SmartHeat Inc. Announces Record 2009 Annual Results
Anticipates Rapid Earnings Growth in 2010 from Clean Technology Energy Savings
Product Sales
· | 2009 revenue of $82.56 million, up 153% compared to $32.68 million in 2008 |
· | 2009 net income of $15.44 million, up 144% compared to $6.34 million in 2008 |
· | 2009 earnings per share (EPS) of $0.58, up 100% compared to $0.29 in 2008 |
· | Positive signs of economic growth in China, anticipates earnings growth momentum to continue into 2010 |
NEW YORK, March 31, 2010 /PRNewswire-Asia/ -- SmartHeat Inc.
(Nasdaq: HEAT; website: www.smartheatinc.com), a market leader in China's clean technology energy savings industry announced today record audited 2009 financial results for the fiscal year ended December 31, 2009. SmartHeat's products significantly reduce heat energy costs, increase energy efficiency and reduce air pollution.
James Jun Wang, Chairman & CEO of SmartHeat, commented, “We are excited to announce our outstanding financial performance for the fiscal year ending in 2009 which exceeded our expectations. Our 2009 financial results are the result of a continued favorable market environment for our industry and the successful execution of our growth strategies. China's energy savings industry continues to be supported by the Chinese government and receives significant funding through government initiatives. In addition, China's economic rebound in the fourth quarter has created a positive environment for growth in 2010 as we expect significant benefits from the continued transition to cleaner technologies and energy saving equipment.”
Fiscal Year 2009 Financial Performance
Revenues were $82.56 million in fiscal year 2009 compared to $32.68 million in 2008, a 153% increase. The significant revenue increase was due to significant sales growth across all product lines as a result of:
| · | Increasing our traditional heat supply sales as a result of growth in the China domestic infrastructure construction industry, accounting for $37.62 million or 45.6% of total sales; and |
| · | Adding new customers in the chemical, engineering, electric power and metal smelting industries, accounting for $25.42 million or 30.7% of our total sales; and |
| · | Rising heat meter sales, accounting for $7.98 million or approximately 9.7% of total sales. |
Gross profit was $29.10 million in fiscal year 2009 compared to $10.96 million in 2008, a 165.51% increase. Gross profit increased primarily due to the decreased cost of goods sold as a percentage of sales while our sales continued to increase.
Operating expenses were $10.92 million in fiscal year 2009 compared to $3.42 million in 2008, a 219% increase. Operating expenses increased because of the higher general and administrative expenses incurred as a result of our growth in sales and production and fees and expenses associated with becoming a public company in 2008.
Operating income was $18.18 million in fiscal year 2009 compared to $7.54 million in 2008, a 141.11% increase. Operating income increased as a result of continued economies of scale in production costs combined with the rapid growth in revenues and improved operating efficiency.
Net income was $15.44 million in fiscal year 2009 compared to $6.34 million in 2008, a 144% increase. Earnings per share were $0.58 in fiscal year 2009 compared to $0.29 in 2008 a 100% increase. In addition to the increased revenue and income from operations, net income and EPS both benefited from a decrease in the tax rate during the year from 18% to 15%.
Management Comments: 2009 Financial Results and 2010 Market Guidance
Mr. Wang commented: “Our audited 2009 financial results exceeded management’s financial performance targets as we described in early 2009. SmartHeat expects to experience significant product sales in 2010 as we anticipate a broader domestic economic expansion in China. China’s businesses and residences are in the process of becoming more energy efficient and environmentally friendly due to economic incentives and policies. SmartHeat will benefit from this process. As a result, SmartHeat anticipates continued strong product sales and earnings growth in 2010 from all sectors of our customer base: government, industrial, commercial and consumers.
Investor Conference Call Instructions:
SmartHeat management will host an earnings conference call to discuss its 2009 financial results and business outlook for 2010.
Date and time: 7:30 am U.S. Eastern Daylight Time, Wednesday March 31, 2010
Participant dial-in numbers:
U.S. toll free number: | 1 888 339-2688 |
International direct dial-in: | 1 617 847-3007 |
Conference pass code: | 119 470 41 |
To listen to a replay of the earnings conference call:
U.S. toll free number: | 1 888 286-8010 |
International direct dial in: | 1 617 801-6888 |
Conference pass code: | 628 492 79 |
About SmartHeat Inc.
Founded by James Jun Wang, a former executive at Honeywell China, SmartHeat Inc. (www.smartheatinc.com) is a NASDAQ Global Market listed (Nasdaq: HEAT) US company with its primary operations in China. SmartHeat is a market leader in China's clean technology energy savings industry. SmartHeat manufactures standard plate heat exchangers (PHEs), custom plate heat exchanger units (PHE Units) and heat meters. SmartHeat's products directly address air pollution problems in China where massive coal burning for cooking and heating purposes is the only source of economical heat energy in China. With broad product applications, SmartHeat's products significantly reduce heating costs, increase energy use and reduce air pollution. SmartHeat's customers include global Fortune 500 companies as well as municipalities and industrial/residential users. China's heat transfer market is currently estimated at approximately $2.4 billion with double-digit annual growth according to China Heating Association.
