- 2Q09 Gross Margin Increases to 46.6% Compared to 34.1% 2Q08- - 2Q09 Operating Income Increases 46.9% to $10.0 Million Compared to 2Q08 - - 2Q09 Net Income increases 44.0% to $8.7 Million Compared to 2Q08 - - Reiterates FY09 Net Income and Diluted EPS Forecast - ENGLEWOOD CLIFFS, N.J., Aug. 14 /PRNewswire-FirstCall/ -- Jinpan International Ltd. (NASDAQ:JST), a leading designer, manufacturer and distributor of cast resin transformers for high voltage distribution equipment, today announced consolidated financial results for the second quarter ended June 30, 2009. Net sales in the second quarter were $40.9 million, a 0.7% increase from $40.6 million in the same period last year. Net sales remained approximately the same as that of the second quarter of 2008 primarily due to downward pressure on unit sale price stemming from lower material prices. In the second quarter, net sales outside of China increased 16.0% to $5.8 million, or 14.2% of net sales, compared to $5 million, or 12.3% of net sales in the same period last year. Cast resin transformers (excluding those for wind power applications), switch gears and unit substations represented $32.6 million, or 79.7% of net sales in the second quarter, while wind energy products represented $8.3 million, or 20.3% of net sales in the second quarter. Gross profit in the second quarter was $19.0 million, a 37.6% increase from $13.8 million, in the same period last year. Second quarter gross margin increased to 46.6% compared to 34.1% in the same period last year. The Company benefited from a lower cost of sales on an absolute basis due to lower raw material prices compared to the same period last year and an increase in sales of customized, high-end products resulting in gross margins during the second quarter which were above normal levels. Selling, general and administrative expenses in the second quarter were $9.0 million, or 22.1% of net sales, a 28.6% increase compared to $7.0 million, or 17.3% of net sales in the same period last year. These expenses increased primarily due to increase in R&D expense and additional overhead costs at the Company's Wuhan and Shanghai facilities, which were not operating during the same period last year. Operating income in the second quarter was $10.0 million, or 24.4% of net sales, a 46.9% increase compared to $6.8 million, or 16.8% of net sales in the same period last year. Net income in the second quarter was $8.7 million, or $1.07 per diluted share, a 44.0% increase compared to $6.0 million, or $0.74 per diluted share, in the same period last year. Second quarter net income as a percentage of net sales was 21.2% as compared to 14.9% in the same period last year. Mr. Zhiyuan Li, Chief Executive Officer of Jinpan made the following comments: "In such a difficult economic environment, we were pleased with our results for the second quarter. We were able to have modest revenue growth in an environment with lower prices. Also in the second quarter, we recorded favorable gross margins because of lower raw materials prices, but also because of a high level of customized, high-end orders that the Company was able to deliver to its clients. For the second half of 2009, we believe gross margins will return to more typical levels of 33% - 34%, which is a level to be proud of in this industry. "We were also pleased to see an increase in orders from our international business segment and believe international orders could generate a growing percentage of net sales in 2009. Our international customers are placing orders for cast resin transformers that benefit wind power applications as well as our more traditional power generation applications typically used in urban settings (such as trains and subways, hospitals, airports and office buildings), industrial (factories) and commercial development settings (processing plants, data centers). "JST continues to take the necessary steps to ensure we have the capacity to meet growing demand from domestic and international customers. Both our Wuhan facility now in operation and soon to be completed first phase of our Shanghai facility can deliver increased production. Our Shanghai facility will house our growing wind energy products business. "As we evaluate our financial performance for the remainder of the year, we anticipate that order volume to grow but the dollar value of our projects will likely remain subject to the challenging global market conditions, thus impacting our original sales projections. We expect gross margins within the high end of our historic range and anticipate net income and EPS growth. We believe we will benefit from the stimulus plans of China and the U.S. and expect growth in our overall financial performance as the domestic and international markets in which we operate continue to show signs of stabilization and increased infrastructure development projects materialize. JST has a strong balance sheet, a healthy cash position, manageable debt and the right strategic plan to sustainably manage our business for growth this year and beyond. We look forward to capitalizing on our opportunities and enhancing value for our shareholders," concluded Mr. Li. Balance Sheet As of June 30, 2009, the Company had $21.3 million of cash and cash equivalents, compared to $16.7 million at December 31, 2008. The Company's accounts receivables on June 30, 2009 totaled $60.2 million, compared to $58.8 million at December 31, 2008. Financial Outlook For the full year 2009, the Company currently anticipates net sales of approximately $154 million to $159 million, a 0% to 3% increase over 2008 sales of $154 million. The Company reiterates its original estimate of net income of approximately $22.5 million to $23.3 million, a 14% to 18% increase over 2008 net income of $19.8 million. The