American Oriental Bioengineering Reports Second Quarter 2011 Financial Results

American Oriental Bioengineering Reports Second Quarter 2011 Financial Results

  PR Newswire

  NEW YORK, Aug. 9, 2011

NEW YORK, Aug. 9, 2011 /PRNewswire-Asia-FirstCall/ -- American Oriental
Bioengineering, Inc. (NYSE: AOB), (the "Company" or "AOB"), 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 second quarter
ended June 30, 2011.

Second Quarter 2011 Financial Performance

In the second quarter of 2011, revenue decreased to $54.1 million from $77.3
million in the same period of 2010.

  *The Company generated revenue of $50.3 million from its manufacturing
    business in the second quarter of 2011 compared with $73.7 million in the
    prior year period. Revenue from pharmaceutical products decreased to $40.7
    million from $63.8 million in the prior year period. Nutraceutical
    products generated revenue of approximately $9.5 million in the second
    quarter of 2011, compared to $9.9 million in the prior year period. We
    decreased the manufacturing of certain generic drugs strategically shifted
    the products mix toward higher-margin products from lower margin products
    in order to minimize the impact from the increased cost of certain raw
    materials and the continuing government price cut on certain products.
  *The Company generated $3.8 million from its distribution business, Nuo
    Hua, in the second quarter of 2011, an increase of 5.2% from $3.6 million
    in the prior year period.

Gross profit in the second quarter of 2011 was $25.8 million compared to $39.8
million in the second quarter of 2010. Gross margin was 47.8% compared to
51.5% in the prior year period. The margin pressure was mainly caused by the
increased costs of certain raw materials and newly levied urban construction
and maintenance tax and educational surcharge to foreign invested companies in
China since December, 2010.

Operating income in the second quarter of 2011 decreased to $6.3 million
compared with $9.1 million in the prior year period. Total operating expenses
decreased 36.4% to $19.6 million from $30.8 million in the prior year period.
Selling, general and administrative expenses decreased 32.4% to $11.3 million
from $16.7 million in the prior year period. The decrease reflects
management's continuing efforts to stringently control the spending.
Advertising expense decreased 63.1% to $3.4 million in the second quarter of
2011 from $9.2 million in the prior year period, reflecting reduced
advertising efforts on some of OTC drugs to correspond to the Company's
selective product sales strategy and optimal product portfolio. Research and
development expenses decreased 3.9% to $3.1 million from $3.3 million in the
prior year period while the company continues to invest in its innovation and
technology improvement.

The Company generated a gain of $1.4 million due to changes in ownership of
unconsolidated entities, including investments in Nuo Hua Affiliate and Aoxing
Pharmaceutical Company, Inc. ("AXN").

Net income attributable to controlling interest for the second quarter of 2011
was $3.6 million, or $0.05 per diluted share, compared to $5.1 million, or
$0.07 per diluted share, in the prior year period.

First Half 2011 Financial Performance

Revenue for the first half of 2011 decreased to $106.1 million from $131.0
million in the prior year period. In the first half of 2011, gross profit was
$50.9 million, compared to $68.1 million in the prior year period. Operating
income in the first half of 2011was $11.8 million, compared to $15.5 million
in the prior year period. Net income attributable to controlling interest in
the first half of 2011 was $4.5 million, or $0.06 per diluted share, compared
to $8.2 million, or $0.11 per diluted share, in the prior year period.

Balance Sheet

Our cash position at June 30, 2011 was $75 million, representing a decrease of
$19.5 million compared with our cash position of $94.6 million at December 31,
2010. The decrease was mainly attributable to the decrease of investing
activities of $35.7 million and partially offset by the increase from the
operating and financing activities of $12.2 million and $0.2 million in the
first half of 2011, respectively.

The Company generated approximately $12.2 million of operating cash flow in
the first half of 2011, representing an increase of $4.4 million compared with
cash flows from operations of $7.7 million for the same period of 2010 mainly
from the collection of accounts and notes receivable of $19.2 million.

