SHANGHAI, Aug. 27, 2020 /PRNewswire/ -- Ossen Innovation Co., Ltd. ("Ossen Innovation" 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 six months ended June 30, 2020.
"Because of the COVID-19 pandemic and China's economic slowdown during the first half of 2020, our top line decreased slightly. Nonetheless, our gross margin increased to 18.7% as we managed to lower our cost," stated Dr. Liang Tang, Chairman of Ossen Innovation. "Looking ahead, with the anticipated recovery of China's infrastructure investment and economic rebound, we are cautiously optimistic to see recovery in infrastructure investment in the construction industry."
Six Months Ended June 30, 2020 Financial Results
For the Six Months Ended June 30, |
||||||
($ millions, except per share data) |
2020 |
2019 |
% Change |
|||
Revenues |
$54.9 |
$65.1 |
-15.7% |
|||
Gross profit |
$10.3 |
$10.1 |
1.4% |
|||
Gross margin |
18.7% |
15.6% |
3.1% |
|||
Operating income |
$7.8 |
$7.3 |
6.9% |
|||
Operating margin |
14.3% |
11.2% |
3.1% |
|||
Net income attributable to Ossen Innovation |
$5.3 |
$5.6 |
-6.7% |
|||
EPS |
$0.27 |
$0.29 |
-6.9% |
|||
For the six months ended June 30, 2020, revenues decreased by $10.2 million, or 15.7%, to $54.9 million from $65.1 million for the same period of last year. This decrease was mainly attributable to the decrease in rare earth coated, zinc coated products and other products, partially offset by the increase in plain surface products.
Gross profit increased by $0.2 million, or 1.4%, to $10.3 million for the six months ended June 30, 2020 from $10.1 million for the same period of last year. Gross margin increased by 3.1 percentage points to 18.7% for the six months ended June 30, 2020 from 15.6% for the same period of last year. The increase of gross margin was due to the improvement of the profitability of almost all products in our portfolio.
Selling expenses increased by $38,512, or 29.4%, to $169,438 for the six months ended June 30, 2020 from $130,926 for the same period of last year. The increase was due to higher freight expenses. General and administrative expenses decreased by $0.4 million, or 14.7%, to $2.3 million for the six months ended June 30, 2020 from $2.7 million for the same period of last year.
As a result, total operating expenses decreased by $0.35 million, or 12.6%, to $2.5 million for the six months ended June 30, 2020 from $2.8 million for the same period of last year.
Operating income increased by $0.5 million, or 6.9%, to $7.8 million for the six months ended June 30, 2020 from $7.3 million for the same period of last year. The increase in operating income was primarily attributable to the increase in gross profit and the decrease in general and administrative expenses. Operating margin was 14.3% for the six months ended June 30, 2020, compared to 11.2% for the same period of last year.
Net income decreased by $0.3 million, or 5.2%, to $5.9 million for the six months ended June 30, 2020 from $6.2 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 $0.4 million, or 6.7%, to $5.3 million for the six months ended June 30, 2020 from $5.7 million for the same period of last year. Earnings per share, both basic and diluted, were $0.27 for the six months ended June 30, 2020, compared to $0.29 for the same period of last year. Basic and diluted earnings per ADS were $0.81 for the six months ended June 30, 2020, compared with $0.87 for the same period of 2019.
Balance Sheet and Cash Flows
As of June 30, 2020, the Company had cash and restricted cash of $11.9 million, compared to $8.6 million at December 31, 2019. Accounts receivable were $64.3 million as of June 30, 2020, compared to $72.5 million as of December 31, 2019. The average days of sales of outstanding ("DSO") were 225 days for the six months ended June 30, 2020, compared to 161 days for the year of 2019. The increase in average DSO was primarily due to the slower payments from our customers during the first half of 2020 as a result of the impact from the pandemic. The balance of prepayment to suppliers for raw materials totaled $75.1 million as of June 30, 2020, compared to $74.4 million at December 31, 2019, due to the expectation of increasing demand of raw materials in the second half of 2020. The Company had inventories of $27.2 million as of June 30, 2020, compared to $15.1 million at the end of 2019. Total working capital was $133.6 million as of June 30, 2020, compared to $130.2 million at December 31, 2019.
Net cash provided by operating activities was $3.4 million for the six months ended June 30, 2020, compared to net cash used in operating activities of $13.5 million for the same period of last year. This was primarily due to the decrease in account receivable and less advance to suppliers, partially offset by the increase in inventories. Net cash used in investing activities was $1,127 for the six months ended June 30, 2020, compared to $74,216 for the same period of last year. Net cash provided by financing activities was $2.9 million for the six months ended June 30, 2020, compared to net cash provided by financing activities of $18.8 million for the same period of last year. This was primarily due to the increase in repayments of short-term bank loans.
