SHANGHAI, Nov. 15, 2011 /PRNewswire-Asia-FirstCall/ -- Ossen Innovation Co., Ltd. ("Ossen" or the "Company") (Nasdaq: OSN), a China-based manufacturer of galvanized pre-stressed steel wires used in the production of bridge cables as well as other pre-stressed steel materials, today announced financial results for the nine months ended September 30, 2011.

"The past couple of months have been challenging," stated Dr. Liang Tang, Chairman of Ossen Innovation. "After the July railway accident in Wenzhou, almost all of the high-speed railway related projects have been halted, including those already in the middle of construction. In addition, the tightened credit environment in China as well as the funding difficulties faced by Ministry of Railways (MOR) have both impacted our business and our clients' business. There have been signs of improvement these weeks, however, especially after the aid from central government to MOR. In the near term, our business growth would be adversely affected for the reasons mentioned and we expect that financial results of 2011 will be lower than our original guidance. But we remain confident and optimistic about the medium to long term market outlook."

Financial Summary

Third Quarter 2011 Financial Results

Revenue was $31.1 million in the third quarter of 2011, up slightly from $30.9 million in the corresponding period a year ago. Sales of coated pre-stressed steel materials, including rare earth coated products, were $10.7 million, representing 34.4% of total sales for the three months ended September 30, 2011. This number was lower as compared to $17.8 million and 56.1% for the first quarter of 2011, $19.7 million and 68.0% for the second quarter of 2011, and $16.6 million and 53.8% for the third quarter of 2010. The main reason for the decline in revenue contribution from coated products was the suspension of bridge projects as part of the nation-wide MOR projects suspended during the third quarter.

Gross profit decreased by $3.0 million to $4.2 million, representing a 41% year-over-year decline. Consolidated gross margin fell from 23.2% to 13.6%. The primary causes of the declines in gross profit and gross margin were lower sales of higher margin coated products and lower pricing on select contracts in an effort to improve sales collection.

Gross margin for the third quarter of 2011 were 23.2% and 11.7% for coated pre-stressed steel products and for plain surface pre-stressed steel products, respectively.

Selling expenses increased 37% to $0.3 million from $0.2 million in the third quarter of 2010 due to higher salaries, marketing and transportation costs. General and administrative expenses increased approximately 29% to $0.3 million from the same period last year due to costs related to our being a public company. Operating income fell 46% to $3.6 million, with operating margin of 11.7% compared to $6.7 million and 21.8%, respectively, in the third quarter of 2010.

Net income attributable to controlling interest fell 56% to $2.0 million in the third quarter of 2011 from $4.5 million in the year-ago period. Earnings per share were $0.10 versus $0.30 a year ago, reflecting lower profits and an increase of 5 million shares outstanding year-over-year as a result of the December 2010 IPO.

Nine Months Ended September 30, 2011 Financial Results

Revenue for the nine months ended September 30, 2011 was $91.9 million, with $48.2 million or 52.5% generated from the sale of coated pre-stressed steel materials. This represented a slight increase over the $89.6 million of total revenue in the nine months ended September 30, 2010 and an increase of $0.5 million or 1.1% over the $47.7 million in sales of coated pre-stressed steel products during the same period of 2010. Within the $48.2 million sales of coated products, sales of rare earth coated products were $44.4 million.

Gross profit increased $1.3 million to $20.1 million in the first nine months of 2011, representing a gross margin of 21.9%, as compared to 21.0% in the same period of last year. Gross margin for rare earth coated products were 27.0% in the nine months ended September 30, 2011.

Operating expenses increased by $1.1 million in the first nine months of 2011 to $2.3 million. Selling expenses and general and administrative expenses were $0.8 million and $1.5 million, respectively. Operating income grew 1% to $17.8 million in the nine months ended September 30, 2011, with operating margin of 19.3%, as compared to 19.7% of the same period of last year.

Net income attributable to controlling interest dropped 1% to $11.5 million in the first nine months of 2011 from $11.6 million in the year-ago period. Earnings per share were $0.57 compared to $0.77 in the same period a year ago.

Balance Sheet and Cash Flows

Ossen had approximately $22.3 million of cash and restricted cash at September 30, 2011 compared to $26.1 million at December 31, 2010. Total accounts receivable and notes receivable increased from $31 million as of December 31, 2010 to $49 million as of September 30, 2011. The average accounts receivable days sales outstanding were 93 days in the first nine months of 2011.

In the third quarter of 2011, the Company generated approximately $5.5 million of cash flows from operations due to a reduction in advance to suppliers which was partially offset by higher accounts receivable and inventories.

The Company raised approximately $22 million from its IPO in December 2010. The funds are being used to fund its 30,000-ton rare earth coated production facility expansion. Through September 30, 2011, Ossen has spent $7.7 million for equipment purchases related to this project.

Financial Outlook for Year End 2011

Due to uncertainties surrounding the temporary suspension of all existing and new high speed railway projects in China by the Ministry of Railways and the tightened credit environment in China, Ossen will be suspending financial guidance for 2011. The Company will continue to communicate relevant news to investors as they occur.

Business Updates

Following a highly publicized high speed railway accident in Wenzhou in July 2011, the PRC Ministry of Railways (MOR) temporarily suspended activities for all existing and new high speed railway projects in China. In the meantime, MOR's high debt ratio was disclosed and local banks tightened their lending policy towards the ministry afterwards. As a result, MOR was unable to honor its payables to suppliers and manufacturers who were working on the railway projects across the country. Ossen and its customers were among those who were impacted by the situation. As many MOR related projects previously awarded to Ossen included construction of bridges, our production of higher margin coated pre-stressed steel products declined significantly due to the suspension of such projects. In addition, MOR's inability to make payment indirectly caused our increased receivables balance.

We have seen positive developments in response to MOR's difficult situation recently. MOR's approximate $4.7 billion (RMB30 billion) bond offering together with eased bank lending policy has allowed MOR to start paying back past dues for various projects. While there are still uncertainties involved, we remain cautiously optimistic that those halted projects will resume construction in the near future.

Ossen has maintained strong relationships with multiple large Chinese banks. The Company has been able to obtain bank financing to fund its working capital needs. On September 30, 2011, the Company had a balance of short term RMB borrowing of $44.2 million and does not expect difficulty to renew these loans under existing credit lines. However, the recent tightening of credit by Chinese banks has negatively impacted many of our clients, including the distributors we work with. As a result, the Company experienced longer receivable days in the third quarter compared with the previous two quarters and 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 Third Quarter 2011 Conference Call" or be prepared to utilize the conference ID.

Please dial in at least 10 minutes before the call to ensure timely participation. The conference call will be live webcast and also archived for 1 year on the Company's IR website.

About Ossen Innovation Co., Ltd.

Ossen Innovation Co., Ltd. manufactures and sells galvanized pre-stressed steel wires used in the production of bridge cables as well as other pre-stressed materials. The Company's products are mainly used in the construction of bridges 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.

-- FINANCIAL TABLES --

RELATED PARTY TRANSACTIONS

(a) Names and Relationship of Related Parties:

(b) Summary of Balances with Related Party:

The interest-free, unsecured notes were provided to a related party to assist with their working capital need.

Zhaoyang and Shanghai Pujiang are customers of the Company. The balance of account receivable from related party arises from the sales of our products to Zhaoyang and Shanghai Pujiang. The balance of account receivable from related party was all collected subsequently.

SZS is a supplier of the Company. The balance of due to related party at September 30, 2011 represents the account payable to SZS for the purchase of raw materials.

SOURCE Ossen Innovation Co., Ltd.