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SmartHeat Inc. Announces Record 2008 Annual Results - Revenues Up 146%, Net Income Up 203%, EPS of $0.29, Anticipates Rapid Earnings Growth in 2009 from Clean Technology Energy Savings Product Sales

Posted on: Wednesday, 18 March 2009, 05:55 CDT

- 2008 revenue of $32.7 million, up 146% compared to $13.3 million in 2007

- 2008 net income of $6.34 million, up 203% compared to $2.09 million in 2007

- 2008 earnings per share (EPS) of $0.29, up 164% compared to $0.11 in 2007

- Benefits from China's national economic stimulus plan towards clean technology energy savings industry

- Anticipates growth momentum to continue in 2009

NEW YORK, March 18 /PRNewswire-Asia/ -- SmartHeat Inc. (Nasdaq: HEAT) (website: www.smartheatinc.com), a market leader in China's clean technology energy savings industry today announced audited 2008 financial results for the fiscal year ended December 31, 2008. SmartHeat is a US company with its primary operations in China. SmartHeat was the first China based company listed on NASDAQ in 2009.

In 2008, SmartHeat experienced continued rapid growth in a favorable market environment. Increased product sales were directly attributed to strong brand name, broader market acceptance of the Company's products and services, deeper market penetration as well as economic expansion in China's energy savings industry. SmartHeat's advanced clean technology energy savings products significantly reduce heat energy waste, lower heat energy costs and reduce air pollution.

Record 2008 Revenue

• Revenue of $32.7 million, up 146% compared to $13.3 million in 2007.
• Revenue increase was primarily due to the significant increase in sales to new and existing customers.

Record 2008 Earnings

• Net income of $6.34 million, up 203% compared to $2.09 million in 2007.
• Net income increase was primarily due to rapid growth in revenue and reductions in costs from improved economies of scale and continuing efforts to increase the efficiency of operations.

Anticipates Significant Sales Growth in 2009 in a Favorable Market Environment

In addition to anticipated new customer orders through organic growth, SmartHeat is a beneficiary of China's favorable environmental policies. China has allocated significant resources within its national economic stimulus plan to increase government spending on environmental protection related products and technology. SmartHeat stands to greatly benefit from these initiatives as the Company's products directly address efficient energy use and reduction in air pollution.

Management Comments: 2008 Financial Results and 2009 Market Guidance

James Jun Wang, CEO of SmartHeat, commented: "Our audited 2008 financial results exceeded management's financial performance targets as we laid out in early 2008. SmartHeat expects to experience significant product sales in 2009 as China has made reduction in air pollution a national priority through stronger environmental protection measures, greater funding efforts and broad mandates for clean technology energy savings equipment use. Based on significantly increased product orders received in the first two months in 2009 compared to the same period in 2008, SmartHeat anticipates strong product sales and earnings growth in 2009 from all sectors of our customer base: government, industrial, commercial and consumers. We look forward to another year of record earnings in 2009."

About SmartHeat Inc.

SmartHeat Inc. (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 and custom plate heat exchanger units. 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 Information: Ms. Jane Ai, Corporate Secretary SmartHeat Inc. Tel: 011-86-13309831658 Email: info@smartheatinc.com

