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This morning's conference call had some good stuff as well. Here are my notes:

*Record strong backlog of $72mm, about 80% of which will be recognized over the next 12 months (this is the main driver in the formation of their guidance)
*Contract bid activity in China continues to be strong. China Fire is seeing clear benefits from the stimulus package in that it's tier 1 iron and steel customer base is much more confident about their access to financing, the demand for product going forward, and the plans for industry consolidation. (Remember that consolidation is good because major players are more likely to abide by relevant government fire codes.)
*Company realized higher ASPs for its proprietary products in 2008, which helped increase margins. Going forward, however, the company continues to target gross margins in the range of 45% to 55% and noted that the entry into new verticals can lower margins because the company may have to source more products from third parties and/or offer price incentives in order to win business from customers with whom they have no track record.
*The company had 114 total solutions contracts in Q4, which means the average contract value has increased by about 5% since the beginning of the year. (That's nice to see since the company has said in the past that it would like to sign larger and larger contracts.)
*The company generated $6mm in cash from operations in Q4, most of which flowed onto the balance sheet. (Waiting on the 10-K to see the formal statement of cash flows.)
*Though receivables rose in the quarter, the company noted that DSOs have decreased and that they have put enhanced receivables collections practices in place.
*The company announced two international contract wins...a $2.1mm deal to install a system in India and a $1.1mm deal to supply products and engineering guidance to a power station in Indonesia. These are obviously big developments for a company that has long said it would like to increase its presence outside of China.
*Company now installs about 70% of new systems for tier 1 iron and steel customers and thinks it has a good chance this year to further increase its market share.

And in answer to some of our questions...

Q: We saw a big increase in product sales this quarter. What drove that and how sustainable is it?
A: That was pent up demand caused by the Q3 shipping shutdown that surrounded the Olympics.

Q: There was also a significant increase in R&D expenditures. What are we working on?
A: Software and new patented technologies. The company believes proprietary technology is what's going to help it keep margins steady and increase the prominence of its brand name.

Q: Any plans to return some of the cash on the balance sheet to shareholders through a small dividend or concerted share repurchase? You have the ability and I think such a move would help more American investors get comfortable owning the stock.
A: Would consider a repurchase and the board has approved one. (Note: I know the board has approved one, but the company has yet to follow through on it. I will continue to bother Brian about this until they do.)

Q: How have shutdowns affected maintenance revenue?
A: Mainteance revenue is and is planned to be a very small part of the business. There's been negligible effect because of that. Rather, the company offers maintenance services as a way to keep in touch with customers after the 1-year warranty has expired.

Q: New regulations?
A: Some big news on this front. The company expects the government to announce new fire code regulations in May that will require all fire safety products to comply with certain national standards. This will obviously benefit companies like China Fire that have patents and that operate in the formal sector. Companies that do not install approved products from approved companies will be held personally liable. Further, Brian noted that the recent fire at the CCTV complex has drawn more attention to the importance of fire safety and the lack of extinguishing technology in industrial and commercial spaces in China.

In all, there was a lot to like in this quarter's report and not much not to like. The company seems to be protected from the downturn thanks to its tier 1 customer base and the Chinese government stimulus specifically targeted to help these designated consolidators. These companies are further incented to have top of the line safety systems because they would stand to lose their status with the government if they did not.

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