Ossen Innovation Announces Second Quarter 2015 Financial Results

SHANGHAI, September 26, 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 ended June 30, 2015.

• Revenues decreased by 28.0% to $25.9 million for the three months ended June 30, 2015, with weakness in both zinc coated PC steel materials and plain surface PC strands and others.
• Net income attributable to Ossen Innovation decreased by 12.7% to $1.3 million, or $0.07 per share, for the three months ended June 30, 2015, compared to $1.5 million, or $0.07 per share, for the same period of last year.
• Gross margin improved by 2.3 points to 12.7% for the three months ended June 30, 2015, mainly due to lower raw material costs.
• Operating margin improved by 1.9 points to 7.8% for the three months ended June 30, 2015 from 5.9% for the same period of last year.

Dr. Liang Tang, Chairman of Ossen Innovation, commented: "The 28% year-over-year decline in our revenues for the second quarter of 2015 highlighted increasing challenges facing our business, as weak investment and trade, combined with high levels of volatility in the domestic stock market, negatively impacted China's already weakening economy during the second quarter. In light of the central government's plan to transform China's growth model from big-ticket project driven to 'more efficient, equitable, and environmentally sustainable' consumer demand driven, we expect China's fixed asset investment, a measure of government spending on infrastructure, continue to expand at a slower pace in coming quarters and thus hinders our ability to grow our business."

Dr. Tang continued: "However, our overall gross margin for the second quarter improved, thanks to lower material costs as Chinese steel prices reached their lowest level in more than 20 years. Heading into the third quarter, we see further slide in steel prices with the composite price index of eight steel products compiled by the China Iron & Steel Association ('CISA') falling to 61.71 last Friday, highlighting ongoing challenges both at the macro level and the industry level."

Three Months Ended June 30, 2015 Financial Results

For the three months ended June 30, 2015, revenues decreased by $10.1 million, or 28.0%, to $25.9 million from $35.9 million for the same period of last year, with weakness in both zinc coated products and plain surface PC strands and others. The sales of coated PC steel materials, including both rare earth and zinc coated products, decreased by $7.4 million, or 25.0%, to $22.3 million and accounted for 86% of total sales for the three months ended June 30, 2015. The sales of rare earth and zinc coated products were $19.8 million and $2.5 million, respectively, for the three months ended June 30, 2015, compared to $20.6 million and $9.0 million, respectively, for the same period of last year. The sales of plain surface PC strands and others decreased by approximately $2.6 million, or 42.4%, to $3.6 million and accounted for 14% of total sales for the three months ended June 30, 2015 mainly due to decreased sales volume of plain surface PC strands as well as sales of other products.

Gross profit decreased by approximately $0.4 million, or 11.7%, to $3.3 million for the three months ended June 30, 2015 from $3.7 million for the same period of last year. Gross margin was 12.7% for the three months ended June 30, 2015, compared to 10.4% for the same period of last year. The increase in overall gross margin was mainly due to lower raw material costs. Gross margins for rare earth and zinc coated products were 9.7% and 20.3%, respectively, for the three months ended June 30, 2015, compared to 6.2% and 22.1%, respectively, for the same period of last year. Gross margin for plain surface PC Strands and others was 24.3% for the three months ended June 30, 2015, compared to 7.2% for the same period of last year.

Selling expenses increased by $0.2 million, or 135.1%, to approximately $0.4 million for the three months ended June 30, 2015. General and administrative expenses decreased by $0.5 million, or 38.4%, to $0.9 million for the three months ended June 30, 2015 mainly due to the $0.2 million decrease in R&D and the $0.2 million decrease in the provision for bad debts. As a result, total operating expenses decreased by $0.3 million, or 20.5%, to approximately $1.3 million for the three months ended June 30, 2015 from $1.6 million for the same period of last year.

Operating income was $2.0 million, or 7.8% of total revenues, for the three months ended June 30, 2015, compared to $2.1 million, or 5.9% of total revenues, for the same period of last year.

Net income decreased by approximately $0.2 million, or 13.4%, to $1.4 million for the three months ended June 30, 2015 from $1.6 million for the same period of last year.

After deducting net income attributable to non-controlling interest, net income attributable to Ossen Innovation decreased by $0.2 million, or 12.7%, to $1.3 million for the three months ended June 30, 2015 from $1.5 million for the same period of last year. Earnings per share, both basic and diluted, were $0.07 for the three months ended June 30, 2015, essentially unchanged from the same period of last year.

