SmartHeat Inc. Announces Record Full Year 2010 Financial Results - 52% Revenue Growth, 47% Net Income Growth

Mar 15, 2011, 06:55 ET from SmartHeat Inc.

NEW YORK, March 15, 2011 /PRNewswire-Asia/ -- SmartHeat Inc. (Nasdaq: HEAT; website: www.smartheatinc.com), a market leader in China's clean technology, energy savings industry, today announced record financial results for the year ended December 31, 2010. SmartHeat management is scheduled to host an investor conference call at 8:30 a.m. EDT on March 15, 2011.

Financial Highlights:

  • Revenues of $125.41 million, up 51.89% from 2009
  • Operating income of $26.69 million, up 46.85% from 2009
  • Net income of $22.69 million, up 46.99% from 2009

Business Highlights:

  • Meets or exceeds guidance for 2010
  • Commences acquisition strategy with German heat pump manufacturer and designer GWP in the first quarter of 2011
  • Continues with market expansion in Western China and nuclear industry

Financial Summary:

2010

2009

Change

Revenue

$125,406,862

$82,563,869

51.89%

Gross Profit

$44,711,917

$29,096,064

53.67%

Gross Profit Margin

35.65%

35.24%

Operating Income

$26,691,040

$18,175,199

46.85%

Operating Margin

21.28%

22.01%

Net Income

$22,698,443

$15,442,529

46.99%

Net Margin

18.10%

18.70%

Diluted EPS

$0.68

$0.58

4Q10

4Q09

Change

Revenue

$41,793,612

$26,022,074

60.61%

Gross Profit

$15,276,581

$9,116,632

67.57%

Gross Profit Margin

36.55%

35.03%

Operating Income

$7,850,823

$3,148,012

149.39%

Operating Margin

18.78%

12.10%

Net Income

$6,497,187

$2,923,175

122.26%

Net Margin

15.55%

11.23%

Revenues

In 2010, total sales increased 51.89% to $125.41 million compared to $82.56 million in 2009.

In the fourth quarter of 2010, total sales increased 60.61% to $41.79 million compared to $26.02 million in 4Q09. All three of the Company's product lines contributed to higher sales in 2010 and were a result of China's energy-saving policies, continued growth in energy-saving industry, and our successful market expansion.

The breakdown of revenues for 2010 was $55.44 million from PHE units and $60.22 million from heat exchangers, with sales from PHE units up 42.21% compared to 2009 and sales from heat exchangers up 69.18% compared to 2009. Sales from heat meters were up 22.08% from 2009 and accounted for $9.74 million in revenues for 2010.

The breakdown of revenues for the fourth quarter of 2010 was $21.64 million from PHE units and $19.33 million from heat exchangers, with sales from PHE units up 107.57% compared to 4Q09 and sales from heat exchangers up 25.06% compared to 4Q09. Sales from heat meters were up 482.29% from 4Q09 and accounted for $0.83 million in revenues for the quarter.

The following table presents the revenue contribution by percentage for each major product line in 4Q10 in comparison with 4Q09 and fiscal year 2010 in comparison with 2009:

Percent of Total Revenues

Product Line

2010

2009

4Q10

4Q09

Plate Heat Exchange (PHE) Unit

44.21%

47.22%

51.77%

40.06%

Heat Exchanger

48.02%

43.11%

46.25%

59.40%

Heat Meters

7.77%

9.67%

1.98%

0.55%

Total

100.00%

100.00%

100.00%

100.00%

Net Income

Net income in 2010 totaled $22.70 million ($0.68 per diluted share), up 47% from $15.44 million ($0.58 per diluted share) in 2009.

Net income in the fourth quarter totaled $6.50 million, up 122.26% from $2.92 million in 4Q09. The higher net income was driven primarily by increased sales from PHEs and PHE units. Earnings per share for 2010 increased by $0.10 per share.

Gross Profit Margin

Gross profit margin for 2010 was 35.65%, up from 35.24% in 2009. Gross profit margin for 4Q10 was 36.55%, up from 35.03% in 4Q09. The margin maintenance for 2010 is due mainly to our effective cost control and our cost-plus pricing.

Operating Expense

Operating expenses as a percentage of sales were 14.4% for fiscal year 2010 and 17.8% for Q410, compared to 13.2% for fiscal year 2009 and 22.9% for Q409. The increase in operating expenses resulted from increased sales and expansion of our business, including the hiring of more sales personnel, higher depreciation expense, training the marketing team and establishing new sales offices in more regions of China. We believe the expansion and training of our marketing team and other employees will increase sales and improve the efficiency of our operations. We will continue our tight budgetary control and cost effectiveness.

