omniture

Mindray Medical International Announces Fourth Quarter and Full Year 2006 Results

Mindray Medical International Limited
2007-03-12 20:04 1887

Rapid International Expansion Drives Record Revenues

Company Ends Year with Strong Debt-free Balance Sheet;

Declares Cash Dividend of US$0.15 Per Share

SHENZHEN, China, March 12 /Xinhua-PRNewswire-FirstCall/ -- Mindray Medical International Limited (NYSE: MR) today announced its selected unaudited financial results for the fourth quarter and full year ended December 31, 2006.

Highlights for Fourth Quarter 2006

-- Fourth quarter 2006 net revenues increased 38.4% over the fourth

quarter 2005 to RMB477.4 million (US$61.2 million).

-- Net revenues generated in international markets in the fourth

quarter 2006 increased by 71.9% to RMB251.6 million (US$32.2

million) from RMB146.4 million in the fourth quarter 2005.

-- Net revenues generated in China in the fourth quarter of 2006

increased by 13.7% to RMB225.8 million (US$28.9 million) from

RMB198.6 million in the fourth quarter 2005.

-- Fourth quarter 2006 non-GAAP net income, as defined below,

increased 65.6% year-over-year to RMB141.5 million (US$18.1

million) from RMB85.5 million in the fourth quarter 2005. Fourth

quarter 2006 GAAP net income was RMB106.0 million (US$13.6

million).

-- Fourth quarter 2006 non-GAAP basic and diluted earnings per share,

as defined below, were RMB1.34 (US$0.17) and RMB1.27 (US$0.16),

respectively. Fourth quarter 2006 GAAP basic and diluted earnings

per share were RMB1.00 (US$0.13) and RMB0.95 (US$0.12),

respectively.

Highlights for the Full Year 2006

-- Full year 2006 net revenues increased 40.5% to RMB1,515.0

million (US$194.1 million).

-- Net revenues generated in international markets for the full

year 2006, were RMB735.6 million (US$94.3 million), a 62.9%

increase from the full year 2005.

-- Net revenues generated in China for the full year 2006, were

RMB779.4 million (US$99.9 million), a 24.3% increase from the

full year 2005.

-- Full Year 2006 non-GAAP net income increased 51.0% to RMB416.8

million (US$53.4 million) from RMB276.0 million in the full year

2005. Full year 2006 GAAP net income was RMB361.8 million (US$46.4

million).

-- Full year 2006 non-GAAP basic and diluted earnings per share were

RMB4.79 (US$0.61) and RMB4.33 (US$0.55), respectively. Full year

2006 GAAP basic and diluted earnings per share were RMB4.16

(US$0.53) and RMB3.75 (US$0.48), respectively.

-- Full year 2006 net operating cash flow was RMB533.0 million

(US$68.3 million) compared to RMB363.4 million operated cash flow

generated in the full year 2005. The Company held RMB1,722.9

million (US$220.8 million) in cash and cash equivalents, short-

term investments and restricted cash as of December 31, 2006.

"We are pleased to report record revenues and net income for Mindray for both the fourth quarter and full year 2006. Our three business segments continued to grow sales both domestically and in an increasing number of international markets," said Mr. Xu Hang, Mindray's Chairman and Co-Chief Executive Officer.

"We are also encouraged by the strong customer reception we have seen for the four new products launched during the year: the DC-6 color Doppler diagnostic ultrasound imaging system, the BC-5500 five-part hematology analyzer, the WATO-50, our first anesthesia machine, and the BeneView T8, our high-end patient monitoring device," continued Mr. Xu. "Our substantial investment in research and development over the past several years has resulted in a strong pipeline of advanced new products."

Mr. Xu reiterated Mindray's commitment to invest approximately 10% of net revenues in research and development activities even as net revenues continue to experience strong growth.

In 2007 the Company expects to introduce at least six new products across its three business segments.

Commenting on the Company's rapid international expansion, Mr. Li Xiting, Mindray's President and Co-Chief Executive Officer added, "In 2006, we successfully opened several international sales offices, and we plan on opening four additional international offices in 2007. As we expand internationally, we will continue to grow our distribution channels and service network to better serve our customers."

