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Ossen Innovation Announces Full Year 2016 Financial Results
Earnings Conference Call is Scheduled for 8:30 am ET on April 11, 2017

SHANGHAI, April 10, 2017 /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 fiscal year ended December 31, 2016.

"We saw slight dip in 2016 revenues as we continued to scale-back our plain surface PC strands business in light of its gross margin deterioration in recent quarters. However, revenues from the coated products snapped back after a down year in 2015 and grew 14.8% in 2016 as a result of the increase in sales volume that more than offset the decrease in average selling price for coated products. We remain cautious on our near-term outlook on the back of continuing headwinds facing the Chinese economy and our industry," commented Dr. Liang Tang, Chairman of Ossen Innovation.

Twelve months Ended December 31, 2016 Financial Results


For the Twelve Months Ended December 31,

($ millions, except per share data)

2016


2015


% Change

Revenues

$117.0


$117.9


-0.7%

Gross profit

$16.1


$15.7


2.5%

Gross margin

13.8%


13.3%


0.4 pp

Operating income

$9.0


$10.2


-12.3%

Operating margin

7.7%


8.7%


-1.0 pp

Net income attributable to Ossen Innovation

$4.8


$5.9


-18.2%

EPS

$0.24


$0.30


-19.2%

For the twelve months ended December 31, 2016, revenues decreased by $0.9 million, or 0.7%, to $117.0 million from $117.9 million for 2015. This decrease was primarily due to decreases in sales from zinc coated products and plain surface PC strands and other products and partially offset by increased sales from rare earth coated products. The sales of coated PC steel materials, including both rare earth and zinc coated products, increased by $14.1 million, or 14.8%, to $109.6 million and accounted for 94% of total sales for the twelve months ended December 31, 2016 from $95.5 million, or 81% of total sales, for the same period of last year. This increase in sales of coated PC steel materials was the result of increase in sales volume for rare earth coated products and partially offset by decreases in average selling prices for both rare earth and zinc coated products.  Sales of rare earth coated products increased by $16.4 million, or 19.2%, to $101.4 million for the twelve months ended December 31, 2016 from $85.0 million for the same period of last year. Sales of zinc coated products decreased by $2.3 million, or 21.6%, to $8.2 million for the twelve months ended December 31, 2016 from $10.5 million for the same period of last year. Sales of plain surface PC strands and PC wires decreased by $11.1 million, or 67.9%, to $5.3 million for the twelve months ended December 31, 2016 from $16.4 million for the same period of last year. The decrease of sales generated by plain surface PC strands and PC wires was primarily due to the decline in sales from wholesale market during the period. Other sales were $2.2 million for the twelve months ended December 31, 2016, compared to $6.0 million for the same period of last year. This decrease was primarily due to less spare raw materials sold in 2016 compared to 2015.

We generated approximately 4.2% and 6.6%, respectively, of our revenues during the years ended December 31, 2016 and 2015 from sales to customers in international markets including primarily Vietnam, South Korea, Japan, New Zealand, Australia, Bangladesh, Brunei, Costa Rica, and Chile, primarily for use in the construction of bridges. The decrease in 2016 was primarily due to one of our customers in South Korea filed for bankruptcy.

Gross profit increased by $0.4 million, or 2.5%, to $16.1 million for the twelve months ended December 31, 2016 from $15.7 million for the same period of last year. Gross margin improved by 43 basis points to 13.8% for the twelve months ended December 31, 2016 from 13.3% for the same period of last year. Gross margins for rare earth and zinc coated products were 11.3% and 14.7%, respectively, for the twelve months ended December 31, 2016, compared to 11.8% and 19.7%, respectively, for the same period of last year. Gross margin for plain surface PC strands and PC wires was 22.6% for the twelve months ended December 31, 2016, compared to 17.5% for the same period of last year.

Selling expenses decreased by $0.3 million, or 25.6%, to $0.7 million for the twelve months ended December 31, 2016 from $1.0 million for the same period of last year. The decrease was due to lower transportation cost. General and administrative expenses increased by $1.9 million, or 42.4%, to $6.4 million for the twelve months ended December 31, 2016 from $4.5 million for the same period of last year, mainly due to higher research and development cost as well as high bad-debt provision in 2016. As a result, total operating expenses increased by $1.6 million, or 30.1%, to $7.1 million for the twelve months ended December 31, 2016 from $5.5 million for the same period of last year.

