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.