Ossen Innovation Announces Third Quarter 2013 Financial Results To Host Conference call at 9:00 am ET on December 9, 2013

SHANGHAI, Dec. 9, 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 nine months ended September 30, 2013.

"The market for steel materials used in infrastructure projects in China continued to be challenging in the third quarter of 2013," said Dr. Liang Tang, Chairman of Ossen Innovation. "However, I am pleased to report that Ossen continued to sell more of our higher margin, pre-stressed coated products as a percentage of total sales. Combined with lower raw material prices, this resulted in improved gross profit, gross margin and increased earnings for the third quarter and nine months ended September 30, 2013. Although the domestic infrastructure environment remains challenging, we continue to focus on driving sales of higher margin products and maintaining conservative operating expenses," concluded Dr. Tang.

Financial Summary

(in millions ex- EPS)

Q3 2013

Q3 2012

Chg.

YTD 2013

YTD 2012

Chg.

Revenue

$33.1

$41.1

-19%

$71.9

$95.0

-24%

Gross Profit

$3.9

$2.9

+33%

$8.5

$7.7

+10%

Net Income*

$1.7

$0.7

+126%

$2.5

$1.1

+127%

EPS

$0.08

$0.04

+100%

$0.12

$0.05

+140%

Shares Outstanding

19.9

20.0

-0.9%

19.9

20.0

-0.3%

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

Third Quarter 2013 Financial Results

Revenue for the three months ended September 30, 2013 was $33.1 million, down 19% from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth and zinc coated products, were approximately $24.3 million, down 8% compared to approximately $26.4 million in the third quarter of 2012. Sales of plain surface PC strands were $4.9 million for the three months ended September 30, 2013, a decrease of $5.9 million compared to the prior year.  These decreases are primarily due to lower demand of coated pre-stressed steel materials and plain surface PC strands because of a decrease in large scale infrastructure projects and increased price competition. 

Gross profit increased from $2.9 million to $3.9 million, a 33% year-over-year increase.  Gross margin was 11.7%, up from 7.1% in the third quarter of 2012. Gross profit and gross margin were higher as a result of lower raw material prices and an increase in sales of higher margin coated pre-stressed steel materials as a percentage of total sales in the third quarter of 2013 compared to the prior year period.

Selling expenses were reduced by 47% to $0.2 million due to a decrease in total sales. General and administrative expenses were $0.8 million, an increase of 63% compared to $0.5 million in the third quarter of 2012 due to higher R&D expenses related to Japanese Industrial Standards certification. Operating income was approximately $2.9 million, an increase of 36% from the same period a year ago.

Net income attributable to Ossen Innovation Co., Ltd. was $1.7 million in the third quarter of 2013 compared to $0.7 million in the year-ago period. Earnings per share were $0.08 versus $0.04 a year ago. The weighted average diluted shares outstanding were 19.9 million compared to 20.0 million.  

Nine Months Ended September 30, 2013 Financial Results

Revenue for the nine months ended September 30, 2013 was $71.9 million, down 24% from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth and zinc coated products, were approximately $61.8 million, down 13% compared to approximately $71.0 million in the same period of 2012. Sales of plain surface PC strands were $10.1 million for the nine months ended September 30, 2013, a decrease of $13.9 million compared to the prior year.  These decreases are primarily due to lower demand of coated pre-stressed steel materials and plain surface PC strands because of a decrease in large scale infrastructure projects and increased price competition.   

Gross profit increased from $7.7 million to $8.5 million, a 10% year-over-year increase.  Gross margin was 11.8%, up from 8.1% in the same period of 2012. Gross margin was higher as a result of lower raw material prices and an increase in sales of higher margin coated pre-stressed steel materials as a percentage of total sales in 2013 compared to the prior year period.

Selling expenses were reduced by 31% to $0.4 million due to a decrease in total sales. General and administrative expenses were $2.4 million, down 17% compared to $2.9 million in the same period of 2012 due to lower audit fees and R&D expenses. Operating income was approximately $5.6 million, an increase of 35% from the same period a year ago.

Net income attributable to Ossen Innovation Co., Ltd. was $2.5 million in the nine months ended September 30, 2013 compared to $1.1 million in the year-ago period. Earnings per share were $0.12 versus $0.05 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 $35.0 million of cash and restricted cash as of September 30, 2013 compared to $27.4 million at December 31, 2012. Total accounts receivable on September 30, 2013 increased to $51.1 million from $45.7 million on December 31, 2012. The average accounts receivable days sales outstanding were 139 days in the third quarter of 2013 compared to 101 days in the third quarter of 2012 which was primarily due to a decrease in total sales. The balance of prepayments to suppliers of raw materials was $55.6 million as of September 30, 2013, a decrease of $22.4 million compared with December 31, 2012. The decrease was mainly due to the Company receiving a large delivery of raw materials from two major suppliers during the first nine months of 2013. Accordingly, inventories increased from $9.8 million at December 31, 2012 to $16.6 million at September 30, 2013. Total working capital was $76.6 million at September 30, 2013. 