Reporting of Non-GAAP Measures

For the fourth quarter and full year 2006, the Company noted that it has reported net income, operating income, and earning per share on a non-GAAP basis. Each of the terms as used by the Company is defined as follows:

-- Non-GAAP operating profit represents operating profit reported in

accordance with GAAP, adjusted for the effects of share based

compensation, and expense and/or amortization of acquired

intangible assets including, but not limited to, in-progress

research and development (IPR&D).

-- Non-GAAP net income represents net income reported in accordance

with GAAP, adjusted for the effects of share-based compensation,

and expense and/or amortization of acquired intangible assets

including, but not limited to, IPR&D, all net of related tax

impact.

-- Non-GAAP earnings per share represents non-GAAP net income divided by

the number of shares used in computing basic and diluted earnings per

share in accordance with GAAP, and excludes the impact of the deemed

dividends for the basic calc.

The Company believes that these non-GAAP operating profit, net income, and earnings per share measures are useful for understanding and assessing Mindray's underlying business performance and operating trends, and expects to report operating profit and net income on a non-GAAP basis using a consistent method on a quarterly basis going forward. These non-GAAP financial measures also facilitate management's internal comparisons to Mindray's historical performance and liquidity. The Company notes that these measures may not be calculated on the same basis of similar measures used by other companies. Please find a reconciliation of non-GAAP figures to GAAP figures in the financial tables attached below.

Financial Results for Fourth Quarter 2006 and Full Year 2006

Fourth quarter 2006 net revenues were RMB477.4 million (US$61.2 million), a 38.4% increase from RMB344.9 million in the fourth quarter 2005. Fourth quarter 2006 gross profit was RMB257.0 million (US$32.9 million), a 40.2% increase from RMB183.2 million in the fourth quarter of 2005.

Full year 2006 net revenues increased 40.5% over the full year 2005 to RMB1,515.0 million (US$194.1 million). Full year 2006 gross profit was RMB827.5 million (US$106.0 million), a 41.4% increase from RMB585.2 million in the full year 2005.

Performance by Segment

Patient Monitoring Devices

The patient monitoring devices segment contributed 40.2% to total net segment revenues in the fourth quarter 2006 compared to 46.2% in the fourth quarter 2005.

Full year segment contribution to total net segment revenue was 40.1% in 2006 compared to 47.8% in 2005.

In October of 2006, the Company introduced the customizable BeneView T8 with a modular design capable of tracking up to 20 physiological parameters and displaying multiple shared hospital records, such as patient medical history and diagnostic images. In December 2006, the Company released its first anesthesia product, the WATO-50, allowing Mindray to provide a more comprehensive life support suite.

Diagnostic Laboratory Instruments

The diagnostic laboratory instruments segment contributed 28.6% to total net segment revenues in the fourth quarter 2006 compared to 24.3% in the fourth quarter 2005.

Full year segment contribution to total net segment revenue was 29.3% in 2006 compared to 25.3% in 2005.

In September 2006 the Company introduced the BC-5500, the first five-part hematology analyzer developed by a Chinese company. Currently, there are fewer than ten medical device manufacturers world-wide that produce five-part hematology analyzers.

Ultrasound Imaging Systems

The ultrasound imaging systems segment contributed 29.8% to total net segment revenues in the fourth quarter 2006 compared to 27.9% in the fourth quarter 2005.

Full year segment contribution to total net segment revenue was 29.3% in 2006 compared to 25.5% in 2005.

In September 2006 the Company introduced its first color Doppler ultrasound imaging system, the DC-6, which has CE Mark, FDA, and SFDA clearance.

Performance by Geographic Region

Net revenues generated in international markets in the fourth quarter 2006 increased by 71.9% to RMB251.6 million (US$32.2 million) from RMB146.4 million in the fourth quarter 2005.

Net revenues generated in international markets for the full year 2006, were RMB735.6 million (US$94.3 million), a 62.9% increase from the full year 2005.

