SHANGHAI, November 30, 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 nine months ended September 30, 2012.
"We had positive revenue growth for a second consecutive quarter," said Dr. Liang Tang, Chairman of Ossen Innovation. "More importantly, we generated positive net income. These developments indicate a rebound in the industry and strong execution from our team. As the market demand improves further, we anticipate our margins to gradually return to historical levels."
Financial Summary
(in millions ex- EPS) | Q3 2012 | Q3 2011 | Chg. | YTD 2012 | YTD 2011 | Chg. |
Revenue | $41.1 | $31.1 | +32% | $95.0 | $91.9 | 3% |
Gross Profit | $2.9 | $4.2 | -31% | $7.7 | $20.1 | -62% |
Net Income* | $0.7 | $2.0 | -63% | $1.1 | $11.5 | -91% |
EPS | $0.04 | $0.10 | -63% | $0.05 | $0.57 | -91% |
Shares Outstanding | 19.9 | 20.0 | -0.3% | 19.9 | 20.0 | -0.1% |
*Net income attributable to controlling interest | ||||||
Third Quarter 2012 Financial Results
Revenue for the three months ended September 30, 2012 was $41.1 million, an increase of $10 million, or 32%, from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth coated products, were $29.7 million, up 178% compared to $10.7 million in the third quarter of 2011 due to overall higher demand of coated pre-stressed steel materials in the market.
Gross profit decreased from $4.2 million to $2.9 million, a 31% year-over-year decline. Gross margin was 7.1%, flat from the second quarter of 2012 and down from 13.6% in the third quarter of 2011. Gross profit and gross margin were down as a result of lower pricing during the market recovery stage.
Gross margin for the third quarter of 2012 were 9.2% and 3.4% for coated pre-stressed steel products and for plain surface pre-stressed steel products, respectively.
Selling expenses increased 19% to $0.3 million due to higher sales. General and administrative expenses increased 58% to $0.5 million mainly due to the increase in R&D expenses. Operating income fell 42% to $2.1 million in the third quarter of 2012 with operating margin of 5.1% compared to $3.6 million and 11.7%, respectively, in the third quarter of 2011.
Net income attributable to controlling interest decreased 63% to $0.7 million in the third quarter of 2012 from $2 million in the year-ago period. Earnings per share were $0.04 versus $0.10 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 88,616 shares repurchased by Ossen as of September 30, 2012.
Nine Months Ended September 30, 2012 Financial Results
Revenues for the nine months ended September 30, 2012 were $95 million, an increase of approximately 3% compared to $91.9 million in the same period a year ago.
Gross profit fell 62% in the first nine months of 2012 to $7.7 million. Gross margin was 8.1% for the nine months ended September 30, 2012 compared to 21.9% in the first nine months of 2011, due to prices decrease as a result of the difficult market conditions.
Operating expenses were $3.5 million, up 53% from $2.3 million in the first nine months of 2011, led by a $1.4 million year-over-year increase in general and administrative expenses. Operating income and operating margin for the year to date of 2012 was $4.2 million and 4.4% compared to $17.8 million and 19.3%, respectively, for the nine months ended September 30, 2011.
Net income attributable to controlling shareholders was $1.1 million, down from $11.5 million in the first nine months of 2011. Earnings per share was $0.05 for the nine months ended September 30, 2012.
Balance Sheet and Cash Flows
Ossen had approximately $24.7 million of cash and restricted cash as of September 30, 2012 compared to $21.3 million at December 31, 2011. Total accounts receivable on September 30, 2012 decreased to $40.5 million from $48.0 million on December 31, 2011. The average accounts receivable days sales outstanding were 101 days in the third quarter of 2012 compared to 118 days in the third quarter of 2011. Advances to suppliers increased to $75.5 million on September 30, 2012 as compared to $62.8 million a quarter ago, as the Company anticipated recovery of the market and purchased larger quantity of raw materials for better pricing. Inventories were down from $17.2 million at December 31, 2011 to 12.4 million at September 30, 2012. Total working capital was $73.5 million at September 30, 2012 compared to $70.8 million at December 31, 2011.