Operating income decreased by $1.3 million, or 12.3%, to $9.0 million for the twelve months ended December 31, 2016 from $10.2 million for the same period of last year. The decrease in operation income was primarily attributable to increases in research and development cost and bad-debt provision in 2016. Operating margin was 7.7% for the twelve months ended December 31, 2016, compared to 8.7% for the same period of last year.

Net income decreased by $1.3 million, or 19.5%, to $5.3 million for the twelve months ended December 31, 2016 from $6.6 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 $1.1 million, or 18.2%, to $4.8 million for the twelve months ended December 31, 2016 from $5.9 million for the same period of last year. Earnings per share, both basic and diluted, were $0.24 for the twelve months ended December 31, 2016, compared to $0.30 for the same period of last year.

Balance Sheet and Cash Flows

As of December 31, 2016, the Company had cash and restricted cash of $6.9 million, compared to $9.6 million at December 31, 2015. Notes receivable were $15.3 million as of December 31, 2016, compared to $8.0 million at December 31, 2015. Accounts receivable were $37.3 million as of December 31, 2016, compared to $43.2 million at December 31, 2015. The average days of sales of outstanding (DSO) were 126 days for the twelve months ended December 31, 2016, compared to 150 days for the year 2015. The balance of prepayment to suppliers for raw materials totaled $46.7 million as of December 31, 2016, compared to $55.7 million at December 31, 2015. The Company had inventories of $26.0 million as of December 31, 2016, compared to $27.3 million at the end of 2015. Total working capital was $101.6 million as of December 31, 2016, compared to $94.7 million at December 31, 2015.

Net cash provided by operating activities was $15.5 million for the twelve months ended December 31, 2016, compared to $12.4 million for the same period of last year. This increase in cash provided by operating activities was the result of a $1.3 million decrease in inventories due to higher consumption of raw materials at the end of 2016, a $9.0 million decrease in advance to suppliers due to less prepayments for raw materials of plain surface and zinc coated products, partially offset by a $1.3 million decrease in net income due to higher operating expenses and a $7.3 million increase in notes receivable because our customers used less cash for payment. Net cash used in investing activities was $17.5 thousand for the twelve months ended December 31, 2016, compared to $29.7 thousand for the same period of last year. Net cash used in financing activities was $7.5 million for the twelve months ended December 31, 2016, compared to $4.4 million for the same period of last year. The increase in cash used in financing activities was the result of the repayment of bond, a decrease in proceeds from notes payable and a decrease in restricted cash, partially offset by an increase in proceeds from short-term bank loans, an increase in proceeds from long-term bank loans and a decrease in repayment of notes payable.

Recent Developments

On January 3, 2017, The Company announced that the Special Committee of the Board of Directors has retained Highline Research Advisors LLC ("HRA"), acting through Corinthian Partners, LLC, as its financial advisor in connection with the review and evaluation of the Proposed Transactions as announced on August 4, 2016.

On December 30, 2016, the Company announced that its Chief Financial Officer ("CFO"), Mr. Feng Peng, has resigned from the Company, effective December 31, 2016, to pursue other opportunities. Mr. Wei Hua, Chief Executive Officer of the Company will act as interim CFO during the transition and search period for a new CFO.

On November 23, 2016, the Company announced the completion of its 2016 annual general meeting of shareholders which was held on November 22, 2016 at the Company's headquarters located at 518 Shangcheng Road, Floor 17, Shanghai, China. At the Annual Meeting, the Company's shareholders elected seven directors, Dr. Liang Tang, Mr. Wei Hua, Mr. Junhong Li, Mr. Xiaobing Liu, Ms. Yingli Pan, and Mr. Zhongcai Wu to Board of Directors; and re-appointed BDO China Shu Lun Pan Certified Public Accountants LLP as the Company's independent registered accounting firm for the fiscal year ending December 31, 2016.

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 "OSN FY2016 Earnings Conference Call" or be prepared to utilize the conference ID.

