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Maker of medical respiratory devices ResMed

(RMD) - Get Report

. reported that its Q2 FY09 revenue surged 10.0% to $222.98 million from $202.68 million in the prior year's quarter. Revenue was driven by an increase in unit sales of flow generators, masks and accessories. Revenue from North America and Latin America was $123.10 million, an increase of 22.9% from $100.20 million, due to increased public and physician awareness of sleep-disordered breathing and growth generated from recent product releases, including the S8II flow generator, VPAP IV bilevel flow generator, Swift LT nasal pillows mask and Mirage Quattro full-face mask. Revenue in markets outside North America and Latin America inched down 2.5% to $99.90 million from $102.50 million, due to unfavorable currency exchange and lower sales of VS ventilation range.

Q2 FY09 gross profit margin plunged 774 basis points to 58.00% from 65.74%, hurt by general reduction in average selling prices and depreciation of the U.S. dollar. The cost of sales rose 13.0% to $91.96 million from $81.35 million. Selling, general and administrative expenses ascended 3.6% to $70.09 million from $67.64 million, due to an increase in the number of sales and administrative personnel. Research & development expenses remained relatively unchanged at $14.92 million. Moreover, expenses increased due to the appreciation of international currencies against the U.S. dollar. Subsequently, operating margin expanded 170 basis points to 19.88% from 18.18%. Earnings for Q2 FY09 grew 26.0%, driven by higher revenue growth. Net income advanced to $33.85 million or $0.44 per share from $26.86 million or $0.34 per share in the year-ago quarter.

At the end of Q2 FY09, RMD's cash and cash equivalents improved 11.1% to $320.49 million from $288.50 million a year ago. In addition, a quick ratio of 2.27 indicates the company's strong liquidity position. Total debt increased 15.3% to $152.90 million from $132.63 million. Shareholders' equity inched down 5.0% to $963.57 million from $1.01 billion. The debt-to-equity ratio worsened to 0.16 from 0.13 a year ago. Returns expanded on the back of higher earnings during the quarter. Return on assets advanced 447 basis points to 9.27% from 4.80% in Q2 FY08. Return on equity expanded 634 basis points to 12.58% from 6.24% a year ago.

During the latest second quarter, ResMed repurchased approximately 56,000 shares at a cost of around $2.00 million. The company launched new products including the Activa LT and Swift LT redesigned LT masks for women.

Looking forward to FY09, RMD plans to introduce the ApneaLink Plus, type III home diagnostic device that will meet existing reimbursement and physician requirements.

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