For the nine months ended September 30, 2012, the Company had approximately $13 million of cash outflows from operations as compared to $13.7 million of outflows in the same period of 2011. The primary reason for the reduction in cash used in operations was improvement in accounts receivable collection during the first nine months of 2012, which was partially offset by increased advances to suppliers.
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. As of September 30, 2012, the Company had repurchased 88,616 shares of ADSs from the secondary market at an average price of $0.98 per share.
Business Updates and Outlook
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 3rd Quarter 2012 Conference Call" or be prepared to utilize the conference ID.
Conference Call | |
Date: | Friday, November 30, 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: | 74841114 |
Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through December 7, 2012. To listen, please call + 1-855-452-5696 within the United States or + 1-646-254-3697 if calling internationally. Utilize the pass code 74841114 for the replay.
This call is being webcast and can be accessed by clicking on this link: http://www.media-server.com/m/p/xamj5r5g
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 BALANCE SHEETS | |||||||
September 30, | December 31, | ||||||
2012 | 2011 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 2,100,709 | $ | 1,568,261 | |||
Restricted cash | 22,613,666 | 19,764,900 | |||||
Notes receivable - bank acceptance notes | 7,903,264 | 10,851,616 | |||||
Accounts receivable, net of allowance for doubtful accounts | 40,548,065 | 48,049,722 | |||||
Inventories | 12,448,654 | 17,222,664 | |||||
Advance to suppliers | 75,535,212 | 41,391,174 | |||||
Other current assets | 3,185,031 | 6,495,241 | |||||
Account receivable from related party | 534,616 | 20,799 | |||||
Total Current Assets | 164,869,217 | 145,364,377 | |||||
Property, plant and equipment, net | 10,031,284 | 11,022,916 | |||||
Land use rights, net | 4,329,806 | 4,380,708 | |||||
Prepayment for plant and equipment | 7,910,914 | 7,869,529 | |||||
TOTAL ASSETS | $ | 187,141,221 | $ | 168,637,530 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current Liabilities | |||||||
Notes payable - bank acceptance notes | $ | 43,626,018 | $ | 24,848,628 | |||
Short-term bank loans | 45,521,731 | 47,966,209 | |||||
Accounts payable | 1,199,579 | 948,475 | |||||
Customer deposits | 608,850 | 459,915 | |||||
Income tax payable | 42,999 | 4,792 | |||||
Other payables and accrued expenses | 421,304 | 324,423 | |||||
Total Current Liabilities | 91,420,481 | 74,552,442 | |||||
Long-term bank loans | 4,583,893 | 4,718,094 | |||||
TOTAL LIABILITIES | 96,004,374 | 79,270,536 | |||||
EQUITY | |||||||
Shareholders' Equity | |||||||
Ordinary shares, $0.01 par value: 100,000,000 shares | 200,000 | 200,000 | |||||
Additional paid-in capital | 33,963,932 | 33,884,656 | |||||
Statutory reserve | 4,040,105 | 3,884,808 | |||||
Retained earnings | 37,149,055 | 36,224,467 | |||||
Treasury stock, at cost: 88,616 and 0 shares as of as | (87,733) |
- | |||||
Accumulated other comprehensive income | 5,742,139 | 5,295,641 | |||||
TOTAL SHAREHOLDERS' EQUITY | 81,007,498 | 79,489,572 | |||||
Non-controlling interest | 10,129,349 | 9,877,422 | |||||
TOTAL EQUITY | 91,136,847 | 89,366,994 | |||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 187,141,221 | $ | 168,637,530 | |||
