2009 total revenue increased by 60.8% through expanded sales to new and existing customers; net income increased by 43.4%

SHENZHEN, China, March 31 /PRNewswire-Asia-FirstCall/ -- China Electric Motor, Inc. (Nasdaq: CELM, "China Electric" or "the Company"), a Delaware corporation and China-based company that engages in the design, production, marketing and sale of micro-motor products through its subsidiary Shenzhen YuePengCheng Motor Co., Ltd. ("Shenzhen YPC"), today announced its financial results for the fourth quarter and fiscal year ended December 31, 2009.

    (Logo: http://www.newscom.com/cgi-bin/prnh/20100331/CNW006LOGO )

    Fourth Quarter 2009 Financial Highlights
    -- Total revenue increased by 57.5% year-over-year to $22.1 million,
       compared to $14.0 million in the fourth quarter of 2008.
       -- 54% of revenue was from sales to original equipment manufacturers
          ("OEMs").
    -- Gross profit increased by 69.4% year-over-year to $6.5 million versus
       $3.8 million in the fourth quarter of 2008.
    -- Operating income was $3.8 million, a 55.1% increase over operating
       income of $2.5 million in the fourth quarter of 2008.
    -- Net income was $2.9 million, a 48.3% increase over net income of $2.0
       million in the fourth quarter of 2008.
    -- Basic and diluted earnings per share were $0.21 and $0.20, respectively,
       translating into increases of 10.5% and 5.3%, respectively, over basic
       and diluted earnings per share of $0.19 in the fourth quarter of 2008.

    Fiscal Year 2009 Highlights
    -- Total revenue increased by 60.8% year-over-year to $85.4 million,
       compared to $53.1 million in 2008.
       -- 53.6% of revenue was from sales to original equipment manufacturers.
    -- Gross profit increased by 64.6% year-over-year to $24.3 million versus
       $14.8 million in 2008.
    -- Operating income was $14.7 million, a 49.8% increase over operating
       income of $9.8 million in 2008.
    -- Net income was $11.5 million, a 43.4% increase over net income of $8.0
       million in 2008.
    -- Basic and diluted earnings per share for the fiscal year 2009 were
       $0.93 and $0.89, respectively, translating into increases of 24.0% and
       18.7%, respectively, over basic and diluted earnings per share of $0.75
       in 2008.

Mr. Yue Wang, Chief Executive Officer of China Electric, said, "2009 was a momentous year for our Company, with significant revenue growth and prudent cost management providing the platform for our initial public offering in January 2010. The results demonstrate that our commitment to R&D is paying off, as our newer, higher-margin products are growing steadily as a proportion of our overall sales. Further, successful execution of our operational initiatives allowed us to grow our sales network and maintain our steadfast commitment to R&D while managing our cost base.

In 2010, we expect to continue to gain market share as we leverage favorable industry trends in new verticals such as the automotive and digital product industries, and focus on developing and marketing higher-margin products. We believe that our initiatives to expand our sales network and distribution channels will continue to drive our efforts to grow direct sales to domestic OEMs, setting the stage for strong growth in 2010."

Fourth Quarter and Fiscal Year 2009 Financial Results

Revenues

Total revenues for the fourth quarter 2009 increased year-over-year by 57.5% to $22.1 million, with 54% of revenue from OEM customers. As a percentage of total revenue, sales of the Home Appliance, Auto Part and Digital Motor product series in the fourth quarter of 2009 were 60.2%, 23.4% and 16.4%, respectively, compared to 61.1%, 25.3% and 13.6%, respectively, in the fourth quarter of 2008.

Total fiscal year 2009 revenue increased year-over-year by 60.8% to $85.4 million. 53.6% of revenue for the year was from OEM customers, compared to 51% in 2008. The impact of increased sales to new and existing customers was partially offset by the sales mix, as sales of the Company's lower-priced products outpaced that of its higher-priced products, which include numerical control motor products. As a percentage of total revenue, sales of the Home Appliance, Auto Part and Digital Motor product series were 63.9%, 22.1% and 14.0%, respectively, compared to 59.3%, 26.9% and 13.8%, respectively, in 2008.

