- Revenues - increased 125% to $12.5 million from $5.6 million in 2Q08 - Net income - increased 257% to $2.6 million from $0.73 million in 2Q08 - Earnings Per Share of $0.11, an increase of 267% from EPS $0.03 in 2Q08 - Raises 3rd quarter 2009 financial guidance to approximately $35 million in revenues and approximately $6.8 million in net income - Raises 2009 earnings guidance to approximately $15.5 million in net income on revenues of approximately $80 million - Successfully completed recent asset acquisition of one of China's largest industry players - Positive signs of economic growth in China, anticipates earnings growth momentum to continue into 2010 NEW YORK, Aug. 11 /PRNewswire-Asia/ -- SmartHeat Inc. (NASDAQ:HEAT) (website: http://www.smartheatinc.com/), a market leader in China's clean technology, energy savings industry today announced record financial results for the 2nd quarter ended June 30, 2009. SmartHeat's products significantly reduce heat energy costs, increase energy efficiency and reduce air pollution. SmartHeat is a U.S. company with its primary operations in China. James Jun Wang, Chairman & CEO of SmartHeat, commented: "Our strong 2nd quarter financial results reflected management's excellent execution of our growth strategies in a favorable market environment for our industry. Due to China's effective implementation of its economic stimulus plan in which the energy savings industry was particularly supported by the Chinese government as a sector that receives significant funding allocations, China's heat energy savings industry has not been negatively impacted by the current global economic slowdown. As a market leader in this space, we believe SmartHeat will continue to deliver consistent and rapid earnings growth in the foreseeable future." Mr. Wang continued: "SmartHeat noticed positive signs of economic recovery and gradual expansion in China's energy savings industry. The current economic slowdown has significantly increased customer awareness towards utilization of energy savings equipment from which we are a primary beneficiary. SmartHeat is well positioned to potentially reap significant benefits from the world's economic recovery." Record 2nd Quarter Revenues -- Revenues of $12.5 million, up 125%, compared to $5.6 million in Q2 2008. -- Significant revenue increase was due to continued market expansion in a favorable market environment. -- SmartHeat experienced significant sales and earnings growth across all product lines. Record 2nd Quarter Net Income -- Net income of $2.6 million, up 257%, compared to $0.73 million in Q2 2008. -- Fully diluted EPS of $0.11, up 267%, compared to EPS of $0.03 in Q2 2008. -- Total shares issued and outstanding as of June 30, 2009 were 24,179,900 shares. -- The significant increase in net income was primarily due to greater economies of scale in production costs combined with rapid growth in revenues and improved operating efficiency. Raises 3rd Quarter 2009 Earnings Guidance Based on our anticipated greater pace of economic recovery in the 2nd half and increased customer demand for our products as we have entered our seasonally strongest quarter in a year, SmartHeat raises 3rd quarter earnings guidance to approximately $35 million in revenues and approximately $6.8 million in net income. In the 3rd quarter of 2008, SmartHeat reported revenues of $20.7 million and net income of $4.3 million. Raises Full Year 2009 Earnings Guidance SmartHeat raises full year 2009 earnings guidance to approximately $15.5 million in net income on approximately $80 million in revenues. In 2008, SmartHeat reported revenues of $32.7 million and net income of $6.34 million. Business Outlook Mr. Wang commented: "Since the beginning of the 2nd half, we have experienced greater customer order flow and willingness among our existing and new customers to increase demand for our energy savings equipment. Our recently completed asset acquisition of one of China's largest PHE manufacturers has not only expanded our production capabilities but also extended our product offerings to new customer segments. We believe SmartHeat's rapid earnings growth momentum will continue well into 2010 as we anticipate broader global economic recovery next year. We are optimistic that SmartHeat is on track to achieve solid 3rd quarter earnings growth and another year of record success in 2009 for our growing list of individual and institutional shareholders." About SmartHeat Inc. Founded by James Jun Wang, a former executive at Honeywell China, SmartHeat Inc. (http://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. Contact Corporate Communications: Ms. Jane Ai, Corporate Secretary SmartHeat Inc. Tel: 011-86-24-25363366 Email: SMARTHEAT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF AS OF JUNE 30, DECEMBER 31, 2009 2008 (UNAUDITED) ASSETS CURRENT ASSETS Cash & cash equivalents $2,408,714 $1,435,212 Restricted cash 933,312 462,048 Accounts receivable, net 8,997,822 11,390,169 Retentions receivable 357,683 290,852 Advances to suppliers 2,909,069 412,524 Other receivables, prepayments and deposits 1,366,965 698,834 Inventories 8,220,181 6,107,583 Note receivable - bank acceptance 14,637 14,631 ------ ------ Total current assets 25,208,383 20,811,853 NON-CURRENT ASSETS Restricted cash 23,345 219,472 Accounts receivable, net 740,116 310,810 Retentions receivable 1,420,830 166,912 Intangible assets, net 4,179,143 1,155,131 Property and