Net revenues generated in China in the fourth quarter 2006 increased by 13.7% to RMB225.8 million (US$28.9 million) from RMB198.6 million in the fourth quarter 2005.

Net revenues generated in China for the full year 2006 were RMB779.4 million (US$99.9 million), a 24.3% increase from the full year 2005.

For the full year 2006, net revenues generated from China was 51.4% of total net revenues compared to 48.6% of net revenues from international markets. For the full year 2005, net revenues generated from China was 58.1% of total net revenues compared to 41.9% of net revenues from international markets.

Gross Margins

The consolidated gross margin for the fourth quarter 2006 was 53.8%, compared to 53.1% in the fourth quarter 2005.

The consolidated gross margin for the full year 2006 was 54.6%, compared to 54.3% for the full year 2005.

The Company received a value-added tax refund (VAT refund) for its self-developed software in fourth quarter 2005 and full year 2005 in the amount of RMB9.4 million and RMB32.1 million, respectively. Such VAT refunds were recognized as a component of revenues in previous years. However, the PRC government changed the regulation in 2006 and the Company's integrated software no longer qualifies for the VAT refund. The consolidated gross margins excluding the VAT refunds would have been 51.8% for the fourth quarter 2005 and 52.9% for the full year 2005.

Operating Expenses

Selling expenses for the fourth quarter 2006 were RMB62.4 million (US$8.0 million), representing an increase of 40.4% from the fourth quarter 2005. As a percentage of total net revenues, selling expenses decreased to 13.1% from 13.7% in the third quarter 2006 and 12.9% in the fourth quarter 2005.

Selling expenses for the full year 2006 were RMB211.9 million (US$27.1 million), representing an increase of 44.6% from the full year 2005. Selling expenses for the full year 2006 were 14.0% of total net revenue compared to 13.6% in 2005.

General and administrative expenses for the fourth quarter 2006 were RMB32.9 million (US$4.2 million), representing an increase of 109.2% from the fourth quarter 2005. As a percentage of total net revenue, general and administrative expenses increased to 6.9% from 5.1% in the third quarter 2006 and 4.6% in the fourth quarter 2005.

General and administrative expenses for the full year 2006 were RMB76.0 million (US$9.7 million), representing a decrease of 32.2% from the full year in 2005. General and administrative expenses for the full year 2006 were 5.0% of total net revenue compared to 10.4% in 2005.

Research and development expenses for the fourth quarter 2006 were RMB46.0 million (US$5.9 million), representing an increase of 34.6% from the fourth quarter 2005. As a percentage of total net revenues, research and development expenses decreased to 9.6%, from 9.9% in the fourth quarter 2005.

Research and development expenses for the full year 2006 were RMB149.1 million (US$19.1 million), representing an increase of 40.5% from the full year 2005. Research and development expenses for the full year 2006 were 9.8% of total net revenue, the same as 2005.

Total share-based compensation expenses, which were allocated to cost of good sold and related operating expenses, were RMB6.5 million (US$0.8 million) in the fourth quarter of 2006. In the fourth quarter 2005 the Company did not incur share-based compensation expenses. For the full year 2006 total share-based compensation expenses were RMB26.1 million (US$3.3 million), compared to RMB70.9 million reported for the full year 2005.

In addition, the Company incurred a charge related to acquired intangible assets in the amount of RMB34.1 million (US$4.4 million) in the fourth quarter 2006 (including a RMB31.8 million charge for in-progress R&D and RMB2.3 million in amortization of other acquired intangible assets included as part of selling expenses) which was recorded in connection with the Company's acquisition of minority interests in the Company's operating subsidiary, Shenzhen Minidray, in April 2006. As stated in Mindray's prospectus, the aggregate purchase price paid in excess of net assets acquired was initially accounted for on the Company's balance sheet as goodwill since April 2006, pending the completion of purchase price allocation exercise, which was finalized in late 2006. Total expense and/or amortization of intangible assets related to the April 2006 acquisition of minority interest will be approximately RMB18.8 million in 2007.

