NEW YORK, Nov. 16 /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 third quarter ended September 30, 2009.
Third Quarter 2009 Financial Performance
Revenue in the third quarter of 2009 increased 11.7% to $78.8 million from $70.6 million in the third quarter of 2008, reflecting continued demand for the Company's core pharmaceutical and nutraceutical products. Revenue from pharmaceutical products increased 6.3% to $66.0 million from $62.1 million in the third quarter of 2008. Revenue from prescription pharmaceutical products increased 22.7% to $29.8 million during the third quarter of 2009, reflecting a year over year increase in sales from prescription formulated Jinji capsule, Boke and CCXA products, which offset declines in sales of Shuanghuanglian Injection Powder ("SHL"). The overall increase in sales was also supported by continuous marketing efforts, an increase in new product offerings, as well as expansion of coverage to previously unaddressed rural markets. OTC pharmaceutical products generated $36.2 million in revenue during the third quarter of 2009, in comparison to $37.8 million in the prior year's period, primarily reflecting lower sales performance of Jinji Yimucao, a drug included in China's Essential Drug list, as distributors reduced orders in anticipation of pricing uncertainty related to healthcare reform. Nutraceutical products generated revenue of approximately $9.2 million in the third quarter of 2009, up 8.7% from $8.5 million in the prior year period, reflecting increased sales of new beverage products launched in the beginning of 2009. The Company generated $3.6 million from its distribution business in the third quarter of 2009.
Gross profit in the third quarter of 2009 was $44.1 million compared to $47.2 million in the third quarter of 2008. Gross margin was 56.0%, compared to 66.8% in the prior year period, reflecting continued revenue mix shift to CCXA's generic product sales, increasing raw material prices and lower margin distribution business from Nuo Hua.
Operating income in the third quarter of 2009 was $15.0 million compared to $21.6 million in the third quarter of 2008. Selling and marketing expenses increased 23.2% to $12.2 million from $9.9 million in the prior year period. The increase primarily reflects increased marketing and promotional initiatives related to enhancing prescription product sales. Advertising expense was $9.0 million in the third quarter of 2009, compared to $9.9 million in the prior year period, reflecting a greater focus on promotional activities and direct sales efforts. General and administrative expenses increased 37.7% to $6.5 million from $4.7 million in the prior year period, primarily driven by expenses related to improving production efficiency and testing equipment and technology upgrades as a result of more stringent GMP manufacturing standards.
Net income attributable to controlling interest for the third quarter of 2009 was $10.0 million, compared to $16.3 million in the prior year period. Excluding $0.9 million of interest expense on convertible securities and $0.2 million of amortized financing costs related to the Company's outstanding convertible notes, the Company's net income attributable to controlling interest was $11.2 million, or $0.13 per diluted share. In the third quarter of 2008, net income per diluted share was approximately $0.21.
Nine Months Ended September 30, 2009 Financial Performance
Revenue for the nine months ended September 30, 2009 increased 16.5% to $196.1 million from $168.4 million in the first nine months of 2008. During the same time period, gross profit increased slightly by 0.5% to $114.2 million from $113.6 million in the first nine months of 2008. Operating income in the first nine months of 2009 was $43.9 million compared to $51.9 million in the first nine months of 2008. Net income attributable to controlling interest for the first nine months of 2009 was $29.7 million, compared to $39.2 million in the prior year period. Excluding $3.8 million of interest expense on convertible securities and $0.7 million of amortized financing costs related to the Company's outstanding convertible notes, the Company's net income attributable to controlling interest was $34.2 million, or $0.39 per diluted share. In the first nine months of 2008, net income per diluted share was approximately $0.50.
As of September 30, 2009, the Company had $115.9 million in cash and generated approximately $44.3 million of operating cash flow during the first nine months of 2009.
Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "Despite the tough business environment we are currently experiencing, we are pleased with our third quarter performance as we continued to enhance our diversified product portfolio and pursue further vertical integration. We are witnessing uncertainty around product pricing related to healthcare reform, and this has caused select disruption in purchasing patterns. Nonetheless, we continue to actively monitor the regulatory landscape and we will adapt our business strategy accordingly. For example, the potential inclusion of our Jinji products in the upcoming national insurance catalog, along with our marketing capabilities, extensive distribution platform, diversified product offering and ongoing rural expansion, should help us navigate the challenging sales environment related to healthcare reform. We continue to drive revenue growth and consistently generate cash despite the uncertain regulatory environment, and we appreciate the hard work and contributions by our entire team."