Cost of Goods Sold

Cost of goods sold in the fourth quarter 2009 increased year-over-year by $5.4 million, or 53.0%, to $15.6 million. The cost of goods sold for fiscal year 2009 increased year-over-year by 59.4% to $61.0 million. The increase in cost of goods sold was driven primarily by the increased sales volume.

Gross Profit and Gross Margin

Gross profit for the fourth quarter of 2009 increased year-over-year by 69.4% to $6.5 million. Gross margin for the fourth quarter 2009 was 29.4%, up from 27.4% in the fourth quarter 2008. This increase in gross margin was due to a slight change in the mix of products sold and a decrease in the price of raw materials, particularly copper and steel, compared to the prior year period. As a result, we saw margin improvement for all product types across the board.

Gross profit for the year ended December 31, 2009, was $24.3 million, or 28.5% of revenues, compared to $14.8 million, or 27.9% of revenues, for the comparable period in 2008. The slight increase in gross margin was due to a change in the mix of products sold during the year, which included an increase in sales of the Company's newer products with higher gross margins, and a decrease in the price of raw materials, particularly copper and steel, during the year.

Operating Expenses

Research and development ("R&D") expenses for the fourth quarter 2009 increased year-over-year by 17.0% to $0.39 million, equivalent to 1.7% of revenues, compared to $0.33 million, or 2.3% of revenues, in the comparable period in 2008. For fiscal year 2009, R&D expenses increased year-over-year by 60% to $1.6 million, equivalent to 1.9% of revenues, compared to $1.0 million, also 1.9% of revenues, in the comparable period in 2008. The increased R&D expenses in the fourth quarter and for the fiscal year were focused on new product initiatives.

Selling expenses for the fourth quarter 2009 increased year-over-year by 50.6% to $1.1 million, compared to $0.71 million in the fourth quarter 2008. This change was primarily a result of increased sales activity. As a percentage of revenues, fourth quarter 2009 selling expenses were relatively stable at 4.8%, compared to 5.1% in the fourth quarter 2008. Selling expenses were $4.2 million for the year ended December 31, 2009, compared to $2.7 million for the comparable period in 2008; the increase was driven by higher sales volume. As a percentage of revenues, 2009 selling expenses remained relatively stable at 5.0%, compared to 5.1% in fiscal year 2008.

General and administrative ("G&A") expenses for the fourth quarter 2009 increased year-over-year by 255.4% to $1.2 million, compared to $0.34 million in the fourth quarter 2008. As a percentage of revenues, fourth quarter 2009 G&A expenses increased to 5.4% from 2.4% in the fourth quarter of 2008. For the fiscal year 2009, G&A expenses increased year-over-year by $1.7 million to $2.9 million. As a percentage of revenues, 2009 G&A expenses increased to 3.4% from 2.2% in the fiscal year 2008, largely due to the necessary increase in expenses that were incurred as a result of preparing for the Company's initial public offering in the United States in 2010.

Accordingly, total operating expenses for the fourth quarter 2009 increased year-over-year by $1.3 million, or 94.9%, to $2.7 million. For the fiscal year 2009, total operating expenses increased year-over-year by $4.7 million, or 94.1%, to $9.6 million.

Earnings

Operating income for the fourth quarter 2009 was $3.8 million, compared to $2.5 million in the fourth quarter of 2008. For fiscal year 2009, operating income was $14.7 million, a 49.8% increase compared to $9.8 million in 2008.

Net income in the fourth quarter 2009 was $2.9 million, compared to a net income of $2.0 million for the fourth quarter of 2008. For fiscal year 2009, net income was $11.5 million, as compared to $8.0 million in 2008.

