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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 Q3 Date: 11/21/2012 1:21 PM
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Jinpan International released their 2012 Q3 earnings report on 14 Nov 2012.

2012 Q3
Net sales for the 2012 Q3 were $58.8 million, an 11.7% decrease from $66.6 million in the same period last year. Net sales for 2012 Q2 were $55.5 million. 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. Net sales for 2011 Q2 were $58.3 million. JST stated that the decrease in sales was primarily the result of decreased domestic sales.

In 2012 Q3, domestic China sales accounted for $51.6 million, or 88.7% of net sales, compared to $59.1 million, which represented 88.7% of net sales in the same period last year. In 2012 Q2, domestic sales accounted for $51.2 million, or 92.3% of net sales. 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 Q3, net sales outside of China for the quarter were $7.2 million, or 12.2% of net sales compared to $7.5 million, or 11.3% of net sales for the same period last year. In 2012 Q2, net sales outside of China were $4.3 million, or 7.7% of net sales. 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.

Gross profit for 2012 Q3 decreased 21.4% year over year to $19.6 million from $24.9 million in the same period last year. 2012 Q3 gross profit margin was 33.3%, compared to 37.4% in the prior year period, and 30.8% in 2012 Q2. 2012 Q2 gross profit $17.1 million. 2012 Q2 gross profit margin was 30.8%. 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%. 2011 Q3 gross profit margin was 37.5%. 2011 Q2 gross profit margin was 38.1%. 2011 Q1 gross profit margin was 36.7%. Gross Profit Margin continues to drop precipitously. It has dropped from 37.5% to 21.4% in just over a year. According to JST, Gross margin decreased in the third quarter mainly due to lower gross margin on recently introduced products. However, gross profit margin did recover from Q2.

2012 Q3 selling and administrative expenses were $14.8 million, or 25.2% of net sales, compared to $16.5 million, or 24.8% of net sales in the same period last year. 2012 Q2 selling and administrative expenses were $14.2 million, or 25.6% of net sales. 2012 Q1 selling and administrative expenses were $10.9 million, or 25.5% of net sales. 2011 Q4 selling and administrative expenses were $16.2 million, or 25.3% of net sales. 2011 Q3 selling and administrative expenses were $16.5 million, or 24.8% of net sales. 2011 Q2 selling and administrative expenses were $13.8 million or 23.7% of net sales. Selling expenses decreased in the third quarter due to lower domestic product sales.

2012 Q3 operating income decreased 43.2% to $4.8 million, or 8.1% of net sales, from $8.4 million, or 12.7% of net sales, in the same period last year. 2012 Q2 operating income was $2.9 million, or 5.3% of net sales. 2012 Q1 operating income was $4.8 million, or 11.3% of net sales. 2011 Q4 operating income was $5.9 million, or 9.2% of net sales. 2011 Q3 operating income was $8.4 million, or 12.7% of net sales. 2011 Q2 operating income was $8.4 million.

2012 Q3 net income decreased 53.7% to $3.9 million, or $0.23 per diluted share, from $8.4 million, or $0.51per diluted share, in the same period last year. Third quarter net income as a percentage of net sales was 6.6% compared to 12.6% in the same period last year. 2012 Q2 net income was $2.4 million, or $0.14 per diluted share (4.2% of net sales). 2011 Q1 net income was $4.0 million, or $0.24 per diluted share (9.3% of net sales). 2011 Q4 net income was $5.4 million, or $0.33 per diluted share (8.4% of net sales). 2011 Q3 net income was $8.4 million, or $0.51 per diluted share. 2011 Q2 net income was $7.3 million, or $0.44 per diluted share.


Balance Sheet
As of September 30, 2012, JST had $16.0 million in cash and cash equivalents. As of June 30, 2012, JST had $26.0 million in cash and cash equivalents. As of March 31, 2012, JST had $12.6 million in cash and cash equivalents. As of 31 December 2011, JST had $24.2 million in cash and cash equivalents. As of September 30, 2011, JST had $13.8 million in cash and cash equivalents. As of June 30 2011, JST had $8.3 million in cash and cash equivalents. As of 31 March 2011, JST had $25.2 million in cash and cash equivalents.

2012 Q3 notes payable decreased to $10.2 million. 2012 Q2 notes payable totaled $6.0 million. 2012 Q1 notes payable totaled $2.2 million. 2011 Q4 notes payable totaled $13.6 million.

As 0f 30 September 2012, total bank loans outstanding were $33.9 million. As of 30 June 2012, total bank loans outstanding were $45.3 million. As of 31 March 2012, total bank loans outstanding. As of 31 December 2011, total bank loans outstanding were $23.0 million. As of 30 September 2011, total bank loans outstanding were $28.5 million. As of 30 June 2011, total bank loans outstanding were $31.0 million. As of 31 March 2011, total bank loans outstanding were $15.7 million.
As of 30 September 2012, JST’s accounts receivable totaled $132.8 million, compared to $110.4
million at December 31, 2011.

As of 30 June 2012, JST’s accounts receivable totaled $121.7 million. As of 31 March 2012, JST’s accounts receivable totaled $114.4 million. As of 31 December 2011, JST’s accounts receivable totaled $110.4 million. As of 30 September 2011, JST’s accounts receivable totaled $110.3 million. As of 30 June 2011, JST’s accounts receivable totaled $96.3 million. As of 31 March 2011, JST’s accounts receivable 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. Previously, JST had explained away the growing accounts receivable. On this phone call it was not addressed. I fully expect to see write downs in the future.

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 (same prediction as last quarter), net income of $13.2-$14.3 million, a decrease of 40% to 45% compared to 2011 (just last quarter JST anticipated 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 (same prediction as last quarter). As I stated last quarter, JST has substantially decreased their full year forecasts. During the 2011 Q4 and 2012 Q1 earnings reports/conference calls, 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. Again this quarter we see decreased projections from just last quarter. 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 2012 Q3,, JST had a backlog of approximately $104 million. JST expects over 41% of this backlog to be shipped by the end of 2012. In addition, JST continued to receive orders in the fourth quarter that they expect to ship by the end of 2012. At the end of July, 2012, JST had a backlog of approximately $115 million. At the end of 2012 Q1, JST had a backlog of approximately $112 million, At the end of 2011 Q3, JST had a backlog of approximately $100 million. At the end of 2011 Q2, JST had a backlog of $91 million. As of 30 April 2011, JST had a backlog of $79 million. At the end of 2010 Q4, JST had a backlog of $60 million.

JST saw increased orders from two of their three existing OEMs. The third OEM, which has been their primary OEM customer has changed the design of their wind turbines. As such, JST is working to redesign their transformers to meet the new specifications/design. This process is 90% complete. In addition, JST is working with two more OEMs to develop transformers for them, which is a good sign.

Overall, this was another not so good quarter for. JST’s lack of forecasting ability really makes me question management. JST is projecting that 2012 will end well and JST remains “confident in our current and long-term operating initiatives which can improve our future revenue and profit growth." That’s great, but they can’t even meet their targets from quarter to quarter, so I don’t have too much faith in their confidence. Still, JST is undervalued (JST is considering ways to increase shareholder value, but, again, they said this two or three quarters ago as well), so I will remain invested.
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