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Author: Viking70 One star, 50 posts Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 58  
Subject: JST 2012 Q2 Date: 9/24/2012 1:18 PM
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Jinpan International released their 2012 Q2 on 14 Aug 2012.


2012 Q2
Net sales for 2012 Q2 were $55.5 million, a 4.7% decrease from $58.3 million in the same period last year.Net sales for 2012 Q1 were $42.8 million. Net sales for 2011 Q4 were $64.1 million. Net sales for the 2011 Q3 were $66.6 million. Sales for 2011 Q2 were $58.3 million. JST stated that the decrease in sales was primarily the result of decreased international sales.

In 2012 Q2, domestic sales accounted for $51.2 million, or 92.3% of net sales, compared to $46.1 million, which represented 79.1% of net sales in the same period last year. In 2012 Q1, domestic sales accounted for $33.8 million, or 79.0% of net sales. In 2012 Q4, domestic sales accounted for $59.8 million, or 93.3% of net sales. In 2011 Q3 domestic sales accounted for $59.1 million, or 88.7% of net sales. In 2011 Q2 domestic sales accounted for $46.1 million, or 79.1% of net sales. Domestic sales were weaker than expected due to softer economic environment.

In 2012 Q2, net sales outside of China were $4.3 million, or 7.7% of net sales compared to $12.2 million, or 20.9% of net sales for the same period last year. In 2012 Q1, net sales outside of China were $9.0 million, or 21% of net sales. In 2011 Q4, net sales outside of China were $4.3 million, or 6.7% of net sales. In 2011 Q3, net sales outside of China were $7.5 million, or 11.3% of net sales. In 2011 Q2, net sales outside of China were $12.2 million, or 20.9% of net sales. As they reported in July, JST’s business in the second quarter was negatively impacted by a change in the design of wind power products by our primary OEM customer, resulting in decreased international sales. JST does expect a portion of their export sales shortfall to be offset by increased orders from their two other OEM customers in the second half of the year resulting in international sales to be equal or slightly less than last year”, which is in-line with previous forecasts.

Gross profit for 2012 Q2 decreased 23.0% year-over-year to $17.1 million from $22.2 million in the same period last year. Second quarter 2012 gross profit margin was 30.8%, compared to 38.1% in the prior year period, and 36.9% in the 2012 first quarter. Gross profit for 2012 Q1 was $15.8 million. 2012 Q1 gross profit margin was 36.9%. Gross profit in 2011 Q4 was $22.2M. 2011 Q4 gross profit margin was 34.6%. (Recall that in 2011 Q4 JST sold some silicon steel to one of their customers as a favor. Without the lower margin sale of silicon steel, the GM would have been 35.7% in 2011 Q4.) Gross profit margin in 2011 Q3 was 37.5%. 2011 Q2 gross profit margin was 38.1%. 2011 Q1 gross profit margin was 36.7%. Gross Profit Margin, which had rebounded last quarter has taken a new dip; not good. According to JST, gross margin decreased in the second quarter due to lower product prices, resulting from a competitive pricing environment, and a higher ratio of standard to customized products sold. JST was forecasting a GM of 33% - 35% for the entire year. If GPM can recover next quarter, this forecast is still viable due to the high GPM in 2012 Q1. This is something to keep an eye on.

2012 Q2 selling and administrative expenses were $14.2 million, or 25.6% of net sales, compared to $13.8 million, or 23.7% of net sales in the same period last year. Selling expenses increased in the second quarter due to higher commissions resulting from increased sales in China. Selling and administrative expenses in the first quarter were $10.9 million, or 25.5% of net sales. Selling and administrative expenses in 2011 Q4 were $16.2 million, or 25.3% of net sales. Selling and administrative expenses in 2011 Q3 were $16.5 million, or 24.8% of net sales. In 2011 Q2 selling and administrative expenses were $13.8 million or 23.7% of net sales.