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, | ||||||||
2012 | 2011 | 2012 | 2011 | ||||||
REVENUES | $ | 41,066,144 | $ | 31,084,373 | $ | 94,956,669 | $ | 91,866,308 | |
COST OF GOODS SOLD | 38,141,575 | 26,867,212 | 87,224,774 | 71,793,245 | |||||
GROSS PROFIT | 2,924,569 | 4,217,261 | 7,731,895 | 20,073,063 | |||||
Operating Expenses: | |||||||||
Selling and distribution expenses | 298,231 | 251,721 | 633,325 | 809,683 | |||||
General and administrative expenses | 521,602 | 329,795 | 2,916,249 | 1,507,432 | |||||
Total Operating Expenses | 819,833 | 581,516 | 3,549,574 | 2,317,115 | |||||
INCOME FROM OPERATIONS | 2,104,736 | 3,635,645 | 4,182,321 | 17,755,948 | |||||
Other Income (Expenses): | |||||||||
Financial expenses, net | (1,143,588) | (1,003,853) | (2,915,253) | (2,611,774) | |||||
Other income, net | 49,374 | 15,006 | 383,255 | 85,692 | |||||
INCOME BEFORE INCOME TAXES | 1,010,522 | 2,646,798 | 1,650,323 | 15,229,866 | |||||
INCOME TAXES | (156,041) | (374,377) | (318,511) | (2,151,107) | |||||
NET INCOME | 854,481 | 2,272,421 | 1,331,812 | 13,078,759 | |||||
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST | 113,215 | 272,679 | 251,927 | 1,594,126 | |||||
NET INCOME ATTRIBUTABLE TO OSSEN INNOVATION CO.,LTD AND SUBSIDIARIES | 741,266 | 1,999,742 | 1,079,885 | 11,484,633 | |||||
OTHER COMPREHENSIVE INCOME (EXPENSES) | |||||||||
Foreign currency translation gain, net of tax | (174,728) | 791,458 | 446,498 | 2,589,219 | |||||
TOTAL OTHER COMPREHENSIVE INCOME (EXPENSES) | (174,728) | 791,458 | 446,498 | 2,589,219 | |||||
COMPREHENSIVE INCOME | 566,538 | 2,791,200 | 1,526,383 | 14,073,852 | |||||
EARNINGS PER ORDINARY SHARE Basic and diluted | $ | 0.04 | $ | 0.10 | $ | 0.05 | $ | 0.57 | |
WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING Basic and diluted | $ | 19,919,613 | $ | 20,000,000 | $ | 19,954,867 | $ | 20,000,000 | |
OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
(Unaudited) | ||||||
Nine Months Ended September 30, | ||||||
2012 | 2011 | |||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 1,331,812 | $ | 13,078,759 | ||
Adjustments to reconcile net income to net cash provided | ||||||
Depreciation and amortization | 1,190,589 | 1,566,548 | ||||
Share-based compensation expense | 79,276 | 78,987 | ||||
Changes in operating assets and liabilities: | ||||||
(Increase) Decrease In: | ||||||
Accounts receivable | 7,501,657 | (35,660,081) | ||||
Inventories | 4,774,010 | 3,820,667 | ||||
Advance to suppliers | (34,144,039) | (23,514,812) | ||||
Other current assets | 3,310,212 | 2,895,266 | ||||
Notes receivable - bank acceptance notes | 2,948,352 | 17,636,928 | ||||
Notes receivable from related party - bank | - | 3,024,895 | ||||
Account receivable from related party | (513,817) | (1,374,570) | ||||
Increase (Decrease) In: | ||||||
Accounts payable | 251,104 | 2,134,674 | ||||
Customer deposits | 148,935 | 50,453 | ||||
Income tax payable | 38,206 | (255,258) | ||||
Other payables and accrued expenses | 96,882 | 18,089 | ||||
Due to related party | - | 2,811,709 | ||||
Net cash used in operating activities | (12,986,821) | (13,687,746) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Purchases of plant and equipment | (28,882) | (154,820) | ||||
Prepayment for plant and equipment | (1,583) | - | ||||
Net cash used in investing activities | (30,465) | (154,820) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
(Increase) in restricted cash | (2,848,766) | (1,328,323) | ||||
