2014

Ossen Innovation Announces Second Quarter 2013 Financial Results To Host Conference call at 9:00 am ET on September 30, 2013

SHANGHAI, Sept. 30, 2013 /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, 2013.

"Demand for steel materials in China continued to be weak in the first half of 2013," said Dr. Liang Tang, Chairman of Ossen Innovation. "During the first half of 2013, the Chinese government continued its prudent monetary policy and there was a temporary shortage of liquidity in the China inter-bank market in the late second quarter of 2013. Despite a challenging environment, Ossen achieved significant reductions in SG&A expenses, and coupled with raw material price declines, resulted in margin improvement and increased earnings for the second quarter and six months ended June 30, 2013. Although the domestic market environment remains challenging, with lower demand for high strength rare earth coated products, we remain optimistic about the opportunity in the second half of 2013 and 2014 to bid on other infrastructure projects and will continue to focus on increasing sales and further improvements in corporate cost controls," concluded Dr. Tang.

Financial Summary

(in millions ex- EPS)

Q2 2013

Q2 2012

Chg.

YTD 2013

YTD 2012

Chg.

Revenue

$24.2

$31.6

-23%

$38.8

$53.9

-28%

Gross Profit

$2.9

$2.2

+30%

$4.6

$4.8

-4%

Net Income*

$0.7

$0.1

+970%

$0.8

$0.3

+130%

EPS

$0.04

$0.003

+1230%

$0.04

$0.02

+100%

Shares Outstanding

19.9

20.0

-0.3%

19.9

20.0

-0.4%

*Net income attributable to Ossen Innovation Co., Ltd.

Second Quarter 2013 Financial Results

Revenue for the three months ended June 30, 2013 was $24.2 million, down 23% from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth and zinc coated products, were approximately $21.3 million, down 7% compared to approximately $22.9 million in the second quarter of 2012 due to lower demand of coated pre-stressed steel materials because of a decrease in large scale bridge projects and increased price competition. 

Gross profit increased from $2.2 million to $2.9 million, a 30% year-over-year increase.  Gross margin was 12.1%, up from 7.1% in the second quarter of 2012. Gross profit and gross margin were higher as a result of lower raw material prices, partially offset by a decrease in product sales prices.

Selling expenses were reduced by 3% to $0.02 million due to lower sales commissions. General and administrative expenses were $1.0 million, down 25% compared to $1.3 million in the second quarter of 2012 due to lower R&D expenses. Operating income was approximately $1.7 million, an increase of 136% from the same period a year ago.

Net income attributable to Ossen Innovation Co., Ltd. was $0.7 million in the second quarter of 2013 compared to $0.1 million in the year-ago period. Earnings per share were $0.04 versus $0.003 a year ago. The weighted average diluted shares outstanding were 19.9 million compared to 20.0 million.  

Six Months Ended June 30, 2013 Financial Results

Revenue for the six months ended June 30, 2013 was $38.8 million, down 28% from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth and zinc coated products, were approximately $34.2 million, down 17% compared to approximately $41.3 million in the same period of 2012 due to lower demand of coated pre-stressed steel materials because of a decrease in large scale bridge projects and increased price competition. 

Gross profit decreased from $4.8 million to $4.6 million, a 4% year-over-year decrease.  Gross margin was 11.9%, up from 8.9% in the same period of 2012. Gross margin was higher as a result of lower raw material prices and due to more coated products sold as a percentage of total sales in 2013 compared to the prior year period, partially offset by a decrease in product sales prices.

Selling expenses were reduced by 16% to $0.03 million due to lower sales commissions. General and administrative expenses were $1.6 million, down 35% compared to $2.4 million in the same period of 2012 due to lower audit fees and R&D expenses. Operating income was approximately $2.8 million, an increase of 33% from the same period a year ago.

Net income attributable to Ossen Innovation Co., Ltd. was $0.8 million in the six months ended June 30, 2013 compared to $0.3 million in the year-ago period. Earnings per share were $0.04 versus $0.02 a year ago. The weighted average diluted shares outstanding were 19.9 million compared to 20.0 million.  

