SHENZHEN, China, Dec 13, 2013 /PRNewswire/ -- Mindray Medical International Limited ("Mindray," NYSE: MR), a leading developer, manufacturer and marketer of medical devices worldwide, today issued a statement to address investors' concerns regarding the recent volatility of the company's stock price. Management also hosted a conference call to answer investor questions.
Mindray stands by the integrity of its historical annual reports and press releases. The company believes that the allegations and accusations set forth in the research report released on December 12th lack merit and contain numerous errors of facts, misleading speculations and malicious interpretations of events. Further, the allegations fail to take into account various factors necessary to understand the matters addressed.
The Company does not intend to enter into an item-by-item refutation of the false statements and errors of facts contained in the December 12th research report, but will show the types of erroneous allegations that are contained in such report to demonstrate the lack of rigor and authenticity contained in such materials
Mindray fully stands by the integrity of its financial statements which have been audited by its independent accountants, PricewaterhouseCoopers (PwC), who have acted as Mindray's auditor since fiscal year 2008.
Mindray's 2012 annual report on Form 20-F was recently reviewed by the U.S. Securities and Exchange Commission (SEC). These reviews are customary and mandated to occur at least every 3 years for U.S. listed companies. As is the SEC's practice following the completion of its review process, the SEC made publicly available the related communications on its website at sec.gov.
The research report in a number of incidents has taken information provided to the SEC in response to discrete questions out of context in an effort to discredit the Company's financial numbers. For example, in response to a tax footnote related question, Mindray indicated that in 2012 on a stand-alone basis (excluding China sales) it recognized a loss in connection with its international sales. However, international sales are, and are expected to remain, an important and profitable activity for Mindray. The disclosure reflects the manner in which Mindray sells and distributes its products internationally. In reaching its international customers, Mindray's manufacturing subsidiary(ies) in the PRC sell its products either through its internal sales team in the PRC directly to the international markets or through its overseas subsidiaries. Profits on products manufactured in China for sale internationally by our PRC subsidiaries tend to be higher because our PRC subsidiaries do not bear the additional fixed (overhead) and variable costs of marketing and distributing products outside of China that would be incurred by our overseas subsidiaries.
2. Existence of Assets
- Cash and Short-term Investments
Mindray has over US$1 billion in cash, cash equivalents and short-term investments as of September 30, 2013. As consistently disclosed previously, a substantial majority of Mindray's cash is in accounts located in China. Due to China's strict capital outflow regulations and a less favorable interest rate environment outside of China in the past few years, Mindray has determined that it was more cost efficient to use third party borrowings to fund its offshore cash needs, including funds required for international acquisitions. Mindray believes that this funding strategy has been a prudent allocation of resources and will continue to monitor the ongoing financing market environment and will adjust its strategy as appropriate.
- Manufacturing and R&D Facilities
The research report suggests that Mindray has not made claimed facilities investments. In particular, the research report contains photos purportedly taken at Mindray's Nanjing and Zhongguancuan facilities. By our initial investigation, we have confirmed one photo is of our completed Changping, Beijing facility (not our Zhonguancuan facility) and the other is not our Nanjing Facility. As long term Mindray investors know, since Mindray's IPO, the company has frequently hosted investor visits to its headquarters and other major facilities. The same applies to the Nanjing facility. For newer investors and others desiring to know the truth, the company will seek to accommodate investor requests for site visits. Alternatively, the addresses of our facilities are No.666, Zhengfangzhong Road, Jiangning Technology Development Zone, Nanjing, Jiangsu Province, China and Building #5, Shangdi Qunying Science Park, Haidian, Beijing,China . Investors are welcomed to drive to such locations to prove it for themselves.
In 2008, Mindray acquired its Datascope patient monitoring business in an asset purchase from a U.S. listed company in exchange for cash consideration of $209 million. In seeking to discredit Mindray's accounting, the research report, among other things, question whether the Datascope acquisition was properly accounted for and whether there were related intangible writeoffs in 2009. The acquired Datascope acquisition was properly accounted for, the business continues to serve as the major infrastructure for Mindray's penetration into the North America medical equipment business and there was no write off of acquired intangible assets in 2009.
