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American Oriental Bioengineering Reports Second Quarter 2008 Financial Results
Date:8/11/2008

-- Revenue Increased 74.0% to $59.0 Million in 2Q08 --

-- 2Q08 Net Income Increased 43.4% to $13.9 Million --

-- 2Q08 Diluted EPS $0.18 versus 2Q07 Diluted EPS $0.15 --

NEW YORK, Aug. 11 /Xinhua-PRNewswire-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE: 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 in China, today announced financial results for the quarter ended June 30, 2008.

Revenue in the second quarter of 2008 increased 74.0% year over year to $59.0 million from $33.9 million, reflecting a continued increase in demand for the Company's OTC and prescription pharmaceutical products. Revenue from pharmaceutical products increased 91.5% to $49.8 million from $26.0 million in the second quarter of 2007. Revenue from OTC pharmaceutical products increased 102.9% to $29.4 million from $14.5 million in the prior year's second quarter, reflecting continued recognition of the Company's new products supported by effective marketing campaigns. Sales generated by CCXA and Boke, which were not subsidiaries in the second quarter of 2007, were major contributors to the increase in OTC sales and generated a combined $13.4 million of revenue during the second quarter of 2008. Strong sales of the Jinji series and Jinji Yimucao products also contributed to the increase in OTC revenue during the second quarter of 2008. Prescription pharmaceutical products generated $20.4 million in revenue during the second quarter of 2008, a 77.2% year over year increase, driven by sales of Shuanghuanglian Injection Powder and Cease Enuresis Soft Gel. We believe that our continous marketing efforts, increased brand recognition and effective pricing strategy, as well as expanding rural market coverage drove prescription pharmaceutical revenue performance during the second quarter of 2008. Nutraceutical product revenue increased approximately 17% to $9.2 million in the second quarter of 2008 from $7.9 million in the prior year's period, and decreased as a percentage of total revenue to approximately 15.6% versus 23.3% in the comparable period. The increase in Nutraceutical revenue was mainly attributed to the increase in sales of peptide tablets and peptide powder. The Company continues to focus on selling and marketing higher growth pharmaceutical products.

Gross profit in the second quarter of 2008 increased 69.1% to $40.1 million from $23.7 million in the second quarter of 2007. Gross margin was approximately 67.9%, compared to 69.9% in the prior year's period, reflecting a shift in product mix.

For the second quarter of 2008, operating expenses increased 75.5% to $21.4 million from $12.2 million in the comparable period of 2007. The increase in operating expenses was primarily due to increases of $3.8 million in sales and marketing expenses, $2.7 million in general and administrative expenses as well as additional depreciation and amortization costs due to the Boke and CCXA acquisitions. Income from operating in the second quarter of 2008 increased 62.4% to $18.7 million from $11.5 million in the second quarter of 2007, while operating margin was 31.7%, compared to 33.9% in the second quarter of the prior year.

Net income for the second quarter of 2008 increased 43.4% to $13.9 million, or $0.18 per diluted share, compared to $9.7 million, or $0.15 per diluted share, in the prior year's period. Net income for the second quarter of 2008 includes the impact of $0.6 million in loss from unconsolidated entities, related to the Company's minority ownership in China Aoxing. Diluted share count in the second quarter of 2008 was 78.2 million, compared to 66.6 million in the second quarter of 2007.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented ''We are very pleased with our financial performance in the second quarter of 2008. All of our product categories exhibited strong sales and we believe that our performance is the result of promoting effective marketing and branding of our products and the expansion into rural markets. We believe that our six month performance speaks to the effectiveness of our acquisition strategy. For the six month period in 2008, OTC revenue was up 117% versus the year before, with $23.4 million of incremental revenue from CCXA and Boke integrations. We also generated $28.4 million of operating cash flow, an increase of 77.3% from the same period of last year.''

Mr. Liu concluded, ''We continue to anticipate revenue growth in 2008 of at least 50 percent, and expect to reach total revenue of at least $245.0 million in the full year 2008. This anticipated year over year top line growth reflects continued demand for our leading products, and particularly our success with CCXA and Boke integrations. We also anticipate net income performance of at least $62.0 million, which reflects anticipated year over year net income growth of more than 44%. This full year financial guidance excludes interest expense related to the July 2008 convertible financing and excludes the financial impact of any pending acquisitions or LOIs. On that note, we remain dedicated to our goal of building a leading pharmaceutical business in China. Today we have signed an LOI and we are in the process of negotiating a large acquisition of a pharmaceutical distribution company located in China, which we believe will bolster the reach of our distribution network. We intend to move quickly and efficiently on the acquisition front and we'll strive to work responsibly and aggressively on behalf of our shareholders.''

The Company will hold a conference call at 5:00 pm ET on August 11, 2008 to discuss its fiscal second quarter 2008 results. Listeners may access the call by dialing 1-800-599-9816 or 1-617-847-8705 for international callers, access code: 41757592. 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 18, 2008. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 95123746.

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 in China.