Balance Sheet and Cash Flows

Ossen had approximately $33.5 million of cash and restricted cash as of June 30, 2013 compared to $27.4 million at December 31, 2012. Total accounts receivable on June 30, 2013 increased to $49.8 million from $45.7 million on December 31, 2012. The average accounts receivable days sales outstanding were 164 days in the second quarter of 2013 compared to 145 days in the second quarter of 2012. The balance of prepayments to suppliers of raw materials was $72.8 million as of June 30, 2013, a decrease of $5.2 million compared with December 31, 2012. The decrease was mainly due to the Company receiving delivery of raw materials from several major suppliers during the first half of 2013. Accordingly, inventories increased from $9.8 million at December 31, 2012 to $15.2 million at June 30, 2013. Total working capital was $74.0 million at June 30, 2013.  The balance due to related parties was $1.6 million as of June 30, 2013, and represents a payable to Shanghai Zheng Fang Xing, a supplier of the Company, for the purchases of raw materials.

The Company generated positive cash flows from operations of $12.4 million in the six months ended June 30, 2013 as compared to $15.8 million of outflows in the same period of 2012. The primary reason for the increase in cash generated in operations was an increase in accounts payable, an increase in customer deposits, and a decrease in prepayments to suppliers during the first and second quarters of 2013, which was partially offset by higher inventories and accounts receivable.

Cash flow used by financing activities was $14.9 million in the six months ended June 30, 2013 as compared to cash flow provided by financing activities of $15.4 million in the same period of 2012. The primary reason was an increase in repayment of short-term bank loans, an increase in restricted cash and a decrease in proceeds from short-term bank loans due to the Chinese government's prudent monetary policy and a temporary shortage of liquidity in Chinese inter-bank market in June 2013.

Business Updates and Outlook

Ossen expects that China will still depend on investment to stimulate its economy. This time it will probably not be a nationwide stimulus package but will likely focus on injecting capital into developing regions like central or western China and will be mainly be for infrastructure development such as highways and railroads, which could create business opportunities for OSN. There are also signs that local governments will continue to invest in infrastructure and it appears that the Chinese central government will encourage private investment to enter infrastructure building.

For the second half of 2013, Ossen expects to bid on bridge projects in Jiangxi province and on bridge and highway projects in Guangdong province, all of which need the Company's plain surface products. In addition, Ossen is one of three companies to enter the final bidding process for a major bridge project in Zhejiang province that will need both plain surface products and rare earth coated products.

With the focus on the developing regions by the new political administration, combined with several newly launched infrastructure projects on which Ossen plans to bid, the Company expects Q3 2013 sales will be improved compared to the first two quarters of 2013. Furthermore, the management currently anticipates Ossen's 2014 financial results to improve significantly as compared to 2013, provided that the industry is not impeded by the problems it encountered this past year, including government regulation and lack of liquidity among lending institutions.

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 2013 Conference Call" or be prepared to utilize the conference ID.

Conference Call

Ossen Innovation Second Quarter 2013 Conference Call

Date:

Monday, September 30, 2013

Time:

9:00 am Eastern Time, US

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

+1-845-675-0437

International Toll Free:

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

Conference ID:

70652577

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through October 8, 2013. To listen, please call +1-855-452-5696 within the United States or +1-646-254-3697 if calling internationally. Utilize the pass code 70652577 for the replay.

This call is being webcast and can be accessed by clicking on this link: 
http://www.media-server.com/m/p/235ug52a

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, as amended. 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.



Feng Peng, Chief Financial Officer



Email: feng.peng@ossencorp.com



Phone: +86 (21) 6888-8886



Web: www.osseninnovation.com

 

Investor Relations

FCC Group LLC

Phone: +1-347-850-7098

Email: ir@ossencorp.com



 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)

 



June 30,



December 31,



2013



2012



(Unaudited)




ASSETS






Current Assets






Cash and cash equivalents

$

2,733,700


$

1,996,764

Restricted cash


30,720,361



25,407,499

Notes receivable – bank acceptance notes


-



394,079

Accounts receivable, net of allowance for doubtful accounts
  of $1,287,695 and $1,277,091 at June 30, 2013 and
  December 31,2012, respectively


49,803,596



45,734,381

Inventories


15,229,054



9,807,044

Advance to suppliers


72,797,704



77,948,496

Other current assets


1,911,151



1,904,626

Notes receivable from related party – bank acceptance notes


-



1,830,208

  Total Current Assets


173,195,566



165,023,097

Property, plant and equipment, net


9,195,290



9,707,587

Land use rights, net


4,357,161



4,317,669

Prepayment for plant and equipment


8,097,529



7,933,361

TOTAL ASSETS

$

194,845,546


$

186,981,714















June 30,



December 31,



2013



2012



(Unaudited)




LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities






Notes payable – bank acceptance notes

$

46,273,076


$

36,933,710

Short-term bank loans


33,467,083



50,679,026

Long term bank loans – current portion


4,530,231



4,438,386

Accounts payable


7,103,147



572,305

Customer deposits


5,198,709



384,602

Income tax payable


156,399



391,353

Other payables and accrued expenses


923,873



805,196

Due to related party


1,588,938



-

  Total Current Liabilities


99,241,456



94,204,578

TOTAL LIABILITIES


99,241,456



94,204,578





EQUITY




Shareholders' Equity






Ordinary shares, $0.01 par value: 100,000,000 shares
 authorized, 20,000,000 shares issued and outstanding as of
 June 30, 2013 and December 31, 2012, respectively


200,000



200,000

Additional paid-in capital


33,971,455



33,971,455

Statutory reserve


4,305,767



4,179,027

Retained earnings


38,963,205



38,311,527

Treasury stock, at cost: 98,041 shares as both of June 30, 2013
 and December 31, 2012


 

(96,608)



(96,608)

Accumulated other comprehensive income


7,932,197



5,999,214

TOTAL SHAREHOLDERS' EQUITY


85,276,016



82,564,615

Non-controlling interest


10,328,074



10,212,521

TOTAL EQUITY


95,604,090



92,777,136

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

194,845,546


$

186,981,714

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,




2013


2012


2013


2012










REVENUES

$

24,186,992

$

31,603,237

$

38,779,745

$

53,890,525

COST OF GOODS SOLD


21,267,149


29,357,849


34,167,886


49,083,199

GROSS PROFIT


2,919,843


2,245,388


4,611,859


4,807,326

Operating Expenses:









Selling and distribution expenses


236,033


242,733


280,108


335,094

General and administrative expenses


956,048


1,269,156


1,558,755


2,394,647

Total Operating Expenses


1,192,081


1,511,889


1,838,863


2,729,741

INCOME FROM OPERATIONS


1,727,762


733,499


2,772,996


2,077,585

Other Income (Expenses):









Financial expenses, net


(826,713)


(838,435)


(1,730,886)


(1,771,665)

Other income, net


51,520


313,339


95,911


333,881

INCOME BEFORE INCOME TAXES


952,569


208,403


1,138,021


639,801

INCOME TAXES


(158,780)


(53,992)


(244,050)


(162,470)

NET INCOME


793,789


154,411


893,971


477,331

LESS: NET INCOME ATTRIBUTABLE TO 

  NONCONTROLLING INTEREST


89,410


88,571


115,553


138,712

NET INCOME ATTRIBUTABLE TO OSSEN
  INNOVATION CO., LTD

AND SUBSIDIARIES


704,379


65,840


778,418


338,619

OTHER COMPREHENSIVE INCOME









Foreign currency translation gain,

  net of tax


1,422,536


60,327


1,932,983


621,227

TOTAL OTHER COMPREHENSIVE

  INCOME


1,422,536


60,327


1,932,983


621,227

COMPREHENSIVE INCOME


2,216,915


126,167


2,711,401


959,846

 

EARNINGS PER ORDINARY SHARE

Basic and diluted

$

0.04

$

0.003

$

0.04

$

0.02

WEIGHTED AVERAGE ORDINARY SHARES  OUTSTANDING

Basic and diluted

$

19,901,959

$

19,957,935

$

19,901,959

$

19,972,688

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(Unaudited)

 



Six Months Ended June 30,




2013



2012

CASH FLOWS FROM OPERATING ACTIVITIES:







 Net income


$

893,971


$

477,331

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







 Depreciation and amortization



769,649



828,846

 Share-based compensation expense



-



52,658

Changes in operating assets and liabilities:







(Increase) Decrease In:







 Accounts receivable



(4,069,215)



(1,903,041)

 Inventories



(5,422,010)



2,218,040

 Advance to suppliers



5,150,793



(21,400,236)

 Other current assets



(6,525)



543,227

 Notes receivable - bank acceptance notes



394,079



2,933,082

 Notes receivable from related party - bank acceptance
   notes



1,830,208



-

Increase (Decrease) In:







