NEW YORK, April 2, 2012 /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
fiscal year ended December 31, 2011.
Mr. James Jun Wang, Chairman and
Chief Executive Officer of SmartHeat, Inc., made the following
comments regarding the performance of SmartHeat during the fiscal
year of 2011:
"Despite a very challenging sales environment caused by a
continuation of China's
restrictive fiscal policy in 2011, we are encouraged by our fourth
quarter results due to our efforts to expand into regional areas of
China, the development of our
marketing force and our restructuring efforts. If not for one-time
impairments to goodwill and inventory taken in the fourth quarter
of 2011, our operating loss of $8.82
million for the fourth quarter would have resulted in
operating income of approximately $3.77
million compared to operating loss of $2.54 million in the third quarter of 2011. While
we wrote-down goodwill for the acquisition of Gustrower Warmepumpen
GmbH ("SmartHeat Germany") and Shenyang Bingchuan Refrigerating
Machine Limited ("SmartHeat Pump") in 2011, we still anticipate
increased sales in the heat pump sector from these acquisitions
over the long term, and we believe that they remain strategically
important steps that should enable us to improve our market share
for both our existing product lines and emerging energy-saving
solutions. We expect that the Chinese government will continue to
require the implementation of energy-saving 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.
"Our decrease in sales and deliveries in the fiscal year of 2011
compared to the fiscal year of 2010 resulted primarily from a
continued slowdown in China's
general economy and demand in the heating-supply and other
industrial market sectors, which caused the abandonment or
postponement of certain projects by our customers. We have been
actively combating the negative trend by maintaining our gross
margin and expanding 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 included staff
reductions in certain plants."
Financial Summary
In the fourth quarter of 2011, total sales increased to
$33.68 million compared to
$16.57 million in Q3 2011 due to
seasonality factors, reinstated orders which were postponed or
cancelled 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.
Mainly due to goodwill impairment of $8.96 million taken in Q4 2011, we experienced an
operating loss of $8.82 million in Q4
2011 compared to an operating loss of $2.54
million in Q3 2011 and a net loss for Q4 2011 of
$9.59 million compared to net loss of
$4.0 million for Q3 2011. If not for
one-time impairments to goodwill and inventory taken in Q4 2011,
our operating loss would have resulted in operating income of
approximately $3.77 million in Q4
2011 compared to operating loss of $2.54
million in Q3 2011.
We concluded that the entire goodwill balance of $6.06 million for SmartHeat Pump and $2.90 million of the SmartHeat Germany goodwill
balance was impaired as of December 31,
2011. We wrote-off goodwill for these acquisitions based on
our near-term assessment of the cash flows they will produce.
However, we still anticipate growth in the heat pump markets in the
future and are continuing the operations of SmartHeat Pump and
SmartHeat Germany. We continue to view these acquisitions as
driving value over the long term but felt it prudent to incur the
one-time impairment at the end of 2011. We also recorded provision
of inventory impairment of $3.73
million for the year ended December
31, 2011, based on our assessment of increased inventory
resulting from the unexpected abandonment and postponement of
certain projects by our customers. The inventory write-off was an
unusual incident resulting from our expectation of customer orders
to occur in 2011 but that were canceled or delayed. In anticipation
of those orders, and in conformity with our standard manufacturing
procedures, we purchased raw materials in advance of production,
which now must be written off. We believe that a portion of the
canceled orders from 2011 for PHEs and PHE Units will be reinstated
and contracts that have been partially delayed will be performed in
2012, gradually consuming our increased levels of inventory.
We believe 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 our marketing team and other employees should result in
improved sales and efficiency of operations. Nevertheless, we are
instituting a rigorous program of cost cutting to continue tight
control of our budget, maintain cost-effectiveness and implement
additional cost-control measures.
