American Oriental Bioengineering Reports Fourth Quarter and Full Year 2010 Financial Results

Mar 14, 2011, 18:03 ET from American Oriental Bioengineering, Inc.

NEW YORK, March 14, 2011 /PRNewswire-Asia-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE: AOB), (the "Company" or "AOBO"), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter ("OTC") products, today announced financial results for the fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter 2010 Financial Performance

In the fourth quarter of 2010, revenue decreased to $83.4 million from $100.0 million in the same period of 2009, primarily caused by decreased sales from pharmaceutical products, partially offset by increased sales from distribution business.

  • The Company generated $79.4 million from its manufacturing business, in the fourth quarter of 2010, compared with $96.4 million in the prior year period.  Revenue from pharmaceutical products decreased 19.7% to $68.3 million from $85.0 million in the prior year period. Nutraceutical products generated revenue of approximately $11.1 million in the fourth quarter of 2010, down 2.8% from $11.4 million in the prior year period.  The revenue performance reflects the Company's strategic shift of revenue mix toward higher-margin products to minimize the impact from the increased cost of certain raw materials and the continuing government price cut on certain products.
  • The Company generated $3.9 million from its distribution business, Nuo Hua, in the fourth quarter of 2010, an increase of 10.2% from $3.6 million in the prior year period, primarily due to Nuo Hua's expanding market coverage.

Gross profit in the fourth quarter of 2010 was $42.4 million compared to $52.6 million in the fourth quarter of 2009. Gross margin was 50.9%, compared to 52.6% in the prior year period. The Company continued its efforts to manage the margin pressure, which was mainly caused as a result of the combined impact of the increased cost of certain raw materials, the government's pricing control on EDL drugs, and increased labor costs.

Operating income in the fourth quarter of 2010 decreased to $5.9 million compared with $14.9 million in the prior year period. Selling, general and administrative expenses were $18.1 million, or 21.7% of total revenue, compared to $21.2 million, or 21.2% of total revenue in the prior year period. This is primarily driven by management's continuing efforts at cost control. Advertising expense increased to $12.0 million in the fourth quarter of 2010, compared to $9.5 million in the prior year period, driven by increased efforts to increase brand awareness and market recognition. Research and development expenses were $4.6 million, or 5.5% of total revenue, compared with $5.4 million, or 5.4% of total revenue, in the prior year period. The company emphasizes the importance of science and technology and continues investment in R&D spending related to create new products, and improve existing product portfolio.

Net income attributable to controlling interest for the fourth quarter of 2010 was $2.8 million, or $0.04 per diluted share, compared to $11.7 million, or $0.14 per diluted share, in the prior year period.

2010 Financial Performance

Revenue for the fiscal year 2010 increased 3.3% to $305.9 million from $296.2 million in 2009, primarily resulted from continuing customer demand and increased sales coverage. Prescription pharmaceutical products generated revenue of $129.2 million, up 11.6% from $115.8 million in the year 2009, and OTC pharmaceutical products generated revenue of $120.9 million, down 5.8% from $128.4 million in 2009. Revenue from nutraceutical products increased 4.8% to $41.0 million from $39.1 million in the year before.  Revenue from Nuo Hua's distribution business was $14.8 million compared to $12.9 million in 2009, primarily resulted from expanded sales coverage and distribution network especially in the rural areas. During the same time period, gross profit decreased by 5.4% to $157.8 million from $166.8 million in the year 2009.

Operating income in the year 2010 was $30.4 million compared to $58.8 million in the year 2009. Net income attributable to controlling interest for the year 2010 was $16.3 million, or $0.22 per diluted share, compared to $41.4 million, or $0.53 per diluted share, in the prior year period.

Balance Sheet

As of December 31, 2010, the Company had $94.6 million in cash and cash equivalents, and generated approximately $8.0 million of operating cash flow during the year of 2010. Working capital was $162.2 million in 2010, reflecting an increase of 23.9% compared to $130.9 million in 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "We are pleased with our fiscal year 2010 financial results in which we demonstrated steady growth despite the increasingly challenging economic environment worldwide and China's rapidly changing regulatory environment. Our growth in 2010 was consistent with our expectations and reflects our continued efforts on profitability focus and cost control. We dynamically adjust our product mix to minimize the negative impact from the increased cost of certain raw materials, as well as the government's price cut on certain drugs. In addition, our long-term investments in science and technology have achieved initial results, which were demonstrated by the strong sales from the new products supported by our R&D efforts. Overall, we remain enthusiastic about the tremendous opportunities in China's healthcare sector, and we are looking forward to more progress in the fiscal year ahead."

Conference Call

The Company will hold a conference call at 8:00 am ET on Tuesday, March 15, 2011, to discuss its results. Listeners may access the call by dialing 1-800-901-5231 or 1-617-786-2961 for international callers, access code: 57286885. A webcast will also be available through AOB's website at www.bioaobo.com. A replay of the call will be available through March 22, 2011. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 91403928.

About American Oriental Bioengineering, Inc.

American Oriental Bioengineering, Inc. is a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products.

