Mindray Medical International, a leading developer, manufacturer and marketer of medical devices worldwide, announced today its selected unaudited financial results for the second quarter ended June 30, 2014.

Net revenues increased 8.9% year-over-year to $334.5 million. International sales were $182.0 million, representing 54.4% of the company’s total net revenues. China sales totaled $152.5 million.

Reagent sales contributed 41.2% to the IVD segment, up from 36.6% in the same period last year and from 38.1% in the previous quarter.

In addition to the reagents, the biochemistry analyzers BS-800 and BS-2000 performed well in China.

"In the second quarter, the Chinese healthcare market remained sluggish for our business while unfavorable foreign exchange and political issues affected our sales in some key emerging markets," commented Mr. Li Xiting, Mindray’s President and Co-Chief Executive Officer. "However, we are encouraged by our reagent sales performance and the growth momentum achieved by our high-speed biochemistry analyzers and high-end ultrasound products. This is the result of our focus on innovation, which allows us to consistently introduce new products into different markets."

Mindray reported net revenues of $334.5 million for the second quarter of 2014, an 8.9% increase from the second quarter of 2013.

Net revenues generated in China increased 3.4% year-over-year to $152.5 million.

Net revenues generated in the international markets increased 13.9% year-over-year to $182.0 million.

Performance by Segment

Patient Monitoring & Life Support Products: Net revenues in this segment increased 1.8% from the second quarter of 2013 to $119.3 million, contributing 35.7% to total net revenues in the second quarter of 2014.

In-Vitro Diagnostic Products: Net revenues in this segment increased 11.3% year-over-year to $98.3 million, contributing 29.4% to total net revenues in the second quarter of 2014. Reagents sales represented 41.2% of this segment’s net revenues.

Medical Imaging Systems: Net revenues in this segment increased 11.2% from a year ago to $84.6 million, contributing 25.3% to total net revenues in the second quarter of 2014.

Others: Net revenues increased 26.3% from the second quarter of 2013 to $32.2 million, contributing 9.6% to total net revenues in the second quarter of 2014. Other net revenues mainly include sales from the orthopedics business, service revenues from extended warranties, sales of accessories and repair service revenues for post-warranty period.

Second quarter 2014 gross profit was $189.2 million, a 7.2% increase from the second quarter of 2013. Second quarter 2014 non-GAAP gross profit was $191.4 million, a 7.1% increase from the second quarter of 2013. Second quarter 2014 gross margin was 56.6% compared to 57.5% in the second quarter of 2013 and 55.1% in the first quarter of 2014. Second quarter 2014 non-GAAP gross margin was 57.2% compared to 58.2% in the second quarter of 2013 and 55.9% in the first quarter of 2014.

Selling expenses in the second quarter of 2014 were $63.5 million, or 19.0% of total net revenues, compared to 17.8% in the second quarter of 2013 and 20.7% in the first quarter of 2014. Non-GAAP selling expenses were $60.6 million, or 18.1% of total net revenues, compared to 17.0% in the second quarter of 2013 and 19.7% in the first quarter of 2014.

General and administrative expenses for the second quarter of 2014 were $27.6 million, or 8.2% of total net revenues, compared to 8.7% in the second quarter of 2013 and 11.3% in the first quarter of 2014. Non-GAAP general and administrative expenses for the second quarter of 2014 were $26.8 million, or 8.0% of total net revenues, compared to 8.5% in the second quarter of 2013 and 9.3% in the first quarter of 2014.

Research and development expenses for the second quarter of 2014 were $33.7 million, or 10.1% of total net revenues, compared to 9.3% in the second quarter of 2013 and 11.4% in the first quarter of 2014. Non-GAAP research and development expenses for the second quarter of 2014 were $32.3 million, or 9.7% of total net revenues, compared to 8.9% in the second quarter of 2013 and 11.0% in the first quarter of 2014.

Total share-based compensation expenses, which were allocated to cost of revenues and related operating expenses, were $3.8 million in the second quarter of 2014 compared to $3.2 million in the second quarter of 2013 and $7.6 million in the first quarter of 2014.

Operating income was $64.4 million in the second quarter of 2014, a 3.4% decrease from a year ago. Non-GAAP operating income in the second quarter of 2014 was $71.6 million, a 2.0% decrease from the second quarter of 2013. Operating margin was 19.3% in the second quarter of 2014 compared to 21.7% in the second quarter of 2013 and 11.8% in the first quarter of 2014. Non-GAAP operating margin was 21.4% in the second quarter of 2014 compared to 23.8% in the second quarter of 2013 and 16.0% in the first quarter of 2014.

Net income decreased 3.9% year-over-year to $59.6 million in the second quarter of 2014. Non-GAAP net income decreased 3.0% year-over-year to $66.2 million in the second quarter of 2014. Net margin was 17.8% in the second quarter of 2014 compared to 20.2% in the second quarter of 2013 and 13.5% in the first quarter of 2014. Non-GAAP net margin was 19.8% in the second quarter of 2014, compared to 22.2% in the second quarter of 2013 and 17.4% in the first quarter of 2014. Excluding the tax benefits related to the nationwide key software enterprise status, second quarter 2014 non-GAAP net income decreased 5.8% year-over-year to $64.3 million and non-GAAP net margin was 19.2%, compared to 22.2% in the second quarter of 2013 and 16.9% in the first quarter of 2014. Second quarter 2014 income tax expense was $9.4 million, representing an effective tax rate of 13.4%.

Second quarter 2014 basic and diluted earnings per share were $0.51 and $0.50 respectively, compared to $0.52 and $0.51 in the second quarter of 2013. Basic and diluted non-GAAP earnings per share were $0.57 and $0.56 respectively, compared to $0.58 and $0.56 in the second quarter of 2013. Excluding the tax benefits, diluted non-GAAP earnings per share was $0.54 in the second quarter of 2014. Shares used in the computation of diluted earnings per share for the second quarter of 2014 were 118.1 million.

Separately, the company announced that Mr. Chen Qingtai has resigned for personal reasons as an independent director of Mindray’s Board of Directors and a member of Audit Committee, with effect from July 31, 2014. Mr. Chen has confirmed that his resignation was not the result of any disagreement with the company on any matter relating to its operations, policies or practices.