NEW YORK, Nov. 8, 2011 /PRNewswire-Asia/ -- SmartHeat Inc.
(NASDAQ: HEAT; website: www.smartheatinc.com), a market leader in
China's clean technology, energy
savings industry, today announced financial results for the third
quarter ended September 30, 2011.
SmartHeat management is scheduled to host an investor conference
call at 8:30 a.m. EST on November 8, 2011.
Mr. James Jun Wang, Chairman and
Chief Executive Officer of SmartHeat Inc., made the following
comments regarding the performance of SmartHeat during the third
quarter of 2011: "We experienced an encouraging increase in sales
and deliveries in the third quarter of 2011 compared to the second
quarter of 2011, and we are well positioned to take advantage of
the results of China's current
anti-inflation policies. The slowdown in the heating-supply and
other industrial markets in China
continued, caused in part by the Chinese government's ongoing
tightening of fiscal policy to fight inflation. We are overcoming
the postponement and cancellation of some of our plate heat
exchanger (PHE) orders in the first half of 2011, however, and
maintaining our gross margin by strengthening our sales efforts
through the maturation of our sales force, increasing sales
channels, improving cost controls, increasing prices and continuing
to improve the efficiency of our manufacturing operations, which
may include staff reductions in certain plants.
"Despite the challenging sales environment, we are encouraged by
the progress of synergization and integration after the acquisition
of Gustrower Warmepumpen GmbH and Shenyang Bingchuan Refrigerating
Machine Limited in the first quarter of 2011. We anticipate
increased sales in the heat pump sector from both of these
companies. Despite the temporary fiscal tightening impacting our
customers in China, we expect that
the Chinese government will continue to require implementation of
energy savings policies to reduce emissions, which we believe will
continue to increase the demand for our energy-saving products in
all industrial sectors. We are optimistic about taking advantage of
West China's economic development
and urbanization trends throughout China as well as positioning ourselves as an
international forward-thinking 'green' company."
Financial Summary
In the third quarter of 2011, total sales increased to
$16.57 million compared to
$7.08 million in Q2 2011 due to
seasonality factors and our steps to increase sales of our PHE
Units and PHEs by continuing our expansion into regional areas of
China. We are encouraged by our
progress in restructuring our business organization, integrating
our heat pump manufacturing subsidiaries and improving operating
efficiency.
Operating loss totaled $2.54
million in Q3 2011 compared with operating loss of
$7.10 million in Q2 2011. Our net
loss for Q3 2011 was $4.0 million
compared to net loss of $6.42 million
for Q2 2011. The decrease in net loss from the second quarter to
the third quarter of 2011 was attributable to improved seasonal
sales and our business expansion efforts, and a slowing of the
growth of bad debt allowance reserves.
The Company believes that the current slowdown in heat-supply
and other industrial markets caused by the Chinese government's
tightened fiscal policy will be temporary and that the previous
expansion and training of the Company's marketing team and other
employees should result in improved sales and efficiency of its
operations. Nevertheless, the Company is instituting a rigorous
program of cost cutting to continue tight control of its budget and
maintain cost-effectiveness and implement additional cost control
measures, including a review of the staffing levels in response to
the decrease in sales.
Revised Full Year 2011 Earnings Guidance
Due to the impact of significant drops of sales, impact of
rising prices on business and the integration costs of Gustrower
Warmepumpen GmbH and Shenyang Bingchuan Refrigerating Machine
Limited Company, two companies acquired by SmartHeat in Q1 2011,
the Company is revising its full year 2011 earnings guidance to
$18 million to $20 million in net
loss and $40 million to $50 million
in revenue.
Investor Conference Call Instructions:
SmartHeat management will host an earnings conference call today
to discuss its third quarter financial results and outlook.
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Date and time:
8:30 a.m.
U.S. Eastern Standard Time,
November 8,
2011
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U.S. toll free number: +1
888 419.5570
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International direct
dial-in: +1 617 896.9871
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Conference passcode: 198
042 83
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About SmartHeat Inc.
