Ossen Innovation Announces First Quarter 2012 Financial Results

SHANGHAI, May 30, 2012 /PRNewswire-Asia-FirstCall/ -- Ossen Innovation Co., Ltd. ("Ossen" or the "Company") (Nasdaq: OSN), a China-based manufacturer of an array of plain surface, rare earth and zinc coated pre-stressed steel materials, today announced its financial results for the three months ended March 31, 2012.

"We are seeing encouraging signs regarding demand for our products," stated Dr. Liang Tang, Chairman of Ossen Innovation. "Since April, we have seen a measured increase in the number of projects requesting bids. The pent up demand for steel wires has been fueled by several quarters of dormant activities and the PRC government's recognition that these infrastructure investments are crucial to China's long-term economic vitality. We expect steady improvement in our financial results and a stronger second half of this year."

Financial Summary

(in millions ex- EPS)

Q1 2012

Q1 2011

Chg.

Revenue

$22.3

$31.7

-30%

Gross Profit

$2.6

$9.1

-72%

Net Income*

$0.3

$5.9

-95%

EPS

$0.01

$0.29

-95%

Shares Outstanding

20.0

20.0

-





*Net income attributable to controlling interest

First Quarter 2012 Financial Results

Revenue was $22.3 million in the first quarter of 2012, down 29.8% from $31.7 million in the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth coated products, were $18.3 million, representing 82.1% of total sales for the three months ended March 31, 2012. This number was up 2.8% compared to $17.8 million in the first quarter of 2011 due to overall higher demand for coated pre-stressed steel materials in the market.

Gross profit decreased by $6.5 million to $2.6 million, a 71.9% year-over-year decline. Consolidated gross margin fell from 28.7% to 11.5%. The lower margin and lower profit of coated products during the first quarter of 2012 was a result of the difficulties faced by the infrastructure sector in China following the July 2011 high speed rail accident and funding problems the Ministry of Railways ("MOR") had.

Gross margin for the first quarter of 2012 were 14.0% and 8.2% for coated pre-stressed steel products and for plain surface pre-stressed steel products, respectively.

Selling and distribution expenses decreased 61.7% to $0.1 million due to difficult market environment in the infrastructure sector. General and administrative expenses increased approximately 250% to $1.1 million due to our payment in the quarter of expenses related to being a public company, including annual auditing fees. Operating income fell 84.3% to $1.3 million in the first quarter of 2012 with operating margin of 6.0% compared to $8.5 million and 26.9%, respectively, in the first quarter of 2011.

Net income attributable to controlling interest fell 95.4% to $0.3 million in the first quarter of 2012 from $5.9 million in the year-ago period. Earnings per share were $0.01 versus $0.29 a year ago.

Balance Sheet and Cash Flows

Ossen had approximately $21.8 million of cash and restricted cash at March 31, 2012 compared to $21.3 million at December 31, 2011. Total accounts receivable on March 31, 2012 increased to $50.2 million from $48.0 million on December 31, 2011. The average accounts receivable days sales outstanding were 201 days in the first three months of 2012. Total working capital was $71.8 million at March 31, 2012 compared to $70.8 million at December 31, 2011.

For the first quarter of 2012, the Company used approximately $0.3 million of cash flows from operations as compared to $12.1 million in the first quarter of 2011. Such reduction in cash flows used from operations was a result of fewer advances to suppliers in Q1 2012.

In November 2011, the Company's Board of Directors approved a share repurchase program for up to 500,000 shares of the Company's American Depositary Receipts ("ADSs") through May 2012. During the three months ended March 31, 2012, the Company repurchased 14,016 shares of ADSs from the secondary market at an average price of $0.98 per share. 

Business Updates

  1. As of the end of April, Ossen has collected $24.1million, or approximately 50%, of the $48 million accounts receivable balance at December 31, 2011. Management is confident about the collection of the remaining balance.
  2. According to government announcements and news release from major media channels, several positive developments have occurred recently about the Ministry of Railways ("MOR") and its related projects. Total credit lines from Chinese local banks available to MOR has reached $317 billion (or RMB2 trillion) to support funding of MOR's suspended and new projects. With more funding becoming available to MOR related projects, more construction will resume. The PRC government aims to invest more than $63 billion (RMB400 billion) in MOR related infrastructure projects in 2012 in order to boost economic growth.