Recent Developments
On July 24, 2020, the Company announced that Pujiang International Group Limited (the "Parent"), a Cayman Islands company listed in Hong Kong which indirectly owns 65.9% of the Company, entered into certain facility agreement (the "Agreement") with two financial institutions (the "Lenders"). Pursuant to the Agreement, the Lenders agreed to make a term loan (the "Loan") of up to US$40 million (with a green shoe option of up to US$30 million) to the Parent for 24 months for working capital and investment purposes. The Loan may be extended for another 12 months upon approval of the Lenders. The Loan is secured by, among others, the Parent's 65.9% beneficial ownership in the Company, and guaranteed by the Company, its affiliates and the Parent's affiliates, including Dr. Liang Tang, chairman of the board of directors of the Company.
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. The Company has two manufacturing facilities located in Ma'anshan, Anhui Province, and Jiujiang, Jiangxi Province.
Forward-Looking 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.
Wei Hua, Chief Executive Officer
Email: int.tr@ossengroup.com
Phone: +86-21-6888-8886
Investor Relations
GCI IR
Phone: +1-347-393-4230
Email: info@goldenir.com
June 30, |
December 31, |
||||
2020 |
2019 |
||||
(Unaudited) |
|||||
ASSETS |
|||||
Current Assets |
|||||
Cash and cash equivalents |
$ |
1,454,063 |
$ |
2,576,677 |
|
Restricted cash |
10,403,397 |
6,025,718 |
|||
Accounts receivable, net of allowance for doubtful accounts of $705,731 and $ $1,253,571 at June 30, 2020 and December 31,2019, respectively |
64,307,044 |
72,544,202 |
|||
Inventories |
27,204,367 |
15,100,328 |
|||
Advance to suppliers |
75,109,128 |
74,391,886 |
|||
Other current assets |
714,326 |
24,643 |
|||
Accounts receivable - related parties |
570,271 |
536,358 |
|||
Total Current Assets |
179,762,596 |
171,199,812 |
|||
Property, plant and equipment, net |
2,687,522 |
2,948,264 |
|||
Land use rights, net |
4,098,030 |
3,288,959 |
|||
Deferred tax assets |
148,063 |
206,002 |
|||
TOTAL ASSETS |
$ |
186,696,211 |
$ |
177,643,037 |
June 30, |
December 31, |
||||
2020 |
2019 |
||||
(Unaudited) |
|||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||
Current Liabilities |
|||||
Notes payable – bank acceptance notes |
$ |
10,898,797 |
$ |
8,895,107 |
|
Short-term bank loans |
17,622,081 |
17,072,867 |
|||
Accounts payable |
2,874,300 |
951,358 |
|||
Customer deposits |
6,226,397 |
3,131,916 |
|||
Income tax payable |
906,569 |
1,417,176 |
|||
Other payables and accrued expenses |
3,634,493 |
3,875,529 |
|||
Customer deposits - related parties |
1,307,377 |
3,358,897 |
|||
Due to related parties |
2,646,172 |
2,297,639 |
|||
Total Current Liabilities |
46,116,186 |
41,000,489 |
|||
Long-term bank loans |
6,015,570 |
6,097,453 |
|||
TOTAL LIABILITIES |
52,131,756 |
47,097,942 |
|||
Shareholders' Equity |
|||||
Ordinary shares, $0.01 par value: 100,000,000 shares authorized, 20,000,000 shares issued; 19,791,110 shares outstanding as of June 30, 2020 and December 31, 2019, respectively |
200,000 |
200,000 |
|||
Additional paid-in capital |
33,971,455 |
33,971,455 |
|||
Statutory reserve |
9,661,185 |
9,043,010 |
|||
Retained earnings |
83,130,110 |
78,484,535 |
|||
Treasury stock, at cost: 208,890 shares as both of June 30, 2020 and December 31, 2019 |
(192,153) |
(192,153) |
|||
Accumulated other comprehensive loss |
(7,624,205) |
(5,789,815) |
|||
TOTAL SHAREHOLDERS' EQUITY |
119,146,392 |
115,717,032 |
|||
Non-controlling interest |
15,418,063 |
14,828,063 |
|||
TOTAL EQUITY |
134,564,455 |
130,545,095 |
|||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
186,696,211 |
$ |
177,643,037 |
|
FOR THE SIX MONTHS ENDED JUNE 30, |
|||||
2020 |
2019 |
||||
REVENUES |
$ |
54,850,700 |
$ |
65,078,854 |
|
COST OF GOODS SOLD |
44,587,771 |
54,957,652 |
|||
GROSS PROFIT |
10,262,929 |
10,121,202 |
|||
Operating Expenses: |
|||||
Selling and distribution expenses |
169,438 |
130,926 |
|||
General and administrative expenses |
2,276,815 |
2,678,356 |
|||
Total Operating Expenses |
2,446,253 |
2,809,282 |
|||
INCOME FROM OPERATIONS |
7,816,676 |
7,311,920 |
|||
Other Income (Expenses): |
|||||
Financial expenses, net |
(1,570,173) |
(731,974) |
|||
Other income, net |
34,881 |
45,226 |
|||