Non-GAAP operating profit, as defined above, in the fourth quarter 2006 was RMB124.7 million (US$16.0 million), representing a 40.2% increase from RMB88.9 million in the fourth quarter 2005. GAAP operating profit in the fourth quarter 2006 was RMB84.0 million (US$10.8 million). Full year 2006 non-GAAP operating profit was RMB419.0 million (US$53.7 million) compared to RMB291.4 million in 2005. As a percentage of net revenue, non-GAAP operating profit was 27.7% for full year 2006, compared to 27.0% for the full year 2005. Full year 2006 GAAP operating profit was RMB358.9 million (US$46.0 million).

Net Income

Fourth quarter 2006 non-GAAP net income increased 65.6% year-over-year to RMB141.5 million (US$18.1 million). Fourth quarter 2006 GAAP net income was RMB106.0 million (US$13.6 million).

Full year 2006 non-GAAP net income increased 51.0% year-over-year to RMB416.8 million (US$53.4 million). Full year 2006 GAAP net income was RMB361.8 million (US$46.4 million).

Fourth quarter 2006 basic and diluted non-GAAP earnings per share were RMB1.34 (US$0.17) and RMB1.27 (US$0.16), respectively. Fourth quarter 2006 GAAP basic and diluted earnings per share for the quarter were RMB1.00 (US$0.13) and RMB0.95 (US$0.12), respectively.

Full year 2006 basic and diluted non-GAAP earnings per share were RMB4.79 (US$0.61) and RMB4.33 (US$0.55), respectively. Full year 2006 GAAP basic and diluted earnings per share were RMB4.16 (US$0.53) and RMB3.75 (US$0.48), respectively.

Other Select data

Full year 2006 net operating cash flow and capital expenditures were RMB533.0 million (US$68.3 million) and RMB72.4 million (US$9.3 million), respectively.

Average account receivable days outstanding was 21 days in 2006 compared to 19 days in 2005. Inventory turnover was 60 days in 2006 compared to 71 days in 2005.

As of December 31, 2006, the Company had RMB1,722.9 million (US$220.8 million) in cash and cash equivalents, short-term investments and restricted cash.

By the end of December 31, 2006, the Company had 2,744 employees, as compared with 2,208 employees as of December 31, 2005.

Dividend Declaration

Mindray's Board of Directors has declared a cash dividend on its ordinary shares of US$0.15 per share, based on its net income for the full year 2006. The cash dividend will be payable on or around April 25, 2007, to shareholders of record as of March 26, 2007. The Company has 105.8 million ordinary shares outstanding as of March 12, 2007.

Business Outlook for Full Year 2007

The Company expects total net revenues for full year 2007 to be in the range of RMB2,120.0 million to RMB2,150.0 million. Full year 2007 non-GAAP net income is expected to be between RMB570.0 million to RMB585.0 million. Non-GAAP net income per share is expected to be RMB5.09 to RMB5.22 on a fully diluted basis, assuming an estimated 112 million total shares outstanding.

The Company estimates total share-based compensation expenses in 2007 will be approximately RMB37.0 million based on the share options that have been granted as of March 12, 2007. Total expense and/or amortization of intangible assets related to the April 2006 acquisition of minority interest will be approximately RMB18.8 million in 2007.

The Company expects its capital expenditure for 2007 to be approximately RMB435.0 million.

The Company's practice is to provide guidance on a full-year basis; this forecast reflects Mindray's current and preliminary views, which are subject to change.

The Company has historically experienced a seasonal fluctuation in sequential revenue between the fourth quarter, typically the strongest quarter of the year, and the first quarter, typically the slowest quarter of the year.

Use of Non-GAAP Financial Measures

In addition to Mindray's consolidated financial results under GAAP, the Company also provides non-GAAP financial measures, including non-GAAP operating profit, non-GAAP net income and non-GAAP earnings per share on a basic and fully diluted basis. The Company believes that the non-GAAP financial measures provide investors with another method for assessing Mindray's operating results in a manner that is focused on the performance of its ongoing operations. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies, and should refer to the reconciliation of GAAP results with non-GAAP results for the three-month periods and the twelve-month periods ended December 31, 2005 and 2006, respectively, in the attached financial statements.