The research report erroneously asserts that there was a $208.2 million Datascope related write-off in 2008 and that $656 million disappeared from Mindray's balance sheet in 2008. The research report seeks to substantiate the Datascope related write-off in 2008 by comparing long-lived asset balances in the U.S. as of December 31, 2008 of $238 million as reflected in the 2008 financial statements to the long-lived asset balance in the U.S. of $29.8 million as reflected in the 2009 financial statements. What the research report fails to properly consider is that both presentations were correct. In 2008 long-lived assets included the total amount of the Datascope assets acquired. In 2009, Mindray changed its basis of presentation with long-lived assets only including the total Datascope long-lived assets actually acquired (derived by deducting from total Datascope assets acquired asset balances the amount of acquired Datascope current assets, other assets, non-current accounts receivable, net, advances for purchase of plant and equipment, intangible assets, net and goodwill). Those deducted amounts were migrated, as appropriate, to other line items in Mindray's consolidated financials. Similarly, in asserting that $656 million in long-lived assets "simply vanished" from Mindray's balance sheet, the research report compared the total long-lived balance of $785.8 million as of December 31, 2008 as reflected in the 2008 financial statements to the long-lived asset balance of $129.1 million balance as reflected in the 2009 financial statements--failing to account for similar changes in presentation. Both the 2008 and 2009 financial statements reflect total assets as of December 31, 2008 of $785.8 million.
In struggling to manufacture inconsistencies in Mindray's financials, the research report in many instances (i) wrongly compares stand-alone account balances for Mindray Medical International Limited (MMIL), our registrant holding company, to consolidated group financial results or (ii) suggests improper accounting treatment or disclosure because standalone MMIL financials were not filed after 2009. Standalone MMIL financial statements were required in 2009 and prior based on specific SEC rules requiring registrant only financial statements if the consolidated group's restricted net assets exceeded 25% of the group's total net asset. As the consolidated group's restricted net assets did not exceed such threshold in 2010 and after, these standalone financials were not presented in the subsequent 20Fs
3. Company Structure and Corporate Governance
Significant efforts were made to improperly discredit Mindray or raise unfounded concerns based on, among other things, Mindray's change in auditors, purported increased complexity of Mindray's corporate structure and inordinate management turnover and recent stock sales by company insiders.
- Previous Change of Auditor
Mindray publicly disclosed in 2008 that it changed its independent accounting firm to PwC from Deloitte and that no disagreement existed with Deloitte at the time of that change. Mindray has not changed its auditor since.
- Organizational Structure and Management Turnover
Mindray's organizational structure has evolved and grown along with its business. This information is also consistently laid out in the company's public filings. The company's board of directors and management have also remained largely stable. Xu Hang remains chairman of the board after stepping down as co-CEO. Ex-CFOs Joyce Hsu and Ronnie Ede also remain as Mindray directors and Jie Liu continues to serve as the COO. Alex Lung has also been with the company for several years and has served as the CFO since 2011.
Recent management ADS sales were primarily done through 10b5-1 plans.
The company is dedicated to protecting its reputation and the interests of its investors. Accordingly, Mindray reserves all rights in this matter, including legal action against the authors involved in the research report. Mindray will pursue any and all means available to protect its brand, reputation, and value in the stock market.
Share Buyback Program
In light of the adverse impact of the research report on the trading price for Mindray's ADSs, Mindray expects to recommence repurchases under its previously announced buyback program.
Conference Call Information
Mindray's management held a conference call at 8:00 AM on December 13, 2013 U.S. Eastern Time (9:00 PM on December 13, 2013 Beijing/Hong Kong Time).
The replay information will be available until December 21, 2013.Dial-in information is as follows:
International Toll Free:
Local dial-in numbers:
Passcode for all regions:
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 made and the views expressed here, which are not historical facts, are forward looking statements. You should be cautioned that forward-looking statements are only predictions and may involve inherent risks and uncertainties. As such, our actual results may be materially different from the statements and the views expressed here today due to a variety of factors.
A number of such risks and uncertainties and factors are outlined in our public filings with the SEC. In particular please refer to risk factors beginning on page 5 of our Annual Report on Form 20-F. Any projections made here today are based only on limited information currently available to us and are subject to change. Mindray does not undertake any obligations to update any forward-looking statements except as required under applicable law.
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:
Mindray Medical International Limited
In the U.S:
Western Bridge, LLC
SOURCE Mindray Medical International Limited