Restatement of Certain Historical Results
During the review of its third quarter 2009 operating results, the Company identified historical accounting errors in: (i) the calculation of stock based compensation, (ii) the recognition of deferred tax liabilities of certain acquired assets and (iii) the provision of deferred tax liabilities on undistributed earnings of foreign subsidiaries. The accounting errors have resulted in the misstatement of certain balance sheet and income statement items and the cumulative net earnings since 2006. The errors did not result from any fraud or intentional misconduct and the Company undertook a review to determine the total amount of the errors and the accounting periods in which the errors occurred. As a result, the Company chose to restate its previously reported financial statements.
The Company has restated its consolidated balance sheets and the related consolidated statements of income, statements of shareholders' equity and statements of cash flows as of and for the years ended December 31, 2008, 2007 and 2006 as reported in its amended annual report on Form 10K/A for the fiscal year ended December 31, 2008. The restated financial information for each of the three interim quarterly periods for 2008 and 2007 were also included in the amended annual report on Form 10-K/A for the fiscal year ended December 31, 2008.
The effects of the restatement on selected income statement line items for the years ended December 31, 2008 and 2007 are as follows:
Increase/(Decrease) in income statement line items 2008 2007 General and administrative $838,190 $466,954 Income before income tax (838,190) (466,954) Income tax (91,916) (1,042,151) Net income attributable to common shareholders (746,274) 575,197 Net income per common share attributable to common shareholders - basic -- 0.01 Net income per common share attributable to common shareholders - diluted $-- $0.01
The cumulative effects of the restatement on selected balance sheet line items as of December 31, 2008 and 2007 are as follows:
Increase/(Decrease) in balance sheet line items 2008 2007 Goodwill $4,620,895 $4,620,895 Deferred tax assets -- 15,297 Deferred tax liability - current (667,095) (109,733) Deferred tax liability - non current 1,551,743 4,050,444 Accumulated other comprehensive income 2,602,180 (346,670) Retained earnings (171,077) 575,197 Additional paid-in capital 1,305,144 466,954
The Company will hold a conference call at 8:00 am ET on Tuesday, November 17, 2009 to discuss third quarter 2009 results. Listeners may access the call by dialing 1-866-770-7051 or 1-617-213-8064 for international callers, access code: 89648638. A webcast will also be available through AOB's website at http://www.bioaobo.com .
A replay of the call will be available through November 24, 2009. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 58148119.
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.
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, 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 Statements of Income and Comprehensive Income (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 2009 2008 2009 2008 As Restated As Restated REVENUES $78,818,666 $70,593,949 196,117,893 $168,372,552 COST OF GOODS SOLD 34,687,505 23,402,407 81,942,766 54,808,490 GROSS PROFIT 44,131,161 47,191,542 114,175,127 113,564,062 Selling and marketing 12,245,746 9,938,877 26,853,377 22,656,477 Advertising 9,013,087 9,913,728 22,360,380 21,760,300 General and administrative 6,457,734 4,690,793 15,981,195 14,235,806 Depreciation and amortization 1,409,399 1,024,436 5,118,588 3,012,107 Total operating expenses 29,125,966 25,567,834 70,313,540 61,664,690 INCOME FROM OPERATIONS 15,005,195 21,623,708 43,861,587 51,899,372 EQUITY IN EARNINGS (LOSS) FROM UNCONSOLIDATED ENTITIES (563,608) 49,417 (299,072) (591,650) INTEREST INCOME (EXPENSE), NET (1,106,805) (1,143,013) (4,306,143) (1,156,782) OTHER (EXPENSE), NET (49,165) 91,986 (164,103) (264,515) INCOME BEFORE INCOME TAXES 13,285,617 20,622,098 39,092,269 49,886,425 INCOME TAXES 3,257,771 4,339,045 9,463,093 10,655,299 NET INCOME 10,027,846 16,283,053 29,629,176 39,231,126 NON-CONTROLLING INTEREST (651) 0 118,866 0 NET INCOME ATTRIBUTE TO CONTROLLING INTEREST 10,027,195 16,283,053 29,748,042 39,231,126 OTHER COMPREHENSIVE INCOME Foreign currency translation gain, net of tax 142,118 646,405 655,400 15,743,396 OTHER COMPREHENSIVE INCOME, NET OF TAX 142,118 646,405 655,400 15,743,396 COMPREHENSIVE INCOME $10,169,313 $16,929,458 30,403,442 $54,974,522 NET INCOME PER COMMON SHARE BASIC $0.13 $0.22 0.40 $0.51 DILUTED $0.13 $0.21 0.39 $0.50 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC 74,636,155 75,101,869 74,592,447 77,164,602 DILUTED 88,868,828 85,417,621 88,825,120 80,553,647 American Oriental Bioengineering, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, 2009 2008 As Restated CURRENT ASSETS Cash and cash equivalents $115,923,399 $70,636,510 Accounts receivable, net of reserve of $512,013 and $226,330 at September 30 , 2009 and December 31, 2008, respectively 37,961,967 36,982,167 Inventories, net of provision for slow moving inventories 15,291,710 13,042,123 Advances to suppliers 2,798,860 3,593,979 Notes receivable 122,300 708,076 Refundable deposit -- 6,396,996 Deferred tax assets 398,563 347,216 Other current assets 1,154,315 744,903 Total Current Assets 173,651,114 132,451,970 LONG-TERM ASSETS Property, plant and equipment, net 96,085,233 98,154,443 Land use rights, net 154,233,322 148,988,870 Deposit for long-term assets -- 6,347,174 Construction in progress 26,645,307 25,385,835 Deferred tax assets 127,823 1,313,832 Other intangible assets, net 19,911,767 23,690,440 Goodwill 33,164,121 33,164,121 Investments in and advances to equity investments 54,995,237 54,963,064 Unamortized financing costs 3,519,766 4,215,983 Total Long-Term Assets 388,682,576 396,223,762 TOTAL ASSETS $562,333,690 $528,675,732 LIABILITIES AND SHAREHOLDERS' EQUITY September 30, December 31, 2009 2008 As Restated CURRENT LIABILITIES Accounts payable $10,082,129 $12,287,887 Notes payables 4,084,893 3,262,877 Other payables and accrued expenses 19,556,446 19,766,652 Taxes payable 1,108,783 420,671 Short-term bank loans 9,652,509 7,140,148 Current portion of long-term bank loans 59,771 58,659 Other liabilities 2,334,788 2,253,440 Deferred tax liability 176,449 178,931 Total Current Liabilities 47,055,768 45,369,265 LONG-TERM LIABILITIES Long-term bank loans 759,597 804,521 Long-term notes payable -- 269,908 Deferred tax liabilities 15,502,047 17,635,511 Unrecognized tax benefits 1,903,342 Convertible Note 115,000,000 115,000,000 Total Long-Term Liabilities 133,164,986 133,709,940 TOTAL LIABILITIES 180,220,754 179,079,205 EQUITY SHAREHOLDERS' EQUITY Preferred stock, $0.001 par value; 2,000,000 shares authorized; 1,000,000 shares issued and outstanding at September 30 , 2009 and December 31, 2008, respectively 1,000 1,000 Common stock, $0.001 par value; 150,000,000 shares authorized; 78,321,439 and 78,249,264 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively. 78,321 78,249 Common stock to be issued 291,000 376,335 Prepaid forward repurchase contract (29,998,616) (29,998,616) Additional paid-in capital 199,363,784 197,046,688 Retained earnings (the restricted portion of retained earnings is $19,924,918 at September 30 , 2009 and December 31, 2008, respectively) 179,500,646 149,752,604 Accumulated other comprehensive income 32,343,586 31,688,186 Total Shareholders' Equity 381,579,721 348,944,446 NONCONTROLLING INTEREST 533,215 652,081 TOTAL EQUITY 382,112,936 349,596,527 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $562,333,690 $528,675,732
SOURCE American Oriental Bioengineering, Inc.
|SOURCE American Oriental Bioengineering, Inc.|
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