Safe Harbor Statement
All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. SmartHeat's actual results may differ from its projections. Further, preliminary results are subject to normal year-end adjustments. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect SmartHeat's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in SmartHeat's filings with the Securities and Exchange Commission.
Corporate Communications Contact:
Ms. Jane Ai, Corporate Secretary
SmartHeat Inc.
Tel: 011-86-24-25363366
Email: info@SmartHeatinc.com
SMARTHEAT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND 2008
| | 2009 | | | 2008 | |
ASSETS | | | | | | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash & cash equivalents | | $ | 48,967,992 | | | $ | 1,435,212 | |
Restricted cash | | | 1,301,573 | | | | 462,048 | |
Accounts receivable, net | | | 31,887,785 | | | | 11,390,169 | |
Retentions receivable | | | 885,642 | | | | 290,852 | |
Advances to suppliers | | | 7,657,791 | | | | 412,524 | |
Other receivables, prepayments and deposits | | | 3,572,600 | | | | 698,834 | |
Inventories | | | 11,259,273 | | | | 6,107,583 | |
Notes receivable - bank acceptances | | | 397,248 | | | | 14,631 | |
| | | | | | | | |
Total current assets | | | 105,929,904 | | | | 20,811,853 | |
| | | | | | | | |
NON-CURRENT ASSETS | | | | | | | | |
Restricted cash | | | 48,361 | | | | 219,472 | |
Accounts receivable, net | | | 237,384 | | | | 310,810 | |
Retentions receivable | | | 349,931 | | | | 166,912 | |
Intangible assets, net | | | 4,071,021 | | | | 1,155,131 | |
Property and equipment, net | | | 7,739,609 | | | | 2,436,553 | |
| | | | | | | | |
Total noncurrent assets | | | 12,446,306 | | | | 4,288,878 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 118,376,210 | | | $ | 25,100,731 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Accounts payable | | $ | 3,493,196 | | | $ | 1,210,906 | |
Unearned revenue | | | 2,130,637 | | | | 850,408 | |
Taxes payable | | | 2,140,627 | | | | 1,327,775 | |
Accrued liabilities and other payables | | | 3,685,272 | | | | 1,330,812 | |
Due to minority shareholder | | | - | | | | 5,303 | |
Notes payable - bank acceptances | | | 1,806,564 | | | | - | |
Loans payable | | | 4,393,544 | | | | 2,443,450 | |
| | | | | | | | |
Total current liabilities | | | 17,649,840 | | | | 7,168,654 | |
| | | | | | | | |
DEFERRED TAX LIABILITY | | | 8,526 | | | | 38,854 | |
| | | | | | | | |
COMMITMENTS AND CONTINGENCIES | | | | | | | | |
| | | | | | | | |
STOCKHOLDERS' EQUITY | | | | | | | | |
Common stock, $0.001 par value; 75,000,000 shares authorized, 32,794,875 and 24,179,900 shares issued and outstanding at December 31, 2009 and 2008, respectively | | | 32,795 | | | | 24,180 | |
Paid in capital | | | 74,917,370 | | | | 8,223,453 | |
Statutory reserve | | | 2,872,006 | | | | 1,150,542 | |
Accumulated other comprehensive income | | | 969,988 | | | | 984,629 | |
Retained earnings | | | 21,231,484 | | | | 7,510,419 | |
| | | | | | | | |
Total Company stockholders' equity | | | 100,023,643 | | | | 17,893,223 | |
| | | | | | | | |
NONCONTROLLING INTEREST | | | 694,201 | | | | - | |
| | | | | | | | |
TOTAL EQUITY | | | 100,717,844 | | | | 17,893,223 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 118,376,210 | | | $ | 25,100,731 | |
SMARTHEAT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
| | YEARS ENDED DECEMBER 31, | |
| | 2009 | | | 2008 | |
| | | | | | |
Net sales | | $ | 82,563,869 | | | $ | 32,676,082 | |
| | | | | | | | |
Cost of goods sold | | | 53,467,805 | | | | 21,717,735 | |
| | | | | | | | |
Gross profit | | | 29,096,064 | | | | 10,958,347 | |
| | | | | | | | |
Operating expenses | | | | | | | | |
Selling expenses | | | 3,934,749 | | | | 1,564,977 | |
General and administrative expenses | | | 6,986,116 | | | | 1,851,693 | |
| | | | | | | | |
Total operating expenses | | | 10,920,865 | | | | 3,416,670 | |
| | | | | | | | |
Income from operations | | | 18,175,199 | | | | 7,541,677 | |
| | | | | | | | |
Non-operating income (expenses) | | | | | | | | |
Interest income | | | 409,221 | | | | 405,266 | |
Interest expense | | | (518,382 | ) | | | (314,192 | ) |
Financial expense | | | (30,304 | ) | | | - | |
Other income | | | 116,795 | | | | 11,738 | |
Other expenses | | | (2,838 | ) | | | (13,709 | ) |