The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of Mindray's liquidity and when planning and forecasting future periods. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliation between these financial measures.

Conference Call Information

Mindray's management will hold its fourth quarter and full year 2006 earnings conference call at 8:00AM on March 12, 2007 U.S. Eastern Time (8:00PM on March 12, 2007 Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows:

Hong Kong: +852-3002-1672

US Toll Free: +1-866-383-8108

International: +1-617-597-5343

Passcode for all regions: Mindray

A replay of the conference call may be accessed by phone at the following numbers until March 22, 2007.

US Toll Free: +1-888-286-8010

International: +1-617-801-6888

Passcode: 38223598

Additionally, a live and archived webcast of this conference call will be available on the Investor Relations section of Mindray's website at http://www.mindray.com .

About Mindray

Mindray Medical International Limited is a leading developer, manufacturer and marketer of medical devices in China with a significant and growing presence outside of China. Established in 1991, Mindray offers a broad range of products across three primary business segments: patient monitoring devices, diagnostic laboratory instruments, and ultrasound imaging systems. Mindray is headquartered in Shenzhen, China, and has 29 local sales and services offices in China, as well as sales and services offices in Boston, Istanbul, London, Mumbai, Seattle and Vancouver. For more information, please visit http://www.mindray.com .

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements," including those related to the Company's anticipated operating results for 2007, pipeline of new products, R&D spending levels and the continued success of our business model and growth initiatives. These statements are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including but not limited to: the expected growth of the medical device market in China and internationally; relevant government policies and regulations relating to the medical device industry; market acceptance of our products; our expectations regarding demand for our products; our ability to expand our production, our sales and distribution network and other aspects of our operations; our ability to stay abreast of market trends and technological advances; our ability to effectively protect our intellectual property rights and not infringe on the intellectual property rights of others; competition in the medical device industry in China and internationally; and general economic and business conditions in the countries in which we operate. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in our prospectus filed with the Securities and Exchange Commission on February 1, 2007. For a discussion of other important factors that could adversely affect our business, financial condition, results of operations and prospects, see "Risk Factors" beginning on page 10 of our prospectus. Our results of operations for the fourth quarter of 2006 and for fiscal year 2006 are not necessarily indicative of our operating results for any future periods. Any projections in this release are based on limited information currently available to us, which is subject to change. Although such projections and the factors influencing them will likely change, we will not necessarily update the information. Such information speaks only as of the date of this release.

This announcement contains translations of certain Renminbi amounts into US dollars at specified rates solely for the convenience of readers. Unless otherwise noted, all translations from Renminbi to US dollars as of and for the quarter and full year ended December 31, 2006 were made at the noon buying rate in the City of New York for cable transfers in Renminbi per US dollar as certified for customs purposes by the Federal Reserve Bank of New York, or the noon buying rate, as of December 29, 2006, which was RMB 7.8041 to US$1.00. Mindray makes no representation that the Renminbi or US dollar amounts referred to in this release could have been or could be converted into US dollars or Renminbi, as the case maybe, at any particular rate or at all.

All references to "shares" are to our ordinary shares, which are divided into two classes, Class A and Class B. Each of our American Depositary Shares, which trade on the New York Stock Exchange, represents one Class A ordinary share.

The accounting policies underlying the financial information for the segmental reportings are based primarily on statutory accounting requirements in the PRC.

Exhibit 1

MINDRAY MEDICAL INTERNATIONAL LIMITED

CONSOLIDATED BALANCE SHEETS

As of December 31,

2005 2006

RMB RMB US$

(derived

from

audited

financials) (unaudited) (unaudited)

ASSETS (In thousands)

Current assets:

Cash and cash equivalents 446,143 1,709,596 219,064

Restricted cash 7,727 -- --

Short-term investments -- 13,312 1,706

Accounts receivable, net 71,330 104,679 13,413

Inventories, net 105,422 122,071 15,642

Value added tax receivables 12,963 -- --

Other receivables 13,987 11,774 1,509

Prepayments and other 17,134 19,263 2,468

Deferred tax assets - current

portion 406 2,747 352

Total current assets 675,112 1,983,442 254,154

Loans to employees 8,460 4,851 622

Long-term investments -- 105,573 13,528

Other assets 2,020 2,124 272

Property, plant and equipment,

net 152,489 186,980 23,959

Land use right 2,639 2,505 321

Deferred tax assets - non-

current portion 115 -- --

Intangible assets -- 149,479 19,154

Goodwill -- 122,169 15,654

Total assets 840,835 2,557,123 327,664

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Notes payable 17,153 50,625 6,487

Accounts payable 62,809 79,352 10,168

Customers' deposits 29,827 47,007 6,023

Salaries payables 43,653 55,676 7,134

Other taxes payable 5,086 7,937 1,017

Other payables 8,862 13,965 1,789

Proceeds payables -- 34,854 4,466

Accrued professional expenses 11,555 -- --

Accrued other expenses 9,908 33,363 4,275

Advance subsidies 14,500 17,900 2,294

Income taxes payable 2,928 11,703 1,500

Total current liablilies 206,281 352,382 45,153

Commitment and contingencies

Minority interests 37,596 10 1

Deferred tax liabilities, net -- 21,815 2,795

37,596 21,825 2,797

Mezzanine equity:

Convertible redeemable

preferred shares 325,389 -- --

Shareholders' equity:

Ordinary shares 79 110 14

Additional paid-in capital 45,773 1,934,937 247,939

Retained earnings 225,717 266,834 34,192

Accumulated other comprehensive

loss -- (18,965) (2,430)

Total shareholders' equity 271,569 2,182,916 279,714

Total liabilities and shareholders'

equity 840,835 2,557,123 327,664

Exhibit 2

MINDRAY MEDICAL INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended December 31,

2005 2006 2006

RMB RMB US$

(unaudited) (unaudited) (unaudited)

(In thousands, except share and per share data)

Net revenues

- PRC 198,578 225,759 28,929

- International 146,355 251,598 32,240

Net revenues 344,933 477,357 61,168

Cost of revenues (note 1) (161,694) (220,396) (28,241)

Gross profit 183,239 256,961 32,927

--

Selling expenses (note 1)(note 2) (44,452) (62,416) (7,998)

General and administrative

expenses (note 1) (15,728) (32,908) (4,217)

Research and development

expenses (note 1) (34,144) (45,966) (5,890)

Expense of in-progress research &

development -- (31,835) (4,079)

Other general expenses -- 179 23

Operating income 88,915 84,015 10,766

--

Other income, net 8,496 7,484 959

Interest income 3,000 19,012 2,436

Interest expense (396) (135) (17)

Income before income taxes and

minority interests 100,015 110,376 14,144

Provision for income taxes (6,153) (4,408) (565)

Minority interests (8,409) -- --

Net Income 85,453 105,968 13,579

Deemed dividend on issuance of

convertible redeemable -- -- --

preferred shares at a discount -- -- --

Income attributable to ordinary

shareholders 85,453 105,968 13,579

Basic earnings per share RMB1.13 RMB1.00 US$0.13

Diluted earnings per share RMB1.13 RMB0.95 US$0.12

Shares used in the computation of:

Basic earnings per share 75,350,054 105,727,677 105,727,677

Diluted earnings per share 75,350,054 111,553,018 111,553,018

Note 1: Three months ended December 31,

2005 2006 2006

RMB RMB US$

(unaudited) (unaudited) (unaudited)

(In thousands)

Share-based compensation charges

incurred during the

period related to:

Cost of revenues -- 188 24

Selling expenses -- 817 105

General and administrative

expenses -- 3,446 442

Research and development expenses -- 2,090 268

Note 2: includes RMB2.3 million in amortization of acquired

intangible assets

Exhibit 2

MINDRAY MEDICAL INTERNATIONAL LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS (Cont.)