Conference Call


Date:

Tuesday, April 11, 2017

Time:

8:30 am ET, U.S.

Conference Line Dial-In (U.S.):

+1-845-675-0437

International Toll Free:

United States: +1-866-519-4004
China, Domestic Mobile: 400-620-8038
China, Domestic: 800-819-0121

Conference ID:

3120010

Please dial in at least 10 minutes before the call to ensure timely participation. A playback will be available through April 19, 2017. To listen, please call +1-646-254-3697 within the United States or +1-855-452-5696 if calling internationally. Utilize the pass code 3120010 for the replay.

This call is being webcast and can be accessed by clicking on this link: http://edge.media-server.com/m/p/oatz365h

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 Ma'anshan, 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:

Tony Tian, CFA,
Weitian Group LLC
Phone: +1-732-910-9692
Email: tony.tian@weitian-ir.com

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015



December 31,


2016


2015

ASSETS






Current assets






Cash and cash equivalents

$

217,631


$

812,277

Restricted cash


6,703,242



8,780,443

Note receivable-bank acceptance note


15,280,381



8,010,228

Accounts receivable, net of allowance for doubtful accounts
of $985,990 and $738,101 at December 31, 2016 and 2015,
respectively


37,298,465



43,247,974

Inventories


25,999,182



27,276,221

Advance to suppliers


46,729,285



55,730,089

Other current assets


197,319



915,041

  Total current assets


132,425,505



144,772,273

Property, plant and equipment, net


4,447,063



5,557,176

Land use rights, net


3,571,184



3,911,084

TOTAL ASSETS

$

140,443,752


$

154,240,533

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015 (Continued)



December 31,


2016


2015







Current Liabilities






Notes payable-bank acceptance notes

$

9,586,276


$

12,477,471

Short-term bank loans


16,916,535



17,714,928

Accounts payables


1,504,863



1,899,400

Customer deposits


135,903



309,147

Taxes payable


594,795



414,250

Other payables and accrued liabilities


1,740,474



1,669,670

Due to related party


3,886



65,769

Due to shareholder


307,499



282,499

Bond payable - current portion


-



15,273,177

  Total current liabilities


30,790,231



50,106,311

Long-term bank loans


7,207,727



-

TOTAL LIABILITIES


37,997,958



50,106,311







EQUITY






Shareholders' Equity






Ordinary shares, $0.01 par value: 100,000,000 shares
authorized; 20,000,000 shares issued; 19,791,110 and
19,828,790 shares outstanding as of December 31, 2016 and
2015, respectively


200,000



200,000

Additional paid-in capital


33,971,455



33,971,455

Statutory reserve


6,123,022



5,631,373

Retained earnings


54,590,589



50,258,265

Treasury stock, at cost: 208,890 and 171,210 shares as of
December 31, 2016 and 2015, respectively


(192,153)



(155,343)

Accumulated other comprehensive income/(loss)


(4,378,873)



2,596,227

TOTAL SHAREHOLDERS' EQUITY


90,314,040



92,501,977

Non-controlling interest


12,131,754



11,632,245

TOTAL EQUITY


102,445,794



104,134,222







TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY

$

140,443,752


$

154,240,533

 

OSSEN INNOVATION CO., LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014



Year Ended December 31,


2016


2015


2014










REVEUNUES

$

117,029,154


$

117,908,416


$

123,571,455

COST OF GOODS SOLD


100,932,528



102,197,994



110,250,876

GROSS PROFIT


16,096,626



15,710,422



13,320,579

Selling expenses


734,159



986,378



772,383

General and administrative expenses


6,376,383



4,478,413



6,340,584

  Total Operating Expenses


7,110,542



5,464,791



7,112,967










INCOME FROM OPERATIONS


8,986,084



10,245,631



6,207,612

Financial expenses, net


(2,827,138)



(2,823,952)



(2,401,268)

Other income, net


90,584



371,894



907,941

INCOME BEFORE INCOME TAX


6,249,530



7,793,573



4,714,285

INCOME TAX


(926,048)



(1,180,167)



(578,727)

NET INCOME


5,323,482



6,613,406



4,135,558

LESS: NET INCOME
ATTRIBUTABLE TO
NONCONTROLLING INTEREST


 