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-Q for the quarter ended June 30, 2008, 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 BALANCE SHEETS

ASSETS

JUNE 30, DECEMBER 31,

2008 2007

(UNAUDITED)

CURRENT ASSETS

Cash and cash equivalents $ 144,473,275 $ 166,410,075

Accounts receivable, net of

reserve of $176,962 and $302,270

at June 30, 2008 and December 31,

2007, respectively 17,332,076 16,494,619

Inventories, net 18,968,955 12,264,536

Advances to suppliers 2,984,896 4,309,352

Notes receivable 691,872 2,259,616

Refundable deposit 6,368,222 --

Other current assets 534,169 5,134,118

Total Current Assets 191,353,465 206,872,316

LONG-TERM ASSETS

Plant and equipment, net 50,561,819 48,496,760

Land use rights, net 48,732,647 46,310,240

Deposit for long-term assets 34,852,986 --

Construction-in-progress 776,947 755,614

Deferred tax assets 1,866,111 1,498,481

Other intangible assets, net 26,232,600 26,972,166

Goodwill 22,566,768 22,566,768

Investment and advances in

unconsolidated entities 19,318,730 242,551

Other long-term assets 290,000 --

Total Long-Term Assets 205,198,608 146,842,580

TOTAL ASSETS $ 396,552,073 $ 353,714,896

LIABILITIES AND SHAREHOLDERS' EQUITY

JUNE 30, DECEMBER 31,

2008 2007

(UNAUDITED)

CURRENT LIABILITIES

Accounts payable $ 4,671,462 $ 3,436,352

Other payables and accrued expenses 8,281,952 7,786,157

Taxes payable 3,766,436 2,843,719

Short-term bank loans 6,694,025 6,289,222

Current portion of long-term bank

loans 2,958,324 2,374,565

Other liabilities 2,711,988 3,621,030

Deferred tax liabilities 358,529 109,733

Total Current Liabilities 29,442,716 26,460,778

LONG-TERM LIABILITIES

Long-term bank loans, net of current

portion 828,879 1,263,483

Long-term notes payable 296,668 286,365

Deferred tax liabilities 16,713,352 12,621,180

Total Long-Term

Liabilities 17,838,899 14,171,028

TOTAL LIABILITIES 47,281,615 40,631,806

COMMITMENTS

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value;

2,000,000 shares authorized;

1,000,000 shares issued and

outstanding at June 30, 2008 and

December 31, 2007, respectively 1,000 1,000

Common stock, $0.001 par value;

150,000,000 shares authorized;

78,249,264 and 77,991,935 shares

issued and outstanding at June 30,

2008 and December 31, 2007,

respectively. 78,249 77,992

Common stock to be issued 182,332 1,611,333

Additional paid-in capital 195,253,082 193,007,987

Retained earnings (the restricted

portion of retained earnings is

$15,910,685 at June 30, 2008 and

December 31, 2007, respectively 125,399,613 102,117,792

Accumulated other comprehensive

income 28,356,182 16,266,986

Total Shareholders' Equity 349,270,458 313,083,090

TOTAL LIABILITIES AND SHAREHOLDERS'

EQUITY $ 396,552,073 $ 353,714,896

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

THREE MONTHS SIX MONTHS

ENDED JUNE 30, ENDED JUNE 30,

2008 2007 2008 2007

REVENUES $ 59,010,005 $ 33,913,234 $ 97,778,603 $ 59,662,608

COST OF GOODS

SOLD 18,928,447 10,210,485 31,406,083 18,240,539

GROSS PROFIT 40,081,558 23,702,749 66,372,520 41,422,069

Selling and

marketing 7,687,892 3,886,564 12,717,600 6,590,035

Advertising 7,452,231 5,412,510 11,846,572 9,237,855

General and

administrative 5,253,274 2,557,805 9,165,957 5,495,949

Depreciation

and

amortization 1,010,461 341,562 1,987,671 675,836

Total

operating

expenses 21,403,858 12,198,441 35,717,800 21,999,675

INCOME FROM

OPERATIONS 18,677,700 11,504,308 30,654,720 19,422,394

EQUITY IN

EARNINGS

(LOSS) FROM

UNCONSOLIDATED

ENTITIES (640,008) 3,888 (641,067) 11,000

INTEREST

INCOME

(EXPENSE), NET (30,616) 43,048 (13,769) 17,238

OTHER INCOME

(EXPENSE), NET (255,770) 56,952 (356,502) 131,958

INCOME BEFORE

INCOME TAXES 17,751,306 11,608,196 29,643,382 19,582,590

INCOME TAXES 3,891,614 1,939,825 6,361,562 3,464,773

NET INCOME 13,859,692 9,668,371 23,281,820 16,117,817

OTHER

COMPREHENSIVE

INCOME

Foreign

currency

translation

gain, net

of tax 5,154,761 1,468,243 12,089,196 2,279,042

TOTAL OTHER

COMPREHENSIVE

INCOME, NET

OF TAX 5,154,761 1,468,243 12,089,196 2,279,042

COMPREHENSIVE

INCOME $ 19,014,453 $ 11,136,614 $ 35,371,016 $ 18,396,859

NET INCOME

PER SHARE

BASIC $ 0.18 $ 0.15 $ 0.30 $ 0.25

DILUTED $ 0.18 $ 0.15 $ 0.30 $ 0.24

WEIGHTED

AVERAGE

NUMBER OF

SHARES

OUTSTANDING

BASIC 78,223,659 65,144,311 78,207,405 64,877,916

DILUTED 78,223,659 66,600,080 78,208,181 66,483,294


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SOURCE American Oriental Bioengineering, Inc.
Copyright©2008 PR Newswire.
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