Year ended December 31,

2005 2006 2006

RMB RMB US$

(derived from

audited

financials) (unaudited) (unaudited)

(In thousands, except share and per share data)

Net revenues

- PRC 626,997 779,378 99,869

- International 451,576 735,603 94,260

Net revenues 1,078,573 1,514,981 194,129

Cost of revenues (note 1) (493,326) (687,484) (88,094)

Gross profit 585,247 827,497 106,035

Selling expenses (note 1)(note 2) (146,499) (211,858) (27,147)

General and administrative

expenses (note 1) (112,082) (76,010) (9,740)

Research and development

expenses (note 1) (106,147) (149,141) (19,111)

Expense of in-progress research &

development -- (31,835) (4,079)

Other general expenses -- 202 26

Operating income 220,519 358,855 45,983

Other income, net 9,210 6,016 771

Interest income 3,854 27,890 3,574

Interest expense (2,019) (462) (59)

Income before income taxes and

minority interests 231,564 392,299 50,269

Provision for income taxes (18,066) (24,057) (3,083)

Minority interests (8,409) (6,456) (827)

Net Income 205,089 361,786 46,359

Deemed dividend on issuance of

convertible redeemable (14,031) -- --

preferred shares at a discount -- -- --

Income attributable to ordinary

shareholders 191,058 361,786 46,359

Basic earnings per share RMB2.31 RMB4.16 US$0.53

Diluted earnings per share RMB2.31 RMB3.75 US$0.48

Shares used in the computation of:

Basic earnings per share 82,790,427 87,066,163 87,066,163

Diluted earnings per share 82,790,427 96,370,084 96,370,084

Note 1 Year ended December 31,

2005 2006 2006

RMB RMB US$

(unaudited) (unaudited) (unaudited)

(In thousands)

Share-based compensation charges

incurred during the

period related to:

Cost of revenues 268 614 79

Selling expenses 8,576 6,372 817

General and administrative

expenses 59,014 12,195 1,563

Research and development expenses 3,071 6,873 881

Note 2: includes RMB2.3 million in amortization of acquired

intangible assets

Exhibit 3

MINDRAY MEDICAL INTERNATIONAL LIMITED

Liquidity and Capital Resources

Year ended December 31,

2005 2006 2006

RMB RMB US$

(derived

from

audited

financials)(unaudited)(unaudited)

(In thousands)

Cash and cash equivalents (note 3) 453,870 1,722,908 220,770

Net cash from operating activities 363,385 533,019 68,300

Net cash used in investing activities (62,428) (178,846) (22,917)

Net cash used in financing activities (33,370) 928,245 118,943

Note 3: includes cash and cash equivalents, short-term investments and

restricted cash

RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE NEAREST

COMPARABLE GAAP MEASURES

For the three months ended,

09/30/2005 12/31/2005 03/31/2006

RMB RMB RMB

(unaudited) (unaudited) (unaudited)

(In thousands, except share and per

share data)

Non-GAAP net income (note 4) 84,001 85,453 71,417

Non-GAAP net margin 28.3% 24.8% 22.4%

Expense/Amortization of acquired

intangible assets -- -- --

Deferred tax impact related to

acquired intangible assets -- -- --

Deemed dividend on issuance of

convertible redeemable preferred

shares at a discount (14,031) -- --

Share-based compensation (44,594) -- (3,014)

GAAP net income 39,407 85,453 68,403

Non-GAAP income per share - basic RMB1.00 RMB1.13 RMB0.95

Non-GAAP income per share - diluted RMB1.00 RMB1.13 RMB0.84

GAAP income per share - basic RMB0.47 RMB1.13 RMB0.91

GAAP income per share - diluted RMB0.47 RMB1.13 RMB0.80

Shares used in computation of:

Basic earnings per share 83,916,315 75,350,054 75,350,054

Diluted earnings per share 83,916,315 75,350,054 85,425,031

Non-GAAP operating income 89,637 88,915 80,187

Non-GAAP operating margin 30.2% 25.8% 25.2%

Expense/Amortization of acquired

intangible assets -- -- --

Share-based compensation (44,594) -- (3,014)

GAAP operating income 45,043 88,915 77,173

RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE NEAREST

COMPARABLE GAAP MEASURES (cont.)

