SHANGHAI, September 15, 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 |
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 | |
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 | 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, | 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, |
(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 | ||
