Ossen Innovation Announces Fourth Quarter and Full Year 2012 Financial Results

SHANGHAI, April 30, 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 twelve months ended December 31, 2012.

"We finished 2012 with positive momentum," said Dr. Liang Tang, Chairman of Ossen Innovation. "The year-over-year growth in revenues for the quarter represented our third consecutive quarter of sales growth. This reflects a gradual improvement in demand for our products. Given the shakeout that occurred among suppliers of coated and uncoated steel products over the past two years, we are in a stronger position today to take advantage of the long term growth in this industry."

Financial Summary

Fourth quarter 2012 Financial Results

Revenue for the three months ended December 31, 2012 was $27.4 million, an increase of 3% from the same period a year ago. Sales of coated pre-stressed steel materials, including rare earth coated products, were approximately $21.1 million, up 160% compared to approximately $8.1 million in the fourth quarter of 2011 due to overall higher demand of coated pre-stressed steel materials.

Gross profit increased from $2 million to $3.1 million, a 56% year-over-year increase. Gross margin was 11.1%, up from 7.1% in the third quarter of 2012 and 7.3% in the fourth quarter of 2011. Gross profit and gross margin were up as a result of higher sales of rare earth coated products, which provide 1%-5% higher gross margin than similar zinc coated products.

Selling expenses fell by 30% to $0.3 million due to lower sales commissions. General and administrative expenses were $1.0 million compared to $1.2 million in the fourth quarter of 2011. Operating income was approximately $1.7 million, an increase of $1.4 million from the same period a year ago.

Net income attributable to Ossen Innovation Co., Ltd. was $1.3 million in the fourth quarter of 2012 compared to $0.1 million in the year-ago period. Earnings per share were $0.07 versus $0.00 a year ago. The weighted average diluted shares outstanding was 19.9 million compared to 20.0 million a year ago as a result of 98,041 shares repurchased by Ossen as of December 31, 2012.

Fiscal Year 2012 Financial Results

Revenues for the twelve months ended December 31, 2012 were $122.4 million, an increase of approximately 3% compared to $118.6 million in the same period a year ago. Sales of coated products were $92.6 million, an increase of 64% from $56.5 million in 2011. Coated products, including rare earth coated products, accounted for approximately 76% of total sales in 2012.

Gross profit fell 51% in the fiscal 2012 to $10.8 million. Gross margin was 8.8% for the twelve months ended December 31, 2012 compared to 18.6% for fiscal 2011 due to lower selling prices for coated and uncoated products.

Operating expenses were $4.9 million, up 23% from $4 million in the first twelve months of 2011 primarily due to a 44% year-over-year increase in general and administrative expenses. Operating income and operating margin for 2012 was $5.9 million and 4.8% compared to $18.1 million and 15.2%, respectively, for the twelve months ended December 31, 2011.

Net income attributable to Ossen Innovation Co., Ltd. was $2.4 million, down from $11.5 million in the fiscal 2011. Earnings per share was $0.12 for the twelve months ended December 31, 2012.

Balance Sheet and Cash Flows

Ossen had approximately $27.4 million of cash and restricted cash as of December 31, 2012 compared to $21.3 million at December 31, 2011. Total accounts receivable on December 31, 2012 decreased to $45.7 million from $48.0 million on December 31, 2011. The average accounts receivable days sales outstanding were 140 days in the twelve months of 2012 compared to 94 days in the twelve months of 2011. Inventories were down from $17.2 million at December 31, 2011 to $9.8 million at December 31, 2012. Total working capital was $70.8 million at the end of 2012 and 2011.

The Company had cash outflows from operations of $8.8 million in the twelve months ended December 31, 2012 as compared to $20.1 million of outflows in the same period of 2011. The primary reason for the reduction in cash used in operations was improvement in accounts receivable collection during the twelve months of 2012, which was partially offset by increased advances to suppliers.

In November 2011, the Company's Board of Directors approved a share repurchase program for up to 500,000 shares of the Company's American Depositary Receipts ("ADSs") through May 2012. On May 31, 2012 the program was further extended for another 12 months to May 31, 2013. The Board decided to suspend the repurchase program in December 2012 to evaluate the best uses of the Company's capital.

Business Updates and Outlook

1. Ossen's plans to add 30,000 tons of annual production capacity for rare earth coated products was delayed due to unfavorable business climate in China in 2011 and 2012. In light of recent favorable policy changes made by China's State Council (see below), the Company will proceed with its expansion plan starting in 2013. Management expects to complete the installation and start operation of its new production lines in the first half of 2014, pending its ability to expand its business and the general business environment in China at that time. Capital expenditures in fiscal year 2013 will be incurred primarily in connection with the purchase of manufacturing equipment for the construction of its new facility in Maanshan City, China, as well as the expansion of existing factory buildings to accommodate new production lines.
2. On March 10, 2013, China's State Council announced its plan to restructure the Ministry of Railways (MOR) to separate the administrative and supervision function from the commercial arm. The responsibility for planning and policy-making for railway development is to move to the Ministry of Transport (MOT). A newly created National Railways Bureau (NRB) under the MOT will be responsible for setting technical standards of railways and supervising the safety of operations, quality of transport services and quality of railway projects. The MOR's enterprise/commercial responsibilities will be incorporated into China National Railway Co. (CNRC), which was established on March 14, 2013 with registered capital of 1.04 trillion Yuan (USD $166.8 billion) and will be administrated by the central government. These reforms are expected to attract more private investment and much needed efficiencies to the railway industry.

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 4th Quarter 2012 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 May 7, 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 51548431 for the replay.

This call is being webcast and can be accessed by clicking on this link: http://www.media-server.com/m/p/h5n84b75

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. 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.