The Company generated positive cash flows from operations of $18.0 million for the nine months ended September 30, 2013 as compared to $13.0 million of outflows for the same period of 2012. The primary reasons for the increase in cash generated in operations were an increase in customer deposits and a decrease in advance to suppliers during the first nine months of 2013, partially offset by higher inventories and accounts receivable.

Cash flow used by financing activities was $21.9 million for the nine months ended September 30, 2013 as compared to cash flow provided by financing activities of $12.9 million for the same period of 2012. The primary reasons for the increase in cash used by financing activities were increases in restricted cash, repayments of bank loans and notes payable, and a decrease in proceeds from short-term bank loans due to the Chinese government's prudent monetary policy.

Business Updates and Outlook

Ossen believes that the Chinese central government will continue to stimulate economic growth by further injecting capital into the economy by funding new infrastructure projects.  While Ossen does not believe that the Chinese government will initiate another large scale, comprehensive capital injection, the Company believes that infrastructure spending will be selectively targeted at developing regions in Central or Western China. Furthermore, Ossen expects spending by local governments on regional infrastructure development, all of which should create additional bidding opportunities for the Company in 2014 and beyond.

In addition, Ossen recently announced that it has been awarded two contracts to supply its plain surface steel strands for new infrastructure projects in Anhui Province. The first contract is to supply 2,500 tons of plain surface steel strands for the renovation of the G205 national highway's Cihu to Caishi section. This renovation project, overseen by the Chinese Ministry of Transport, will use the steel strands for long span prestressed concrete structures of the overpass.  The second contract is to supply 18,000 tons of plain surface steel strands for the construction of the Wangdong Yangtze River highway bridge upstream of the Wan River in Anhui Province. This construction project, overseen by the Anhui Province Planning Department, will use the steel strands for long span prestressed concrete structures of the bridge approach. Based on information received from the Ministry of Transport and the Anhui Province Planning Department, respectively, Ossen expects to begin delivery of these plain surface steel strands in the first half of 2014.

Furthermore, Ossen announced that it has been awarded a contract to supply 15,000 tons of plain surface steel strands to a construction company responsible for building the new Jiujiang express loop highway in Jiujiang City, Jiangxi Province, China. The steel strands will be used in the construction of bridges and elevated highways in this infrastructure project. Based on information received from the construction company responsible for building the Jujiang express loop highway, Ossen expects to begin delivery of the plain surface steel strands in the first quarter of 2014.

Finally, Ossen expects Q4 2013 sales will be similar to the third quarter of 2013 while 2014 results are expected to significantly improve over 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 Third Quarter 2013 Conference Call" or be prepared to utilize the conference ID.

Conference Call

Ossen Innovation Third Quarter 2013 Conference Call

Date:

Monday, December 9, 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:

19296069

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through December 17, 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 19296069 for the replay.

This call is being webcast and can be accessed by clicking on this link: http://www.media-server.com/m/p/rpe2si4h

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



September 30,



December 31,



2013



2012



(Unaudited)




ASSETS






Current Assets






Cash and cash equivalents

$

2,298,617


$

1,996,764

Restricted cash


32,694,705



25,407,499

Notes receivable – bank acceptance notes


-



394,079

Accounts receivable, net of allowance for doubtful accounts of

  $1,286,407 and $1,277,091 at September 30, 2013 and December

  31,2012, respectively


51,094,124



45,734,381

Inventories


16,572,561



9,807,044

Advance to suppliers


55,558,438



77,948,496

Other current assets


2,205,884



1,904,626

Notes receivable from related party – bank acceptance notes


-



1,830,208

  Total Current Assets


160,424,329



165,023,097

Property, plant and equipment, net


8,888,337



9,707,587

Land use rights, net


4,361,318



4,317,669

Prepayment for plant and equipment


8,146,031



7,933,361

TOTAL ASSETS

$

181,820,015


$

186,981,714

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



September 30,



December 31,



2013



2012



(Unaudited)




LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities






Notes payable – bank acceptance notes

$

48,340,631


$

36,933,710

Short-term bank loans


31,388,857



50,679,026

Long term bank loans – current portion


-



4,438,386

Accounts payable


408,581



572,305

Customer deposits


1,828,131



384,602

Income tax payable


87,223



391,353

Other payables and accrued expenses


1,254,604



805,196

Due to related party


467,252



-

  Total Current Liabilities


83,775,279



94,204,578

TOTAL LIABILITIES


83,775,279



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 September 30,

  2013 and December 31, 2012, respectively


200,000



200,000

Additional paid-in capital


33,971,455



33,971,455

Statutory reserve


4,477,623



4,179,027

Retained earnings


40,467,753



38,311,527

Treasury stock, at cost: 98,041 shares as both of September 30,

  2013 and December 31, 2012


(96,608)



(96,608)

Accumulated other comprehensive income


8,524,134



5,999,214

TOTAL SHAREHOLDERS' EQUITY


87,544,357



82,564,615

Non-controlling interest


10,500,379



10,212,521

TOTAL EQUITY


98,044,736



92,777,136

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

181,820,015


$

186,981,714

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)





FOR THE THREE MONTHS ENDED SEPTEMBER 30,


FOR THE NINE MONTHS

ENDED SEPTEMBER 30,




2013


2012


2013


2012










REVENUES

$

33,118,243

$

41,066,144

$

71,897,988

$

94,956,669

COST OF GOODS SOLD


29,239,480


38,141,575


63,407,366


87,224,774

GROSS PROFIT


3,878,763


2,924,569


8,490,622


7,731,895

Operating Expenses:









Selling and distribution expenses


159,249


298,231


439,357


633,325

General and administrative expenses


848,110


521,602


2,406,865


2,916,249

Total Operating Expenses


1,007,359


819,833


2,846,222


3,549,574

INCOME FROM OPERATIONS


2,871,404


2,104,736


5,644,400


4,182,321

Other Income (Expenses):









Financial expenses, net


(727,244)


(1,143,588)


(2,458,130)


(2,915,253)

Other income, net


38,232


49,374


134,143


383,255

INCOME BEFORE INCOME TAXES


2,182,392


1,010,522


3,320,413


1,650,323

INCOME TAXES


(333,683)


(156,041)


(577,733)


(318,511)

NET INCOME


1,848,709


854,481


2,742,680


1,331,812

LESS: NET INCOME ATTRIBUTABLE

  TO NONCONTROLLING INTEREST


172,305


113,215


287,858


251,927

NET INCOME ATTRIBUTABLE TO 

  OSSEN INNOVATION CO.,LTD

AND SUBSIDIARIES


1,676,404


741,266


2,454,822


1,079,885

OTHER COMPREHENSIVE INCOME









Foreign currency translation gain, net of tax


591,937


(174,728)


2,524,920


446,498

TOTAL OTHER COMPREHENSIVE

  INCOME (LOSS)


591,937


(174,728)


2,524,920


446,498

COMPREHENSIVE INCOME


2,268,341


566,538


4,979,742


1,526,383

 

EARNINGS PER ORDINARY SHARE

Basic and diluted

$

0.08

$

0.04

$

0.12

$

0.05

WEIGHTED AVERAGE ORDINARY

SHARES  OUTSTANDING

Basic and diluted

$

19,901,959

$

19,919,613

$

19,901,959

$

19,954,867

 

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










Total Ossen Innovation Co., Ltd. Shareholders' Equity








Ordinary Shares

$0.01 Par Value


Treasury Stock



Additional Paid-in

Capital



Accumulated Other
Comprehensive Income



 

Statutory Reserve



Retained
Earnings



Non Controlling
 Interest



Total


Shares

Amount


Shares

Amount













Balance at December 31, 2012

20,000,000


200,000


(98,041)

 

(96,608)

 

33,971,455

 

5,999,214


 

4,179,027



38,311,527



10,212,521



92,777,136

Net income

-


-


-

-



-



-



-



2,454,822



287,858



2,742,680

Transfer to statutory reserve

-


-


-

-



-



-



298,596



(298,596)



-



-

Foreign currency translation 

  adjustment

-


-


 

-

 

-



-



2,524,920



 

-



-



-



2,524,920

Balance at September 30, 2013

20,000,000

$

200,000


(98,041)

$

(96,608)

 

$

33,971,455

 

$

8,524,134


 

$

 

4,477,623


$

40,467,753


$

10,500,379


$

98,044,736


































 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



Nine Months Ended September 30,




2013



2012

CASH FLOWS FROM OPERATING ACTIVITIES:







 Net income


$

2,742,680


$

1,331,812

 Adjustments to reconcile net income to net cash provided by/

  (used in) operating activities:







 Depreciation and amortization



1,152,788



1,190,589

 Share-based compensation expense



-



79,276

Changes in operating assets and liabilities:







(Increase) Decrease In:







 Accounts receivable



(5,359,744)



