Ossen Innovation Announces Second Quarter 2012 Financial Results

SHANGHAI, Sept. 14, 2012 /PRNewswire-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 and six months ended June 30, 2012.

"We are pleased to see a rebound in our sales in the quarter," stated Dr. Liang Tang, Chairman of Ossen Innovation. "These improvements have indicated encouraging demand of our products in the market. While uncertainties still remain in the industy, given infrastructure investments are crucial to China's long-term economic vitality, we expect to see continued improvements in our financial results and a stronger second half of this year."

Financial Summary

(in millions ex- EPS)

Q2 2012

Q2 2011

Chg.

1H 2012

1H 2011

Chg.

Revenue

$31.6

$29.0

+9%

$53.9

$60.8

-11%

Gross Profit

$2.2

$6.8

-67%

$4.8

$15.9

-70%

Net Income*

$0.1

$3.6

-98%

$0.3

$9.5

-96%

EPS

$0.003

$0.18

-98%

$0.02

$0.47

-96%

Shares Outstanding

19.9

20.0

-0.3%

19.9

20.0

-0.1%

*Net income attributable to controlling interest

Second Quarter 2012 Financial Results

Revenue for the three months ended June 30, 2012 was $31.6 million, an increase of $2.6 million, or 9%, from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth coated products, were $22.9 million, up 16% compared to $19.7 million in the second quarter of 2011 due to overall higher demand of coated pre-stressed steel materials in the market.

Gross profit decreased from $6.8 million to $2.2 million, a 67% year-over-year decline. Consolidated gross margin fell from 23.3% to 7.1%. Gross profit and gross margin were down mainly due to the price decreases of some of our products because of the continued tough market conditions in the infrastructure sector in China.

Gross margin for the second quarter of 2012 were 8.9% and 6.0% for coated pre-stressed steel products and for plain surface pre-stressed steel products, respectively.

Selling and distribution expenses decreased 23% to $0.2 million due to successful efforts by the Company to reduce costs. General and administrative expenses increased 48% to $1.3 million mainly due to the increase in R&D expenses. Operating income decreased 87% to $0.7 million in the second quarter of 2012 with operating margin of 2.3% compared to $5.6 million and 19.2%, respectively, in the second quarter of 2011.

Net income attributable to controlling interest fell 98% to $0.1 million in the second quarter of 2012 from $3.6 million in the year-ago period. Earnings per share were $0.003 versus $0.18 a year ago. The weighted average diluted shares outstanding was 19.9 million compared to 20.0 million a year ago as a result of 69,782 shares repurchased by Ossen as of June 30, 2012.  

First Half 2012 Financial Results

Revenues for the six months ended June 30, 2012 were $53.9 million, down 11% compared to $60.8 million in the same period a year ago.

Gross profit fell 70% in the first six months of 2012 to $4.8 million. Gross margin was 8.9% for the six months ended June 30, 2012 compared to 26.1% in the first six months of 2011.

Operating expenses were $2.7 million, up 57% from $1.7 million in the first six months of 2011, driven by the $1.2 million year-over-year increase in general and administrative expenses. Operating income and operating margin for the first half of 2012 were $2.1 million and 3.9% compared to $14.1 million and 23.2%, respectively, for the first half of 2011.

Net income attributable to controlling shareholders was $0.3 million, down from $9.5 million in the first six months of 2011. Earnings per share was $0.02 for the six months ended June 30, 2012.

Balance Sheet and Cash Flows

Ossen had approximately $19.2 million of cash and restricted cash at June 30, 2012 compared to $21.3 million at December 31, 2011. Total accounts receivable on June 30, 2012 increased slightly to $50.0 million from $48.0 million on December 31, 2011. The average accounts receivable days sales outstanding were 145 days in the second quarter of 2012 compared to 97 days in the second quarter of 2011. Inventories were down from $17.2 million at December 31, 2011 to $15.0 million at June 30, 2012. Total working capital was $72.3 million at June 30, 2012 compared to $70.8 million at December 31, 2011.

For the second quarter of 2012, the Company used approximately $15.5 million of cash flows from operations as compared to $7.0 million in the second quarter of 2011. The primary reason for the increase was higher notes receivable balance and advance to suppliers at June 30, 2012.

The Company generated approximately $15.2 million of cash flows from financing activities in the second quarter of 2012 as compared to $7.8 million in the second quarter of 2011. The increase was mainly due to increased proceeds from short-term bank loans and increased proceeds from notes payable during the period.  

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. On May 31, 2012 the program was further extended for another 12 months to May 31, 2013. During the three months ended June 30, 2012, the Company repurchased 55,766 shares of ADSs from the secondary market at an average price of $0.99 per share. 

Business Updates and Outlook

1.  As of the end of August, Ossen has collected $37.1 million, or approximately 77% of the $48.0 million accounts receivable balance at December 31, 2011. Management expects to collect the remaining balance in the near future.

2.  According to government announcements and news release from major media channels, from May 2012 the number of domestic investment projects reviewed and approved by China's National Development and Reform Commission stood above 200 in each month. Most of these approved projects are in the infrastructure sector. Such trend is expected to continue and is widely viewed as part of the actions from Chinese central government 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 Second Quarter 2012 Conference Call" or be prepared to utilize the conference ID.