Company anticipates that diluted earnings per share for 2009 will be between $2.75 to $2.85 per share. Conference Call Information Jinpan's management will host an earnings conference call today, August 14, 2009 at 8:30 a.m. U.S. Eastern Time. Listeners may access the call by dialing #1-913-312-1450. A webcast will also be available via the Company's website at http://www.viavid.net/. A recording of the call will be available through August 28, 2009. Listeners may access it by dialing #1-719-457-0820, access code: 9513647. About Jinpan International Ltd Jinpan International Ltd. (NASDAQ:JST) designs, manufactures and distributes cast resin transformers for high voltage distribution equipment in China and other countries around the world. Jinpan's cast resin transformers allow high voltage transmissions of electricity to be distributed to various locations at lower, more usable voltage levels. The Company has obtained ISO9001 and ISO1401 certification 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. 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 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; -- 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 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. 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 Condensed Consolidated Statements of Income (unaudited) For the Three and Six Month Periods Ended June 30, 2009 Three Three Six Six months months months months ended ended ended ended June 30 June 30 June 30 June 30 (In thousands, except 2009 2008 2009 2008 per share data) US$ US$ US$ US$ Net sales 40,903 40,604 73,290 64,402 Cost of Goods Sold (21,859) (26,767) (42,530) (43,106) Gross Margin 19,044 13,837 30,760 21,296 Operating Expenses Selling and administrative (9,047) (7,033) (15,277) (11,503) Operating income 9,997 6,804 15,483 9,793 Interest Expenses (248) (291) (352) (470) Other Income 72 187 122 371 Income before income taxes 9,821 6,700 15,253 9,694 Income taxes (1,133) (667) (1,886) (1,261) Net income 8,688 6,033 13,367 8,433 Earnings per share -Basic $1.09 $0.76 $1.67 $1.06 -Diluted $1.07 $0.74 $1.65 $1.03 Weighted average number of shares -Basic 8,002,794 7,984,147 8,002,794 7,984,147 -Diluted 8,086,090 8,152,304 8,086,090 8,152,304 Jinpan International Limited and Subsidiaries Condensed Consolidated Balance Sheets (unaudited) June 30, December 31, 2009 2008 (In thousands) US$ US$ Assets Current assets: Cash and cash equivalents 21,331 16,739 Accounts receivable, net 60,196 58,793 Inventories 28,508 31,868 Prepaid expenses 27,934 4,713 Other receivables 6,915 7,317 Total current assets 144,884 119,430 Property, plant and equipment, net 18,045 18,213 Construction in progress 6,693 6,055 Land use right 6,130 6,098 Intangible asset-Goodwill 12,333 12,348 Deferred tax assets 257 301 Total assets 188,342 162,445 Liabilities and Shareholders' Equity Current liabilities: Short term bank loans 4,392 11,726 Accounts payable 9,758 11,300 Notes Payable 26,352 - Tax Payable 1,640 3,671 Advances from customers 6,419 7,828 Other Payable 19,544 20,733 Total current liabilities 68,105 55,258 Shareholders' equity: Common stock, US$0.009 par value: Authorized shares - 20,000,000 Issued and outstanding shares - 8,209,684 in 2009 74 73 and 8,189,684 in 2008 Common Stock, Warrants 854 854 Convertible preferred stock, US$0.009 par value: Authorized shares - 1,000,000 Issued and outstanding shares - 3,044 in 2008 - - and 2009 Additional paid-in capital 34,266 34,035 Reserves 3,906 3,906 Retained earnings 72,692 60,296 Accumulated other comprehensive income 9,192 8,812 120,984 107,976 Less: Treasury shares at cost, common stock-192,470 in 2009 and 202,470 in 2008 (747) (789) Total shareholders' equity 120,237 107,187 Total liabilities and shareholders' equity 188,342 162,445 Jinpan International Limited and Subsidiaries Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2009 (Unaudited) Six Six months months ended ended June 30, June 30, 2009 2008 (In thousands) US$ US$ Operating activities Net income 13,367 8,433 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Depreciation 1,454 632 Provision for doubtful debt (286) (282) Loss on disposal of fixed assets - 1 Deferred income tax 43 277 Stock-based compensation cost 205 184 Changes in operating assets and liabilities Accounts receivable (1,188) (10,639) Inventories 3,324 (5,662) Prepaid expenses (23,241) (4,209) Other receivables 394 207 Accounts payable (1,529) 3,003 Notes payable 26,367 - Tax payable (2,028) (463) Advance from customers (1,401) 888 Other payable (1,164) 2,706 Net cash provided by/(used in) operating activities 14,317 (4,924) Investing activities Purchases of property, plant and equipment (1,348) (1,055) Proceeds from sales of property, plant and equipment - 2 Payment for construction in progress (645) (10,952) Purchase of available-for sale securities - (1,180) Net cash used in investing activities (1,993) (13,185) Financing activities Proceeds from bank loan 4,850 17,436 Repayment of bank loan (12,175) (4,580) Proceeds from exercise of stock options 70 - Dividends paid (970) (967) Net cash provided by/(used in) financing activities (8,225) 11,889 Effect of exchange rate changes on cash 493 464 Net increase/(decrease) in cash and cash equivalents 4,592 (5,756) Cash and cash equivalents at beginning of year 16,739 17,122 Cash and cash equivalents at end of the period 21,331 11,366 Interest paid 364 544 Income taxes paid 2,971 1,715 DATASOURCE: Jinpan International Ltd. CONTACT: Investors, Mark Du, Chief Financial Officer of Jinpan International Ltd., +1-201-227-0680; or In China: Yuening Jiang of ICR, Inc., +86-10-6599-7965; or In U.S.: Brian M. Prenoveau, CFA, +1-203-682-8200 Web Site: http://www.viavid.net/

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