Mindray Announces 2011 Fourth Quarter and Full Year Results

SHENZHEN, China, February 28, 2012 /PRNewswire-Asia-FirstCall/ -- Mindray Medical International Limited (NYSE: MR), a leading developer, manufacturer and marketer of medical devices worldwide, announced today its selected unaudited financial results for the fourth quarter and full year ended December 31, 2011.

Highlights for Fourth Quarter and Full Year 2011

• Fourth quarter net revenue increased 25.2% year-over-year to $264.1 million and full year 2011 net revenue rose 25.1% to $880.7 million.
• Robust regular sales drove China revenues to grow 30.9% year-over-year in the fourth quarter and 27.6% for full year 2011.
• International sales jumped 20.9% year-over-year in the fourth quarter and 23.3% for full year 2011. Emerging markets were again the key growth drivers.
• Fourth quarter 2011 non-GAAP net income increased 14.2% to $51.8 million. Excluding the tax benefits, full year 2011 non-GAAP net income increased 10.1% to $178.8 million.
• In the fourth quarter of 2011, accounts receivable days and inventory days improved to 66 days and 78 days respectively, compared to 71 days and 100 days in the previous quarter.
• Net operating cash inflow strengthened significantly to $96.4 million in the fourth quarter, mainly as a result of improved working capital management.
• Declared 2011 dividend of $0.40 per share.
• Exceeded 2011 product development goals by launching 13 new products in markets around the world.
• Announced a total of four acquisitions in 2011 to further enhance the company's technology and product offerings.

"2011 marks another year of significant achievements in Mindray's history. We strengthened our sales and distribution in domestic and emerging markets, and increased our direct sales effort in developed markets. We also enhanced our system to gain deeper market insights and accelerated our product upgrades and portfolio expansion," commented Mr.Xu Hang, Mindray's Chairman and Co-Chief Executive Officer. "While China and the emerging markets were the key growth drivers for the company, we also delivered solid results in the developed markets. Our performance in the US, which reached high-teens growth for the year, was particularly strong. This gave us even more confidence in our ability to continue expanding our global presence in the future."

Fourth Quarter 2011 Results

Revenues

Mindray reported net revenues of $264.1 million for the fourth quarter of 2011, a 25.2% increase from $211.0 million in the fourth quarter of 2010.

• Net revenues generated in China increased 30.9% to $117.6 million from $89.8 million in the fourth quarter of 2010.
• Net revenues generated in the international markets increased 20.9% to $146.5 million from $121.1 million in the fourth quarter of 2010.

Performance by Segment

Patient Monitoring and Life Support Products: Revenues in this segment increased 20.5% to $119.5 million from $99.1 million in the fourth quarter of 2010, contributing 45.3% to the total net segment revenues in this quarter.

In-Vitro Diagnostic Products: Revenues in this segment increased 25.2% to $63.9 million from $51.1 million in the fourth quarter of 2010, contributing 24.2% to the total net segment revenues in this quarter. Reagents sales represented 32.1% of this segment's revenues.

Medical Imaging Systems: Revenues in this segment increased 28.5% to $65.1 million from $50.6 million in the fourth quarter of 2010, contributing 24.6% to the total net segment revenues in this quarter.

Others: The other revenues, primarily comprising service revenue from extended warranty and sales of accessories, increased 54.4% to $15.7 million from $10.2 million in the fourth quarter of 2010, contributing 5.9% to the total net segment revenues in this quarter.

Gross Margins

Fourth quarter 2011 gross profit was $143.1 million, a 24.1% increase from $115.3 million in the fourth quarter of 2010. Non-GAAP gross profit was $144.5 million, a 24.0% increase from $116.5 million in the fourth quarter of 2010. The gross margin was 54.2%, compared to 54.7% in the fourth quarter of 2010 and 54.9% in the third quarter of 2011. Non-GAAP gross margin was 54.7%, compared to 55.2% in the fourth quarter of 2010 and 55.5% in the third quarter of 2011.

Operating Expenses

Selling expenses for the fourth quarter of 2011 were $51.9 million, or 19.7% of the total net revenues, compared to 19.9% in the fourth quarter of 2010 and 18.8% in the third quarter of 2011. Non-GAAP selling expenses were $50.2 million, or 19.0% of the total net revenues, compared to 19.2% in the fourth quarter of 2010 and 18.0% in the third quarter of 2011.

General and administrative expenses for the fourth quarter of 2011 were $17.7 million, or 6.7% of the total net revenues, compared to 9.1% in the fourth quarter of 2010 and 9.5% in the third quarter of 2011. Non-GAAP general and administrative expenses were $16.7 million, or 6.3% of the total net revenues, compared to 8.5% in the fourth quarter of 2010 and 8.9% in the third quarter of 2011.

Research and development expenses for the fourth quarter of 2011 were $25.6 million, or 9.7% of the total net revenues, compared to 7.9% in the fourth quarter of 2010 and 8.9% in the third quarter of 2011. Non-GAAP research and development expenses were $24.5 million, or 9.3% of the total net revenues, compared to 7.7% in the fourth quarter of 2010 and 8.4% in the third quarter of 2011.

