Ossen Innovation Announces First Quarter 2012 Financial Results

May 30, 2012, 16:30 ET from Ossen Innovation Co., Ltd.

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


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http://www.mz-ir.com