Conference Call


Date:

Monday, September 17, 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:

22964240

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through September 24, 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 22964240 for the replay.

This call is being webcast and can be accessed by clicking on this link: http://www.media-server.com/m/p/9cz9j4f7

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

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2012 AND 2011


OSSEN INNOVATION CO., LTD AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS









June 30,



December 31,



2012



2011



(Unaudited)




ASSETS






Current Assets






Cash and cash equivalents

$

2,097,093


$

1,568,261

Restricted cash


17,113,101



19,764,900

Notes receivable – bank acceptance notes


7,918,534



10,851,616

Accounts receivable, net of allowance for doubtful accounts of
$387,001 and $384,311 at June 30, 2012 and December 31,2011,
respectively


49,952,764



48,049,722

Inventories


15,004,624



17,222,664

Advance to suppliers


62,791,410



41,391,174

Other current assets


5,952,014



6,495,241

Account receivable from related party


20,944



20,799

  Total Current Assets


160,850,484



145,364,377

Property, plant and equipment, net


10,408,766



11,022,916

Land use rights, net


4,362,572



4,380,708

Prepayment for plant and equipment


7,926,199



7,869,529

TOTAL ASSETS

$

183,548,021


$

168,637,530

 


OSSEN INNOVATION CO., LTD AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS









June 30,



December 31,



2012



2011



(Unaudited)




LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities






Notes payable – bank acceptance notes

$

34,999,921


$

24,848,628

Short-term bank loans


51,311,874



47,966,209

Accounts payable


1,145,233



948,475

Customer deposits


351,400



459,915

Income tax payable


46,055



4,792

Other payables and accrued expenses


334,868



324,423

Due to related party


316,741



-

  Total Current Liabilities


88,506,092



74,552,442

Long-term bank loans


4,592,750



4,718,094

TOTAL LIABILITIES


93,098,842



79,270,536





EQUITY




Shareholders' Equity






Ordinary shares, $0.01 par value: 100,000,000 shares authorized,
20,000,000 shares issued and 19,930,218 shares outstanding as of
June 30, 2012 ;20,000,000 shares issued and 20,000,000
outstanding as of  December 31, 2011, respectively


200,000



200,000

Additional paid-in capital


33,937,314



33,884,656

Statutory reserve


3,963,003



3,884,808

Retained earnings


36,484,891



36,224,467

Treasury stock, at cost: 69,782 and 0 shares as of as of June 30,
2012 and December 31, 2011, respectively


 

(69,031)



 

-

Accumulated other comprehensive income


5,916,868



5,295,641

TOTAL SHAREHOLDERS' EQUITY


80,433,045



79,489,572

Non-controlling interest


10,016,134



9,877,422

TOTAL EQUITY


90,449,179



89,366,994

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

183,548,021


$

168,637,530

 

 


OSSEN INNOVATION CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)










FOR THE THREE MONTHS ENDED JUNE 30,


FOR THE SIX MONTHS ENDED JUNE 30,




2012


2011


2012


2011










REVENUES

$

31,603,237

$

29,036,672

$

53,890,525

$

60,781,935

COST OF GOODS SOLD


29,357,849


22,282,476


49,083,199


44,926,033

GROSS PROFIT


2,245,388


6,754,196


4,807,326


15,855,902

Operating Expenses:









Selling and distribution expenses


242,733


316,520


335,094


557,961

General and administrative expenses


1,269,156


856,142


2,394,647


1,177,638

Total Operating Expenses


1,511,889


1,172,662


2,729,741


1,735,599

INCOME FROM OPERATIONS


733,499


5,581,534


2,077,585


14,120,303

Other Income (Expenses):









Financial expenses, net


(838,435)


(799,256)


(1,771,665)


(1,607,920)

Other income, net


313,339


26,654


333,881


70,686

INCOME BEFORE INCOME TAXES


208,403


4,808,932


639,801


12,583,069

INCOME TAXES


(53,992)


(694,317)


(162,470)


(1,776,730)

NET INCOME


154,411


4,114,615


477,331


10,806,339

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST


88,571


503,273


138,712


1,321,446

NET INCOME ATTRIBUTABLE TO OSSEN INNOVATION CO.,LTD

AND SUBSIDIARIES


65,840


3,611,342


338,619


9,484,893

OTHER COMPREHENSIVE INCOME









Foreign currency translation gain, net of tax


60,327


1,318,437


621,227


1,797,761

TOTAL OTHER COMPREHENSIVE INCOME


60,327


1,318,437


621,227


1,797,761

COMPREHENSIVE INCOME


126,167


4,929,779


959,846


11,282,654

 

EARNINGS PER ORDINARY SHARE

Basic and diluted

$

0.003

$

0.18

$

0.02

$

0.47

WEIGHTED AVERAGE ORDINARY SHARES  OUTSTANDING

Basic and diluted

$

19,957,935

$

20,000,000

$

19,972,688

$

20,000,000

 

 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






Six Months Ended June 30,




2012



2011

CASH FLOWS FROM OPERATING ACTIVITIES:







 Net income


$

477,331


$

10,806,339

 Adjustments to reconcile net income to net cash provided by/

(used in) operating activities:







 Depreciation and amortization



828,846



887,688

 Share-based compensation expense



52,658



52,369

Changes in operating assets and liabilities:







(Increase) Decrease In:







 Accounts receivable



(1,903,041)



(18,398,026)

 Inventories



2,218,040



7,690,684

 Advance to suppliers



(21,400,236)



(47,427,444)

 Other current assets



543,227



3,203,047

 Notes receivable - bank acceptance notes



2,933,082



17,636,928

 Notes receivable from related party - bank acceptance notes



-



3,024,895

 Account receivable from related party



-



(348,967)

Increase (Decrease) In:







 Accounts payable



196,757



(1,968,618)

 Customer deposits



(108,515)



5,415,978

 Income tax payable



41,263



76,140

 Other payables and accrued expenses



10,445



179,525

 Due to related party



316,741



-

Net cash used in operating activities



(15,793,402)



(19,169,462)








CASH FLOWS FROM INVESTING ACTIVITIES:







 Purchases of plant and equipment



(28,412)



(127,460)

 Prepayment for plant and equipment



(1,584)



-

Net cash used in investing activities



(29,996)



(127,460)

 

 


OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






Six Months Ended June 30,




2012



2011

CASH FLOWS FROM FINANCING ACTIVITIES:







 Decrease in restricted cash



2,651,800



198,311

 Proceeds from short-term bank loans



32,466,791



38,985,133

 Repayments of short-term bank loans



(29,456,793)



(27,960,315)

 Repayments of long-term bank loans



(158,376)



-

 Proceeds from notes payable-bank acceptance notes



39,910,676



25,990,099

 Repayment of notes payable-bank acceptance notes



(29,933,007)



(26,014,096)

 Repurchase of common shares



(69,031)



-

 IPO compensation



-



440,954

Net cash provided by financing activities



15,412,060



11,640,086








DECREASE IN CASH AND CASH EQUIVALENTS



(411,338)



(7,656,836)

 Effect of exchange rate changes on cash



940,170



1,098,621

 Cash and cash equivalents at beginning of period



1,568,261



12,322,982

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

2,097,093


$

5,764,767








SUPPLEMENTARY CASH FLOW INFORMATION







Cash paid during the periods:







 Income taxes paid


$

121,240


$

1,716,523

 Interest paid


$

1,849,501


$

1,336,592

Non-cash transactions:







Appropriation to statutory reserve


$

78,195


$

970,380

 


 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






Three Months Ended June 30,




2012



2011

CASH FLOWS FROM OPERATING ACTIVITIES:







 Net income


$

154,410


$

4,114,615

 Adjustments to reconcile net income to net cash provided by/

(used in) operating activities:







 Depreciation and amortization



389,354



487,314

 Share-based compensation expense



26,329



26,329

Changes in operating assets and liabilities:







(Increase) Decrease In:







 Accounts receivable



210,226



(1,863,434)

 Inventories



112,777



(2,160,408)

 Advance to suppliers



(8,983,615)



(17,040,730)

 Other current assets



540,995



2,617,257

 Notes receivable - bank acceptance notes



(7,918,534)



1,522,047

 Account receivable from related party



-



2,855,463

Increase (Decrease) In:







 Accounts payable



(39,272)



70,938

 Customer deposits



(49,671)



3,903,949

 Income tax payable



40,070



(441,374)

 Other payables and accrued expenses



193,564



(345,952)

 Due to related party



(181,266)



(780,770)

Net cash used in operating activities



(15,504,633)



(7,034,756)








CASH FLOWS FROM INVESTING ACTIVITIES:







 Purchases of plant and equipment



(24,890)



(122,712)

 Prepayment for plant and equipment



(1,584)



-

Net cash used in investing activities



(26,474)



(122,712)

 


 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)






Three Months Ended June 30,




2012



2011

CASH FLOWS FROM FINANCING ACTIVITIES:







 (Increase)/Decrease in restricted cash



2,302,373



(3,799,809)

 Proceeds from short-term bank loans



22,243,204



16,458,853

 Repayments of short-term bank loans



(14,082,532)



(11,095,758)

 Proceeds from notes payable-bank acceptance notes



25,803,397



19,445,298

 Repayment of notes payable-bank acceptance notes



(21,056,517)



(13,241,808)

 Repurchase of common shares



(55,316)



-

Net cash provided by financing activities



15,154,609



7,766,776








INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS



(376,498)



609,308

 Effect of exchange rate changes on cash



90,504



813,476

 Cash and cash equivalents at beginning of period



2,383,087



4,341,983

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

2,097,093


$

5,764,767








SUPPLEMENTARY CASH FLOW INFORMATION







Cash paid during the periods:







 Income taxes paid


$

13,926


$

1,145,915

 Interest paid


$

911,872


$

680,367

Non-cash transactions:







Appropriation to statutory reserve


$

21,738


$

381,285

 

SOURCE Ossen Innovation Co., Ltd.



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http://www.osseninnovation.com

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