Basic earnings per share for the fourth quarter 2009 were $0.21 and diluted earnings per share were $0.20. Basic and diluted earnings per share were $0.19 for the fourth quarter 2008. Basic earnings per share for the fiscal year 2009 were $0.93 and diluted earnings per share were $0.89. Basic and diluted earnings per share for fiscal year 2008 were $0.75.

Balance Sheet

Cash and cash equivalents were $10.6 million as of December 31, 2009, compared to $2.7 million as of December 31, 2008, primarily attributable to the increase of funds from the Company's private placement.

Total accounts receivable as of December 31, 2009 were $8.5 million compared to $5.2 million as of December 31, 2008. Inventories as of December 31, 2009 amounted to $7.2 million, compared to $7.3 million as of December 31, 2008.

Business Outlook

Strong gross domestic product growth in China and recovering export markets are expected to serve as a backdrop for a strong performance in fiscal 2010. In China, the combination of rising disposable income and the extension of the government's stimulus package relating to subsidies for home appliance and vehicle purchases is expected to lead to increased demand for small appliances and vehicles. The Company believes that this, in turn, will boost demand for micro-motor products.

In order to capitalize on these positive macro trends, China Electric plans to continue its efforts to increase direct sales to domestic OEMs as a proportion of total revenue, with a focus on its higher-margin products. Capacity expansion plans are on track, with the new production line expected to commence production in July 2010.

Guidance for First Quarter and Fiscal Year 2010

As of March 31, 2010, the Company reports that there are 2.5 million AC motor units with an average selling price of $3.50 in the backlog; these products are mainly are used for home appliance motors. Management estimates that revenue for the first quarter of 2010 will be in the range of $20.7 million to $21.2 million, and that revenue for fiscal year 2010 will be in the range of $110 million to $120 million. Management expects net income for the first quarter of 2010 to be in the range of $3.0 million to $3.25 million, and net income for fiscal 2010 to be between $17.05 million and $19.8 million. Management estimates that basic and diluted earnings per share for the first quarter of 2010 will be between $0.163 and $0.176, based on 18,436,389 shares outstanding (on a fully diluted basis).

Conference Call and Webcast

China Electric senior management will host a conference call at 5:00 am (Pacific) / 8:00 am (Eastern) / 8:00 pm (Beijing/Hong Kong) on March 31, 2010 to discuss its 2009 fourth quarter and full year financial results and recent business activity. To access the live teleconference, please dial +1 866 700-7173 (US) or +1 617 213-8838 (International), and enter the passcode 67942307. Please dial in approximately 10 minutes before the scheduled time of the call.

A replay of the conference call will be available from 11:00 am (Eastern) on March 31, 2010, by dialing +1 888 286-8010 (US) or +1 617 801-6888 (International) and entering the passcode 36848283.

A live webcast of the conference call and replay will also be available on the investor relations page of the Company's website at: http://szmotor.investorroom.com .

About China Electric Motor, Inc.

China Electric Motor, Inc. (Nasdaq: CELM) is a China-based company that engages in the design, production, marketing and sale of micro-motor products through its subsidiary Shenzhen YPC. The Company's products are incorporated into consumer electronics, automobiles, power tools, toys and household appliances, and are sold under its "Sunna" brandname. The Company provides micro-motor products that meet the growing demand for efficient, quiet and compact motors from manufacturers of consumer electronics, automobiles, power tools, toys and household appliances. China Electric Motor, Inc. sells its products directly to original equipment manufacturers and to distributors and resellers both domestically in the People's Republic of China and internationally to customers in Korea and Hong Kong. The Company's manufacturing facilities are located in Shenzhen, Guangdong.

Forward-looking Statements

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain of the statements made in the press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of a variety of factors, including our ability to maintain and increase revenues and sales of our products, our ability to develop and market new products, our strategic investments and acquisitions, compliances and changes in the laws of the People's Republic of China (the "PRC") that affect our operations, and vulnerability of our business to general economic downturn, especially in the PRC, and other risk factors detailed in reports filed with the Securities and Exchange Commission from time to time.