Conference Call

To attend the call, please use the information below for either dial-in access or webcast access. When prompted on dial-in, ask for "Ossen Innovation First quarter 2012 Conference Call" or be prepared to utilize the conference ID.

Conference Call


Date:

Thursday, May 31, 2012

Time:

9:00 am Eastern Time, US

Conference Line Dial-In (U.S.):

+1-718-354-1231

International Toll Free:

United States: +1-866-519-4004
China, Domestic Mobile: 4006208038
China, Domestic: 8008190121

Conference ID:

84905084

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through June 7, 2012. To listen, please call +1-866-214-5335 within the United States or +1-718-354-1232 if calling internationally. Utilize the pass code 84905084 for the replay.

This call is being webcast and can be accessed by clicking on this link: http://www.media-server.com/m/p/4kf4gj3m

About Ossen Innovation Co., Ltd.

Ossen Innovation Co., Ltd. manufactures and sells a wide variety of plain surface pre-stressed steel materials and rare earth coated and zinc coated pre-stressed steel materials. The Company's products are mainly used in the construction of bridges, as well as in highways and other infrastructure projects. Ossen has two manufacturing facilities located in Maanshan, Anhui Province, and Jiujiang, Jiangxi Province.  

Safe Harbor Statements

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks outlined in the Company's public filings with the Securities and Exchange Commission, including the Company's annual report on Form 20-F. All information provided in this press release is as of the date hereof. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

For more information, please contact:


Ossen Innovation Co., Ltd.

Alan Jin, Chief Financial Officer

Email: alanjin@osseninnovation.com  

Phone: +86 (21) 5888-3163

Web:   www.osseninnovation.com


Investor Relations

MZ North America

Ted Haberfield, President

Phone: +1-760-755-2716

Email: thaberfield@mzgroup.us

Web: www.mz-ir.com


OSSEN INNOVATION CO., LTD.
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2012 AND 2011


OSSEN INNOVATION CO., LTD AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS









March 31,



December 31,



2012



2011



(Unaudited)




ASSETS






Current Assets






Cash and cash equivalents

$

2,383,087


$

1,568,261

Restricted cash


19,415,474



19,764,900

Notes receivable - bank acceptance notes


-



10,851,616

Accounts receivable, net of allowance for doubtful accounts
of $386,744 and $384,311, respectively


50,162,989



48,049,722

Inventories


15,117,401



17,222,664

Advance to suppliers


53,807,795



41,391,174

Other current assets


6,493,010



6,495,241

Account receivable from related party


20,930



20,799

  Total Current Assets


147,400,686



145,364,377

Property, plant and equipment, net


10,735,699



11,022,916

Land use rights, net


4,384,056



4,380,708

Prepayment for plant and equipment


7,919,348



7,869,529

TOTAL ASSETS

$

170,439,789


$

168,637,530







LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities






Notes payable ¨C bank acceptance notes

$

30,228,694


$

24,848,628

Short-term bank loans


43,127,097



47,966,209

Accounts payable


1,184,505



948,475

Customer deposits


401,071



459,915

Income tax payable


5,985



4,792

Other payables and accrued expenses


141,304



324,423

Due to related party


498,007



-

  Total Current Liabilities


75,586,663



74,552,442

Long-term bank loans


4,589,697



4,718,094

TOTAL LIABILITIES


80,176,360



79,270,536





EQUITY




Shareholders' Equity






Ordinary shares, $0.01 par value: 100,000,000 shares
authorized, 20,000,000 shares issued and 19,985,984
shares outstanding at March 31, 2012; 20,000,000 shares
issued and outstanding at December 31, 2011


200,000



200,000

Additional paid-in capital


33,910,985



33,884,656

Statutory reserve


3,941,265



3,884,808

Retained earnings


36,440,790



36,224,467

Treasury stock, at cost: 14,016 and 0 shares as of as of
March 31, 2012 and December 31, 2011, respectively


 

(13,715)



 