2011 Full Year Guidance

SmartHeat is announcing full year 2011 guidance of $22 - $28 million in net income on $120 - $150 million in revenues, reflecting $0.60 - $0.80 EPS.

Outlook

Mr. James Jun Wang, Chairman and Chief Executive Officer of Smart Heat Inc., commented: "We maintained the momentum from the first nine months of 2010 and delivered another set of strong results. We thank our hard working employees who are dedicated to executing our operational strategy. We are quite pleased to see the significant payback we expected to receive from investments made to expand our sales and distribution channels."

"Government requirements to implement energy savings and emission reduction have increased the demand for our energy-saving products in all industrial sectors. We are optimistic about taking advantage of economic development in West China and urbanization trends throughout the country even though China is experiencing inflation and is responding to currency and inflationary pressures. Furthermore, we plan to reap the benefits of our expansion into western China and are excited about the addition of the German heat pump manufacturer GWP, which, with our expansion into nuclear energy products, will be a valuable addition to our clean energy business portfolio." concluded Mr. Wang.

Investor Conference Call Instructions:

SmartHeat management will host an earnings conference call to discuss its 2010 financial results and 2011 outlook.

Date and time:  8:30 a.m. U.S. Eastern Daylight Saving Time, March 15, 2011

U.S. toll free number:  +1 866-800-8648

International direct dial-in: +1-617-614-2702

Conference passcode: 163 032 65

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) U.S. company with its primary operations in China. SmartHeat is a market leader in China's clean technology energy savings industry. SmartHeat manufactures heat exchangers, 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, reduce air pollution, and have broad applications. 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 the 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, 2010 AND 2009

2010

2009

ASSETS

CURRENT ASSETS

    Cash & cash equivalents

$   56,806,471

$   48,967,992

    Restricted cash

1,949,742

1,301,573

    Accounts receivable, net

47,224,476

31,887,785

    Retentions receivable

2,548,401

885,642

    Advances to suppliers

8,351,579

7,657,791

    Other receivables, prepayments and deposits

6,301,772

3,572,600

    Inventories

26,585,362

11,259,273

    Deferred tax asset

380,232

-

    Notes receivable - bank acceptances

1,457,457

397,248

       Total current assets

151,605,492

105,929,904

NON-CURRENT ASSETS

    Deferred tax asset

22,266

-

    Restricted cash

502,672

48,361

    Accounts receivable, net

-

237,384

    Retentions receivable

1,062,167

349,931

    Intangible assets, net

14,243,734

4,071,021

    Construction in progress

81,204

-

    Property and equipment, net

8,381,019

7,739,609

      Total noncurrent assets

24,293,062

12,446,306

TOTAL ASSETS

$ 175,898,554

$ 118,376,210

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

    Accounts payable

$     4,490,333

$     3,493,196

    Unearned revenue

1,131,193

2,130,637

    Taxes payable

2,000,456

2,140,627

    Accrued liabilities and other payables

3,039,701

3,685,272

    Notes payable - bank acceptances

2,207,280

1,806,564

    Loans payable

9,059,749

4,393,544

        Total current liabilities

21,928,712

17,649,840

DEFERRED TAX LIABILITY

-

8,526

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

    Common stock, $0.001 par value; 75,000,000                shares authorized,  38,551,939 and 32,794,875        shares issued and outstanding at December 31,          2010 and 2009, respectively

38,552

32,795

    Paid in capital

102,251,027

74,917,370

    Statutory reserve

5,301,918

2,872,006

    Accumulated other comprehensive income

4,252,261

969,988

    Retained earnings

41,500,015

21,231,484

        Total Company stockholders' equity

153,343,773

100,023,643

        NONCONTROLLING INTEREST

626,069

694,201

        TOTAL EQUITY

153,969,842

100,717,844

TOTAL LIABILITIES AND EQUITY

$ 175,898,554

$ 118,376,210

SMARTHEAT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

2010

2009

2008

Net sales

$ 125,406,862

$ 82,563,869

$ 32,676,082

Cost of goods sold

80,694,945

53,467,805

21,717,735

Gross profit

44,711,917

29,096,064

10,958,347

Operating expenses

    Selling expenses

8,559,665

3,934,749

1,564,977

    General and administrative expenses

9,461,212

6,986,116

1,851,693

    Total operating expenses

18,020,877

10,920,865

3,416,670

Income from operations

26,691,040

18,175,199

7,541,677

Non-operating income (expenses)

    Interest income

433,534

409,221

405,266

    Interest expense

(131,350)

(518,382)

(314,192)

    Financial expense

(49,751)

(30,304)

-

    Exchange gain (loss)

33,932

(26,255)

(12,044)

    Other income

201,291

282,393

27,968

    Other expenses

(26,954)

(2,838)

(13,709)

    Total non-operating income, net

460,702

113,835

93,289

Income before income tax

27,151,742

18,289,034

7,634,966

Income tax expense

4,533,112

2,858,186

1,293,660

Income from operations

22,618,630

15,430,848

6,341,306

Less: Income (loss) attributable to noncontrolling interest

(79,813)

(11,681)

5,966

Income to SmartHeat Inc.