Founded by James Jun Wang, a
former executive at Honeywell China, SmartHeat Inc.
(www.smartheatinc.com) is a NASDAQ Global Select 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 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,
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.
Contact Corporate Communications:
Ms. Jane Ai, Corporate Secretary
SmartHeat Inc.
Tel: 011-86-24-25363366
Email: info@SmartHeatinc.com
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SMARTHEAT
INC. AND SUBSIDIARIES
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CONSOLIDATED
BALANCE SHEETS
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September
30, 2011
(Unaudited)
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December 31,
2010
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ASSETS
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CURRENT ASSETS
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Cash &
equivalents
|
$
12,257,202
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$
56,806,471
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Restricted
cash
|
2,075,969
|
1,949,742
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Accounts
receivable, net
|
35,435,963
|
47,224,476
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Retentions
receivable
|
2,914,986
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2,548,401
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Advances to
suppliers
|
21,791,588
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8,351,579
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Other receivables,
prepayments and deposits
|
9,538,520
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6,301,772
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Tax
receivables
|
1,391,304
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-
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Inventories
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58,207,965
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26,585,362
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Deferred tax
asset
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-
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380,232
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Notes receivable -
bank acceptances
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802,075
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1,457,457
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Total
current assets
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144,415,572
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151,605,492
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NONCURRENT ASSETS
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Restricted
cash
|
155,254
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502,672
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Retentions
receivable
|
1,084,696
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1,062,167
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Advance for
construction and equipment
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977,463
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-
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Construction in
progress
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518,433
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81,204
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Property and
equipment, net
|
11,429,832
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8,381,019
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Intangible assets,
net
|
15,399,192
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14,243,734
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Goodwill
|
11,151,957
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-
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Deferred tax
asset
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-
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22,266
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Other noncurrent
asset
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14,939
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-
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Total
noncurrent assets
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40,731,766
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24,293,062
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TOTAL ASSETS
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$
185,147,338
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$
175,898,554
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LIABILITIES AND STOCKHOLDERS'
EQUITY
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CURRENT LIABILITIES
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Accounts
payable
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$
9,767,193
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$
4,490,333
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Advance from
customers
|
7,843,587
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1,131,193
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Taxes
payable
|
26,357
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2,000,456
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Accrued
liabilities and other payables
|
2,223,938
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3,039,701
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Notes payable -
bank acceptances
|
1,510,985
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2,207,280
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Loans
payable
|
16,837,401
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9,059,749
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|
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Total current liabilities
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38,209,461
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21,928,712
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DEFERRED TAX
LIABILITY
|
212,475
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-
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LONG-TERM PAYABLE
|
371,483