499,509



716,602



276,682



NET INCOME ATTRIBUTABLE TO OSSEN INNOVATION CO.,LTD
AND SUBSIDIARIES


 

4,823,973



5,896,804



3,858,876












OTHER COMPREHENSIVE
INCOME (LOSS)









Foreign currency translation gain (loss)


(6,975,100)



(5,829,470)



779,135

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)


(6,975,100)



(5,829,470)



779,135

COMPREHENSIVE INCOME/(LOSS)

$

(2,151,127)


$

67,334


$

4,638,011










EARNINGS PER ORDINARY SHARE









Basic and diluted

$

0.24


$

0.30


$

0.19

WEIGHTED AVERAGE ORDINARY SHARES OUTSTANDING









Basic and diluted


19,804,164



19,862,537



19,901,959

 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014




Year Ended December 31,




2016



2015



2014

CASH FLOWS FROM OPERATING
ACTIVITIES:










 Net income


$

5,323,482


$

6,613,406


$

4,135,558

 Adjustments to reconcile net income to net cash
provided by operating activities:










 Depreciation and amortization



883,755



1,416,060



1,531,278

 Share-based compensation expense









-

Changes in operating assets and liabilities:










(Increase) Decrease In:










 Accounts receivable



5,949,508



10,516,441



(5,564,338)

 Inventories



1,277,040



(7,138,320)



(1,387,131)

 Advance to suppliers



9,000,804



597,301



(5,712,575)

 Other current assets



717,722



31,278



2,501,567

 Notes receivable - bank acceptance notes



(7,270,152)



1,914,927



(7,503,574)

 Notes receivable from related party - bank acceptance
notes



-



-



12,915,099

Increase (Decrease) In:










 Accounts payable



(394,537)



(1,317,676)



2,713,132

 Customer deposits



(173,243)



(278,858)



(2,320,266)

 Income tax payable



180,545



(138,209)



319,918

 Other payables and accrued expenses



70,804



46,712



73,209

Due to related party



(61,883)



(3,700)



52,558

Due to shareholder



25,000



182,499



50,000

Net cash provided by operating activities



15,528,845



12,441,861



1,804,435











CASH FLOWS FROM INVESTING ACTIVITIES:










 Purchases of plant and equipment



(17,537)



(29,687)



(81,441)

 Disposal of property, plant and equipment



-



-



456

Net cash used in investing activities



(17,537)



(29,687)



(80,985)

 

OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014 (Continued)




Year Ended December 31,




2016



2015



2014

CASH FLOWS FROM FINANCING ACTIVITIES:










 Decrease in restricted cash



2,077,201



8,792,289



14,210,938

 Proceeds from short-term bank loans



20,422,885



18,462,625



28,475,194

 Repayments of short-term bank loans



(20,068,975)



(18,462,625)



(37,261,825)

 Proceeds from long-term bank loans



7,530,007



-



-

 Proceeds from notes payable-bank acceptance notes



17,846,117



36,202,800



55,811,380

 Repayment of notes payable-bank acceptance notes



(20,029,819)



(49,367,454)



(80,682,428)

 Repurchase of common share



(36,810)



(58,735)



-

 Proceeds from bond payable






-



15,946,109

 Repayments of bond payable



(15,273,177)



-



-

Net cash used in financing activities



(7,532,571)



(4,431,100)



(3,500,632)











INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS



7,978,737



7,981,074



(1,777,182)

 Effect of exchange rate changes on cash



(8,573,384)



(7,853,389)



1,322,324

 Cash and cash equivalents at beginning of period



812,277



684,592



1,139,450

CASH AND CASH EQUIVALENTS AT END OF
PERIOD


$

217,630


$

812,277


$

684,592











SUPPLEMENTARY CASH FLOW
INFORMATION










Cash paid during the periods:










 Income taxes paid


$

740,873


$

1,301,687


$

722,948

 Interest paid


$

2,311,039


$

3,353,344


$

1,977,014

Non-cash transactions:










Appropriation to statutory reserve


$

491,649


$

609,621


$

406,053

 

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SOURCE Ossen Innovation Co., Ltd.

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