Jinpan International Reports Fourth Quarter and Full Year 2014 Financial Results

CARLSTADT, N.J., March 16, 2015 /PRNewswire/ -- Jinpan International Limited (Nasdaq: JST), a leading designer, manufacturer, and distributor of cast resin transformers, today reported unaudited consolidated financial results for the fourth quarter and full year ending December 31, 2014. 

Fourth Quarter 2014 Results

Net sales for the fourth quarter were $72.2 million, a 14.4% increase from $63.1 million in the same period last year.  The increase was driven by very strong growth in sales of our integrated products, including switchgear and unit substations, as we have leveraged our increased capacity to diversify our product portfolio and enter larger markets.

In the fourth quarter, China sales increased 15.6% year-over-year to $66.6 million, or 92.2% of net sales, compared to $57.6 million, or 91.2% of net sales in the same period last year. Net sales outside of China for the quarter increased 1.2% year-over-year to $5.6 million, or 7.8% of net sales, compared to $5.5 million, or 8.8% of net sales, for the same period last year.

Sales of cast resin transformers decreased 5.0% year-over-year to $40.1 million, or 55.6% of net sales, compared to $42.2 million or 66.9% of net sales, for the same period last year. Sales of our integrated products, including switchgear and unit substations, increased 56.3% year-over-year to $23.2 million, or 32.2% of sales, compared to $14.9 million, or 23.6% of net sales, for the same period last year. 

Sales to OEM customers decreased 3.1% year-over-year to $8.8 million, or 12.2% of net sales, compared to $9.1 million, or 14.4% of net sales in the same period last year.

Gross profit in the fourth quarter decreased 1.9% year over year to $20.4 million from $20.8 million in the same period last year.  Fourth quarter 2014 gross profit margin was 28.3%, compared to 33.0% in the prior year period. Gross margin in the fourth quarter decreased compared to the same period last year primarily due to an increased mix of sales of switchgear and unit substations, which carry lower gross margins.  Gross margins were also impacted by price declines on our cast resin transformer products and increased raw materials costs.

Selling and administrative expenses in the fourth quarter were $18.1 million, or 25.1% of net sales, compared to $18.5 million, or 29.3% of net sales in the same period last year.  Selling and administrative expenses decreased from the same period last year due to lower selling expenses associated with the sales of switchgear and unit substations.  This reduction was partially offset by approximately $0.6 million in expenses associated with the proposed going private transaction, which was terminated in December 2014. 

Operating income for the fourth quarter increased 4.8% to $2.3 million, or 3.2% of net sales, from $2.2 million, or 3.5% of net sales, in the same period last year.

Net income for the fourth quarter increased 9.1% to $4.4 million, or $0.27 per diluted share, compared to $4.1 million, or $0.24 per diluted share, in the same period last year.  Fourth quarter net income, as a percentage of net sales, was 6.2% compared to 6.5% in the same period last year.

Full Year 2014 Results

Net sales for the full year 2014 were a record $241.0 million, a 6.8% increase from $225.7 million last year.  Gross profit in 2014 increased 4.1% to $75.5 million and gross profit margin decreased to 31.3%, compared to 32.1% during 2013.  Selling and administrative expenses were $59.6 million, compared to $55.8 million last year. Operating profit in 2014 decreased 4.8% to $15.9 million, or 6.6% of net sales, compared to $16.7 million, or 7.4% of net sales, last year.  Net income in 2014 decreased 6.4% to $15.5 million, or $0.93 per share, compared to $16.6 million, or $0.99 per share, in the prior year.

Mr. Zhiyuan Li, Chief Executive Officer of Jinpan International, stated, "Our 2014 results reflect another year of record sales despite facing a challenging economic environment characterized by uncertainty and a lack of visibility within the Chinese market.  Importantly, the year was marked by positive progress with the execution of several of our strategic initiatives." 

"Our product diversification was a major highlight during the year, as our additional manufacturing capacity in Guilin provided us with flexibility to increase our production of switchgear and unit substations.  These products are integrated systems, incorporating our transformers as well as other components, and carry higher sales prices and provide access to larger addressable markets.  While these products typically generate lower gross margins, this impact is largely offset by lower selling expenses. We are very pleased with our success with these product categories and expect continued growth and diversification this year."