22,698,443

15,442,529

6,335,340

Other comprehensive item

    Foreign currency translation gain (loss)

3,282,273

(14,641)

510,770

Comprehensive Income

$   25,980,716

$ 15,427,888

$   6,846,110

Basic weighted average shares outstanding

33,419,416

26,535,502

22,176,322

Diluted weighted average shares outstanding

33,453,684

26,592,066

22,176,432

Basic earnings per share

$              0.68

$            0.58

$            0.29

Diluted earnings per share

$              0.68

$            0.58

$            0.29

SMARTHEAT INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

2010

2009

2008

CASH FLOWS FROM OPERATING ACTIVITIES:

           Income including noncontrolling interest

$ 22,618,630

$ 15,430,848

$ 6,341,306

           Adjustments to reconcile income including noncontrolling

           interest to net cash used in operating activities:

           Depreciation and amortization

1,011,815

635,368

252,598

           Unearned interest on accounts receivable

(71,133)

120,522

(127,819)

           Stock option compensation expense

195,083

3,292

5,613

           Stock issued for consulting service

18,090

-

-

           Changes in deferred tax

(410,616)

(30,353)

(163)

                        (Increase) decrease in current assets:

                            Accounts receivable

(14,716,105)

(20,724,401)

(4,943,868)

                            Retentions receivable

(2,285,983)

(777,062)

(74,797)

                            Advances to suppliers

(462,687)

(7,233,127)

62,759

                            Other receivables, prepayments and deposits

715,988

(2,806,803)

182,577

                            Inventories

(14,651,940)

(5,143,857)

2,405,678

                        Increase (decrease) in current liabilities:

                            Accounts payable

3,634,538

4,051,684

(2,389,649)

                            Unearned revenue

(1,042,449)

1,278,907

(2,993,636)

                            Taxes payable

(193,868)

811,275

779,408

                            Accrued liabilities and other payables

(3,993,197)

(5,776,851)

(261,040)

           Net cash used in operating activities

(9,633,834)

(20,160,557)

(761,033)

CASH FLOWS FROM INVESTING ACTIVITIES:

                            Change in restricted cash

(1,037,592)

(667,502)

(108,040)

                            Acquisition of property & equipment

(1,112,629)

(942,442)

(439,861)

                            Acquisition of intangible asset

(10,120,267)

-

-

                            Notes receivable

(495,873)

-

(14,635)

                            Cash purchased at acquisition

-

-

55,426

                            Construction in progress

(79,444)

-

-

           Net cash used in investing activities

(12,845,805)

(1,609,944)

(507,110)

CASH FLOWS FROM FINANCING ACTIVITIES:

                            Proceeds from short-term loan

4,431,642

4,552,774

5,136,069

                            Change in due to minority shareholders

-

-

(663)

                            Cash contribution from noncontrolling interest

-

705,882

-

                            Repayment to shareholder

-

-

(343,913)

                            Repayment to short-term loan

-

(2,605,768)

(7,583,873)

                            Payment on notes payable

(2,117,001)

-

-

                            Issuance of common stock

27,040,742

65,007,390

5,100,000

                            Warrants exercised

85,500

1,691,850

-

           Net cash provided by financing activities

29,440,883

69,352,128

2,307,620

EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS

877,235

(48,847)

2,588

NET INCREASE IN CASH & CASH EQUIVALENTS

7,838,479

47,532,780

1,042,065

CASH & CASH EQUIVALENTS, BEGINNING OF YEAR

48,967,992

1,435,212

393,147

CASH & CASH EQUIVALENTS, END OF YEAR

$ 56,806,471

$ 48,967,992

$ 1,435,212

Supplemental Cash flow data:

  Income tax paid

$   3,738,517

$   1,500,415

$    660,127

  Interest paid

$      242,961

$      338,513

$    274,969

SOURCE SmartHeat Inc.



RELATED LINKS

http://www.smartheatinc.com