    For more information, please contact:

    Investor Contacts:
     Dexter Fong
     China Electric Motor, Inc.
     Tel:   +86-755-8278-6083
     Email: dexterfong@gmail.com

     Simon Ze
     China Electric Motor, Inc.
     Tel:   +86-755-8257-7750
     Email: ze_simon@hotmail.com

    Investor Relations (HK):
     Ruby Yim
     Taylor Rafferty
     Tel:   +852-3196-3712
     Email: ChinaElectricMotor@Taylor-Rafferty.com

    Investor Relations (US):
     Delia Cannan
     Taylor Rafferty
     Tel:   +1-212-889-4350
     Email: ChinaElectricMotor@Taylor-Rafferty.com

    Media Contact:
     Jason Marshall
     Taylor Rafferty
     Tel:   +1-212-889-4350
     Email: ChinaElectricMotor@Taylor-Rafferty.com

The Company's operational and financial performance for year ended December 31, 2009 is described in more detail in the Company's report on Form 10-K, which was filed with the US Securities and Exchange Commission on March 31, 2010.

                        - FINANCIAL TABLES TO FOLLOW -



                 China Electric Motor, Inc. and Subsidiaries
                         Consolidated Balance Sheets
                              (In U.S. Dollars)

                                            December 31,          December 31,
                                               2009                  2008
    Assets
      Current Assets
        Cash and cash equivalents           $10,633,518          $ 2,655,808
        Accounts receivable, net              8,526,451            5,239,785
        Inventories, net                      7,194,656            7,293,544
        Prepaid expenses and other
         receivable                                  --               15,103
      Total current assets                   26,354,625           15,204,240
      Property and equipment, net             7,936,284            2,770,782
    Total Assets                            $34,290,909          $17,975,022

    Liabilities and Shareholders'
     Equity
      Current Liabilities
        Accounts payable                    $ 2,217,702          $ 2,309,026
        Accrued liabilities and
         other payable                          463,185              240,130
        Various taxes payable                    28,962               39,972
        Wages payable                           465,119              295,367
        Corporate tax payable                   878,305              469,435
        Due to related party                  1,581,376            1,339,337
        Due to affiliated companies             334,977                   --
      Total current liabilities               5,969,626            4,693,267
    Total Liabilities                         5,969,626            4,693,267

    Commitments and Contingencies

    Shareholders' Equity
      Preferred stock, $0.0001 par
       value, 10,000,000 shares
       authorized, none issued                       --                   --
      Common stock, $0.0001 par
       value, 100,000,000 shares
       authorized, 14,083,030
       and 10,679,260 shares issued
       and outstanding at December
       31, 2009 and 2008,
       respectively                               1,408                1,068
      Additional paid-in capital              3,899,125              158,271
      Accumulated other
       comprehensive income                     889,668            1,089,032
      Statutory surplus reserve
       fund                                   1,177,075            1,177,075
      Retained earnings
       (unrestricted)                        22,354,007           10,856,309
    Total Shareholders' Equity               28,321,283           13,281,755
    Total Shareholders'
     Liabilities & Equity                   $34,290,909          $17,975,022



                 China Electric Motor, Inc. and Subsidiaries
                    Consolidated Statements of Operations
                              (In U.S. Dollars)

                        For the Three Months Ended     For the Year Ended
                              December 31,                 December 31,
                            2009          2008          2009          2008
     Revenue             $22,085,645   $14,022,685   $85,379,374   $53,072,547
      Cost of Goods
      Sold               (15,581,686)  (10,182,654)  (61,042,596)  (38,285,648)
     Gross Profit          6,503,959     3,840,031    24,336,778    14,786,899
     Selling Expenses      1,067,547       708,955     4,237,346     2,719,775