 Accounts payable



6,530,842



196,757

 Customer deposits



4,814,106



(108,515)

 Income tax payable



(234,954)



41,263

 Other payables and accrued expenses



118,677



10,445

 Due to related party



1,588,938



316,741

Net cash provided by/(used in) operating activities



12,358,559



(15,793,402)








CASH FLOWS FROM INVESTING ACTIVITIES:







 Purchases of plant and equipment



(14,313)



(28,412)

 Prepayment for plant and equipment



-



(1,584)

Net cash used in investing activities



(14,313)



(29,996)









Six Months Ended June 30,




2013



2012

CASH FLOWS FROM FINANCING ACTIVITIES:







 (Increase)/Decrease in restricted cash



(5,312,862)



2,651,800

 Proceeds from short-term bank loans



14,550,667



32,466,791

 Repayments of short-term bank loans



(32,627,081)



(29,456,793)

 Repayments of long-term bank loans



-



(158,376)

 Proceeds from notes payable-bank acceptance notes



45,806,173



39,910,676

 Repayment of notes payable-bank acceptance notes



(37,317,616)



(29,933,007)

 Repurchase of common shares



-



(69,031)

Net cash provided by/(used in) financing activities



(14,900,719)



15,412,060








DECREASE IN CASH AND CASH EQUIVALENTS



(2,556,473)



(411,338)

 Effect of exchange rate changes on cash



3,293,409



940,170

 Cash and cash equivalents at beginning of period



1,996,764



1,568,261

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

2,733,700


$

2,097,093








SUPPLEMENTARY CASH FLOW INFORMATION







Cash paid during the periods:







 Income taxes paid


$

482,301


$

121,240

 Interest paid


$

1,799,554


$

1,849,501

Non-cash transactions:







Appropriation to statutory reserve


$

126,740


$

78,195

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(Unaudited)

 



Three Months Ended June 30,




2013



2012

CASH FLOWS FROM OPERATING ACTIVITIES:







 Net income


$

793,789


$

154,410

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







 Depreciation and amortization



385,159



389,354

 Share-based compensation expense



-



26,329

Changes in operating assets and liabilities:







(Increase) Decrease In:







 Accounts receivable



(11,668,005)



210,226

 Inventories



924,775



112,777

 Advance to suppliers



89,361



(8,983,615)

 Other current assets



(46,193)



540,995

 Notes receivable - bank acceptance notes



-



(7,918,534)

 Account receivable from related party



2,625,082



-

Increase (Decrease) In:







 Accounts payable



6,505,020



(39,272)

 Customer deposits



1,554,806



(49,671)

 Income tax payable



102,953



40,070

 Other payables and accrued expenses



415,697



193,564

 Due to related party



1,588,938



(181,266)

Net cash used in operating activities



3,271,382



(15,504,633)








CASH FLOWS FROM INVESTING ACTIVITIES:







 Purchases of plant and equipment



(1,642)



(24,890)

 Prepayment for plant and equipment



-



(1,584)

Net cash used in investing activities



(1,642)



(26,474)









Three Months Ended June 30,




2013



2012

CASH FLOWS FROM FINANCING ACTIVITIES:







 (Increase)/Decrease in restricted cash



(11,874,205)



2,302,373

 Proceeds from short-term bank loans



8,501,060



22,243,204

 Repayments of short-term bank loans



(20,449,255)



(14,082,532)

 Proceeds from notes payable-bank acceptance notes



31,318,956



25,803,397

 Repayment of notes payable-bank acceptance notes



(14,551,991)



(21,056,517)

 Repurchase of common shares



-



(55,316)

Net cash provided by/(used in) financing activities



(7,055,435)



15,154,609








DECREASE IN CASH AND CASH EQUIVALENTS



(3,785,695)



(376,498)

 Effect of exchange rate changes on cash



2,413,868



90,504

 Cash and cash equivalents at beginning of period



4,105,527



2,383,087

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

2,733,700


$

2,097,093








SUPPLEMENTARY CASH FLOW INFORMATION







Cash paid during the periods:







 Income taxes paid


$

93,121


$

13,926

 Interest paid


$

899,581


$

911,872

Non-cash transactions:







Appropriation to statutory reserve


$

81,034


$

21,738

 

SOURCE Ossen Innovation Co., Ltd.



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