SHANGHAI, Dec. 9, 2013 /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, 2013.

"The market for steel materials used in infrastructure projects in China continued to be challenging in the third quarter of 2013," said Dr. Liang Tang, Chairman of Ossen Innovation. "However, I am pleased to report that Ossen continued to sell more of our higher margin, pre-stressed coated products as a percentage of total sales. Combined with lower raw material prices, this resulted in improved gross profit, gross margin and increased earnings for the third quarter and nine months ended September 30, 2013. Although the domestic infrastructure environment remains challenging, we continue to focus on driving sales of higher margin products and maintaining conservative operating expenses," concluded Dr. Tang.

Financial Summary

*Net income attributable to Ossen Innovation Co., Ltd.

Third Quarter 2013 Financial Results

Revenue for the three months ended September 30, 2013 was $33.1 million, down 19% from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth and zinc coated products, were approximately $24.3 million, down 8% compared to approximately $26.4 million in the third quarter of 2012. Sales of plain surface PC strands were $4.9 million for the three months ended September 30, 2013, a decrease of $5.9 million compared to the prior year.  These decreases are primarily due to lower demand of coated pre-stressed steel materials and plain surface PC strands because of a decrease in large scale infrastructure projects and increased price competition. 

Gross profit increased from $2.9 million to $3.9 million, a 33% year-over-year increase.  Gross margin was 11.7%, up from 7.1% in the third quarter of 2012. Gross profit and gross margin were higher as a result of lower raw material prices and an increase in sales of higher margin coated pre-stressed steel materials as a percentage of total sales in the third quarter of 2013 compared to the prior year period.

Selling expenses were reduced by 47% to $0.2 million due to a decrease in total sales. General and administrative expenses were $0.8 million, an increase of 63% compared to $0.5 million in the third quarter of 2012 due to higher R&D expenses related to Japanese Industrial Standards certification. Operating income was approximately $2.9 million, an increase of 36% from the same period a year ago.

Net income attributable to Ossen Innovation Co., Ltd. was $1.7 million in the third quarter of 2013 compared to $0.7 million in the year-ago period. Earnings per share were $0.08 versus $0.04 a year ago. The weighted average diluted shares outstanding were 19.9 million compared to 20.0 million.  

Nine Months Ended September 30, 2013 Financial Results

Revenue for the nine months ended September 30, 2013 was $71.9 million, down 24% from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth and zinc coated products, were approximately $61.8 million, down 13% compared to approximately $71.0 million in the same period of 2012. Sales of plain surface PC strands were $10.1 million for the nine months ended September 30, 2013, a decrease of $13.9 million compared to the prior year.  These decreases are primarily due to lower demand of coated pre-stressed steel materials and plain surface PC strands because of a decrease in large scale infrastructure projects and increased price competition.   

Gross profit increased from $7.7 million to $8.5 million, a 10% year-over-year increase.  Gross margin was 11.8%, up from 8.1% in the same period of 2012. Gross margin was higher as a result of lower raw material prices and an increase in sales of higher margin coated pre-stressed steel materials as a percentage of total sales in 2013 compared to the prior year period.

Selling expenses were reduced by 31% to $0.4 million due to a decrease in total sales. General and administrative expenses were $2.4 million, down 17% compared to $2.9 million in the same period of 2012 due to lower audit fees and R&D expenses. Operating income was approximately $5.6 million, an increase of 35% from the same period a year ago.

Net income attributable to Ossen Innovation Co., Ltd. was $2.5 million in the nine months ended September 30, 2013 compared to $1.1 million in the year-ago period. Earnings per share were $0.12 versus $0.05 a year ago. The weighted average diluted shares outstanding were 19.9 million compared to 20.0 million.  

Balance Sheet and Cash Flows

Ossen had approximately $35.0 million of cash and restricted cash as of September 30, 2013 compared to $27.4 million at December 31, 2012. Total accounts receivable on September 30, 2013 increased to $51.1 million from $45.7 million on December 31, 2012. The average accounts receivable days sales outstanding were 139 days in the third quarter of 2013 compared to 101 days in the third quarter of 2012 which was primarily due to a decrease in total sales. The balance of prepayments to suppliers of raw materials was $55.6 million as of September 30, 2013, a decrease of $22.4 million compared with December 31, 2012. The decrease was mainly due to the Company receiving a large delivery of raw materials from two major suppliers during the first nine months of 2013. Accordingly, inventories increased from $9.8 million at December 31, 2012 to $16.6 million at September 30, 2013. Total working capital was $76.6 million at September 30, 2013. 

The Company generated positive cash flows from operations of $18.0 million for the nine months ended September 30, 2013 as compared to $13.0 million of outflows for the same period of 2012. The primary reasons for the increase in cash generated in operations were an increase in customer deposits and a decrease in advance to suppliers during the first nine months of 2013, partially offset by higher inventories and accounts receivable.

Cash flow used by financing activities was $21.9 million for the nine months ended September 30, 2013 as compared to cash flow provided by financing activities of $12.9 million for the same period of 2012. The primary reasons for the increase in cash used by financing activities were increases in restricted cash, repayments of bank loans and notes payable, and a decrease in proceeds from short-term bank loans due to the Chinese government's prudent monetary policy.

Business Updates and Outlook

Ossen believes that the Chinese central government will continue to stimulate economic growth by further injecting capital into the economy by funding new infrastructure projects.  While Ossen does not believe that the Chinese government will initiate another large scale, comprehensive capital injection, the Company believes that infrastructure spending will be selectively targeted at developing regions in Central or Western China. Furthermore, Ossen expects spending by local governments on regional infrastructure development, all of which should create additional bidding opportunities for the Company in 2014 and beyond.

In addition, Ossen recently announced that it has been awarded two contracts to supply its plain surface steel strands for new infrastructure projects in Anhui Province. The first contract is to supply 2,500 tons of plain surface steel strands for the renovation of the G205 national highway's Cihu to Caishi section. This renovation project, overseen by the Chinese Ministry of Transport, will use the steel strands for long span prestressed concrete structures of the overpass.  The second contract is to supply 18,000 tons of plain surface steel strands for the construction of the Wangdong Yangtze River highway bridge upstream of the Wan River in Anhui Province. This construction project, overseen by the Anhui Province Planning Department, will use the steel strands for long span prestressed concrete structures of the bridge approach. Based on information received from the Ministry of Transport and the Anhui Province Planning Department, respectively, Ossen expects to begin delivery of these plain surface steel strands in the first half of 2014.

Furthermore, Ossen announced that it has been awarded a contract to supply 15,000 tons of plain surface steel strands to a construction company responsible for building the new Jiujiang express loop highway in Jiujiang City, Jiangxi Province, China. The steel strands will be used in the construction of bridges and elevated highways in this infrastructure project. Based on information received from the construction company responsible for building the Jujiang express loop highway, Ossen expects to begin delivery of the plain surface steel strands in the first quarter of 2014.

Finally, Ossen expects Q4 2013 sales will be similar to the third quarter of 2013 while 2014 results are expected to significantly improve over 2013, provided that the industry is not impeded by the problems it encountered this past year, including government regulation and lack of liquidity among lending institutions.

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 2013 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 December 17, 2013. To listen, please call +1-855-452-5696 within the United States or +1-646-254-3697 if calling internationally. Utilize the pass code 19296069 for the replay.

This call is being webcast and can be accessed by clicking on this link: http://www.media-server.com/m/p/rpe2si4h

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.

 

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SOURCE Ossen Innovation Co., Ltd.