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), heat meters and heat
pumps. 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
|
SMARTHEAT
INC. AND SUBSIDIARIES
|
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
|
|
|
|
|
|
|
December 31,
2011
|
December 31,
2010
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
Cash &
equivalents
|
$
12,419,922
|
$
56,806,471
|
|
|
Restricted
cash
|
2,688,691
|
1,949,742
|
|
|
Accounts
receivable, net
|
47,055,517
|
47,224,476
|
|
|
Retentions
receivable
|
3,583,898
|
2,548,401
|
|
|
Advances to
suppliers
|
17,603,984
|
7,839,401
|
|
|
Other receivables,
prepayments and deposits
|
6,663,330
|
6,301,772
|
|
|
Inventories,
net
|
53,648,549
|
26,585,362
|
|
|
Deferred tax
asset
|
-
|
380,232
|
|
|
Notes receivable -
bank acceptances
|
1,916,320
|
1,457,457
|
|
|
|
|
|
|
Total
current assets
|
145,580,211
|
151,093,314
|
|
|
|
|
|
|
NONCURRENT ASSETS
|
|
|
|
|
Restricted
cash
|
204,991
|
502,672
|
|
|
Retentions
receivable
|
670,291
|
1,062,167
|
|
|
Advance to
supplier for equipment
|
1,122,914
|
512,178
|
|
|
Construction in
progress
|
522,876
|
81,204
|
|
|
Property and
equipment, net
|
11,348,601
|
8,381,019
|
|
|
Intangible assets,
net
|
15,419,805
|
14,243,734
|
|
|
Goodwill
|
2,098,332
|
-
|
|
|
Deferred tax
asset
|
-
|
22,266
|
|
|
Other noncurrent
asset
|
10,044
|
-
|
|
|
|
|
|
|
Total
noncurrent assets
|
31,397,854
|
24,805,240
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
176,978,065
|
$
175,898,554
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
Accounts
payable
|
$
12,660,100
|
$
4,490,333
|
|
|
Advance from
customers
|
4,585,218
|
1,131,193
|
|
|
Taxes
payable
|
1,178,712
|
2,000,456
|
|
|
Accrued
liabilities and other payables
|
4,136,298
|
3,039,701
|
|
|
Notes payable -
bank acceptances
|
3,278,232
|
2,207,280
|
|
|
Loans
payable
|
10,633,402
|
9,059,749
|
|
|
|
|
|
|
Total current liabilities
|
36,471,962
|
21,928,712
|
|
|
|
|
|
|
DEFERRED TAX
LIABILITY
|
189,516
|
-
|
|
|
|
|
|
|
LONG-TERM PAYABLE
|
2,281,023
|
-
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
Common stock,
$0.001 par value; 75,000,000
shares authorized, 3,955,774 and 3,855,194 shares issued and
outstanding at December 31, 2011 and 2010, respectively
|
3,956
|
3,855
|
|
|
Paid-in
capital
|
102,985,737
|
102,285,724
|
|
|
Statutory
reserve
|
5,396,014
|
5,301,918
|
|
|
Accumulated other
comprehensive income
|
11,119,887
|
4,252,261
|
|
|
Retained
earnings
|
17,445,733
|
41,500,015
|
|
|
|
|
|
|
Total Company stockholders' equity
|
136,951,327
|
153,343,773
|
|
|
|
|
|
|
NONCONTROLLING INTEREST
|
1,084,237
|
626,069
|
|
|
|
|
|
|
TOTAL EQUITY
|
138,035,564
|
153,969,842
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY
|
$
176,978,065
|
$
175,898,554
|
|
|
|
|
|
SMARTHEAT
INC. AND SUBSIDIARIES
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
|
|
|
|
|
|
|
|
|
|
YEARS ENDED
DECEMBER 31,
|
|
|
2011
|
2010
|
|
|
|
|
|
|
Net sales
|
$ 65,221,104
|
$ 125,406,862
|
|
|
Cost of goods sold
|
44,559,093
|
80,694,945
|
|
|
|
|
|
|
Gross profit
|
20,662,011
|
44,711,917
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
Selling
|
9,514,588
|
8,559,665
|
|
|
General and
administrative
|
25,167,249
|
9,461,212
|
|
|
Goodwill
impairment
|
8,956,313
|
-
|
|
|
|
|
|
|
Total operating
expenses
|
43,638,150
|
18,020,877
|
|
|
|
|
|
|
Income (loss) from
operations
|
(22,976,139)
|
26,691,040
|
|
|
|
|
|
|
Non-operating income
(expenses)
|
|
|
|
|
Interest
income
|
243,810
|
433,534
|
|
|
Interest
expense
|
(925,250)
|
(131,350)
|
|
|
Financial
expense
|
(150,371)
|
(49,751)
|
|
|
Foreign exchange
transaction gain (loss)
|
(407,880)
|
33,932
|
|
|
Other income
(expense), net
|
(26,230)
|
174,337
|
|
|
|
|
|
|
Total
non-operating income (expenses), net
|
(1,265,921)
|
460,702
|
|
|
|
|
|
|
Income (loss) before income
tax
|
(24,242,060)
|
27,151,742
|
|
|
Income tax expense
|
186,373
|
4,533,112
|
|
|
|
|
|
|
Net income (loss) before
noncontrolling interest
|
(24,428,433)
|
22,618,630
|
|
|
Less: Loss attributable to
noncontrolling interest
|
(468,247)
|
(79,813)
|
|
|
|
|
|
|
Net income (loss) to SmartHeat
Inc.
|
(23,960,186)
|
22,698,443
|
|
|
|
|
|
|
Other comprehensive
item
|
|
|
|
|
Foreign currency
translation gain
attributable to
SmartHeat Inc.
|
6,867,626
|
3,282,273
|
|
|
|
|
|
|
Foreign currency
translation gain
attributable to
noncontrolling interest
|
81,103
|
11,681
|
|
|
|
|
|
|
Comprehensive income (loss)
attributable to SmartHeat Inc.
