SHANGHAI, June 30, 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 three months ended March 31, 2017.

Dr. Liang Tang, Chairman of Ossen Innovation, commented, "The economic headwinds and sluggish industry demand continued to drag on our business, leading to a 15% decline in revenues in the first quarter. The decline in revenues also reflected a further scale-back of our plain surface PC strands and PC wires business in light of its gross margin deterioration in recent quarters. Gross and operating margins also decreased by 3.5 and 3.1 percentage points, respectively, highlighting continuing pricing pressure.  Looking ahead, we remain cautious on our near-term outlook."

Three months Ended March 31, 2017 Financial Results


For the Three Months Ended March 31,

($ millions, except per share data)

2017


2016


% Change

Revenues

$25.6


$30.1


-15.0%

Gross profit

$1.8


$3.1


-43.3%

Gross margin

6.9%


10.4%


-3.5 pp

Operating income

$0.5


$1.5


-67.2%

Operating margin

2.0%


5.1%


-3.1 pp

Net income attributable to Ossen Innovation

$0.0


$0.5


-89.2%

EPS

$0.00


$0.02


-89.2%

For the three months ended March 31, 2017, revenues decreased by $4.5 million, or 15.0%, to $25.6 million from $30.1 million for the same period of last year. This decrease was primarily due to decreases in sales from both coated products and plain surface and other products. The sales of coated PC steel materials, including both rare earth and zinc coated products, were $22.1 million and accounted for 86% of total sales for the three months ended March 31, 2017. Sales of rare earth coated products, zinc coated products, and plain surface and other products were $22.0 million, $0.2 million, and $3.5 million for the three months ended March 31, 2017, respectively.

Gross profit decreased by $1.4 million, or 43.3%, to $1.8 million for the three months ended March 31, 2017 from $3.1 million for the same period of last year. Gross margin decreased by 3.5 percentage points to 6.9% for the three months ended March 31, 2017 from 10.4% for the same period of last year. Gross margins for rare earth and zinc coated products were 4.1% and 55.0%, respectively, for the three months ended March 31, 2017, compared to 7.6% and 33.6%, respectively, for the same period of last year. Gross margin for plain surface and other products was 22.5% for the three months ended March 31, 2017, compared to 20.3% for the same period of last year.

Selling expenses decreased by $0.1 million, or 34.5%, to $0.15 million for the three months ended March 31, 2017 from $0.23 million for the same period of last year. The decrease was due to lower transportation cost. General and administrative expenses decreased by $0.2 million, or 18.2%, to $1.12 million for the three months ended March 31, 2017 from $1.37 million for the same period of last year. As a result, total operating expenses decreased by $0.3 million, or 20.5%, to $1.3 million for the three months ended March 31, 2017 from $1.6 million for the same period of last year.

Operating income decreased by $1.0 million, or 67.2%, to $0.5 million for the three months ended March 31, 2017 from $1.5 million for the same period of last year. The decrease in operation income was primarily attributable to decrease in gross profit and partially offset by decrease in general and administrative expenses in 2017. Operating margin was 2.0% for the three months ended March 31, 2017, compared to 5.1% for the same period of last year.

Net income decreased by $0.5 million, or 82.3%, to $0.1 million for the three months ended March 31, 2017 from $0.6 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 $0.4 million, or 89.2%, to $0.05 million for the three months ended March 31, 2017 from $0.46 million for the same period of last year. Earnings per share, both basic and diluted, were $0.003 for the three months ended March 31, 2017, compared to $0.023 for the same period of last year.

Balance Sheet and Cash Flows

As of March 31, 2017, the Company had cash and restricted cash of $6.8 million, compared to $6.9 million at December 31, 2016. Notes receivable were $7.3 million as of March 31, 2017, compared to $15.3 million at December 31, 2016. Accounts receivable were $48.5 million as of March 31, 2017, compared to $37.3 million at December 31, 2016. The average days of sales of outstanding (DSO) were 151 days for the three months ended March 31, 2017, compared to 126 days for the year of 2016. The increase in DSO was mainly because the Chinese New Year delayed the timing of collections.  The balance of prepayment to suppliers for raw materials totaled $55.5 million as of March 31, 2017, compared to $46.7 million at December 31, 2016. The Company had inventories of $16.4 million as of March 31, 2017, compared to $26.0 million at the end of 2016. During the quarter, the Company reduced the procurement of raw materials due to the rising steel price. Total working capital was $102.6 million as of March 31, 2017, compared to $101.6 million at December 31, 2016.

Net cash used in operating activities was $0.3 million for the three months ended March 31, 2017, compared to $0.8 million for the same period of last year. Net cash used in investing activities was $nil for the three months ended March 31, 2017, compared to $3,000 for the same period of last year. Net cash used in financing activities was $45,000 for the three months ended March 31, 2017, compared to $91,000 for the same period of last year.

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.

