Jinpan International Reports Third Quarter 2014 Financial Results

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* Third quarter revenue decreased 10.2% year-over-year to $61.8 million

* Third quarter operating income decreased 32.7% to $5.2 million, or 8.4% of sales

* Third quarter net income decreased 38.8% year-over-year to $4.3 million, or $0.26 per share

* Full Year 2014 net income expected to be in the range of $16.5 million to $17.0 million, or $0.99 to $1.02 per share

CARLSTADT, N.J., Nov. 13, 2014 /PRNewswire/ -- Jinpan International Limited JST, a leading designer, manufacturer, and distributor of cast resin transformers, today reported unaudited consolidated financial results for the third quarter ending September 30, 2014. 

Third Quarter 2014 Results

Net sales for the third quarter were $61.8 million, a 10.2% decrease from $68.7 million in the same period last year.  The decline in sales during the quarter was due to delays in some of our customers' projects along with decreased shipments to our OEM customers. 

In the third quarter, China sales decreased 6.7% year-over-year to $54.7 million, or 88.5% of net sales, compared to $58.6 million, or 85.3% of net sales, in the same period last year. Sales outside of China for the quarter decreased 20.7% year-over-year to $7.1 million, or 11.5% of net sales, compared to $10.1 million, or 14.7% of net sales for the same period last year. 

Sales to OEM customers decreased 24.8% year-over-year to $9.6 million, or 15.6% of net sales, compared to $12.8 million, or 18.6% of net sales in the same period last year.

Gross profit in the third quarter decreased 15.3% year over year to $20.2 million from $23.9 million in the same period last year.  Third quarter 2014 gross profit margin was 32.8%, compared to 34.8% in the prior year period. Gross margin for the quarter remained within our expected range.  The decrease from the same period last year was due to lower sales volume and a slightly more competitive pricing environment.

Selling and administrative expenses in the third quarter were $15.1 million, or 24.4% of net sales, compared to $16.2 million, or 23.5% of net sales in the same period last year.  Selling and administrative expenses decreased from the same period last year primarily due to lower sales volume, which more than offset increases in research and development spending. 

Operating income for the third quarter decreased 32.7% to $5.2 million, or 8.4% of net sales, from $7.7 million, or 11.2% of net sales, in the same period last year.

Net income for the third quarter decreased 38.8% to $4.3 million, or $0.26 per diluted share, compared to $7.0 million, or $0.42 per diluted share, in the same period last year.  Third quarter net income, as a percentage of net sales, was 6.9% compared to 10.1% in the same period last year.

Mr. Zhiyuan Li, Chief Executive Officer of Jinpan International, stated, "Our third quarter results reflect economic uncertainty within China's economy which caused delays in some of our customers' projects and impacted our shipments during the third quarter.  Sales to our OEM customers also declined during the quarter, reflecting lumpy shipment patterns to our largest wind energy customer." 

"From a product standpoint, our sales continued to diversify.  Sales of our cast resin transformers were impacted most heavily by the customer project delays, while sales of our VPI transformers and reactors increased year-over-year.  Sales of switchgear and unit substations were roughly flat with the second quarter of 2014, but were down compared to very strong sales in the third quarter of last year."

"Likewise, our OEM sales demonstrated diversification during the quarter.  Our OEM sales declined compared to a very strong comparable period in the third quarter of last year.  This decline was due to a decrease in shipments to our largest OEM customer, which operates in the wind energy market.  We expect shipments to this customer will recover in the coming quarters.  Sales to our other OEM customers increased during the third quarter of 2014, as we began to ramp up shipments to one of our newest customers."

"China's current economic environment presents some challenges, but it is one that we have anticipated and we believe our product quality, technology leadership, production capability, and sales reach position us to compete favorably. Customer orders for the third quarter and year-to-date reflect double-digit growth compared to the comparable periods in 2013.  We expect our shipment cycle will normalize as economic uncertainty diminishes and our customers regain confidence to proceed with their projects."

