Deer Consumer Products Announces Record 2011 Financial Results; Provides 2012 Growth Outlook

2011 revenue of $226.7 million, an increase of 28.9% from 2010 2011 net income of $39.8 million, an increase of 31% from 2010 Fully diluted earnings per share of $1.18, an EPS increase of 31% from 2010 Anticipates favorable Chinese domestic consumer market environment for continued growth in 2012 Deer Consumer Products, Inc. DEER announces today record financial results for the year ended December 31, 2011. 2011 REVENUE 2011 revenue was $226.7 million, an increase of $50.9 million, or 28.9%, from $175.8 million in 2010. Approximately 68% of our sales in 2011 were generated from the China domestic market while approximately 32% were from export markets. The increase in revenues was a result of our sales expansion in the China domestic market of our Deer branded product lines. We were also able to raise the average selling prices of our products and maintained healthy profit margins across our product lines. 2011 GROSS PROFIT MARGIN 2011 gross profit margin was approximately 30.6%, which reflects blended profit margins between our higher margin China domestic sales and generally lower margin export sales as well as an increase in the average selling prices of our products. In addition, we are continuing to improve the efficiency of our manufacturing operations by producing key components of our products in house, allowing us to benefit further from economies of scale and achieve improved manufacturing margins. 2011 OPERATING EXPENSES 2011 SG&A expenses were $21.0 million, an increase of $7.3 million, or 52.9%, from $13.7 million in 2010, as expected, due to the hiring of additional direct sales staff and in-store product promoters to further our revenue growth in China. As expected, our advertising costs remained minimal in 2011 because we use factory representatives and in-store promoters to promote our products directly to consumers at retail locations, a standard marketing practice in the small household appliances industry in China. The in-store promotion approach is highly effective in marketing products directly to consumers in the unique Chinese retail environment as compared to traditional mass media advertising channels, which can cause significant advertising expenses without enhancing sales. According to a survey in the 2010 China Small Electronics Market Research Report, approximately 60% of Chinese consumers surveyed purchased small household appliances after being introduced to the product by in-store promoters. Like other established domestic brands in China, our in-store promoters market our products exclusively and directly to in-store customer traffic.