JST Jinpan International Limited

- 3Q08 Sales Increase 52% to $44.7 Million - ENGLEWOOD CLIFFS, N.J., Nov. 14 /PRNewswire-FirstCall/ -- Jinpan International Ltd. (NASDAQ:JST), a leading designer, manufacturer, and marketer of cast resin transformers for power distribution and wind energy products, today announced consolidated financial results for the third quarter ended September 30, 2008. Total sales for the third quarter reached $44.7 million, a 51.9% increase over total sales of $29.5 million for the same period last year. The increase in sales was primarily a result of strong demand for the Company's cast resin transformers, both in China and internationally, as well as increased sales for the Company's wind energy products which include transformers and reactors for wind energy applications. Sales outside of China in the third quarter increased 725% to 5.8 million, or 13% of total sales, compared to $0.8 million, or 2.7% of total sales, for the same period last year. Cast resin transformers, switch gears and unit substations represented $38.3 million, or 86%, of sales in the third quarter while wind energy products represented $6.5 million, or 14%, of total sales. Gross profit in the third quarter was $14.0 million, a 33% increase over the same period last year. Third quarter gross margin decreased 440 basis points to 31.4%, compared to 35.8% in the same period last year. During the third quarter the Company was negatively impacted by an increased in the cost of its raw materials. Due to the contractual terms of many of the Company's customer purchase order agreements, the Company was not able to pass the effect of this cost increase on to its customers until after the completion of the third quarter. Consequently, the Company believes that gross margin will trend higher in the fourth quarter due to the recent decline in raw material prices. Selling and administrative expenses in the third quarter were $6.7 million, or 15.0% of sales, compared to $5.7 million, or 19.5% of sales, in the same period last year. Selling and administrative expenses on a percentage basis decreased due to the implementation of strict cost control measures. Operating income in the third quarter of 2008 increased 52% to $7.3 million, or 16.4% of sales, compared to $4.8 million, or 16.4% of sales, in the same period last year. Net income for the third quarter of 2008 increased 24.8% to $5.2 million, or $0.63 per diluted share, compared to $4.1 million, or $0.51 per diluted share, in the same period last year. Mr. Zhiyuan Li, Chief Executive Officer of Jinpan, commented, "We are proud to see continued strong growth in our business. Despite the challenging market environment, overall demand for our cast resin and power distribution products remains healthy. We believe we are developing an effective operating platform, targeting the right end markets, and have the financial strength to further expand our business opportunity for the remainder of this year and beyond. We anticipate continued growth in our existing markets within China, and believe that our business outside of China will contribute more meaningfully to our revenue stream in the future." The Company's cash position at the end of the third quarter was $12.3 million compared to $17.1 million as of December 31, 2007 and $11.4 million at the end of the second quarter of 2008. Accounts receivable at September 30, 2008, increased to $60.0 million from $43.0 million as of December 31, 2007 largely due to the increase in total sales. Accounts receivable as a percentage of trailing twelve months revenue was 38% in the third quarter, which is within the same range as the prior year period. Inventories at September 30, 2008 were valued at $35.5 million, a 7% increase from the end of the second quarter of 2008 and a 37.8% increase from the end of the fourth quarter of 2007. The increase in inventory also reflects the additional capacity at the Company's Wuhan manufacturing facility requiring supporting raw material and work-in-progress inventory. Through the first nine months of 2008, revenue increased 40.4% to $109.1 million compared to $77.8 million for the same period last year. Gross profit through the first nine months of 2008 increased 36.1% to $35.3 million, or 32.4% of sales, compared to $26.0 million, or 33.4% of sales, for the same period last year. Selling and administrative expenses