Tina Xiao - Weitian Investor Relations Feng Peng - CFO

Good morning ladies and gentlemen, thank you for standing by. Welcome to the Ossen Innovation Company Limited Second Quarter 2015 Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. This conference is being recorded today September 28, 2015. I would now like to turn the conference over to Tina Xiao of Weitian Investor Relations. Thank you. Please go ahead.

Thank you operator and welcome everyone to today's conference call for Ossen Innovation Company Limited. This call will cover Ossen's financial and operating results for the three months ended June 30, 2015. Joining us today is Mr. Feng Peng, the company’s Chief Financial Officer. Before we get started, I'm going to quickly read a disclaimer about forward-looking statements. This call may contain in addition to historical information forward-looking statements within the meaning of the federal securities laws regarding Ossen Company Limited. Forward-looking statements include statements about plans, objectives, goals, strategies, future events, and performance and underlying assumptions, and other statements that are different than historical facts. These forward-looking statements are based on current management expectations and are subject to risks and uncertainties that may result in expectations not being realized and may cause actual outcomes to differ materially from expectations reflected in these forward-looking statements. Potential risks and uncertainties include change in demand for the company's products, the impact of competition and the government regulation, and other risks contained in the statements filed from time to time with the SEC. All such forward-looking statements, whether written or oral, made on behalf of the company are expressly qualified by these cautionary statements, and such forward-looking statements are subject to risks and uncertainties and we caution you not to place undue reliance on these. At this time, I'd like to turn the call over to Mr. Feng Peng, CFO of the company. Feng please go ahead.