Exchange loss | | | (26,255 | ) | | | (12,044 | ) |
Subsidy income | | | 165,598 | | | | 16,230 | |
| | | | | | | | |
Total non-operating income, net | | | 113,835 | | | | 93,289 | |
| | | | | | | | |
Income before income tax | | | 18,289,034 | | | | 7,634,966 | |
| | | | | | | | |
Income tax expense | | | 2,858,186 | | | | 1,293,660 | |
| | | | | | | | |
Income from operations | | | 15,430,848 | | | | 6,341,306 | |
| | | | | | | | |
Less: Income (loss) attributable to noncontrolling interest | | | (11,681 | ) | | | 5,966 | |
| | | | | | | | |
Net income to SmartHeat Inc | | | 15,442,529 | | | | 6,335,340 | |
| | | | | | | | |
Other comprehensive item Foreign currency translation | | | (14,641 | ) | | | 510,770 | |
| | | | | | | | |
Comprehensive Income | | $ | 15,427,888 | | | $ | 6,846,110 | |
| | | | | | | | |
Basic weighted average shares outstanding | | | 26,535,502 | | | | 22,176,322 | |
| | | | | | | | |
Diluted weighted average shares outstanding | | | 26,592,066 | | | | 22,176,432 | |
| | | | | | | | |
Basic earnings per share | | $ | 0.58 | | | $ | 0.29 | |
| | | | | | | | |
Diluted earnings per share | | $ | 0.58 | | | $ | 0.29 | |
SMARTHEAT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
| | YEARS ENDED DECEMBER 31, | |
| | 2009 | | | 2008 | |
| | | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
Income including noncontrolling interest | | $ | 15,430,848 | | | $ | 6,341,306 | |
Adjustments to reconcile income including noncontrolling interest to net cash used in operating activities: | | | | | | | | |
Depreciation and amortization | | | 635,368 | | | | 252,598 | |
Unearned interest on accounts receivable | | | 120,522 | | | | (127,819 | ) |
Stock option compensation expense | | | 3,292 | | | | 5,613 | |
Changes in deferred tax liability | | | (30,353 | ) | | | (163 | ) |
(Increase) decrease in current assets: | | | | | | | | |
Accounts receivable | | | (20,724,401 | ) | | | (4,943,868 | ) |
Retentions receivable | | | (777,062 | ) | | | (74,797 | ) |
Advances to suppliers | | | (7,233,127 | ) | | | 62,759 | |
Other receivables, prepayments and deposits | | | (2,230,595 | ) | | | 182,577 | |
Inventory | | | (5,143,857 | ) | | | 2,405,678 | |
Increase (decrease) in current liabilities: | | | | | | | | |
Accounts payable | | | 4,051,684 | | | | (2,389,649 | ) |
Unearned revenue | | | 1,278,907 | | | | (2,993,636 | ) |
Taxes payable | | | 811,275 | | | | 779,408 | |
Accrued liabilities and other payables | | | (5,776,850 | ) | | | (261,040 | ) |
| | | | | | | | |
Net cash used in operating activities | | | (19,584,349 | ) | | | (761,033 | ) |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Increase in restricted cash | | | (667,502 | ) | | | (108,040 | ) |
Cash purchased at acquisition | | | - | | | | 55,426 | |
Acquisition of property & equipment | | | (942,442 | ) | | | (439,861 | ) |
Notes receivable | | | - | | | | (14,635 | ) |
| | | | | | | | |
Net cash used in investing activities | | | (1,609,944 | ) | | | (507,110 | ) |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Cash contribution from noncontrolling interest | | | 705,882 | | | | - | |
Change in due to minority shareholders | | | - | | | | (663 | ) |
Repayment to shareholder | | | - | | | | (343,913 | ) |
Proceeds from short term loans | | | 4,552,774 | | | | 5,136,069 | |
Repayment on short term loans | | | (1,870,976 | ) | | | (7,583,873 | ) |
Warrants exercised | | | 380,850 | | | | - | |
Shares issued | | | 65,007,390 | | | | 5,100,000 | |
| | | | | | | | |
Net cash provided by financing activities | | | 68,775,920 | | | | 2,307,620 | |
| | | | | | | | |
EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS | | | (48,847 | ) | | | 2,588 | |
| | | | | | | | |
NET INCREASE IN CASH & CASH EQUIVALENTS | | | 47,532,780 | | | | 1,042,065 | |
| | | | | | | | |
CASH & CASH EQUIVALENTS, BEGINNING OF YEAR | | | 1,435,212 | | | | 393,147 | |
| | | | | | | | |
CASH & CASH EQUIVALENTS, END OF YEAR | | $ | 48,967,992 | | | $ | 1,435,212 | |
| | | | | | | | |
Supplemental Cash flow data: | | | | | | | | |
Income tax paid | | $ | 1,500,415 | | | $ | 660,127 | |
Interest paid | | $ | 338,513 | | | $ | 274,969 | |
CONTACT: Corporate Contact: Ms. Jane Ai, Corporate Secretary, SmartHeat Inc., 011-86-24-25363366, info@SmartHeatinc.com