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-
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COMMITMENTS AND
CONTINGENCIES
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STOCKHOLDERS' EQUITY
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Common stock,
$0.001 par value; 75,000,000
shares authorized, 38,601,939 and 38,551,939 shares issued
and
outstanding at September 30, 2011, and December 31, 2010
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38,602
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38,552
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Paid-in
capital
|
102,523,424
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102,251,027
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Statutory
reserve
|
4,962,052
|
5,301,918
|
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|
Accumulated other
comprehensive income
|
9,969,280
|
4,252,261
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Retained
earnings
|
27,470,582
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41,500,015
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Total Company stockholders' equity
|
144,963,940
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153,343,773
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NONCONTROLLING INTEREST
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1,389,979
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626,069
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TOTAL EQUITY
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146,353,919
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153,969,842
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TOTAL LIABILITIES AND
EQUITY
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$
185,147,338
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$
175,898,554
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SMARTHEAT
INC. AND SUBSIDIARIES
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CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
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(UNAUDITED)
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NINE MONTHS
ENDED SEPTEMBER 30,
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THREE MONTHS
ENDED SEPTEMBER 30,
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2011
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2010
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2011
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2010
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Net sales
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$ 31,543,940
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$ 83,613,250
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$ 16,573,890
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$ 51,476,821
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Cost of goods sold
|
21,025,243
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54,177,914
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11,263,003
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33,061,854
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Gross profit
|
10,518,697
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29,435,336
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5,310,887
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18,414,967
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Operating expenses
|
|
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|
|
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Selling
|
6,611,522
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5,972,651
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2,409,435
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3,335,303
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General and
administrative
|
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R&D
|
598,117
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480,572
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85,250
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259,879
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Bad debt
|
8,913,261
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15,744
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|
3,107,589
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(38,484)
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G&A expenses
|
8,550,170
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4,126,152
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|
2,244,025
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1,840,058
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|
|
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|
|
|
|
|
|
Total operating
expenses
|
24,673,070
|
10,595,119
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|
7,846,299
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5,396,756
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|
|
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|
|
|
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|
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Income (loss) from
operations
|
(14,154,373)
|
18,840,217
|
|
(2,535,412)
|
13,018,211
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|
|
|
|
|
|
|
|
|
Non-operating income
(expenses)
|
|
|
|
|
|
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|
Interest
income
|
166,419
|
322,462
|
|
33,925
|
117,853
|
|
|
Interest
expense
|
(590,242)
|
(41,871)
|
|
(297,007)
|
(41,871)
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|
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Financial income
(expense)
|
(54,999)
|
(36,430)
|
|
22,285
|
(17,427)
|
|
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Foreign exchange
transaction gain (loss)
|
(439,983)
|
24,652
|
|
(137,779)
|
68,323
|
|
|
Other income,
net
|
548,995
|
134,446
|
|
224,766
|
52,060
|
|
|
|
|
|
|
|
|
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Total
non-operating income (expenses), net
|
(369,810)
|
403,259
|
|
(153,810)
|
178,938
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
tax
|
(14,524,183)
|
19,243,476
|
|
(2,689,222)
|
13,197,149
|
|
|
Income tax expense
(benefit)