For the three months ended,

06/30/2006 09/30/2006

RMB RMB

(unaudited) (unaudited)

Non-GAAP net income (note 4) 103,541 100,372

Non-GAAP net margin 28.9% 27.8%

Expense/Amortization of acquired

intangible assets -- --

Deferred tax impact related to

acquired intangible assets -- --

Deemed dividend on issuance of

convertible redeemable preferred

shares at a discount -- --

Share-based compensation (7,172) (9,327)

GAAP net income 96,369 91,045

Non-GAAP income per share - basic RMB1.27 RMB1.18

Non-GAAP income per share - diluted RMB1.13 RMB1.04

GAAP income per share - basic RMB1.18 RMB1.07

GAAP income per share - diluted RMB1.05 RMB0.94

Shares used in computation of:

Basic earnings per share 81,595,905 85,276,860

Diluted earnings per share 91,477,498 96,913,296

Non-GAAP operating income 107,915 106,250

Non-GAAP operating margin 30.1% 29.4%

Expense/Amortization of acquired

intangible assets -- --

Share-based compensation (7,172) (9,327)

GAAP operating income 100,743 96,923

RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE NEAREST

COMPARABLE GAAP MEASURES (cont.)

For the three months ended,

12/31/2006 12/31/2006

RMB US$

(unaudited) (unaudited)

Non-GAAP net income (note 4) 141,512 18,133

Non-GAAP net margin 29.6% 29.6%

Expense/Amortization of acquired

intangible assets (34,121) (4,372)

Deferred tax impact related to

acquired intangible assets 5,118 656

Deemed dividend on issuance of

convertible redeemable preferred

shares at a discount -- --

Share-based compensation (6,541) (838)

GAAP net income 105,968 13,579

Non-GAAP income per share - basic RMB1.34 US$0.17

Non-GAAP income per share - diluted RMB1.27 US$0.16

GAAP income per share - basic RMB1.00 US$0.13

GAAP income per share - diluted RMB0.95 US$0.12

Shares used in computation of:

Basic earnings per share 105,727,677 105,727,677

Diluted earnings per share 111,445,681 111,445,681

Non-GAAP operating income 124,677 15,976

Non-GAAP operating margin 26.1% 26.1%

Expense/Amortization of acquired

intangible assets (34,121) (4,372)

Share-based compensation (6,541) (838)

GAAP operating income 84,015 10,766

RECONCILIATIONS OF NON-GAAP RESULTS OF OPERATIONS MEASURES TO THE NEAREST

COMPARABLE GAAP MEASURES (cont.)

For the year ended December 31,

2005 2006 2006

RMB RMB US$

(unaudited) (unaudited) (unaudited)

(In thousands, except share and per share data)

Non-GAAP net income (note 4) 276,018 416,843 53,414

Non-GAAP net margin 25.6% 27.5% 27.5%

Expense/Amortization of

acquired intangible assets -- (34,121) (4,372)

Deferred tax impact related to

acquired intangible assets -- 5,118 656

Deemed dividend on issuance of

convertible redeemable preferred

shares at a discount (14,031) -- --

Share-based compensation (70,929) (26,054) (3,339)

GAAP net income 205,089 361,786 46,359

Non-GAAP income per share - basic RMB3.33 RMB4.79 US$0.61

Non-GAAP income per share - diluted RMB3.33 RMB4.33 US$0.55

GAAP income per share - basic RMB2.48 RMB4.16 US$0.53

GAAP income per share - diluted RMB2.48 RMB3.75 US$0.48

Shares used in computation of:

Basic earnings per share 82,790,427 87,066,163 87,066,163

Diluted earnings per share 82,790,427 96,370,084 96,370,084

Non-GAAP operating income 291,448 419,030 53,694

Non-GAAP operating margin 27.0% 27.7% 27.7%

Expense of acquired intangible

assets -- (34,121) (4,372)

Share-based compensation (70,929) (26,054) (3,339)

GAAP operating income 220,519 358,855 45,983

Note 4: the figures do not include impact of minority interests of

RMB8.4 million and RMB6.5 million attributable to fourth quarter

2005 and first quarter 2006, respectively.

Source: Mindray Medical International Limited
collection