SMARTHEAT, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AS OF AS OF DECEMBER 31, DECEMBER 31, 2008 2007 ASSETS CURRENT ASSETS Cash & cash equivalents $1,435,212 $393,147 Restricted cash 462,048 537,098 Accounts receivable, net 11,390,169 4,762,822 Retentions receivable 290,852 191,319 Advances to suppliers 412,524 158,750 Other receivables, prepayments and deposits 698,834 766,231 Inventories 6,107,583 7,928,408 Due from related party - 118,560 Note receivable 14,631 - ------ ------- Total current assets 20,811,853 14,856,335 NON-CURRENT ASSETS Restricted cash 219,472 - Accounts receivable, net 310,810 949,998 Retentions receivable 166,912 169,309 Intangible assets, net 1,155,131 534,208 Property and equipment, net 2,436,553 2,040,809 --------- --------- Total noncurrent assets 4,288,878 3,694,324 ----------- ----------- TOTAL ASSETS $25,100,731 $18,550,659 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $1,210,906 $3,128,585 Unearned revenue 850,408 3,125,406 Taxes payable 1,327,775 503,010 Accrued liabilities and other payables 1,330,812 807,700 Due to related party - 445,990 Due to minority shareholder 5,303 - Loans payable 2,443,450 4,619,856 --------- --------- Total current liabilities 7,168,654 12,630,547 DEFERRED TAX LIABILITY 38,854 - COMMITMENTS AND CONTINGENCIES MINORITY INTEREST - - STOCKHOLDERS' EQUITY Common stock, $0.001 par value; 75,000,000 shares authorized, 24,179,900 and 18,500,000 shares issued and outstanding at December 31, 2008 and December 31, 2007, respectively 24,180 18,500 Paid in capital 8,223,453 3,102,132 Statutory reserve 1,150,542 506,532 Accumulated other comprehensive income 984,629 473,859 Retained earnings 7,510,419 1,819,089 --------- --------- Total stockholders' equity 17,893,223 5,920,112 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,100,731 $18,550,659 =========== =========== SMARTHEAT, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2008 2007 ---- ---- Net sales $32,676,082 $13,273,151 Cost of goods sold 21,717,735 8,667,353 ---------- --------- Gross profit 10,958,347 4,605,798 Operating expenses Selling expenses 1,564,977 1,681,624 General and administrative expenses 1,851,693 687,466 --------- ------- Total operating expenses 3,416,670 2,369,090 --------- --------- Income from operations 7,541,677 2,236,708 Non-operating income (expenses) Interest income 405,266 175,084 Interest expense (314,192) (230,905) Other income 11,738 45,126 Other expenses (13,709) (16,939) Exchange loss (12,044) - Subsidy income 16,230 52,591 ------ ------ Total non-operating income 93,289 24,957 Income before income tax 7,634,966 2,261,665 Income tax expense 1,293,660 175,647 --------- ------- Income after income tax 6,341,306 2,086,018 Less: minority interest 5,966 (1,873) --------- --------- Net income 6,335,340 2,087,891 Other comprehensive item Foreign currency translation 510,770 333,449 ------- ------- Comprehensive Income $6,846,110 $2,421,340 ========== ========== Basic weighted average shares outstanding 22,176,322 18,500,000 ---------- ---------- Diluted weighted average shares outstanding 22,176,432 18,500,000 ---------- ---------- Basic earnings per share $0.29 $0.11 ===== ===== Diluted earnings per share $0.29 $0.11 ===== ===== SMARTHEAT, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008 2007 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $6,335,340 $2,087,891 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 252,598 104,055 Unearned interest on accounts receivable (127,819) (122,379) Stock option compensation expense 5,613 - Decrease in deferred tax liability (163) - Minority interest 5,966 (1,873) (Increase) decrease in current assets: Accounts receivable (4,943,868) (2,526,521) Retentions receivable (74,797) 70,446 Advances to suppliers 62,759 (45,386) Other receivables, prepayments and deposits 182,577 (327,734) Inventory 2,405,678 (2,184,063) Receivables from related party - (86,242) Increase (decrease) in current liabilities: Accounts payable (2,389,649) 979,881 Unearned revenue (2,993,636) 1,265,085 Taxes payable 779,408 326,053 Accrued liabilities and other payables (261,040) 513,507 Payables to related party - (54,761) ------- ------- Net cash used in operating activities (761,033) (2,041) -------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Increase in restricted cash (108,040) (135,915) Cash purchased at acquisition 55,426 - Acquisition of property & equipment (439,861) (909,280) Note receivable (14,635) - ------- ------- Net cash used in investing activities (507,110) (1,045,195) -------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in due to minority shareholders (663) - Change in due from / (to) shareholder (343,913) (558,243) Short term loans (2,447,804) 1,774,966 Capital contribution 5,100,000 - --------- ------- Net cash provided by financing activities 2,307,620 1,216,723 --------- --------- EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS 2,588 21,365 NET INCREASE IN CASH & CASH EQUIVALENTS 1,042,065 190,852 CASH & CASH EQUIVALENTS, BEGINNING OF YEAR 393,147 202,295 ------- ------- CASH & CASH EQUIVALENTS, END OF YEAR $1,435,212 $393,147 ========== ======== Supplemental Cash flow data: Income tax paid $660,127 $134,033 ======== ======== Interest paid $274,969 $280,719 ======== ========

SOURCE SmartHeat Inc.

Source: PR Newswire

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