Our net cash used in investing activities amounted to $35.7 million in the
first half of 2011 including cash outflows for a deposit of $23.8 million for
a long-lived asset to be acquired, which will allow us to have the right to
establish a TCM raw material trading center in Northeast China approved by
SFDA. The investment is intended to be integrated with our competitive
infrastructure and whole supply chain management, providing a platform for the
Company to start a TCM raw material trading business, offering a long term
steadier supply of quality raw materials with manageable costs covering
Northeast China and generating new profit stream in addition to our existing
product portfolio.

We also paid $8.5 million for purchases of construction in progress in the
first half of 2011 for the expansion and upgrade of our manufacturing
facilities to complement capacity improvement and efficiency enhancement.

We maintain a significant level of working capital. Our working capital
decreased to $138.5 million at June 30, 2011, as compared to $162.2 million at
December 31, 2010, primarily due to a decrease in cash and cash equivalents by
$19.5 million, a decrease in net accounts and notes receivable by $19.0
million and partially offset by an increase of net inventories of $11.9
million.

Mr. Tony Liu, Chairman and Chief Executive Officer of AOB, commented, "Our
second quarter 2011 financial results were in line with our expectations
considering the increased costs of certain raw materials and the government's
price reduction on certain drugs. The financial performance reflects our
continuing efforts on profitability and cost control, which largely absorbed
revenue pressure and mitigated margin decline. We are also excited to benefit
from our long-term investments in R&D both domestically and internationally."

Conference Call

The Company will hold a conference call at 8:00 am ET on Wednesday, August 10,
2011, to discuss its results. Listeners may access the call by dialing
1-800-299-0148 or 1-617-801-9711 for international callers, access code:
43793141. A webcast will also be available through AOB's website at
www.bioaobo.com . A replay of the call will be available through August 17,
2011. Listeners may access the replay by dialing 1-888-286-8010 or
1-617-801-6888 for international callers, access code: 22224178.

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 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
                                 (UNAUDITED)
                       THREE MONTHS ENDED JUNE 30   SIX MONTHS ENDED JUNE 30
                           2011          2010          2011          2010
Revenues             $   54,051,796 $  77,296,212 $ 106,053,906 $ 131,045,980
Cost of sales            28,206,945    37,455,860    55,133,145    62,968,907
GROSS PROFIT             25,844,851    39,840,352    50,920,761    68,077,073
Selling, general &
administrative
expenses                 11,258,098    16,663,566    22,497,345    27,406,278
Advertising costs         3,399,355     9,217,247     7,220,503    15,965,717
Research and
development costs         3,125,276     3,250,882     5,826,488     6,029,691
Depreciation and
amortization              1,784,380     1,622,989     3,555,091     3,219,947
Total operating
expenses                 19,567,109    30,754,684    39,099,427    52,621,633
INCOME FROM
OPERATIONS                6,277,742     9,085,668    11,821,334    15,455,440
Equity in earnings
(losses) from
unconsolidated
entities                    551,461     (296,301)       141,575      (41,086)
Gain (loss) on
changes in ownership
of unconsolidated
entities                  1,417,878       125,502     1,417,878      (12,240)
Interest expense,
net                     (1,518,810)   (1,371,246)   (3,032,395)   (2,937,031)
Other income
(expenses), net              11,887      (30,039)       437,767      (17,792)
INCOME BEFORE INCOME
TAXES                     6,740,158     7,513,584    10,786,159    12,447,291
Income tax                3,169,813     2,395,850     6,294,668     4,211,780
NET INCOME                3,570,345     5,117,734     4,491,491     8,235,511
Net loss attribute
to non-controlling
interest                     10,673         6,476        13,679        11,876
NET INCOME
ATTRIBUTABLE TO
CONTROLLING INTEREST      3,581,018     5,124,210     4,505,170     8,247,387
OTHER COMPREHENSIVE
INCOME                    8,277,811     1,843,654    11,410,277     1,936,503
COMPREHENSIVE INCOME $   11,858,829 $   6,967,864 $  15,915,447 $  10,183,890
EARNINGS PER COMMON
SHARE
Basic                $         0.05 $        0.07 $        0.06 $        0.11
Diluted              $         0.05 $        0.07 $        0.06 $        0.11
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic                    74,675,136    74,743,986    74,788,633    74,680,327
Diluted                  76,621,881    75,857,073    76,328,242    75,502,489

           AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (UNAUDITED)
                                                    JUNE 30,     DECEMBER 31,
                                                      2011           2010
CURRENT ASSETS
Cash and cash equivalents                       $   75,030,526 $   94,568,520
Restricted Cash                                      1,306,706        537,297
Accounts and notes receivable, net                  61,582,172     80,598,919
Inventories, net                                    24,562,693     12,665,586
Advances to suppliers and prepaid expenses          18,038,742     14,246,144
Deferred tax assets                                    319,197        649,503
Other current assets                                 2,867,258      2,986,005
             Total Current Assets                  183,707,294    206,251,974
LONG-TERM ASSETS
Property, plant and equipment, net                 110,060,705    109,547,616
Land use rights, net                               157,244,683    155,433,311
Other long term assets                              38,112,044      8,167,880
Construction in progress                            31,479,655     22,516,044
Other intangible assets, net                        13,539,694     14,889,127
Goodwill                                            33,164,121     33,164,121
Other long-term investment                          41,772,510              -
Investments in and advances to equity
investments                                         19,759,725     59,068,491
Deferred tax assets                                     90,519        147,024
Unamortized financing costs                          1,895,259      2,359,404
            Total Long-Term Assets                 447,118,915    405,293,018
                 TOTAL ASSETS                   $  630,826,209 $  611,544,992
LIABILITIES AND SHAREHOLDERS’
EQUITY
                                                    JUNE 30,     DECEMBER 31,
                                                      2011           2010
CURRENT LIABILITIES
Accounts payable                                $   14,663,333 $   10,716,686
Notes payable                                        1,306,706        537,297
Other payables and accrued expenses                 14,175,197     18,039,557
Taxes payable                                        2,550,152      1,237,169
Short-term bank loans                                8,166,337      6,957,258
Current portion of long-term bank loans                 62,148         61,405
Other liabilities                                    4,107,599      6,284,107
Deferred tax liabilities                               171,650        243,304
           Total Current Liabilities                45,203,122     44,076,783
LONG-TERM LIABILITIES
Long-term bank loans, net of current portion           648,560        679,866
Deferred tax liabilities                            15,671,928     15,837,479
Unrecognized tax benefits                            6,666,147      5,050,157
Convertible Notes                                  115,000,000    115,000,000
          Total Long-Term Liabilities              137,986,635    136,567,502
               TOTAL LIABILITIES                   183,189,757    180,644,285
EQUITY
SHAREHOLDERS’ EQUITY
Preferred stock, $0.001 par value; 2,000,000
shares authorized;
            1,000,000 shares issued and
            outstanding at June 30, 2011 and
            December 31, 2010, respectively              1,000          1,000
Common stock, $0.001 par value; 150,000,000
shares authorized;
            78,915,514 shares and 78,598,604
            shares issued as of June 30, 2011
            and December 31, 2010,
            respectively; 78,466,351 shares and
            78,598,604 shares outstanding as of
            June 30, 2011 and December 31,
            2010, respectively                          78,915         78,598
Common stock to be issued                              157,333        350,500
Additional paid-in capital                         205,149,497    203,322,671
Retained earnings (the restricted portion of
retained earnings is
            $26,471,124 at both June 30, 2011
            and December 31, 2010)                 212,020,274    207,515,104
Less: Treasury stock, at cost (449,163 shares
and nil as of June 30, 2011 and December 31,
2010, respectively)                                  (799,999)              -
Less: Prepaid forward repurchase contract         (29,998,616)   (29,998,616)
Accumulated other comprehensive income              60,536,528     49,126,251
          Total Shareholders’ Equity               447,144,932    430,395,508
Non-controlling Interest                               491,520        505,199
                 TOTAL EQUITY                      447,636,452    430,900,707
         TOTAL LIABILITIES AND EQUITY           $  630,826,209 $  611,544,992

SOURCE American Oriental Bioengineering, Inc.

Website: http://www.bioaobo.com
 
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