7,501,657

 Inventories



(6,765,517)



4,774,010

 Advance to suppliers



22,390,059



(34,144,039)

 Other current assets



(301,259)



3,310,212

 Notes receivable - bank acceptance notes



394,079



2,948,352

Notes receivable from related party - bank acceptance notes



1,830,208



-

 Account receivable from related party



-



(513,817)

Increase (Decrease) In:







 Accounts payable



(163,724)



251,104

 Customer deposits



1,443,528



148,935

 Income tax payable



(304,130)



38,206

 Other payables and accrued expenses



449,408



96,882

 Due to related party



467,252



-

Net cash provided by/(used in) operating activities



17,975,628



(12,986,821)








CASH FLOWS FROM INVESTING ACTIVITIES:







 Purchases of plant and equipment



(14,806)



(28,882)

 Prepayment for plant and equipment



-



(1,583)

Net cash used in investing activities



(14,806)



(30,465)

 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



Nine Months Ended September 30,




2013



2012

CASH FLOWS FROM FINANCING ACTIVITIES:







 Increase in restricted cash



(7,287,207)



(2,848,766)

 Proceeds from short-term bank loans



28,766,506



41,784,077

 Repayments of short-term bank loans



(49,171,458)



(44,474,787)

 Repayments of long-term bank loans



(4,503,563)



(158,278)

 Proceeds from notes payable-bank acceptance notes



62,406,511



59,354,226

 Repayment of notes payable-bank acceptance notes



(52,112,653)



(40,677,430)

 Repurchase of common shares



-



(87,733)

Net cash provided by/(used in) financing activities



(21,901,864)



12,891,309








DECREASE IN CASH AND CASH EQUIVALENTS



(3,941,042)



(125,977)

 Effect of exchange rate changes on cash



4,242,895



658,425

 Cash and cash equivalents at beginning of period



1,996,764



1,568,261

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

2,298,617


$

2,100,709








SUPPLEMENTARY CASH FLOW INFORMATION







Cash paid during the periods:







 Income taxes paid


$

884,946


$

280,278

 Interest paid


$

2,428,135


$

2,778,438

Non-cash transactions:







Appropriation to statutory reserve


$

298,596


$

155,297

 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 



Three Months Ended September 30,




2013



2012

CASH FLOWS FROM OPERATING ACTIVITIES:







 Net income


$

1,848,709


$

854,481

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







 Depreciation and amortization



383,139



361,743

 Share-based compensation expense



-



26,618

Changes in operating assets and liabilities:







(Increase) Decrease In:







 Accounts receivable



(1,290,529)



9,404,698

 Inventories



(1,343,507)



2,555,970

 Advance to suppliers



17,239,266



(12,743,803)

 Other current assets



(294,734)



2,766,985

 Notes receivable - bank acceptance notes



-



15,270

 Account receivable from related party



-



(513,817)

Increase (Decrease) In:







 Accounts payable



(6,694,566)



54,347

 Customer deposits



(3,370,578)



257,450

 Income tax payable



(69,176)



(3,057)

 Other payables and accrued expenses



330,731



86,437

 Due to related party



(1,121,686)



(316,741)

Net cash provided by operating activities



5,617,069



2,806,581








CASH FLOWS FROM INVESTING ACTIVITIES:







 Purchases of plant and equipment



(493)



(486)

Net cash used in investing activities



(493)



(486)

 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)



Three Months Ended September 30,




2013



2012

CASH FLOWS FROM FINANCING ACTIVITIES:







 Increase in restricted cash



(1,974,345)



(5,500,566)

 Proceeds from short-term bank loans



14,215,839



9,317,286

 Repayments of short-term bank loans



(16,544,377)



(15,017,994)

 Repayments of long-term bank loans



(4,503,563)



-

 Proceeds from notes payable-bank acceptance notes



16,600,338



19,443,550

 Repayment of notes payable-bank acceptance notes



(14,795,037)



(10,744,423)

 Repurchase of common shares



-



(18,702)

Net cash used in financing activities



(7,001,145)



(2,520,849)








INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS



(1,384,569)



285,246

 Effect of exchange rate changes on cash



949,486



(281,630)

 Cash and cash equivalents at beginning of period



2,733,700



2,097,093

CASH AND CASH EQUIVALENTS AT END OF PERIOD


$

2,298,617


$

2,100,709








SUPPLEMENTARY CASH FLOW INFORMATION







Cash paid during the periods:







 Income taxes paid


$

402,645


$

159,038

 Interest paid


$

682,581


$

928,937

Non-cash transactions:







Appropriation to statutory reserve


$

171,856


$

77,102

 

SOURCE Ossen Innovation Co., Ltd.



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