Six Months Ended June 30, 2015 Financial Results

For the six months ended June 30, 2015, revenues decreased by $11.3 million, or 17.7%, to $52.6 million from $64.0 million for the same period of last year, mainly due to weakness in both rare earth coated and zinc coated products sales. The sales of coated PC steel materials, including both rare earth and zinc coated products, decreased by $11.8 million, or 21.1%, to $44.4 million and accounted for 84% of total sales for the six months ended June 30, 2015. The sales of rare earth and zinc coated products were $38.0 million and $6.4 million, respectively, for the six months ended June 30, 2015, compared to $47.2 million and $9.0 million, respectively, for the same period of last year. The sales of plain surface PC strands and others increased by $0.5 million, or 6.7%, to $8.3 million and accounted for 16% of total sales for the six months ended June 30, 2015.

Gross profit increased by approximately $0.5 million, or 8.6%, to $6.9 million for the six months ended June 30, 2015 from $6.4 million for the same period of last year. Gross margin was 13.1% for the six months ended June 30, 2015, compared to 10.0% for the same period of last year. The increase in gross margin was mainly due to lower raw material costs. Gross margins for rare earth and zinc coated products were 10.5% and 23.9%, respectively, for the six months ended June 30, 2015, compared to 7.7% and 22.1%, respectively, for the same period of last year. Gross margin for plain surface PC Strands and others was 16.8% for the six months ended June 30, 2015, compared to 9.5% for the same period of last year.

Selling expenses increased by $0.2 million, or 87.2%, to $0.5 million for the six months ended June 30, 2015. General and administrative expenses decreased by $0.1 million, or 2.0%, to $2.7 million for the six months ended June 30, 2015. As a result, total operating expenses increased by $0.2 million, or 6.0%, to approximately $3.2 million for the six months ended June 30, 2015 from $3.0 million for the same period of last year.

Operating income was $3.7 million, or 7.0% of total revenues, for the six months ended June 30, 2015, compared to $3.3 million, or 5.2% of total revenues, for the same period of last year.

Net income increased by approximately $0.1 million, or 6.4%, to $2.2 million for the six months ended June 30, 2015 from $2.1 million for the same period of last year.

After deducting net income attributable to non-controlling interest, net income attributable to Ossen Innovation increased by $0.2 million, or 9.8%, to $2.2 million for the six months ended June 30, 2015 from $2.0 million for the same period of last year. Earnings per share, both basic and diluted, were $0.11 for the six months ended June 30, 2015, compared to $0.10 for the same period of last year.

Balance Sheet and Cash Flows

The Company had approximately $17.1 million of cash and restricted cash as of June 30, 2015, compared to $18.3 million at December 31, 2014. Accounts receivable were $52.1 million as of June 30, 2015, compared to $53.8 million at December 31, 2014. The days of sales of outstanding (DSO) were 178 days for the six months ended June 30, 2015, compared to 151 days for the year of 2014 as a result of higher accounts receivable. The increase in accounts receivable was primarily due to the longer cycle of some of our customers' construction projects. Based on our historical experience, most of these projects are government sponsored programs and we are confident that we will be able to collect the balance when the projects are completed. The balance of prepayment to suppliers for raw materials totaled $63.4 million as of June 30, 2015, compared to $56.3 million at December 31, 2014. The Company had inventories of $19.6 million as of June 30, 2015, compared to $20.1 million at the end of 2014. Total working capital was $111.3 million as of June 30, 2015, compared to $108.0 million at December 31, 2014.

Net cash provided by operating activities was $5.4 million for the six months ended June 30, 2015, compared to $9.8 million for the same period of last year. Net cash used in investing activities was $18,048 for the six months ended June 30, 2015, compared to $2,509 for the same period of last year. Net cash used in financing activities was $4.2 million for the six months ended June 30, 2015, compared to $11.3 million for the same period of last year.

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 2015 Conference Call" or be prepared to utilize the conference ID.

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through October 6, 2015. To listen, please call +1-855-452-5696 within the United States or +1-646-254-3697 if calling internationally. Utilize the pass code 47015366 for the replay.

This call is being webcast and can be accessed by clicking on this link: http://edge.media-server.com/m/p/3dzd46mx

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
Weitian Group LLC
Phone: +1-917-609-0333
Email: tina.xiao@weitian-ir.com

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