Proceeds from short-term bank loans | 41,784,077 | 57,482,746 | ||||
Repayments of short-term bank loans | (44,474,787) | (51,602,914) | ||||
Repayments of long-term bank loans | (158,278) | - | ||||
Proceeds from notes payable-bank acceptance notes | 59,354,226 | 34,833,953 | ||||
Repayment of notes payable-bank acceptance notes | (40,677,430) | (32,730,957) | ||||
Repurchase of common shares | (87,733) | - | ||||
IPO compensation | - | 440,955 | ||||
Net cash provided by financing activities | 12,891,309 | 7,095,460 | ||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (125,977) | (6,747,106) | ||||
Effect of exchange rate changes on cash | 658,425 | 1,584,415 | ||||
Cash and cash equivalents at beginning of period | 1,568,261 | 12,322,982 | ||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 2,100,709 | $ | 7,160,291 | ||
SUPPLEMENTARY CASH FLOW INFORMATION | ||||||
Cash paid during the periods: | ||||||
Income taxes paid | $ | 280,278 | $ | 2,424,113 | ||
Interest paid | $ | 2,778,438 | $ | 2,177,824 | ||
Non-cash transactions: | ||||||
Appropriation to statutory reserve | $ | 155,297 | $ | 1,173,410 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||
Net income | $ | 854,481 | $ | 2,272,421 | ||
Adjustments to reconcile net income to net cash provided | ||||||
Depreciation and amortization | 361,743 | 678,860 | ||||
Share-based compensation expense | 26,618 | 26,618 | ||||
Changes in operating assets and liabilities: | ||||||
(Increase) Decrease In: | ||||||
Accounts receivable | 9,404,698 | (17,262,055) | ||||
Inventories | 2,555,970 | (3,870,017) | ||||
Advance to suppliers | (12,743,803) | 23,912,632 | ||||
Other current assets | 2,766,985 | (307,780) | ||||
Notes receivable - bank acceptance notes | 15,270 | - | ||||
Account receivable from related party | (513,817) | (1,025,603) | ||||
Increase (Decrease) In: | ||||||
Accounts payable | 54,347 | 4,103,291 | ||||
Customer deposits | 257,450 | (5,365,525) | ||||
Income tax payable | (3,057) | (331,398) | ||||
Other payables and accrued expenses | 86,437 | (161,436) | ||||
Due to related party | (316,741) | 2,811,709 | ||||
Net cash provided by operating activities | 2,806,581 | 5,481,717 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Purchases of plant and equipment | (486) | (27,360) | ||||
Net cash used in investing activities | (486) | (27,360) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
(Increase) in restricted cash | (5,500,566) | (1,526,634) | ||||
Proceeds from short-term bank loans | 9,317,286 | 18,497,612 | ||||
Repayments of short-term bank loans | (15,017,994) | (23,642,600) | ||||
Proceeds from notes payable-bank acceptance notes | 19,443,550 | 8,843,854 | ||||
Repayment of notes payable-bank acceptance notes | (10,744,423) | (6,716,861) | ||||
Repurchase of common shares | (18,702) | - | ||||
Net cash used in financing activities | (2,520,849) | (4,544,629) | ||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 285,246 | 909,728 | ||||
Effect of exchange rate changes on cash | (281,630) | 485,796 | ||||
Cash and cash equivalents at beginning of period | 2,097,093 | 5,764,767 | ||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 2,100,709 | $ | 7,160,291 | ||
SUPPLEMENTARY CASH FLOW INFORMATION | ||||||
Cash paid during the periods: | ||||||
Income taxes paid | $ | 159,038 | $ | 707,589 | ||
Interest paid | $ | 928,937 | $ | 841,232 | ||
Non-cash transactions: | ||||||
Appropriation to statutory reserve | $ | 77,102 | $ | 230,030 | ||
