Mindray Medical International Limited (MR), a leading Chinese medical devices company, reported fourth-quarter and fiscal 2010 adjusted (excluding one-time expenses) earnings per share of 38 cents and $1.45, respectively, beating the corresponding Zacks Consensus Estimates of 33 cents and $1.36, and surpassing the year-ago earnings of 37 cents per share and $1.30 per share.
Reported net income rose 9.7% year over year to $41 million (or 35 cents per share) in the fourth quarter.
Total revenues were $211 million in the fourth quarter, up 11.7% year over year, exceeding the Zacks Consensus Estimate of $210 million. Sales were $704.3 million in the fiscal year, up 11.1% year over year, but missed the Zacks Consensus Estimate of $817 million by a wide margin.
Mindray posted international sales (ex-China) of $121.1 million, up 19.5% year over year. Sales in China expanded 2.7% year over year to $89.8 million in the reported quarter.
Segment-wise Revenues
Patient Monitoring & Life Support Products (47% of total revenue) revenues increased 19.9% year over year in the quarter to $99.1 million. In-Vitro Diagnostic Products (24.2% of total revenue) sales were $51.1 million, up 11.4%.
Medical Imaging Systems (24% of total revenue) revenues were $50.6 million, a growth of 4.3%. Other revenues (4.8% of total revenue) dropped 13.6% to $10.2 million.
Margins
Adjusted gross profit was $115.3 million in the quarter, up 13% year over year. Adjusted gross margin of 55.2% was higher than 54.9% in the year-ago period.
Adjusted selling expenses were $40.6 million, or 19.2% of total net revenues, compared with 16.9% a year ago. Adjusted general and administrative expenses were $18 million, or 8.5% of revenues, compared with 8.1% a year ago. Adjusted research and development expenses were $16.2 million, or 7.7% of revenues, versus 7.5% in the prior-year quarter.
Adjusted operating income was $41.8 million in the quarter, a year-over-year drop of 1.3%. Adjusted operating margin was 19.8% compared with 22.4% a year ago.
Balance Sheet and Cash Flow
As of December 31, 2010, Mindray had $433.5 million in cash and liquid investments, up about 16.4% year over year. Net cash generated from operating activities during the fourth quarter was $67.3 million compared with $86.3 million a year ago.
Outlook
Mindray provides guidance on a full year basis. The company maintains its revenue growth guidance of 16% for fiscal 2011. It also expects adjusted net income for the year to increase 10% year over year.
In a separate statement, Mindray agreed to acquire a majority stake in Shenzhen Shenke Medical Instrument Technical Development Co. Ltd., a leading manufacturer of infusion pumps in China. The terms of the deal were not disclosed. Mindray expects to accomplish synergy by combining its manufacturing and sales setup with Shenke’s brand name in the infusion pump arena. The company also expects Shenke’s infusion pumps to complement its own patient monitoring and life support product line.
Mindray, a global Chinese medical devices company, holds a leading share in certain niches of the medical device market in China. The company competes with global device manufacturers such as General Electric (GE), Philips (PHG) and Siemens (SI).
Mindray has a strong position in the low and mid segments of the medical devices market and is poised to benefit from the solid fundamentals of the Chinese health care sector, including health care reform. Its new product development initiatives, expanding international footprint (and revenues) and solid sales infrastructure remain encouraging.
While Mindray’s strength is currently in the low and mid-end segments, the company is seeking to carve a niche in the high-end market as well. However, it is exposed to intense competition from multi national corporations with significant R&D budgets.
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