Total share-based compensation expenses for the fourth quarter of 2011, which were allocated to cost of goods sold and related operating expenses, were $3.2 million, compared to $1.7 million in the fourth quarter of 2010 and $3.1 million in the third quarter of 2011.

Operating income in the fourth quarter was $47.9 million, a 28.1% increase from $37.4 million in the fourth quarter of 2010. Non-GAAP operating income was $53.0 million, a 26.9% increase from $41.8 million in the fourth quarter of 2010. Operating margin was 18.1% compared to 17.7% in the fourth quarter of 2010 and 17.7% in the third quarter of 2011. Non-GAAP operating margin was 20.1%, compared to 19.8% in the fourth quarter of 2010 and 20.1% in the third quarter of 2011.

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")

Fourth quarter 2011 EBITDA increased 8.1% year-over-year to $57.6 million from $53.3 million in the fourth quarter of 2010.

Net Income

Fourth quarter 2011 net income was $46.8 million compared to $41.0 million in the fourth quarter of 2010. Non-GAAP net income increased 14.2% to $51.8 million from $45.4 million in the fourth quarter of 2010. Net margin was 17.7%, compared to 19.5% in the fourth quarter of 2010 and 17.1% in the third quarter of 2011. Non-GAAP net margin was 19.6%, compared to 21.5% in the fourth quarter of 2010 and 19.4% in the third quarter of 2011. Fourth quarter 2011 income tax expense was $8.2 million, representing an effective tax rate of 14.9%, compared to a 15.5% effective tax rate in the fourth quarter of 2010.

Fourth quarter 2011 basic and diluted earnings per share were $0.41 and $0.40, respectively, compared to $0.36 and $0.35 in the fourth quarter of 2010. Fourth quarter 2011 basic and diluted non-GAAP earnings per share were $0.45 and $0.44, respectively, compared to $0.40 and $0.38 in the fourth quarter of 2010. Shares used in the computation of diluted earnings per share for the fourth quarter of 2011 were 118.4 million.

Other Selected Data

Accounts receivable days were 66 days in the fourth quarter of 2011 compared to 71 days in the third quarter of 2011. Inventory days were 78 days in the fourth quarter compared to 100 days in the third quarter. Accounts payable days were 44 days in the fourth quarter compared to 58 days in the third quarter. Mindray calculates the above working capital days using the average of beginning and ending balances of the quarter.

As of December 31, 2011, the company had total $603.5 million in cash and cash equivalents, and short-term investments as compared to $532.2 million as of September 30, 2011. Net cash generated from operating activities and net cash outflow for capital expenditures for the quarter were $96.4 million and $26.2 million, respectively.

As of December 31, 2011 the company had approximately 6,800 employees, up from 6,391 employees as of December 31, 2010.

Full Year 2011 Results

Mindray reported net revenues of $880.7 million for the full year 2011, a 25.1% increase from $704.3 million for the full year 2010.

• Net revenues generated in China for the full year 2011 increased 27.6% to $374.3 million from $293.4 million in 2010.
• Net revenues generated in international markets for the full year 2011 increased 23.3% to $506.4 million from $410.9 million in 2010.

Full year 2011 EBITDA increased 6.1% to $203.7 million from $192.1 million in 2010.

Full year 2011 net income was $166.6 million compared to $155.5 million in 2010. Non-GAAP net income increased 9.0% year-over-year to $186.3 million from $170.9 million in 2010. Net margin was 18.9%, compared to 22.1% in 2010. Non-GAAP net margin was 21.2%, compared to 24.3% in 2010. Full year 2011 income tax expense was $22.6 million, representing an effective tax rate of 11.9%, compared to 10.2% in 2010.

Diluted earnings per share increased 6.4% year-over-year to $1.41 from $1.32 in 2010. Non-GAAP diluted earnings per share increased 8.2% to $1.57 from $1.45 in 2010.

Dividend Declaration

Mindray's board of directors has declared a cash dividend on its ordinary shares of $0.40 per share, based on the company's net income for the full year 2011. The cash dividend will be payable on or around April 10, 2012, to shareholders of record as of March 9, 2012. The company has approximately 116 million outstanding ordinary shares as of January 31, 2012.

Business Outlook for Full Year 2012

The company expects its full year 2012 net revenues to grow at least 18% over its full year 2011 net revenues. The company also expects its full year 2012 non-GAAP net income to grow at least 13% over its non-GAAP net income for full year 2011. This guidance excludes the tax benefits related to the key software enterprise status ($7.6 million recognized in the first quarter of 2011 for the calendar year 2010 and the potential tax benefit that we may receive in 2012 for the calendar year 2011) and assumes a corporate income tax rate of 15% applicable to the Shenzhen subsidiary.

The company expects its capital expenditure for 2012 to be around $90 million.

The company's practice is to provide guidance on a full year basis only. This forecast reflects Mindray's current and preliminary views, which are subject to change.

