CARLSTADT, N.J., July 16 /PRNewswire-FirstCall/ -- Jinpan International Ltd. (Nasdaq: JST), a leading designer, manufacturer, and distributor of cast resin transformers for voltage distribution equipment, today announced preliminary financial results for the second quarter ended June 30, 2010.
The Company reported preliminary unaudited net sales for the second quarter of 2010 of $36.8 million, a 10% decrease from $40.9 million for the same period last year. Domestic sales accounted for $30.5 million of revenue while international sales represented $6.3 million. Preliminary second quarter net income and diluted earnings per share are expected to be approximately $2.0 million and $0.12, respectively. Second quarter 2010 net income was adversely impacted by a $2.5 million increase in income taxes related to the distribution of profits from subsidiaries to the parent company, Jinpan International, Ltd.
Second quarter preliminary gross profit is expected to be $16.0 million, or 43.4% of revenue, compared to $19.0 million, or 46.6% in the prior year period.
Mr. Zhiyuan Li, Chief Executive Officer of Jinpan, commented, "While demand from domestic customers has been strong, orders in our international business have taken longer to materialize than originally anticipated. Although the framework supply agreements we signed with a primary OEM customer in early 2010 indicated increased demand for 2010, we do not believe that we will be able to realize the revenue from many of these orders in 2010 due to the delayed placement of orders by the OEM customer."Domestically, demand remains solid but we continue to face a competitive price environment in China due to depressed prices of silicon steel, a significant component in cast resin transformers. This allows smaller manufacturers to compete aggressively with Jinpan on price. For 2010, we expect domestic sales volume for our products to increase approximately 10% while pricing in our domestic business is expected to decline approximately 20% compared to last year." Mr. Li continued, "In 2008, China changed its tax law structure where profits generated from Chinese companies distributed to a foreign company incur a 10% income tax. At the end of June, our Chinese subsidiaries paid a one-time tax expense of approximately $2.5 million incurred by the allocation of approximately $25 million for profit distribution to the parent Company. "At this time, we are reducing our guidance for the full year. We now estimate net sales for 2010 will decrease approximately 10-15% compared to net sales in 2009. Net income is expected to decline 45-50% as compared to 2009, primarily due to delayed international orders and more taxes incurred this year.