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Message: AOBO Reports Second Quarter 2010 Financial Results
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AOBO Reports Second Quarter 2010 Financial Results

posted on Aug 09, 10 06:00AM

NEW YORK, Aug. 9 /PRNewswire-Asia-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE:AOB - News), ("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 second quarter ended June 30, 2010.

Second Quarter 2010 Financial Performance

Revenue in the second quarter of 2010 increased 8.5% year over year to $77.3 million from $71.2 million, reflecting continued demand for the Company's core prescription products.


-- Revenue from pharmaceutical products increased 9.1% to $63.8 million
from $58.4 million in the second quarter of 2009. Revenue from
prescription pharmaceutical products increased 20.8% to $30.4 million
from $25.2 million in the prior year period, primarily due to the
increase sales of the Jinji capsule, SHL powder, YYQH capsule and the
expansion of CCXA generic pharmaceutical products in the rural market.
The overall increase in sales was supported by our continuous marketing
efforts, increase in new products offerings, as well as expanding
coverage in the rural market. OTC pharmaceutical products generated
$33.4 million in revenue during the second quarter of 2010, compared to
$33.3 million in the prior year period.
-- Nutraceutical products generated revenue of approximately $9.9 million
in the second quarter of 2010, up 4.3% from $9.5 million in the prior
year period, reflecting increased sales of soybean milk as the market
expanded.
-- The Company generated $3.6 million from its distribution business, Nuo
Hua, in the second quarter of 2010. An increase of 10.0% was mainly
attributed to Nuo Hua's expanding market coverage.

Gross profit in the second quarter of 2010 was $39.8 million, compared to $41.6 million in the second quarter of 2009. Gross margin was 51.5%, compared to 58.4% in the prior year period and 52.5% in the prior quarter reflecting a greater proportion of generic product sales in the rural market. Further, the increased purchase prices of certain raw materials increased the cost of sales also contributed to lower gross profit.

Operating income in the second quarter of 2010 was $9.1 million, compared to $18.0 million in the prior year period. Selling and marketing expenses increased 22.4% to $11.5 million from $9.4 million in the prior year period, and advertising expense increased 18.5% to $9.2 million in the second quarter of 2010 from $7.8 million in the prior year period. General and administrative expenses increased 28.1% to $5.2 million from $4.0 million in the prior year period. Research and development expenses increased to $3.3 million from $0.8 million in the prior year period, reflecting the Company's continued efforts in research and development activities. Our research and development activities consist of near term, middle team and long term stages which contribute to both our current and future business strategies.

Net income attributable to controlling interest for the second quarter of 2010 was $5.1 million, compared to $12.6 million in the prior year period. The Company's net income attributable to controlling interest was $0.07 per diluted share, compared to $0.16 per diluted share in the same period of 2009.

Six Month Financial Performance

Revenue for the six months ended June 30, 2010 increased 11.7% to $131.0 million from $117.3 million in the first six months of 2009. During the same time period, gross profit was $68.1 million, compared to $70.0 million in the first six months of 2009. Operating income in the first six months of 2010 was $15.5 million, compared to $28.9 million in the first six months of 2009. Net income attributable to controlling interest for the first six months of 2010 was $8.2 million, compared to $19.7 million in the prior year period. In the first six months of 2010, net income per diluted share was approximately $0.11.

Balance Sheet

As of June 30, 2010, the Company had $96.4 million in cash and cash equivalents, and generated approximately $7.7 million of operating cash flow during the first half of 2010. Working capital was $147.0 million as of June 30, 2010, reflecting an increase of 12.3% from $130.9 million as of December 31, 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "AOBO's prescription product division ramped up very quickly in the second quarter of 2010. The double digit growth is a result of our previous investment in new products as well as continued strong demand for existing branded products. During the past quarter, we continued to execute our R&D-driven strategy, which consumed 4.2% of total revenue. Our focus on upgrading existing products and developing new ones will proactively prepare AOB for both near term and long term growth. Furthermore, we continued to strengthen and integrate AOBO's unified mega brand through an effective advertising campaign as well as fortify our presence in rural areas with advanced sales network expansion. Meanwhile, we consistently monitored our inventory of raw materials and assiduously controlled costs, which partially offset the two prevalent influences of rising raw material costs and labor costs. These combined efforts are aimed to help AOBO more effectively adjust to policy changes and capitalize on emerging opportunities."

Conference Call

The Company will hold a conference call at 8:00 am ET on Monday, August 9, to discuss its results. Listeners may access the call by dialing 1-800-573- 4842 or 1-617-224-4327 for international callers, access code: 10613898. A webcast will also be available through AOB's website at http://www.bioaobo.com . A replay of the call will be available through August 16, 2010. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 35043398.

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.




AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2010 2009 2010 2009

Revenues $77,296,212 $71,222,037 $131,045,980 $117,299,227
Cost of sales 37,455,860 29,594,923 62,968,907 47,255,261

GROSS PROFIT 39,840,352 41,627,114 68,077,073 70,043,966

Selling and
marketing
expenses 11,505,462 9,396,129 17,481,688 14,607,631
Advertising
costs 9,217,247 7,779,936 15,965,717 13,347,293
Research and
development
costs 3,250,882 809,584 6,029,691 1,559,382
General and
administrative
expenses 5,158,104 4,026,425 9,924,590 8,417,126
Depreciation and
amortization 1,622,989 1,623,556 3,219,947 3,256,142

Total operating
expenses 30,754,684 23,635,630 52,621,633 41,187,574

INCOME FROM
OPERATIONS 9,085,668 17,991,484 15,455,440 28,856,392

Equity in
earnings (loss)
from
unconsolidated
entities (170,799) (173,258) (53,326) 264,536
Interest
expense, net 1,371,246 1,620,069 2,937,031 3,199,338
Other expenses,
net 30,039 16,329 17,792 114,938

INCOME BEFORE
INCOME TAXES 7,513,584 16,181,828 12,447,291 25,806,652
Income tax 2,395,850 3,735,558 4,211,780 6,205,322

NET INCOME 5,117,734 12,446,270 8,235,511 19,601,330

Net loss
attributable to
non-controlling
interest 6,476 123,068 11,876 119,517

NET INCOME
ATTRIBUTABLE TO
CONTROLLING
INTEREST 5,124,210 12,569,338 8,247,387 19,720,847

OTHER
COMPREHENSIVE
INCOME 1,843,654 21,945 1,936,503 513,282

COMPREHENSIVE
INCOME $6,967,864 $12,591,283 $10,183,890 $20,234,129

EARNINGS PER
COMMON SHARE
Basic $0.07 $0.17 $0.11 $0.27
Diluted $0.07 $0.16 $0.11 $0.26

WEIGHTED AVERAGE
SHARES
OUTSTANDING
Basic 74,743,986 74,582,920 74,680,327 74,560,809
Diluted 75,857,073 88,815,593 75,502,489 86,939,711



AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

JUNE 30, DECEMBER 31,
2010 2009
CURRENT ASSETS
Cash and cash equivalents $96,433,832 $91,126,486
Restricted Cash 1,103,535 3,298,379
Accounts and notes receivable, net 66,767,659 57,504,454
Inventories, net 19,016,578 10,015,711
Advances to suppliers and prepaid
expenses 5,937,021 13,901,180
Deferred tax assets 550,535 824,451
Other current assets 1,347,639 1,246,647
Total Current Assets 191,156,799 177,917,308

LONG-TERM ASSETS
Property, plant and equipment, net 95,445,470 95,468,265
Land use rights, net 152,594,995 153,604,196
Other long term assets 7,967,784 7,909,086
Construction in progress 29,324,123 28,975,386
Other intangible assets, net 16,329,103 18,695,554
Goodwill 33,164,121 33,164,121
Investments in and advances to
equity investments 57,441,048 57,325,887
Deferred tax assets 143,781 134,268
Unamortized financing costs 2,823,549 3,287,694
Total Long-Term Assets 395,233,974 398,564,457

TOTAL ASSETS $586,390,773 $576,481,765

LIABILITIES AND SHAREHOLDERS' EQUITY

JUNE 30, DECEMBER 31,
2010 2009
CURRENT LIABILITIES
Accounts payable $11,477,039 $7,497,143
Notes payable 1,103,535 3,392,575
Other payables and accrued expenses 16,935,522 22,320,757
Taxes payable 605,024 947,338
Short-term bank loans 8,959,257 10,384,368
Current portion of long-term bank
loans 60,629 60,108
Other liabilities 4,842,631 2,199,280
Deferred tax liabilities 173,496 172,473
Total Current Liabilities 44,157,133 46,974,042

LONG-TERM LIABILITIES
Long-term bank loans, net of current
portion 710,598 743,957
Deferred tax liabilities 15,652,960 15,961,465
Unrecognized tax benefits 3,871,701 2,746,561
Convertible Notes 115,000,000 115,000,000
Total Long-Term Liabilities 135,235,259 134,451,983
TOTAL LIABILITIES 179,392,392 181,426,025

EQUITY
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value;
2,000,000 shares authorized;
1,000,000 shares issued and
outstanding at at June 30, 2010
and December 31, 2009, respectively 1,000 1,000
Common stock, $0.001 par value;
150,000,000 shares authorized;
78,580,138 and 78,321,419 shares
issued and outstanding at June
30, 2010 and December 31,
2009,respectively. 78,580 78,321
Common stock to be issued 181,500 388,000
Prepaid forward repurchase contract (29,998,616) (29,998,616)
Additional paid-in capital 201,806,789 199,829,921
Retained earnings (the restricted
portion of retained earnings is
$23,757,901 at June 30 and
December 31, 2009.) 199,421,141 191,173,754
Accumulated other comprehensive
income 34,986,727 33,050,224
Total Shareholders' Equity 406,477,121 394,522,604
Non-controlling Interest 521,260 533,136
TOTAL EQUITY 406,998,381 395,055,740
TOTAL LIABILITIES AND EQUITY $586,390,773 $576,481,765



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