Thank you, and thank you everyone for joining us today for our second quarter ended June 30, 2015 financial results conference call. The second quarter turned out to be a another challenging quarter for Ossen and our revenue declined by 28% year-over-year as a result of market opportunities and industrial weakness. At the macro level weak investment and trade, combined with high levels of volatility in the domestic stock market, negatively impacted China’s already weakening economy during their second quarter. Concerns set the government annual GDP growth target around 7% could be at risk have spread to Peoples Bank of China to cut interest rate and reserve ratio multiple times this year with the more recent cuts in June and August respectively. At the industry level Chinese steel industry experienced yet another difficult quarter as slowing demand and excess production capacity drove steel prices to the lowest level in more than 20 years during the second quarter. Heading into the third quarter we see further slide in steel price with composite price index of eight steel product compiled by the China Iron & Steel Association falling to 61.71 last Friday, highlighting ongoing challenges for our business both at the macro level and the industry level. Looking ahead in light of the central government’s plan to transform China’s growth model from big-ticket project driven to more efficient, equitable, and environmentally sustainable consumer demand driven, we expect China's fixed asset investment, a measure of government spending on infrastructure, to what we view as highly correlated to our business continue to expand at a slower pace in coming quarters and that hinders our ability to grow our business. Next I will discuss -- June 30, 2015. Revenue decreased by 28% to $25.9 million for the second quarter of 2015, from $35.9 million for the same period of last year. This decrease was mainly due to weakness in both zinc coated products and plain surface PC strands in the second quarter. Sales of coated PC steel materials including rare earth and the zinc coated products decreased by 25% to $22.3 million and accounted for 86% of total sales for the second quarter of 2015. Sales of rare earth and zinc coated products were $19.8 million and $2.5 million respectively for the second quarter of 2015 compared to $20.6 million and $9 million respectively for the same period of last year. Sales of plain surface PC strands and other decreased by 42.4% to $3.6 million and accounted for 14% of total sales for the second quarter of 2015. Cost of goods sold decreased by 29.9% to $22.6 million for the second quarter of 2015 from $32.2 million for the same period of last year. The decrease was mainly due to lower average price of raw materials. Gross profit decreased by 11.7% to $3.3 million for the second quarter of 2015 from $3.7 million for the same period of last year. Gross margin increased by 2.3% to 12.7% for second quarter of 2015, from 10.4% for the same period of last year. The increase in gross margin was mainly due to lower raw material costs. Gross margins for rare earth and zinc coated products were 9.7% and 20.3% respectively for the second quarter of 2015, compared to 6.2% and 22.1% respectively for the same period of last year. Gross margin for plain surface PC Strands and others was 24.3% for the second quarter of 2015 compared to 7.2% for the same period of last year. Selling expenses was approximately $0.4 million for the second quarter of 2015 including $0.2 million from the same period of last year. General and administrative expenses was approximately $0.9 million for the second quarter of 2015 decreasing $0.5 million from the same period of last year. The decrease was primarily due to the $0.2 million decrease in R&D and $0.2 million decrease in the provision for bad debts. Operating income was $2 million for the second quarter of 2015 compared to $2.1 million for the same period of last year. Operating margin was 7.8% for the second quarter of 2015 compared to 5.9% for the same period of last year. After deducting net income attributable to non-controlling interest, net income attributable to Ossen Innovation was $1.3 million for the second quarter of 2015 compared to $1.5 million for the same period of last year. Earnings per share, both basic and diluted, were $0.074 for the second quarter of 2015, compared to $0.065 for the same period of last year. In the second quarter of 2015 61,000 shares were repurchased by the company. Now I will shift gear to six months ended June 30, 2015 financial results. Revenues decreased by 17.7% to $52.6 million for the first half of 2015 from $64 million for the same period of last year. This decrease was mainly due to the declines in both rare earth coated and zinc coated products sales. Sales of coated materials, including both rare earth and zinc coated products, decreased by 21.1% to $44.4 million and accounted for 84% of total sales for the first half of 2015. The sales of rare earth and zinc coated products were $38 million and $6.4 million, respectively, for the first half of 2015, compared to $47.2 million and $9 million respectively, for the same period of last year. Sales of plain surface PC strands and others increased to 6.7% to $8.3 million and accounted for 16% of total sales for the first half of 2015. Cost of goods sold decreased by 20.6% to $45.7 million for the first half of 2015 from $57.6 million for the same period of last year. The decrease was mainly due to lower average price of raw materials. Gross profit increased by 8.6% to $6.9 million for the first half of 2015 from $6.4 million for the same period of last year. Gross margin increased by 3.1% to 13.1% for the first half of 2015 from 10% for the same period of last year. The increase in gross margin was mainly due to lower raw material costs. Gross margins for rare earth and zinc coated products were 10.5% and 23.9%, respectively, for the first half of 2015, compared to 7.7% and 22.1%, respectively, for the same period of last year. Gross margin for plain surface PC Strands and others was 16.8% for the first half of 2015, compared to 9.5% for the same period of last year. Selling expenses was approximately $0.5 million for the first half of 2015 increasing $0.2 million from the same period of last year. General and administrative expenses were approximately $2.7 million for the first half of 2015 decreasing $0.1 million from the same period of last year. As a result total operating expenses were approximately $3.2 million for the first half of 2015 increasing $0.2 million from $3 million for the same period of last year. Operating income was $3.7 million for the first half of 2015 compared to $3.3 million for the same period of last year. Operating margin was 7.0% compared to 5.2% for the same period of last year. After allocating net income attributable to non-controlling interest, net income attributable to Ossen Innovation was $2.2 million for the first half of 2015 compared to $2 million for the same period of last year. EPS both basic and diluted were $0.11 for the six months ended June 30, 2015 compared to $0.10 for the same period of last year. Now turning to balance sheet and the cash flows, as of June 30, 2015 Ossen had approximately $17.1 million of cash and restricted cash compared to $18.3 million at December 31, 2014. Total accounts receivable were $52.1 million as of June 30, 2015 compared to $53.8 million at December 31, 2014. The average days of sales outstanding were 178 days for the six months ended June 30, 2015 compared to 151 days for the year of 2014 as a result of higher account receivable. We have $13.2 million of accounts receivable age over 180 days as of December 31, 2014. As of September 22, 2015 we have collected approximately $12.3 million of such receivables. The balance of prepayments to suppliers for raw materials was $63.4 million as of June 30, 2015 compared to $56.3 million at December 31, 2014. The company had inventories of $19.6 million as of June 30, 2015 compared to $20.1 million at December 31, 2014. Total working capital was $111.3 million as of June 30, 2015 compared to $108 million at December 31, 2014. Net cash provided by operating activities was $5.4 million for the first half of 2015 compared to $9.8 million for the same period of last year. Net of cash used in financing activities was $4.2 million for the first half of 2015 compared to $11.3 million for the same period of last year. I will now turn the call next to operator for any questions.

On behalf of our entire management team I would like to thank everyone again for joining us today for Ossen Innovation second quarter 2015 earnings conference call. We appreciate your interest and support in Ossen and look forward to speaking with you again next time. Good-bye.

Thank you. Ladies and gentlemen that does conclude the conference for today. Thank you for participating, you may all disconnect.