"We remained active with our OEM customers during the year.  Although 2014 OEM sales declined slightly, we expect a strong rebound during 2015 drive by an increase in sales to our largest OEM customer and a ramp up in sales to our newest OEM customer within the wind power markets."

"We generated strong cash flow during the year, enabling us to strengthen our balance sheet.  Cash flow from operations increased to $20.7 million during 2014, a 44.1% increase from $14.3 million during the prior year.  This cash flow enabled Jinpan to return to a positive net cash position at year-end." 

"China's economic environment remains challenging, particularly within our core cast resin transformer markets, where we are faced with slowing growth and pricing pressure.  While we are pleased with our successful expansion into the larger switchgear and unit substation markets, the market is nonetheless volatile.  As such, we are approaching 2015 with a disciplined focus on prudent sales growth, cost control, and margin preservation." 

"At the end of December 2014, our backlog equaled $119 million, up 19.0% from the same period last year and down 6.3% from the third quarter of 2014." 

Balance Sheet

As of December 31, 2014, the Company had $27.5 million in cash and cash equivalents, restricted cash, and short term investments, compared to $30.8 million as of December 31, 2013. The Company's accounts receivable on December 31, 2014 totaled $140.2 million, compared to $144.6 million as of December 31, 2013.   Total bank loans outstanding at December 31, 2014 were $26.2 million, compared to $43.1 million at December 31, 2013. 

Financial Outlook

For the full year 2015, the Company projects revenue growth of approximately 3% compared to 2014.  Net sales are expected to be approximately $248 million. Net income is expected to be approximately $15.5 million, or $0.93 per share, flat with the prior year. We expect continued growth in sales of our integrated products and sales into the OEM channel to offset slight volume declines and pricing pressure within the cast resin transformer market.  Due to the uncertainty within the Chinese economy, we are opting to take a conservative view until visibility improves.

Recent Developments

On September 22, 2014, the Company announced that its Board of Directors has received a preliminary, non-binding proposal letter dated September 21, 2014 from Li Zhiyuan, the Company's Chairman of the Board of Directors, President, and Chief Executive Officer and FNOF E&M Investment Limited (collectively, with Mr. Li, the "Buyer Parties"), to acquire all of the outstanding common shares of the Company not currently owned by the Buyer Parties in a going private transaction for $8.80 per common share, subject to certain conditions (the "Proposal").  The Company's Board of Directors formed a committee of independent directors (the "Special Committee") on September 26, 2014 to evaluate the Proposal.  The Special Committee subsequently retained a legal counsel and a financial advisor. On December 29, 2014, the Company announced that the Buyer Parties withdrew their preliminary non-binding proposal.

Conference Call Information

Jinpan's management will host a conference call and webcast on Monday, March 16, 2015, at 8:30 a.m. Eastern Time.  Listeners may access the call by dialing 1-888-389-5988 (toll free) or 1-719-325-2393 (international).  A webcast will also be available via http://public.viavid.com, with event ID: 113275.  A replay of the call will be available through March 23, 2015, by dialing 1-877-870-5176, access code 5620905. 

ABOUT JINPAN INTERNATIONAL

Jinpan International Limited (NASDAQ: JST) designs, manufactures, and markets electrical control and distribution equipment used in demanding industrial applications, utility projects, renewable energy installations, and infrastructure projects.  Major products include cast resin transformers, VPI transformers and reactors, switchgears, and unit substations.  Jinpan serves a wide range of customers in China and reaches international markets as a qualified supplier to leading global industrial electrical equipment manufacturers. Jinpan's four manufacturing facilities in China are located in the cities of Haikou, Wuhan, Shanghai and Guilin.  The Company's manufacturing facilities in China comprise the largest cast resin transformer production capacity in that country. The Company was founded in 1993.  Its principal executive offices are located in Haikou, Hainan, China and its United States office is based in Carlstadt, New Jersey.  For more information, visit www.jinpaninternational.com. 

Safe Harbor Regarding Forward Looking Statements

This press release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and observations and involve known and unknown risks, and uncertainties or other factors not under the Company's control, which may cause actual results, performance or achievements of the company to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors are listed from time-to-time in our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 20-F for the period ended December 31, 2012 and our subsequent reports on Form 6-K.  Except as required by law, we are not under any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

FINANCIAL STATEMENTS FOLLOW:

SOURCE Jinpan International Limited