Jinpan International Reports Third Quarter 2010 Financial Results

CARLSTADT, N.J., Nov. 15, 2010 /PRNewswire-FirstCall/ -- Jinpan International Ltd (Nasdaq: JST), a leading designer, manufacturer, and distributor of cast resin transformers for voltage distribution equipment, today announced unaudited consolidated financial results for the third quarter ended September 30,  2010.  

Net sales for the third quarter were $44.6 million, a 1.5% increase from $43.9 million in the same period last year.  The increase in sales was the result of higher transformer sales in the Company's domestic business. In the third quarter, domestic sales accounted for $42.2 million, or 94.6% of net sales, compared to $35.8 million, or 81.5% of net sales in the same period last year. Net sales outside of China were $2.4 million, or 5.4% of net sales, compared to $8.1 million, or 18.5% of net sales in the same period last year.

Cast resin transformers (excluding those for wind power applications), switch gears and unit substations represented $39.9 million, or 89.4% of net sales in the third quarter, while wind energy products represented $4.7 million, or 10.6% of net sales in the third quarter.

Gross profit in the third quarter decreased 16.6% to $16.0 million from $19.2 million, and the gross profit margin was 35.9%, compared to 43.7% in the prior year.  Gross margin was impacted by decreased sales of wind power transformer products and a competitive pricing environment for transformers due to lower silicon steel prices.

Selling, general and administrative expenses in the third quarter were $11.6 million, or 26.0% of net sales, compared to $9.4 million, or 21.4% of net sales in the same period last year. These expenses increased as a result of higher commission fees paid to third party sales agents, increased R&D expense related to new product development, and higher overhead costs related to the Company's Shanghai facility which was not operational in the prior year period.

Operating income decreased 55.1% to $4.4 million, or 9.9% of net sales, from $9.8 million, or 22.3% of net sales in the same period last year.

Net income for the third quarter decreased 53.5 % to $4.3 million, or $0.27 per diluted share, from $9.4 million, or $0.57 per diluted share, in the same period last year.  

As of October 31, 2010, the Company had a backlog of approximately $62.0 million, which was higher than the $58.5 million at June 30, 2010.  Backlog related to international and wind-related orders increased to their highest levels since the third quarter of 2009.  

Mr. Zhiyuan Li, Chief Executive Officer of Jinpan, commented, "Our third quarter financial results were a continuation of the trends from last quarter.  The average price of our transformers decreased due to lower silicon steel prices.  We do not expect silicon steel pricing to rebound for the next several quarters.  However, we continue to see improvements in order flow.  The volume of transformers shipped in the third quarter increased over the same period last year.  Recently, we also received a $5 million wind related order from a major OEM customer for delivery in 2011.

As we look ahead to next year, we believe that 2011 will be a much better year for our business.  On the domestic side, we have been working on several R&D projects, which we expect will benefit our future performance beginning next year.  We continue to make progress on the diversification of our global OEM customer base. We expect to be qualified by a fourth major OEM customer in the first quarter of 2011.  We also expect improved overall sales of wind transformer products, particularly in the U.S. market, beginning next year.  We look forward to capitalizing on new market opportunities and believe that we are well positioned for growth as the economic environment improves."

Balance Sheet

As of September 30, 2010, the Company had $19.5 million in cash and cash equivalents, compared to $25.7 million at December 31, 2009. The Company's accounts receivable on September 30, 2010 totaled $77.3 million, compared to $64.2 million on December 31, 2009. Notes payable as of September 30, 2010 decreased to $3.2 million compared to $5.0 million on December 31, 2009.  

Financial Outlook

For the fourth quarter of 2010, the Company currently anticipates net sales in the range of $40-$42 million, net income of approximately $4.6-$5.3 million and diluted EPS of $0.28 to $0.32.  For the full year 2010, the Company currently anticipates a net sales in the range of $141-$143 million, gross profit of 36%-38%, net income of approximately $12.1-$12.8 million and diluted EPS of $0.74 to $0.78.  

The Company expects full year sales volume to increase approximately 10% while average pricing is expected to decline approximately 20% compared to 2009.

Conference Call Information

Jinpan's management will host an earnings conference call on November 15, 2010 at 8:30 a.m. U.S. Eastern Time.  Listeners may access the call by dialing #1-719-325-2140.  A webcast will also be available via www.viavid.net.  A replay of the call will be available through November 29, 2010.  Listeners may access the replay by dialing #1-858-384-5517, access code: 5941486.

About Jinpan International Ltd

Jinpan International Ltd. (Nasdaq: JST) designs, manufactures, and markets cast resin transformers for power distribution and wind energy products. Jinpan's cast resin transformers allow high voltage transmissions of electricity to be distributed to various locations in lower, more usable voltages. The Company has obtained ISO9001 and ISO14001 certifications for its cast resin transformers. Its principal executive offices are located in Hainan, China and its U.S. headquarters is based in Carlstadt, New Jersey.

Safe Harbor Provision

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, 2009 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.

Jinpan International Limited and Subsidiaries

Consolidated Statements of Income (unaudited)

For the Three and Nine Month Periods Ended September 30, 2010

Jinpan International Limited and Subsidiaries

Consolidated Balance Sheets

Jinpan International Limited and Subsidiaries

Consolidated Statements of Cash Flows

For the Six Months Ended September 30, 2010(Unaudited)

SOURCE Jinpan International