"Looking ahead, we are optimistic about the overall market environment in our key markets," commented Li Xiting, Mindray's President and Co-Chief Executive Officer. "We believe China will continue to be the bright spot due to our strong competitive position and favorable private and government spending trends in the healthcare industry. In emerging markets, we will continue to grasp private and public opportunities, although we foresee headwinds in regions that are politically unstable. For developed markets, we are happy with our steady market share gain in the US, while we expect some pressure on our sales in Western Europe as a result of economic uncertainty. We will, however, strive to achieve yet another year of operational excellence and remain confident about our company's long-term position in the global market."

Conference Call Information

Mindray's management will hold an earnings conference call at 8:00 AM on February 28, 2012 U.S. Eastern Time (9:00 PM on February 28, 2012 Beijing/Hong Kong Time).

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

A replay of the conference call may be accessed by phone at the following numbers until March 13, 2012.

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

Use of Non-GAAP Financial Measures

Mindray provides gross profit, R&D expenses, selling expenses, general and administrative expenses, operating income, net income and earnings per share on a non-GAAP basis, as well as EBITDA to enable investors to better assess the company's operating performance.

The company has reported for the fourth quarter and full year of 2011 and provided guidance for full year 2012 earnings on a non-GAAP basis. Each of the terms as used by the company is defined as follows:

• Non-GAAP gross profit represents gross profit reported in accordance with GAAP, adjusted for the effects of share-based compensation and amortization of acquired intangible assets.
• Non-GAAP operating income represents operating income reported in accordance with GAAP, adjusted for the effects of share-based compensation, realignment cost - post acquisition, legal fees and amortization of acquired intangible assets.
• Non-GAAP selling expenses represent selling expenses reported in accordance with GAAP, adjusted for the effects of share-based compensation and amortization of acquired intangible assets.
• Non-GAAP general and administrative expenses represent general and administrative expenses reported in accordance with GAAP, adjusted for the effects of share-based compensation, realignment cost - post acquisition and legal fees.
• Non-GAAP research and development expenses represent research and development expenses reported in accordance with GAAP, adjusted for the effects of share-based compensation.
• Non-GAAP net income represents net income reported in accordance with GAAP, adjusted for the effects of share-based compensation, realignment cost - post acquisition, legal fees, amortization of acquired intangible assets and deferred tax impact related to acquired intangible assets.
• 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 declared dividends for the basic calculation.
• EBITDA represents net income reported in accordance with GAAP, adjusted for the effect of interest income, interest expenses, provision of income taxes, depreciation and amortization.

The company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The company notes that these measures may not be calculated on the same basis of similar measures used by other companies. 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 months and years ended December 31, 2010 and 2011, respectively, in the attached financial information.

Cautionary Note Regarding Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including, without limitation, statements about Mindray's anticipated net revenues, non-GAAP net income and capital expenditure for 2012,, the tax benefit that we may receive in 2012 for the calendar year 2011, our assumption of a corporate income tax rate of 15% applicable to the Shenzhen subsidiary, our ability to continue expanding our global presence in the future, our optimism about the overall market environment in our key markets, our belief that China will continue to be the bright spot due to our strong competitive position and favorable private and government spending trends in the healthcare industry, our anticipation to continue to grasp private and public opportunities in emerging markets although we foresee headwinds in regions that are politically unstable, our steady market share gain in the U.S., our anticipation of some pressure on our sales in Western Europe as a result of economic uncertainty, that we will strive to achieve another year of operational excellence and remain confident about our company's long-term position in the global market, are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual results due to a variety of factors, including, without limitation, 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. 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 4 of our annual report on Form 20-F which was filed on April 8, 2011. Our results of operations for the fourth quarter of 2011 and the full year ended December 31, 2011 are not necessarily indicative of our operating results for any future periods. The company has not completed its audit of 2011 financial statements and the selected unaudited financial results for the fourth quarter and full year ended December 31, 2011 announced today are subject to adjustment. The anticipated results for the fourth quarter and full year ended December 31, 2011 remain subject to the finalization of the company's year-end closing, reporting and audit processes, particularly as related to accrued expenses, income taxes, share-based compensation expenses, and expenses and/or amortization of intangible assets. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in our public filings with the Securities and Exchange Commission. 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.

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.

About Mindray

We are a leading developer, manufacturer and marketer of medical devices worldwide. We maintain our global headquarters in Shenzhen, China, U.S. headquarters in Mahwah, New Jersey and multiple sales offices in major international markets. From our main manufacturing and engineering base in China, we supply through our worldwide distribution network a broad range of products across three primary business segments, namely patient monitoring and life support, in-vitro diagnostic, and medical imaging systems. For more information, please visit http://ir.mindray.com.

For investor and media inquiries, please contact:

In the U.S:

Hoki Luk
Western Bridge, LLC
Tel: +1-646-808-9150
Email: hoki.luk@westernbridgegroup.com

In China:
Cathy Gao
Mindray Medical International Limited
Tel: +86-755-8188-8023
Email: cathy.gao@mindray.com