-

Accumulated other comprehensive income


5,856,541



5,295,641

TOTAL SHAREHOLDERS' EQUITY


80,335,866



79,489,572

Non-controlling interest


9,927,563



9,877,422

TOTAL EQUITY


90,263,429



89,366,994

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

170,439,789


$

168,637,530

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)




Three Months Ended March 31,



2012



2011







REVEUNUES

$

22,287,288


$

31,745,263

COST OF GOODS SOLD


19,725,350



22,643,557

GROSS PROFIT


2,561,938



9,101,706

Selling expenses


92,361



241,441

General and administrative expenses


1,125,491



321,496

  Total Operating Expenses


1,217,852



562,937







INCOME FROM OPERATIONS


1,344,086



8,538,769

Financial expenses, net


(933,230)



(808,664)

Other income, net


20,543



44,032

INCOME BEFORE INCOME TAX


431,399



7,774,137

INCOME TAX


(108,478)



(1,082,413)

NET INCOME


322,921



6,691,724

LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST


 

50,141



 

818,173

NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST


 

272,780



 

5,873,551

OTHER COMPREHENSIVE INCOME






Foreign currency translation gain


560,900



479,324

TOTAL OTHER COMPREHENSIVE INCOME


 

560,900



 

479,324

COMPREHENSIVE INCOME

$

833,680


$

6,352,875







EARNINGS PER ORDINARY SHARE






Basic and diluted

$

0.01


$

0.29

WEIGHTED AVERAGE ORDINARY SHARES  OUTSTANDING






Basic and diluted


19,987,441



20,000,000

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






Three Months Ended March 31,



2012


2011

CASH FLOWS FROM OPERATING ACTIVITIES:







 Net income


$

322,921


$

6,691,724

 Adjustments to reconcile net income to net cash provided
by/ (used in) operating activities:







 Depreciation and amortization



439,492



400,374

 Share-based compensation expense



26,329



26,040

Changes in operating assets and liabilities:







(Increase) Decrease In:







 Accounts receivable



(2,113,267)



(16,534,592)

 Inventories



2,105,263



9,851,092

 Advance to suppliers



(12,416,621)



(30,386,714)

 Other current assets



2,232



585,790

 Notes receivable - bank acceptance notes



10,851,616



16,114,881

 Notes receivable from related party - bank acceptance notes



-



3,024,895

 Account receivable from related party



-



(3,204,430)

Increase (Decrease) In:







 Accounts payable



236,030



(2,039,556)

 Customer deposits



(58,844)



1,512,029

 Income tax payable



1,193



517,514

 Other payables and accrued expenses



(183,119)



525,477

 Due to related party



498,007



780,770

Net cash used in operating activities



(288,768)



(12,134,706)








CASH FLOWS FROM INVESTING ACTIVITIES:







 Purchases of plant and equipment



(3,522)



(4,748)

Net cash used in investing activities



(3,522)



(4,748)








CASH FLOWS FROM FINANCING ACTIVITIES:







 Decrease in restricted cash



349,427



3,998,120

 Proceeds from short-term bank loans



10,223,587



22,526,280

 Repayments of short-term bank loans



(15,374,261)



(16,864,557)

 Repayments of long-term bank loans



(158,509)



-

 Proceeds from notes payable-bank acceptance notes



14,107,279



6,544,801

 Repayment of notes payable-bank acceptance notes



(8,876,490)



(12,772,288)

 Repurchase of common shares



(13,715)




 IPO compensation



-



440,954

Net cash provided by financing activities



257,318



3,873,310








DECREASE IN CASH AND CASH EQUIVALENTS



(34,972)



(8,266,144)

 Effect of exchange rate changes on cash



849,798



285,145

 Cash and cash equivalents at beginning of period



1,568,261



12,322,982

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

2,383,087


$

4,341,983








SUPPLEMENTARY CASH FLOW INFORMATION







Cash paid during the periods:







 Income taxes paid


$

107,314


$

570,608

 Interest paid


$

937,179


$

656,225

Non-cash transactions:







Appropriation to statutory reserve


$

56,457


$

589,095

SOURCE Ossen Innovation Co., Ltd.



RELATED LINKS
http://www.osseninnovation.com
http://www.media-server.com/m/p/4kf4gj3m
http://www.mz-ir.com

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