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








March 31,


December 31,


2017


2016



(Unaudited)




ASSETS






Current Assets






Cash and cash equivalents

$

742,415


$

217,631

Restricted cash


6,022,841



6,703,242

Notes receivable – bank acceptance notes


7,256,367



15,280,381

Accounts receivable, net of allowance for doubtful accounts of $1,053,219 and $985,990 at March 31, 2017 and December 31,2016, respectively


48,514,649



37,298,465

Inventories


16,403,361



25,999,182

Advance to suppliers


55,536,112



46,729,285

Other current assets


216,897



197,319

  Total Current Assets


134,692,642



132,425,505

Property, plant and equipment, net


4,307,145



4,447,063

Land use rights, net


3,572,923



3,571,184

TOTAL ASSETS

$

142,572,710


$

140,443,752







LIABILITIES AND SHAREHOLDERS' EQUITY






Current Liabilities






Notes payable – bank acceptance notes

$

8,925,332


$

9,586,276

Short-term bank loans


17,030,694



16,916,535

Accounts payable


3,020,452



1,504,863

Customer deposits


333,668



135,903

Income tax payable


382,107



594,795

Other payables and accrued expenses


2,023,126



1,740,474

Due to related party


3,912



3,886

Due to shareholder


347,499



307,499

  Total Current Liabilities


32,066,790



30,790,231

Long-term bank loans


7,256,367



7,207,727

TOTAL LIABILITIES


39,323,157



37,997,958







EQUITY






Shareholders' Equity






Ordinary shares, $0.01par value: 100,000,000 shares authorized, 20,000,000 shares issued; 19,791,110 shares outstanding as of March 31, 2017 and December 31, 2016, respectively


200,000



200,000

Additional paid-in capital


33,971,455



33,971,455

Statutory reserve


6,147,452



6,123,022

Retained earnings


54,615,873



54,590,589

Treasury stock, at cost: 171,210 shares as of March 31, 2017 and December 31, 2016, respectively


(192,153)



(192,153)

Accumulated other comprehensive income


(3,677,790)



(4,378,873)

TOTAL SHAREHOLDERS' EQUITY


91,064,837



90,314,040

Non-controlling interest


12,184,716



12,131,754

TOTAL EQUITY


103,249,553



102,445,794

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

142,572,710


$

140,443,752































OSSEN INNOVATION CO., LTD AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME 

(Unaudited)








Three Months Ended March 31,


2017


2016







REVEUNUES

$

25,582,538


$

30,087,939

COST OF GOODS SOLD


23,809,907



26,960,453

GROSS PROFIT


1,772,631



3,127,486

Selling expenses


152,018



232,226

General and administrative expenses


1,119,428



1,367,866

  Total Operating Expenses


1,271,446



1,600,092







INCOME FROM OPERATIONS


501,185



1,527,394

Financial expenses, net


(406,513)



(837,473)

Other income, net


7,254



33,179

INCOME BEFORE INCOME TAX


101,926



723,100

INCOME TAX BENEFIT (EXPENSES)


750



(144,214)

NET INCOME


102,676



578,886

LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTEREST








52,962



116,882

NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST








49,714



462,004

OTHER COMPREHENSIVE INCOME






Foreign currency translation gain


701,083



701,863

TOTAL OTHER COMPREHENSIVE INCOME








701,083



701,863

COMPREHENSIVE INCOME

$

750,797


$

1,163,867







EARNINGS PER ORDINARY SHARE






Basic and diluted

$

0.003


$

0.02

WEIGHTED AVERAGE ORDINARY SHARES  OUTSTANDING






Basic and diluted


19,791,110



19,828,790



















OSSEN INNOVATION CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)








Three Months Ended March 31,


2017


2016

CASH FLOWS FROM OPERATING ACTIVITIES:






 Net income

$

102,676


$

578,886

 Adjustments to reconcile net income to net cash provided by/ (used in) operating activities:






 Depreciation and amortization


183,562



237,148

Changes in operating assets and liabilities:






(Increase) Decrease In:






 Accounts receivable


(11,216,183)



(10,416,914)

 Inventories


9,595,821



6,351,643

 Advance to suppliers


(8,806,827)



(6,708,129)

 Other current assets


(19,578)



524,099

 Notes receivable - bank acceptance notes


8,024,013



8,010,228

Increase (Decrease) In:






 Accounts payable


1,515,589



(1,036,275)

 Customer deposits


197,764



236,563

 Income tax payable


(212,688)



142,367

 Other payables and accrued expenses


282,652



1,304,460

 Due to related party


-



(65,769)

 Due to shareholder


40,000



-

Net cash used in operating activities


(313,199)



(841,693)







CASH FLOWS FROM INVESTING ACTIVITIES:






 Purchases of plant and equipment


-



(3,031)

Net cash used in investing activities


-



(3,031)







CASH FLOWS FROM FINANCING ACTIVITIES:






 Decrease / (Increase) in restricted cash


680,400



(2,383,538)

 Proceeds from short-term bank loans


722,976



530,540

 Repayments of short-term bank loans


(722,976)



(531,020)

 Proceeds from notes payable-bank acceptance notes


4,645,626



8,714,930

 Repayment of notes payable-bank acceptance notes


(5,371,505)



(6,421,527)

Net cash used in financing activities


(45,479)



(90,615)







DECREASE IN CASH AND CASH EQUIVALENTS


(358,677)



(935,339)

 Effect of exchange rate changes on cash


883,461



1,012,546

 Cash and cash equivalents at beginning of period


217,631



812,277

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

742,415


$

889,484







SUPPLEMENTARY CASH FLOW INFORMATION






Cash paid during the periods:






 Income taxes paid

$

225,114


$

195,274

 Interest paid

$

359,529


$

674,865

Non-cash transactions:






Appropriation to statutory reserve

$

19,502


$

69,344

 

SOURCE Ossen Innovation Co., Ltd.


Source: Ossen Innovation Co., Ltd.