|
(5,159)
|
3,059,182
|
|
1,322,900
|
2,092,876
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
noncontrolling interest
|
(14,519,024)
|
16,184,294
|
|
(4,012,122)
|
11,104,273
|
|
|
Less: Income (loss) attributable
to noncontrolling interest
|
(149,727)
|
(16,962)
|
|
(15,003)
|
(2,232)
|
|
|
|
|
|
|
|
|
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Net income (loss) to SmartHeat
Inc.
|
(14,369,297)
|
16,201,256
|
|
(3,997,119)
|
11,106,505
|
|
|
|
|
|
|
|
|
|
Other comprehensive
item
|
|
|
|
|
|
|
|
Foreign currency
translation gain
|
5,717,019
|
1,931,721
|
|
2,091,719
|
1,418,870
|
|
|
|
|
|
|
|
|
|
Comprehensive Income
(Loss)
|
$ (8,652,278)
|
$ 18,132,977
|
|
$ (1,905,400)
|
$ 12,525,375
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|
|
|
|
|
|
|
|
|
Basic weighted average shares
outstanding
|
38,582,342
|
32,804,292
|
|
38,601,939
|
32,811,125
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding
|
38,582,342
|
32,846,171
|
|
38,601,939
|
32,817,520
|
|
|
|
|
|
|
|
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|
Basic earnings (loss) per
share
|
$
(0.37)
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$
0.49
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|
$
(0.10)
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$
0.34
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|
|
|
|
|
|
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Diluted earnings (loss) per
share
|
$
(0.37)
|
$
0.49
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|
$
(0.10)
|
$
0.34
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|
|
|
|
|
|
|
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SMARTHEAT
INC. AND SUBSIDIARIES
|
|
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CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
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(UNAUDITED)
|
|
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|
|
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|
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|
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NINE MONTHS
ENDED SEPTEMBER 30,
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|
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|
2011
|
2010
|
|
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|
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CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
Income (loss) including noncontrolling
interest
|
$ (14,519,024)
|
$ 16,184,294
|
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|
Adjustments to reconcile income (loss) including
noncontrolling
|
|
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|
|
interest to net cash used in operating
activities:
|
|
|
|
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Depreciation and amortization
|
1,252,981
|
709,544
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|
Provision for bad debt
|
8,913,261
|
15,744
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Unearned interest on accounts receivable
|
(71,118)
|
(74,520)
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|
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Stock compensation
|
272,447
|
160,959
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Loss on disposal of fixed assets
|
9,548
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-
|
|
|
Changes in deferred tax
|
(58,098)
|
(23,160)
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(Increase)
decrease in current assets:
|
|
|
|
|
Accounts receivable
|
5,854,356
|
(17,807,291)
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|
|
Retentions receivable
|
(232,191)
|
(1,547,759)
|
|
|
Advances to suppliers
|
(12,764,507)
|
(4,761,889)
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Other receivables, prepayments and
deposits
|
3,198,367
|
1,995,914
|
|
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Inventories
|
(27,931,844)
|
(20,659,166)
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|
Increase
(decrease) in current liabilities:
|
|
|
|
|
Accounts payable
|
3,807,969
|
3,635,847
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|
|
Advance from customers
|
6,521,146
|
2,079,159
|
|
|
Taxes payable
|
(2,975,398)
|
608,861
|
|
|
Accrued liabilities and other
payables
|
(2,700,390)
|
128,354
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
(31,422,495)
|
(19,355,109)
|
|
|
|
|
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CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
Change in restricted cash
|
317,415
|
(12,593)
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|
|
Acquisition of property &
equipment
|
(2,453,889)
|
(3,277,320)
|
|
|
Advance for construction and
equipment
|
(977,463)
|
-
|
|
|
Disposal of fixed assets
|
39,418
|
-
|
|
|
Acquisition of intangible
asset
|
(106,971)
|
(170,689)
|
|
|
Deposit for land use right
|
-
|
(9,448,356)
|
|
|
Notes receivable
|
701,069
|
(404,449)
|
|
|
Other receivables-advance to third
parties
|
(5,293,224)
|
-
|
|
|
Cash acquired from
acquisition
|
448,849
|
-
|
|
|
Cash paid at acquisition
|
(13,588,207)
|
-
|
|
|
Construction in progress
|
(424,286)
|
(79,008)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
(21,337,289)
|
(13,392,415)
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
Warrants exercised
|
-
|
85,500
|
|
|
Proceeds from short-term
loans
|
6,461,314
|
4,407,357
|
|
|
Repayment to short-term
loans
|
-
|
(4,407,357)
|
|
|
Other payables-advance from third
parties
|
802,606
|
-
|
|
|
Cash contribution from noncontrolling
interest
|
754,332
|
-
|
|
|
Payment on notes payable
|
(771,988)
|
(1,812,243)
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
activities
|
7,246,264
|
(1,726,743)
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGE
ON CASH & EQUIVALENTS
|
964,251
|
230,366
|
|
|
|
|
|
|
|
NET DECREASE IN CASH &
EQUIVALENTS
|
(44,549,269)
|
(34,243,901)
|
|
|
|
|
|
|
|
CASH & EQUIVALENTS,
BEGINNING OF PERIOD
|
56,806,471
|
48,967,992
|
|
|
|
|
|
|
|
CASH & EQUIVALENTS, END OF
PERIOD
|
$ 12,257,202
|
$ 14,724,091
|
|
|
|
|
|
|
|
Supplemental cash flow
data:
|
|
|
|
|
Income tax
paid
|
$
1,661,821
|
$ 1,634,509
|
|
|
Interest paid
|
$
563,269
|
$
137,787
|
|
|
|
|
|
SOURCE SmartHeat Inc.