|
$ (17,092,560)
|
$ 25,980,716
|
|
|
|
|
|
|
Comprehensive loss attributable
to noncontrolling interest
|
$
(387,144)
|
$
(68,132)
|
|
|
|
|
|
|
Basic weighted average shares
outstanding
|
3,867,578
|
3,341,942
|
|
|
|
|
|
|
Diluted weighted average shares
outstanding
|
3,867,578
|
3,345,368
|
|
|
|
|
|
|
Basic earnings (loss) per
share
|
$
(6.20)
|
$
6.79
|
|
|
|
|
|
|
Diluted earnings (loss) per
share
|
$
(6.20)
|
$
6.79
|
|
|
|
|
|
SMARTHEAT
INC. AND SUBSIDIARIES
|
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
YEARS ENDED
DECEMBER 31,
|
|
|
2011
|
2010
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
Income (loss) including noncontrolling
interest
|
$ (24,428,433)
|
$ 22,618,630
|
|
|
Adjustments to reconcile income (loss) including
noncontrolling
|
|
|
|
|
interest to net cash used in operating
activities:
|
|
|
|
|
Depreciation and amortization
|
1,678,653
|
1,011,815
|
|
|
Provision for bad debts
|
7,635,040
|
-
|
|
|
Provision for inventory impairment
|
3,733,390
|
-
|
|
|
Unearned interest on accounts receivable
|
(26,683)
|
(71,133)
|
|
|
Stock option expense
|
141,114
|
195,083
|
|
|
Stock issued for consulting service
|
559,000
|
18,090
|
|
|
Loss on disposal of fixed assets
|
9,605
|
-
|
|
|
Goodwill impairment
|
8,956,313
|
-
|
|
|
Changes in deferred tax
|
(82,676)
|
(410,616)
|
|
|
(Increase)
decrease in current assets:
|
|
|
|
|
Accounts receivable
|
(4,052,545)
|
(14,716,105)
|
|
|
Retentions receivable
|
(448,424)
|
(2,285,983)
|
|
|
Advances to suppliers
|
(9,213,499)
|
38,384
|
|
|
Other receivables, prepayments and
deposits
|
(1,506,485)
|
715,988
|
|
|
Inventories
|
(26,969,530)
|
(14,651,940)
|
|
|
Increase
(decrease) in current liabilities:
|
|
|
|
|
Accounts payable
|
6,759,686
|
3,634,538
|
|
|
Advance from customers
|
3,388,328
|
(1,042,449)
|
|
|
Taxes payable
|
(500,373)
|
(193,868)
|
|
|
Accrued liabilities and other
payables
|
1,862,772
|
(3,993,197)
|
|
|
Increase
(decrease) in noncurrent assets:
|
|
|
|
|
Other noncurrent
|
240,427
|
-
|
|
|
|
|
|
|
Net cash used in operating activities
|
(32,264,320)
|
(9,132,763)
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
Change in restricted cash
|
(308,291)
|
(1,037,592)
|
|
|
Acquisition of property &
equipment
|
(2,612,263)
|
(1,112,629)
|
|
|
Acquisition of intangible
assets
|
(151,551)
|
(10,120,267)
|
|
|
Cash received from disposal of fixed
assets
|
39,655
|
-
|
|
|
Cash paid for acquisition
|
(13,516,138)
|
-
|
|
|
Cash acquired from acquisition of
subsidiaries
|
429,124
|
-
|
|
|
Notes receivable
|
(375,029)
|
(495,873)
|
|
|
Advance for equipment
purchase
|
(570,287)
|
(501,071)
|
|
|
Construction in progress
|
(426,828)
|
(79,444)
|
|
|
|
|
|
|
Net cash used in investing activities
|
(17,491,608)
|
(13,346,876)
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
Warrants exercised
|
-
|
85,500
|
|
|
Proceeds from short-term
loans
|
8,825,169
|
4,431,642
|
|
|
Repayment to short-term
loans
|
(8,518,232)
|
|
|
|
Issuance of common stock
|
-
|
27,040,742
|
|
|
Long-term payable
|
2,012,758
|
-
|
|
|
Cash contribution from noncontrolling
interest
|
758,851
|
-
|
|
|
Notes payable
|
934,796
|
-
|
|
|
Payment on notes payable
|
-
|
(2,117,001)
|
|
|
|
|
|
|
Net cash provided by financing activities
|
4,013,342
|
29,440,883
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGE
ON CASH & EQUIVALENTS
|
1,356,037
|
877,235
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH
& EQUIVALENTS
|
(44,386,549)
|
7,838,479
|
|
|
|
|
|
|
CASH & EQUIVALENTS,
BEGINNING OF YEAR
|
56,806,471
|
48,967,992
|
|
|
|
|
|
|
CASH & EQUIVALENTS, END OF
YEAR
|
$ 12,419,922
|
$ 56,806,471
|
|
|
|
|
|
|
Supplemental cash flow
data:
|
|
|
|
|
Income tax
paid
|
$
1,944,173
|
$ 3,738,517
|
|
|
Interest paid
|
$
898,706
|
$
242,961
|
|
|
|
|
SOURCE SmartHeat, Inc.