INCOME BEFORE INCOME TAXES |
6,281,384 |
6,625,172 |
|||
INCOME TAXES |
(427,634) |
(448,781) |
|||
NET INCOME |
5,853,750 |
6,176,391 |
|||
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST |
590,000 |
532,394 |
|||
NET INCOME ATTRIBUTABLE TO OSSEN INNOVATION CO.,LTD AND SUBSIDIARIES |
5,263,750 |
5,643,997 |
|||
OTHER COMPREHENSIVE LOSS |
|||||
Foreign currency translation loss, net of tax |
(1,834,390) |
(252,155) |
|||
TOTAL OTHER COMPREHENSIVE LOSS |
(1,834,390) |
(252,155) |
|||
COMPREHENSIVE INCOME |
3,429,360 |
5,391,842 |
|||
EARNINGS PER ORDINARY SHARE Basic and diluted |
$ |
0.27 |
$ |
0.29 |
|
WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING Basic and diluted |
$ |
19,791,110 |
$ |
19,791,110 |
|
Total Ossen Innovation Co., Ltd. Shareholders' Equity |
||||||||||||||||||||||||||||||||
Ordinary Shares $0.01 Par Value |
Treasury Stock |
Additional Paid-in Capital |
Accumulated Other |
Statutory Reserve |
Retained |
Non Controlling |
Total |
|||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||
Balance at December 31, 2019 |
20,000,000 |
200,000 |
(208,890) |
(192,153) |
33,971,455 |
(5,789,815) |
9,043,010 |
78,484,535 |
14,828,063 |
130,545,095 |
||||||||||||||||||||||
Net income |
- |
- |
- |
- |
- |
- |
- |
5,263,750 |
590,000 |
5,853,750 |
||||||||||||||||||||||
Transfer to statutory reserve |
- |
- |
- |
- |
- |
- |
618,175 |
(618,175) |
- |
- |
||||||||||||||||||||||
Foreign currency translation adjustment |
- |
- |
- |
- |
- |
(1,834,390) |
- |
- |
- |
(1,834,390) |
||||||||||||||||||||||
Balance at June 30, 2020 |
20,000,000 |
$ |
200,000 |
(208,890) |
$ |
(192,153) |
$ |
33,971,455 |
$ |
(7,624,205) |
$ |
9,661,185 |
$ |
83,130,110 |
$ |
15,418,063 |
$ |
134,564,455 |
||||||||||||||
Six Months Ended June 30, |
||||||
2020 |
2019 |
|||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||
Net income |
$ |
5,853,750 |
$ |
6,176,391 |
||
Adjustments to reconcile net income to net cash provided by/ (used in) operating activities: |
||||||
Depreciation and amortization |
275,652 |
309,983 |
||||
Changes in operating assets and liabilities: |
||||||
(Increase) Decrease In: |
||||||
Accounts receivable |
8,237,159 |
4,897,473 |
||||
Inventories |
(12,104,038) |
7,599,204 |
||||
Advance to suppliers |
(717,242) |
(31,704,863) |
||||
Other current assets |
(689,684) |
3,043 |
||||
Accounts receivable - related parties |
(33,913) |
(801,511) |
||||
Deferred tax assets |
57,939 |
5,814 |
||||
Increase (Decrease) In: |
||||||
Accounts payable |
1,922,942 |
2,879,547 |
||||
Customer deposits |
3,094,481 |
353,627 |
||||
Income tax payable |
(510,606) |
(277,676) |
||||
Other payables and accrued expenses |
(241,036) |
(99,840) |
||||
Customer deposits - related parties |
(2,051,520) |
(3,740,404) |
||||
Due to related parties |
348,532 |
2,559,998 |
||||
Due to shareholder |
- |
(1,695,259) |
||||
Net cash provided by/ (used in) operating activities |
3,442,416 |
(13,534,473) |
||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||
Purchases of plant and equipment |
(1,127) |
(74,216) |
||||
Net cash used in investing activities |
(1,127) |
(74,216) |
||||
Six Months Ended June 30, |
||||||
2020 |
2019 |
|||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||
Proceeds from short-term bank loans |
44,091,837 |
28,495,089 |
||||
Repayments of short-term bank loans |
(43,307,030) |
(8,489,469) |
||||
Proceeds from notes payable-bank acceptance notes |
3,567,301 |
1,476,429 |
||||
Repayment of notes payable-bank acceptance notes |
(1,426,920) |
(2,657,573) |
||||
Net cash provided by financing activities |
2,925,188 |
18,824,476 |
||||
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH |
6,366,477 |
5,215,785 |
||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash |
(3,111,412) |
(485,440) |
||||
Cash, cash equivalents and restricted cash at beginning of period |
8,602,395 |
8,098,052 |
||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD |
$ |
11,857,460 |
$ |
12,828,397 |
||
SUPPLEMENTARY CASH FLOW INFORMATION |
||||||
Cash paid during the periods: |
||||||
Income taxes paid |
$ |
867,580 |
$ |
1,102,556 |
||
Interest paid |
$ |
1,484,798 |
$ |
735,675 |
||
Non-cash transactions: |
||||||
Appropriation to statutory reserve |
$ |
618,175 |
$ |
645,941 |
||
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