through the first nine months of 2008 were $18.2 million, or 16.7% of sales, compared to $14.2 million, or 18.2% of sales, for the same period last year. Operating income through the first nine months of 2008 increased 44.8% to $17.1 million compared to $11.8 million for the same period last year. Net income through the first nine months of 2008 increased 38.2% to $13.6 million, or $1.67 per diluted share, compared to $9.8 million, or $1.21 per diluted share, for the same period last year. 2008 Financial Outlook The Company reiterates its 2008 outlook of sales of approximately $155 million, which represents a 30% increase over 2007 sales of $119.6 million. The Company is modifying its 2008 net income estimates from approximately $21.4 million, or $2.64 per diluted share, to a range of $20.0-$20.5 million, or $2.45-$2.52 per diluted share in order to account for increased taxes due from the Company's U.S. operations, which are expected to represent a higher percentage of total overall revenue in 2008 than originally anticipated. These forecasts include the sales contributions from the Wuhan manufacturing facility which opened in June, 2008. Mr. Li continued, "We remain focused on becoming a leading supplier of electrical power distribution equipment. Demand for electricity continues to grow on a global scale and our business is well positioned to capitalize on ongoing economic and infrastructure growth in China as well as from increased alternative energy projects in markets around the world. We continue to focus on increasing our market penetration, developing high margin power distribution products and enhancing our operations to increase manufacturing capacity and efficiency. We remain encouraged with our performance and look forward to continued progress ahead." Conference Call The Company will hold a conference call to discuss the financial results at 9:00 a.m. ET today. The Company invites you to join the call by dialing 1-913-312-0843. A live webcast of the conference call will be available at http://www.viavid.net/. A replay of the call will be available after the call through November 28, 2008. Listeners may access the replay by dialing 1-719-457-0820, passcode: 3940737. 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 ISO1401 certifications of its cast resin transformers. Its principal executive offices are located in Hainan, China and its U.S. headquarters is based in Englewood Cliffs, New Jersey. Forward Looking Statements "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 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, 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 include, but are not limited to, the following: -- our ability to successfully implement our business strategy; -- the impact of existing and new competitors in the markets in which we compete, including competitors that may offer less expensive products and services, more desirable or innovative products or technological substitutes, or have more extensive resources or better financing; -- the effects of rapid technological changes and vigorous competition in the markets in which we operate; -- uncertainties about the future growth in electricity consumption and infrastructure development in the markets in which we operate; -- uncertainties about the degree of growth in the number of consumers in the markets in which we operate using mobile personal communications services and the growth in the population in those areas; -- other factors or trends affecting the industry generally and our financial condition in particular; -- the effects of the higher degree of regulation in the markets in which we operate; -- general economic and political conditions in the countries in which we operate or other countries which have an impact on our business activities or investments; -- the monetary and interest rate policies of the countries in which we operate; -- changes in competition and the pricing environments in the countries in which we operate; -- exchange rates; and -- other factors listed from time to time in the our filings with the Securities and Exchange Commission, including, without limitation, our Annual Report on Form 20-F for the period ended December 31, 2007 and our subsequent reports on Form 6-K. Jinpan International Limited and Subsidiaries Consolidated Statements of Income (unaudited) For the Three and Nine Month