2010. It also expects adjusted net income for the year to increase 10% year over year (excluding the reduction of $8.6 million in corporate income tax in the first quarter of 2010).
 
Mindray’s guidance incorporates a corporate income tax rate of 15% for its Shenzhen subsidiary. The company expects capital expenditure of about $60 million to $70 million for fiscal 2010.


 
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