2012 Q2 operating income decreased 65.4% to $2.9 million, or 5.3% of net sales, from $8.4 million, or 14.5% of net sales, in the same period last year. 2012 Q1 operating income was $4.8 million, or 11.3% of net sales, from $3.2 million, or 10.6% of net sales, in the same period last year. In 2011 Q4, operating income was $5.9 million, or 9.2% of net sales. In 2011 Q3, operating income was $8.4 million, or 12.7% of net sales. In 2011 Q2 operating income was $8.4 million.

2012 Q2 net income decreased 67.6% to $2.4 million, or $0.14 per diluted share, from $7.3 million, or $0.44 per diluted share, in the same period last year. 2011 Q2 net income as a
percentage of net sales was 4.2% compared to 12.5% in the same period last year. Net income for the first quarter was $4.0 million, or $0.24 per diluted share (9.3% of net sales). In 2011 Q4, net income was $5.4 million, or $0.33 per diluted share (8.4% of net sales). In 2011 Q3, net income was $8.4 million, or $0.51 per diluted share. In 2011 Q2 net income was $7.3 million, or $0.44 per diluted share.


Balance Sheet

As of June 30, 2012, the Company had $26.0 million in cash and cash equivalents, compared to $24.2 million at December 31, 2011. As of March 31, 2012, the Company had $12.6 million in cash and cash equivalents. As of 31 December 2011 JST had $24.2 million. As of September 30, 2011, the Company had $13.8 million in cash, cash equivalents and restricted cash. Cash, cash equivalents at the end of 2011 Q2 was $8.3 million. In 2011 Q1, cash, cash equivalents, and restricted cash was $25.2 million.


At the end of 2012 Q2, notes payable totaled $6.0 million. In 2012 Q1, notes payable totaled $2.2 million. In 2011 Q4, notes payable totaled $13.6 million.

Total bank loans outstanding at June 30, 2012 increased to $45.3 million. Total bank loans outstanding at March 31, 2012 were $31.6 million. Total bank loans on 31 December 2011 were $23.0 million. Total bank loans outstanding on September 30, 2011 were $28.5 million. Total bank loans outstanding at June 30, 2011 were $31.0 million. Total bank loans outstanding at March 31, 2011 were $15.7 million.

The Company's accounts receivable on June 30, 2012 totaled $121.7 million. The Company's accounts receivable on March 31, 2012 totaled $114.4 million. The company’s accounts receivable on 31 Dec 2011 totaled $110.4 million. Accounts receivable on at the end of 2011 Q3 totaled $110.3 million. Accounts receivable at the end of 2011 Q2 totaled $96.3 million. Accounts receivable at the end of 2011 Q1 totaled $77.5 million. This trend is not good. Accounts receivable has been growing consistently over the past year and now appears to have exceeded sales growth rate.


Financial Outlook
For the full year 2012, JST currently anticipates net sales of $208-$219 million, a decrease of 0% to 5% compared to 2011, net income of $15.5-$16.5 million, a decrease of 30% to 35% compared to 2011, and gross profit margin of approximately 33% to 34% of net sales. This is a substantial decrease from JST’s earlier forecasts (2011 Q4 and 2012 Q1 earnings reports/conference calls), when JST anticipated net sales growth of 20-25% to $262-$273 million, gross profit margin of 33%-35%, and net income growth of approximately 17-22% to $27.8-$29.0 million. This is big problem for JST—they lack the ability to properly forecast their sales and profit expectations. This is the same problem that they had a few years ago. I believe that investors faith in a company takes a big hit when guidance is so drastically reduced from one quarter to the next.

At the end of July, 2012, JST had a backlog of approximately $115 million. JST expects that approximately 70% to 80% of this backlog will be shipped in 2012, setting them up for an improved second half. At the end of 2012 Q1, JST had a backlog of approximately $112 million, As of September 30th, 2011, the Company had a backlog of approximately $100 million compared to $91 million as of June 30th, 2011, $79 million as of April 30, 2011 and $60 million as of December 31, 2010.

This was not a good quarter for JST. However, the stock price drop is excessive, especially when one considers the P/E, debt levels, future growth potential, etc. I still believe that JST will be a good long term investment. As such, I have finally added a third allotment at $4.89.
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