Periods Ended September 30, 2008 Three Three Nine Nine months months months months ended ended ended ended Sept 30 Sept 30 Sept 30 Sept 30 2008 2007 2008 2007 (In thousands, except US$ US$ US$ US$ per share data) Net sales 44,724 29,467 109,126 77,756 Cost of Goods Sold (30,684) (18,908) (73,789) (51,777) Gross Margin 14,040 10,559 35,337 25,979 Operating Expenses Selling and administrative (6,725) (5,736) (18,228) (14,154) Operating income 7,315 4,823 17,109 11,825 Interest Expenses (451) (196) (921) (442) Other Income 186 157 556 351 Income before income taxes 7,050 4,784 16,744 11,734 Income taxes (1,895) (652) (3,156) (1,910) Net income 5,155 4,132 13,588 9,824 Earnings per share -Basic US$0.65 US$0.52 US$1.70 US$1.23 -Diluted US$0.63 US$0.51 US$1.67 US$1.21 Weighted average number of shares -Basic 7,987,214 7,974,295 7,987,214 7,974,295 -Diluted 8,147,342 8,087,308 8,147,342 8,087,308 Jinpan International Limited and Subsidiaries Consolidated Balance Sheets As of September 30, 2008 Sept. 30 Dec. 31 2008 2007 US$ US$ unaudited Assets Current assets: Cash and cash equivalents $12,329 $17,122 Investment available for sales 737 193 Accounts receivable, net 60,367 43,026 Inventories 35,463 25,743 Prepaid expenses 7,943 12,208 Other receivables 5,854 2,969 Total current assets 126,958 96,996 Property, plant and equipment, net 18,496 9,031 Construction in progress 10,300 2,889 Intangible assets-Goodwill 12,356 11,549 Deferred tax assets 803 807 Total assets 168,913 121,272 Liabilities and Shareholders' Equity Current liabilities: Short term bank loans 22,773 9,874 Accounts payable 11,350 6,372 Income tax 3,472 2,353 Advance from customers 6,272 4,638 Other Payable 23,589 15,292 Total current liabilities 67,456 38,529 Shareholders' equity: Common stock, US$0.009 par value: Authorized shares - 20,000,000 Issued and outstanding shares - 8,189,684 in 2008 and 8,186,617 in 2007 73 73 Common Stock, Warrants 854 854 Convertible preferred stock, US$0.009 par value: Authorized shares - 1,000,000 Issued and outstanding shares - 3,055 in 2008 and 6,111 in 2007 1 1 Additional paid-in capital 34,128 33,938 Reserves 3,905 3,905 Retained earnings 51,313 39,659 Accumulated other comprehensive income 11,972 5,102 102,246 83,532 Less: Treasure shares at cost, common stock-206,470 in 2008 and 206,470 in 2007 (789) (789) Total shareholders' equity 101,457 82,743 Total liabilities and shareholders' $168,913 $121,272 Jinpan International Limited and Subsidiaries Consolidated Statements of Cash Flows For the Nine Months Ended September 30, 2008(Unaudited) Nine Nine months months ended ended Sept 30 Sept 30 2008 2007 Operating activities Net income 13,588 9,824 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Depreciation 1,109 762 Provision for Doubtful Debt (298) 373 Loss/(Gain) on disposal of fixed assets 7 8 Deferred Income Tax 58 6 Stock-based compensation cost 183 21 Changes in operating assets and liabilities Accounts receivable (13,553) (13,207) Inventories (7,654) (2,152) Prepaid expenses (3,585) (4,736) Other receivables (2,588) (519) Accounts payable 4,380 (845) Income tax 922 660 Advance from customers 1,266 851 Other liabilities 6,985 937 Net cash provided by/(used in) operating activities 820 (8,017) Investing activities Purchases of property, plant and equipment (9,655) (4,018) Proceeds from sales of property, plant and equipment 2 18 Payment for construction in progress (6,966) (795) Purchase of available-for-sales securities (511) - Net cash provided by (used in) investing activities (17,130) (4,795) Financing activities Proceeds from bank loan 25,921 9,309 Repayment of bank loan (14,124) (9,157) Proceeds from exercise of stock options - 34 Acquired minority interest - (11,000) Dividends paid (1,934) (1,931) Net cash provided by/(used in) financing activities 9,863 (12,745) Effect of exchange rate changes on cash 1,654 662 Net increase/(decrease) in cash and cash equivalents (4,793) (24,895) Cash and cash equivalents at beginning of year 17,122 34,115 Cash and cash equivalents at end of the period 12,329 9,220 Interest paid 843 274 Income taxes paid 1,812 1,282 DATASOURCE: Jinpan International Ltd. CONTACT: Investors: Mark Du, Chief Financial Officer of Jinpan International Ltd., +1-201-227-0680; or Bill Zima of ICR, Inc., +1-203-682-8200 Web site: http://www.jstusa.net/

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