equipment, net 7,363,041 2,436,553 --------- --------- Total noncurrent assets 13,726,475 4,288,878 ----------- ----------- TOTAL ASSETS $38,934,858 $25,100,731 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $1,620,935 $1,210,906 Unearned revenue 1,691,800 850,408 Notes payable - bank acceptance 762,710 - Taxes payable 559,085 1,327,775 Accrued liabilities and other payables 5,968,709 1,330,812 Due to minority shareholder - 5,303 Loans payable 5,562,142 2,443,450 --------- --------- Total current liabilities 16,165,381 7,168,654 OTHER PAYABLES - NONCURRENT 1,200,586 - DEFERRED TAX LIABILITY 23,488 38,854 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, $0.001 par value; 75,000,000 shares authorized, 24,179,900 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively 24,180 24,180 Paid in capital 8,223,671 8,223,453 Statutory reserve 1,530,781 1,150,542 Accumulated other comprehensive income 997,772 984,629 Retained earnings 10,768,999 7,510,419 ---------- --------- Total stockholders' equity 21,545,403 17,893,223 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,934,858 $25,100,731 =========== =========== The accompanying notes are an integral part of these consolidated financial statements SMARTHEAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (UNAUDITED) FOR THE SIX MONTHS FOR THE THREE MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------ -------------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net sales $18,705,898 $8,637,283 $12,498,395 $5,558,232 Cost of goods sold 11,874,903 6,228,156 7,973,956 4,115,200 ---------- --------- --------- --------- Gross profit 6,830,995 2,409,127 4,524,439 1,443,032 Operating expenses Selling expenses 1,159,532 608,028 698,619 410,607 General and administrative expenses 1,340,132 446,470 770,610 162,325 --------- ------- ------- ------- Total operating expenses 2,499,664 1,054,498 1,469,229 572,932 --------- --------- --------- ------- Income from operations 4,331,331 1,354,629 3,055,210 870,100 Non-operating income (expenses) Interest income 80,421 260,683 63,740 113,545 Interest expense (117,612) (163,040) (64,760) (96,412) Subsidy income 35,340 9,141 35,340 9,141 Other expense (11,199) - (10,119) (2,891) Other income 969 8,290 969 - --- ----- --- - Total non-operating income (expenses) (12,081) 115,074 25,170 23,383 Income before income tax 4,319,250 1,469,703 3,080,380 893,483 Income tax expense 680,432 266,028 462,831 161,071 ------- ------- ------- ------- Net income 3,638,818 1,203,675 2,617,549 732,412 Other comprehensive item Foreign currency translation 13,143 410,896 11,433 168,802 ------ ------- ------ ------- Comprehensive Income $3,651,961 1,614,571 $2,628,982 $901,214 ========== ========= ========== ======== Basic weighted average shares outstanding 24,179,900 20,213,419 24,179,900 21,926,838 ---------- ---------- ---------- ---------- Diluted weighted average shares outstanding 24,191,063 20,213,419 24,206,099 21,926,838 ---------- ---------- ---------- ---------- Basic earnings per share $0.15 $0.06 $0.11 $0.03 ===== ===== ===== ===== Diluted earnings per share $0.15 $0.06 $0.11 $0.03 ===== ===== ===== ===== The accompanying notes are an integral part of these consolidated financial statements SMARTHEAT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2009 2008 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,638,818 $1,203,675 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 194,027 104,038 Unearned interest on accounts receivable 68,292 (22,366) Stock option compensation expense 218 - Decrease in deferred tax liability (15,380) - (Increase) decrease in current assets: Accounts receivable 1,349,607 (1,803,120) Retentions receivable (1,320,413) 346,914 Advances to suppliers (2,487,309) (1,888,198) Other receivables, prepayments and deposits (1,468,178) (277,990) Inventories (2,109,938) 2,874,481 Increase (decrease) in current liabilities: Accounts payable 1,721,658 1,358,223 Unearned revenue 840,957 (1,709,100) Taxes payable (769,124) (167,960) Accrued liabilities and other payables 226,202 423,418 ------- ------- Net cash (used in) provided by operating activities (130,563) 442,015 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Restricted cash (274,835) (229,833) Construction in progress - (39,549) Acquisition of property & equipment (239,005) (119,299) -------- -------- Net cash used in investing activities (513,840) (388,681) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of assets acquisition liability (1,500,139) - Repayment to shareholder - (44,862) Proceeds from (Repayment to) short term loans 3,117,362 (213,152) --------- -------- Net cash provided by (used in) financing activities 1,617,223 (258,014) --------- -------- EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS 682 19,028 NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 973,502 (185,652) CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD 1,435,212 393,147 --------- ------- CASH & CASH EQUIVALENTS, END OF PERIOD $2,408,714 $207,495 ========== ======== Supplemental Cash flow data: Income tax paid $995,787 $197,756 ======== ======== Interest paid $121,259 $87,887 ======== ======= The accompanying notes are an integral part of these consolidated financial statements DATASOURCE: SmartHeat Inc. CONTACT: Ms. Jane Ai, Corporate Secretary, SmartHeat Inc., 011-86-24-25363366, Web Site: http://www.smartheatinc.com/

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