     General and
      administrative
       Merger cost            37,362            --       820,000            --
       Research and
        development          385,385       329,521     1,649,504     1,032,722
       Depreciation            4,919         5,427        20,910        22,636
       Others
        general and
        administrative     1,194,166       335,999     2,873,658     1,171,908
    Total general and
     administrative        1,621,832       670,947     5,364,072     2,227,266
       Total operating
        expenses           2,689,379     1,379,902     9,601,418     4,947,041
     Income from
      operations           3,814,580     2,460,129    14,735,360     9,839,858

     Other income (expenses)
       Interest income
        (expense)             (3,782)       12,880        16,087        15,036
       Imputed interest           --       (36,899)           --       (50,126)
       Sundry income
        (expenses), net        5,462        11,712         8,318         8,845
     Total other income
      (expenses)               1,680       (12,307)       24,405       (26,245)

     Income before income
      taxes                3,816,260     2,447,822    14,759,765     9,813,613
      Income taxes          (880,491)     (468,552)   (3,262,067)   (1,797,721)
     Net income           $2,935,769    $1,979,270   $11,497,698    $8,015,892

     Basic earnings
      per share                $0.21         $0.19         $0.93         $0.75

    Weighted-average
     shares outstanding,
     Basic                14,041,237    10,679,260    12,356,530    10,679,260

    Diluted earnings
     per share                 $0.20         $0.19         $0.89         $0.75

    Weighted-average
     shares outstanding,
     Diluted              14,952,974    10,679,260    12,988,805    10,679,260



                 China Electric Motor, Inc. and Subsidiaries
                    Consolidated Statements of Cash Flows
                         (Decrease) Increase in Cash
                              (In U.S. Dollars)

                                                For Years       For Years
                                                  Ended           Ended
                                               December 31,    December 31,
                                                   2009            2008

    Cash Flows From Operating Activities
       Net Income (loss)                        $11,497,698     $8,015,892

       Adjustments to reconcile net income
        to net cash provided by operating
        activities:
           Bad debt recovery                         (3,248)            --
           Imputed interest expense                      --         50,126
           Depreciation                             678,039        519,014
       Changes in operating assets and
        liabilities:
         (Increase) decrease in:
           Accounts receivable, net              (3,297,186)    (2,594,662)
           Inventories, net                          79,724     (3,355,276)
           Prepaid expenses and other
            receivables                              15,064         73,661
         Increase (decrease) in:
           Accounts payable                         (85,257)       692,371
           Accrued liabilities and other
            payable                                 223,692             --
           Various taxes payable                    (10,905)        (9,195)
           Wages payable                            170,528        119,971
           Corporate tax payable                    410,104        350,403
     Net cash provided by (used in)
      operating activities                        9,678,253      3,862,305

     Cash Flows From Investing Activities
           Purchases of property and
            equipment                            (5,849,388)      (754,160)
     Net cash used in investing activities       (5,849,388)      (754,160)

     Cash Flows From Financing Activities
           Net proceeds from/(Repayments
            to) short-term loan                          --        164,520
           Net proceeds from issuance of
            shares                                3,741,194             --
           Dividends paid                                --     (2,088,600)
           Increase (decrease) in due to
            related parties                         577,016       (199,865)
     Net cash provided by (used in)
      financing activities                        4,318,210     (2,452,985)

           Effect of exchange rate
            changes on cash                        (169,365)       411,870
     Net increase (decrease) in cash and
      cash equivalents                            7,977,710      1,067,030

     Cash and cash equivalents, beginning
      of period                                   2,655,808      1,588,778

     Cash and cash equivalents, end of
      period                                    $10,633,518     $2,655,808

    Supplemental disclosure information:
           Income taxes paid                     $2,845,066     $1,797,721
           Interest expense paid                        $--            $--

SOURCE China Electric Motor, Inc.

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