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American Oriental Bioengineering Reports Fourth Quarter and Full Year 2008 Financial Results

Friday, October 16, 2009 General News J E 4
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NEW YORK, March 9 American OrientalBioengineering, Inc. (NYSE: AOB), a pharmaceutical company dedicated toimproving health through the development, manufacture and commercialization ofa broad range of prescription and over the counter ("OTC") products in China,today announced financial results for the fourth quarter and fiscal year endedDecember 31, 2008.

Financial Results

Revenue in the fourth quarter of 2008 increased 67.9% year over year to$96.3 million from $57.3 million, reflecting continued demand for theCompany's core prescription and OTC pharmaceutical products. Revenue frompharmaceutical products increased 69.9% to $81.2 million from $47.8 million inthe prior year's fourth quarter, driven by increased demand for the JinjiSeries of products, Shuanghuanglian Injection Powder, and the Cease EnuresisSoft Gel and Patch. Prescription pharmaceutical products generated $28.5million in revenue during the fourth quarter, up 39.8% year over year, and OTCpharmaceutical products generated $52.6 million in revenue during the fourthquarter, up 92.3% year over year. Nutraceutical products generated revenue ofapproximately $9.6 million in the fourth quarter of 2008, roughly flatcompared to the prior year period. Revenue from nutraceutical products as apercentage of total revenue decreased to approximately 10.0% fromapproximately 16.6% in the fourth quarter of last year, as the Companycontinued to focus more on pharmaceutical product sales. The Companygenerated $5.5 million in distribution revenue since acquiring Nuo Hua onOctober 18, 2008.

Gross profit in the fourth quarter of 2008 increased 53.9% to $60.0million from $39.0 million in the fourth quarter of 2007. Gross margin was62.4%, compared with 68.1% in the prior year's period, reflecting lower margindistribution and CCXA product revenue.

Operating income in the fourth quarter was $11.8 million compared with$18.8 million in the prior year period and primarily reflects a $12.3 millionexpense for in-process R&D at GuangXi HuiKe ("GHK"), which the Companyacquired in the fourth quarter. In line with accounting policies at the timeof the acquisition, the Company was required to expense, not capitalize, theestimated future value of GHK's intangible assets. General and administrationexpenses as well as selling and marketing expenses increased 77% to $22.3million from $12.6 million in the prior year period. The increase primarilyreflects marketing and promotional initiatives related to Jinji and Bokeproducts.

Net income for the fourth quarter of 2008 was $8.0 million, or $0.10 perdiluted share. Non-GAAP net income, which excludes interest expense relatedto the Company's outstanding convertible debt as well as the in-process R&Dexpense described above, increased 42.7% to $21.7 million, from $15.2 millionin the prior year period. Non-GAAP net income per diluted share increased to$0.25 per diluted share in the fourth quarter of 2008, from $0.20 per dilutedshare in the prior year period. Please refer to the Company's GAAP toNon-GAAP reconciliation table provided below.

Fiscal 2008 Financial Results

Revenue for the fiscal year 2008 increased 64.9% to $264.6 million from$160.5 million in 2007. Prescription pharmaceutical products generatedrevenue of $87.4 million, up 48.1% from $59.0 million in the year 2007, andOTC pharmaceutical products generated revenue of $137.5 million, up 99.8% from$68.8 million in 2007. The CCXA and Boke businesses contributed revenue of$24.8 million and $38.2 million, respectively, during the fiscal year 2008,compared with $5.4 million and $3.2 million in 2007. CCXA and Boke businessesbegan contributing to revenue in the third and fourth quarters of 2007.Revenue from nutraceutical products increased 4.9% to $34.3 million from $32.7million in the year before. Revenue from Nuo Hua's distribution business was$5.5 million and began contributing to results in the fourth quarter of 2008.

Net income in 2008 increased 10.4% to $47.8 million, or $0.61 per dilutedshare. Non-GAAP net income, as described above and reconciled below, was$62.7 million, compared with $43.3 million in the prior year. Non-GAAP netincome per diluted share increased to $0.76 per diluted share from $0.61 perdiluted share in the prior year.

