Ossen Innovation Announces Fourth Quarter and Full Year 2014 Financial Results

SHANGHAI, April 29, 2015 /PRNewswire/ -- 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 quarter and full year ended December 31, 2014. And the 20-F has been filed with the SEC and is available at www.sec.gov.

Dr. Liang Tang, Chairman of Ossen Innovation, commented: "We faced significant headwinds in 2014 on the back of China's economic growth hitting 24 year low as property prices cooled and companies and local government struggled under a heavy debt burdens despite stimulus measures by the central government in the second half of 2014. Additionally, a tightened credit environment throughout the year also limited our ability to borrow funds and thus meet the up-front cash deposit requirement to bid on some of the projects that we believe we otherwise could have won."

"Despite these macro challenges, we grew our overall revenues by 8.5% in 2014 and improved our gross margin by 700 and 65 basis points in the fourth quarter of 2014 and the year of 2014, respectively, as we increased the sales of lower strength rare earth coated products with lower grade raw materials that gave us cost advantage versus our competitors without sacrificing product strength and quality," continued Dr. Tang.

"Looking ahead, with signs pointing to China's economy entering a new stage of a 'new normal' with slower growth on the horizon in 2015 and years to come, we remain cautious in our near-term outlook," concluded Dr. Tang.

Three Months Ended December 31, 2014 Financial Results

For the three months ended December 31, 2014, revenues decreased by $10.2 million, or 24.4%, to $31.8 million from $42.0 million for the same period of last year, mainly due to the weaknesses in rare earth coated products sales and partially offset by strength in plain surface pre-stressed ("PC") strands and other products. The sales of coated PC steel materials, including rare earth and zinc coated products, decreased by $12.1 million, or 31.2%, to $26.7 million and accounted for 84% of total sales for the three months ended December 31, 2014. The sales of rare earth and zinc coated products were $25.7 million and $1.0 million, respectively, for the three months ended December 31, 2014, compared to $36.5 million and $2.3 million, respectively, for the same period of last year. The sales of plain surface PC strands and others increased by approximately $1.8 million, or 56.6%, to $5.1 million and accounted for 16% of total sales for the three months ended December 31, 2014 mainly due to increase in sales of other products.

Gross profit increased by $1.5 million, or 48.9%, to $4.5 million for the three months ended December 31, 2014 from $3.0 million for the same period of last year. Gross margin was 14.3% for the three months ended December 31, 2014, compared to 7.3% for the same period of last year. The increase in gross margin was mainly due to the decrease in average prices of raw materials.

Selling expenses increased by $0.02 million, or 10.9%, to approximately $0.2 million for the three months ended December 31, 2014. General and administrative expenses increased by $1.2 million, or 114.0%, to approximately $2.3 million for the three months ended December 31, 2014 mainly due to increase in research and development expenses. Operating income and operating margin were $2.0 million and 6.4% for the three months ended December 31, 2014, compared to $1.8 million and 4.2% for the same period of last year, respectively.

After deducting net income attributable to non-controlling interest, net income attributable to Ossen Innovation increased by $0.2 million, or 19.6%, to $1.4 million for the three months ended December 31, 2014 from $1.2 million for the same period of last year. Earnings per share, both basic and diluted, was $0.07 for the three months ended December 31, 2014, versus $0.06 for the same period of last year.

Twelve Months Ended December 31, 2014 Financial Results

For the twelve months ended December 31, 2014, revenues increased by $9.7 million, or 8.5%, to $123.6 million from $113.9 million for the year of 2013. The increase in revenues was mainly from sales of rare earth coated pre-stressed ("PC") wires and PC strands. The sales of coated steel materials, including rare earth and zinc coated products, increased by $7.0 million, or 7.0%, to $107.6 million and accounted for 87% of total sales for the twelve months ended December 31, 2014. The sales of rare earth and zinc coated products were $97.6 million and $16.0 million, respectively, for the twelve months ended December 31, 2014, compared to $90.6 million and $10.0 million for the year of 2013. The sales of plain surface PC strands and others also increased by $2.7 million, or 20.1%, to $16.0 million and accounted for 13% of total sales for the twelve months ended December 31, 2014.

Gross profit increased by $1.8 million, or 15.4%, to $13.3 million for the twelve months ended December 31, 2014 from $11.5 million for the year of 2013. Gross margin was 10.8% for the twelve months ended December 31, 2014, compared to 10.1% for the year of 2013. The increase in gross margin was mainly due to the decrease of average price of raw materials and sales in new international market, especially Japan, which had higher gross margin compared to domestic market.

Selling expenses increased by $0.1 million, or 23.5%, to approximately $0.8 million for the twelve months ended December 31, 2014. General and administrative expenses increased by $2.9 million, or 81.9%, to approximately $6.3 million for the twelve months ended December 31, 2014 mainly due to increase in research and development expenses associated with the development of products for new customers and rare earth zinc-aluminum coated products. Operating income and operating margin were $6.2 million and 5.0% for the twelve months ended December 31, 2014, compared to $7.4 million and 6.5% for the year of 2013, respectively. The decrease in operating income and operating margin were mainly due to the above-mentioned $2.7 million increase in research and development expenses and a $0.5 million increase in bad-debt provision.

After deducting net income attributable to non-controlling interest, net income attributable to Ossen Innovation increased by $0.2 million, or 5.9%, to $3.9 million for the twelve months ended December 31, 2014 from $3.6 million for the year of 2013. Earnings per share, both basic and diluted, was $0.19 for the twelve months ended December 31, 2014, compared to $0.18 for the year of 2013.

Balance Sheet and Cash Flows

The Company had approximately $18.3 million of cash and restricted cash as of December 31, 2014, compared to $32.9 million at December 31, 2013. Accounts receivable were $53.8 million as of December 31, 2014, compared to $48.2 million at December 31, 2013. The days of sales of outstanding were 151 days for the year of 2014, essentially unchanged from the year of 2013. The balance of prepayment to suppliers for raw materials totaled $56.3 million as of December 31, 2014, compared to $50.6 million at December 31, 2013. The Company had inventories of $20.1 million as of December 31, 2014, compared to $18.8 million at the end of 2013. Total working capital was $108.0 million as of December 31, 2014, compared to $85.7 million at December 31, 2013.

The major sources of our liquidity for fiscal years 2013 and 2012 were bank borrowings, including loans from banks and bank acceptance notes. In 2014, in addition to bank borrowings, our subsidiary in Maanshan, Ossen Materials, completed a private placement of approximately $16.2 million in aggregate principal amount of notes to certain accredited investors in China. The notes bear a fixed interest rate of 10.75% per annum, payable annually in arrears, and mature on September 2, 2016. After deducting placement agent fees and other offering expenses, Ossen Materials received net proceeds of approximately $15.4 million. We expect to finance our operations and working capital needs in the near future from cash generated from operations and short-term borrowings.

Net cash provided by operating activities was $1.8 million for the twelve months ended December 31, 2014, compared to $10.0 million for the year of 2013. Net cash used in investing activities was $0.1 million for the twelve months ended December 31, 2014, compared to net cash provided by investing activities of $8.1 million for the year of 2013. Net cash used in financing activities was $3.5 million for the twelve months ended December 31, 2014, compared to $22.1 million for the year of 2013.

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 Fourth Quarter 2014 Conference Call" or be prepared to utilize the conference ID.

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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.

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