Safe Harbor Statement

Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  The economic, competitive, governmental, technological and other factors identified in the Company's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2010, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

Contact:

ICR, LLC

Christine Duan or Ashley Ammon

203-682-8200

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THREE MONTHS ENDED DECEMBER 31

TWELVE MONTHS ENDED DECEMBER 31

2010

2009

2010

2009

Revenues

$

83,365,061

$

100,032,887

$

305,944,085

$

296,150,780

Cost of sales

40,966,778

47,425,009

148,186,531

129,367,775

GROSS PROFIT

42,398,283

52,607,878

157,757,554

166,783,005

Selling, general and administrative expenses

18,112,902

21,163,863

66,439,702

62,164,936

Advertising costs

11,971,242

9,536,612

38,920,905

31,896,992

Research and development costs

4,610,737

5,417,834

15,365,131

7,922,357

Depreciation and amortization expenses

1,760,232

1,591,061

6,662,237

6,038,625

Total operating expenses

36,455,113

37,709,370

127,387,975

108,022,910

INCOME FROM OPERATIONS

5,943,170

14,898,508

30,369,579

58,760,095

Equity in earnings (losses) from unconsolidated entities

196,134

2,374,211

384,991

2,075,139

Interest expense, net

(1,506,962)

(1,440,239)

(5,900,055)

(5,746,382)

Other expenses, net

(119,396)

(405,558)

(204,736)

(569,661)

INCOME BEFORE INCOME TAXES

4,512,946

15,426,922

24,649,779

54,519,191

Income tax

1,758,188

3,753,893

8,336,366

13,216,986

NET INCOME

2,754,758

11,673,029

16,313,413

41,302,205

Net loss (income) attributable to non-controlling interest

8,382

79

27,937

118,945

NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST

2,763,140

11,673,108

16,341,350

41,421,150

OTHER COMPREHENSIVE INCOME

Foreign currency translation gain

6,350,139

706,638

16,076,027

1,362,038

OTHER COMPREHENSIVE INCOME

6,350,139

706,638

16,076,027

1,362,038

COMPREHENSIVE INCOME

$

9,113,279

$

12,379,746

$

32,417,377

$

42,783,188

EARNINGS PER COMMON SHARE

Basic

$

0.04

$

0.16

$

0.22

$

0.56

Diluted

$

0.04

$

0.14

$

0.22

$

0.53

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

Basic

74,956,648

74,673,067

74,810,016

74,612,602

Diluted

75,983,964

89,494,201

75,724,826

89,286,621

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 31,

DECEMBER 31,

2010

2009

CURRENT ASSETS

Cash and cash equivalents

$

94,568,520

$

91,126,486

Restricted Cash

537,297

3,298,379

Accounts and notes receivable, net

80,598,919

57,504,454

Inventories, net

12,665,586

10,015,711

Advances to suppliers and prepaid expenses

14,246,144

13,901,180

Deferred tax assets

649,503

824,451

Other current assets

2,986,005

1,246,647

Total Current Assets

206,251,974

177,917,308

LONG-TERM ASSETS

Property, plant and equipment, net

109,547,616

95,468,265

Land use rights, net

155,433,311

153,604,196

Other long term assets

8,167,880

7,909,086

Construction in progress

22,516,044

28,975,386

Other intangible assets, net

14,889,127

18,695,554

Goodwill

33,164,121

33,164,121

Investments in and advances to equity investments

59,068,491

57,325,887

Deferred tax assets

147,024

134,268

Unamortized financing costs

2,359,404

3,287,694

Total Long-Term Assets

405,293,018

398,564,457

TOTAL ASSETS

$

611,544,992

$

576,481,765

LIABILITIES AND SHAREHOLDERS’ EQUITY

DECEMBER 31,

DECEMBER 31,

2010

2009

CURRENT LIABILITIES

Accounts payable

$

10,716,686

$

7,497,143

Notes payable

537,297

3,392,575

Other payables and accrued expenses

18,039,557

22,320,757

Taxes payable

1,237,169

947,338

Short-term bank loans

6,957,258

10,384,368

Current portion of long-term bank loans

61,405

60,108

Other liabilities

6,284,107

2,199,280

Deferred tax liabilities

243,304

172,473

Total Current Liabilities

44,076,783

46,974,042

LONG-TERM LIABILITIES

Long-term bank loans, net of current portion

679,866

743,957

Deferred tax liabilities

15,837,479

15,961,465

Unrecognized tax benefits

5,050,157

2,746,561

Convertible Notes

115,000,000

115,000,000

Total Long-Term Liabilities

136,567,502

134,451,983

TOTAL LIABILITIES

180,644,285

181,426,025

EQUITY

SHAREHOLDERS’ EQUITY

Preferred stock, $0.001 par value; 2,000,000 shares authorized;

1,000,000 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively

1,000

1,000

Common stock, $0.001 par value; 150,000,000 shares authorized;

78,598,604 and 78,321,439 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively.

78,598

78,321

Common stock to be issued

350,500

388,000

Prepaid forward repurchase contract

(29,998,616)

(29,998,616)

Additional paid-in capital

203,322,671

199,829,921

Retained earnings (the restricted portion of retained earnings is

$26,471,124 and $23,757,901 at December 31, 2010 and December 31, 2009, respectively)

207,515,104

191,173,754

Accumulated other comprehensive income

49,126,251

33,050,224

Total Shareholders’ Equity

430,395,508

394,522,604

Non-controlling Interest

505,199

533,136

TOTAL EQUITY

430,900,707

395,055,740

TOTAL LIABILITIES AND EQUITY

$

611,544,992

$

576,481,765

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SOURCE American Oriental Bioengineering, Inc.



RELATED LINKS

http://www.bioaobo.com