Press Release
 
Ossen Innovation Announces Unaudited Financial Results for the Six Months Ended June 30, 2020
08/27/20

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
Comprehensive Income



 

Statutory Reserve



Retained
Earnings



Non Controlling
 Interest



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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SOURCE Ossen Innovation Co., Ltd.

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