"At the end of September, our backlog equaled $127 million, up 21.0% from the same period last year and up 6.7% from the second quarter of 2014."  

Balance Sheet

As of September 30, 2014, the Company had $17.9 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 September 30, 2014 totaled $147.5 million, compared to $144.6 million as of December 31, 2013.   Total bank loans outstanding at September 30, 2014 were $29.6 million, compared to $43.1 million at December 31, 2013. 

Financial Outlook

For the full year 2014, the Company projects revenue and earnings growth of approximately 0% to 3% compared to 2013.   Net sales are expected to be in the range of $226 million and $233 million and net income is expected to be in the range of $16.5 million and $17.0 million, or $0.99 to $1.02 per share.  This earnings guidance excludes expenses associated with the proposed going private transaction. 

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 has retained a legal counsel and a financial advisor. The Board of Directors cautions the Company's shareholders and others considering trading in its securities that no decisions have been made by the Special Committee with respect to the Company's response to the proposal. No assurance can be given that the Proposal, or any other transaction, will be consummated.  The Company does not intend to disclose developments regarding these matters unless and until its Board of Directors determines there is a need to update the market. 

Conference Call Information

Jinpan's management will hold a conference call on Thursday, November 13, 2014, at 8:30 a.m. ET.   Listeners may access the call by dialing 1-888-417-8533 (toll free) or 1-719-325-2354 (international).  A webcast of the conference call will also be available via http://public.viavid.com, with event ID: 111770.  A replay of the call will be available through November 20, 2014 by dialing 1-877-870-5176, access code 1537527. 

ABOUT JINPAN INTERNATIONAL

Jinpan International Limited 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 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, 2013 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:

 

 

Jinpan International Limited and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)

For the Three and Nine Month Periods Ended September 30, 2014




Three months ended

Nine months ended



September 30

September 30









2014

2013

2014

2013

(In thousands, except number of shares and per share data)


US$

US$

US$

US$







Net sales


61,762

68,743

168,789

162,579

Cost of Goods Sold


(41,524)

(44,853)

(113,747)

(106,572)

Gross Margin


20,238

23,890

55,042

56,007







Operating Expenses






Selling and administrative


(15,055)

(16,187)

(41,484)

(41,541)

Operating income


5,183

7,703

13,558

14,466







Interest Expenses


(607)

(579)

(1,826)

(1,341)

Other Income


658

1,209

1,621

1,856

Income before income taxes


5,234

8,333

13,354

14,981







Income taxes


(965)

(1,357)

(2,283)

(2,482)

Net income after taxes


4,269

6,976

11,070

12,499







Other comprehensive income (loss)






   Foreign currency translation adjustment


(7)

(12)

5

(13)

Total comprehensive income


4,262

6,964

11,075

12,486







Earnings per share






-Basic


US$0.26

US$ 0.43

US$ 0.68

US$ 0.77







-Diluted


US$0.26

US$ 0.42

US$ 0.67

US$ 0.75







Weighted average number of shares






-Basic


16,232,178

16,216,704

16,232,178

16,216,704







-Diluted


16,630,653

16,609,978

16,640,885

16,603,938



 



Jinpan International Limited and Subsidiaries

Consolidated Balance Sheet






(Unaudited)


(Audited)


September 30, 2014


December 31, 2013

(In US$ thousands, except number of shares and per share data)




Assets




Current assets:




     Cash and cash equivalents

8,132


24,582

     Restricted cash

1,147


1,316

     Short-term investment

8,615


4,920

     Notes receivable

11,630


15,802

     Accounts receivable, net

147,492


144,606

     Inventories, net

48,588


33,614

     Prepaid expenses

9,677


4,204

     Land use right

377


377

     Deferred tax assets

2,415


2,119

     Other receivables

8,064


6,891

     Total current assets

246,137


238,431





Property, plant and equipment, net

73,557


75,601

Construction-in-progress

1,706


3,787

Land use right

14,491


14,840

Goodwill

13,693


13,818

Other assets

81


90

Deferred tax assets

34


34

Total assets

349,698


346,601





Liabilities and shareholders' equity




Current liabilities:




     Short-term bank loans

3,529


11,101

     Accounts payable

30,667


27,013

     Notes Payable

14,222


10,498

     Income tax payable

1,907


2,516

     Advances from customers

17,951


14,207

     Other liabilities

28,764


30,339

     Total current liabilities

97,040


95,674

Commitments and contingencies




Long term liability:




     Deferred Income

4,932


4,785

     Long Term bank loans

26,119


31,998

Total Liabilities

128,091


132,457





Shareholders' equity:




Convertible preferred stock, US$0.0045 par value:




      Authorized shares - 2,000,000




      Issued and outstanding shares – none in 2014 and 2013



-

Common stock, US$0.0045 par value:




Authorized shares – 40,000,000




Issued and outstanding shares –16,418,456 in 2014 and 2013

74


74

Common stock-warrants

-


-

Additional paid-in capital

37,997


37,693

Reserves

13,099


12,849

Retained earnings

145,742


136,874

Accumulated other comprehensive income

24,964


26,937


221,876


214,427

Less: Treasury shares at cost,




Common stock –135,488 in 2014 and 138,306 in  2013

(268)


(283)

Total shareholders' equity

221,608


214,144

Total liabilities and shareholders' equity

349,699


346,601

 

 

 

Jinpan International Limited and Subsidiaries

Consolidated Statement of Cash Flows

For the Nine Months Ended September 30, 2014 (Unaudited)




For the Nine Months Ended


September 30


2014

2013

(In thousands)

US$

US$




Operating Activities



      Net Income

11,070

12,499

      Adjustments to reconcile net income to



           Net Cash provided by (used in ) operating activities:



           Depreciation

5,301

4,759

           Amortization of prepaid lease

212

278

           Deferred Income Tax

(317)

(576)

           Provision for doubtful debts

1,792

3,306

           Loss/(gain) on disposal of fixed assets

-

-

           Stock-based compensation Cost

304

105

      Changes in operating assets and liabilities



           Restricted Cash

158

(86)

           Accounts Receivable

(6,004)

(26,769)

           Notes Receivable

4,047

7,770

           Inventories

(15,966)

(14,027)

           Prepaid Expenses

(5,536)

(2,030)

           Other Receivable

(1,233)

(1,455)

           Accounts Payable

3,916

6,953

           Notes Payable

3,837

2,519

           Income Tax

(589)

1,029

           Advance From customers

3,890

418

           Other liabilities

(1,312)

2,903

Net Cash provided by ( used in ) operating activities

4,189

(2,404)

Investing activities



     Purchases of property, plant and equipment

(1,257)

(5,492)

     Proceeds from sales of property, plant and equipment

-

-

     Payment for construction in progress

(620)

(6,590)

     Sell of short term investment

54,533

42,159

     Increase in short term investment

(58,289)

(36,851)

     Receipt of government grant for new plant construction

191

885

Net Cash provided by ( used in ) investing activities

(5,442)

(5,889)

Financing activities



     Proceeds from bank loan

9,860

23,633

     Repayment of bank loan

(22,980)

(20,673)

     Proceeds from exercised stock option

16

215

     Dividend paid

(1,954)

(1,461)

Net Cash provided by ( used in ) financing activities

(15,058)

1,714

Effect of exchange rate changes on cash

(139)

301

Net increase/(decrease) in cash and cash equivalents

(16,450)

(6,278)

Cash and Cash equivalents at beginning of year

24,582

18,510

Cash and Cash equivalents at end of year

8,132

12,232




Interest paid

1,292

1,849

Income Tax paid

3,187

1,587

 

 

 

SOURCE Jinpan International Limited

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