Mr. Tony Liu, Chairman and Chief Executive Officer of American OrientalBioengineering, commented, "In 2008, we strengthened our leading brands,enhanced our product portfolio, and diversified our operations in a way thatlends flexibility to our business model, so that we can navigate China'srapidly changing regulatory environment. We achieved these successes despitethe increasingly challenging economic environment worldwide, and we arecautiously optimistic that China's healthcare industry remains somewhatinsulated from the global economic crisis. Going into 2009 and 2010, we'llcontinue to strengthen our core competencies in production, sales andmarketing and distribution reach, as well as focus on R&D efforts and ourinfrastructure, to ensure that we are well-prepared to capitalize on the manyopportunities we see in China's healthcare sector."

Conference Call

The Company will hold a conference call at 8:00 am ET on March 9, 2009 todiscuss fiscal fourth quarter and full year 2008 results. Listeners mayaccess the call by dialing 1-866-203-2528 or 1-617-213-8847 for internationalcallers, access code: 34183253. A webcast will also be available through AOB'swebsite at http://www.bioaobo.com . A replay of the call will be availablethrough March 16, 2009. Listeners may access the replay by dialing1-888-286-8010 or 1-617-801-6888 for international callers, access code:73734657.

About American Oriental Bioengineering, Inc.

American Oriental Bioengineering, Inc. is a China-based pharmaceuticalcompany dedicated to improving health through the development, manufacture andcommercialization of a broad range of prescription and over the counterproducts.

Statements made in this press release are forward-looking and are madepursuant to the safe harbor provisions of the Securities Litigation Reform Actof 1995. Such statements involve risks and uncertainties that may causeactual results to differ materially from those set forth in these statements.The economic, competitive, governmental, technological and other factorsidentified in the Company's filings with the Securities and ExchangeCommission, including the Form 10-K for the year ended December 31, 2008, maycause actual results or events to differ materially from those described inthe forward looking statements in this press release. The Company undertakesno obligation to publicly update or revise any forward-looking statements,whether because of new information, future events, or otherwise.For more information, please contact: Integrated Corporate Relations, Inc. Ashley M. Ammon Tel: +1-203-682-8208 AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME QUARTER ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, 2008 2007 2008 2007 Unaudited Unaudited Audited Audited REVENUES $96,270,506 $57,332,523 $264,643,058 $160,482,383 COST OF GOODS SOLD 36,222,784 18,302,489 91,031,274 49,364,486 GROSS PROFIT 60,047,722 39,030,034 173,611,784 111,117,897 Selling and marketing 17,117,853 8,435,612 39,774,330 20,669,303 Advertising 12,342,238 6,696,321 34,102,538 22,865,903 General and administrative 5,132,162 4,131,923 18,765,757 13,365,156 Depreciation and amortization 1,371,108 936,546 4,383,215 1,989,425 Purchased in-process research and development 12,255,248 -- 12,255,248 -- Total operating expenses 48,218,609 20,200,402 109,281,088 58,889,787 EQUITY IN EARNINGS (LOSS) FROM UNCONSOLIDATED ENTITIES (541,336) -- (1,132,986) 23,711 INTEREST INCOME (EXPENSE), NET (1,414,233) 196,352 (2,571,015) 617,524 OTHER EXPENSE, NET 198,672 (589,087) (65,843) (525,065) MINORITY INTERESTS (27,575) -- (27,575) -- INCOME BEFORE INCOME TAXES 10,044,641 18,436,897 60,533,277 52,344,280 INCOME TAXES 2,003,492 3,204,281 12,727,388 9,053,399 NET INCOME 8,041,149 15,232,616 47,805,889 43,290,881 OTHER COMPREHENSIVE INCOME Foreign currency translation gain, net of tax 552 5,833,544 12,819,020 10,105,577 OTHER COMPREHENSIVE INCOME, NET OF TAX 552 5,833,544 12,819,020 10,105,577 COMPREHENSIVE INCOME $8,041,701 $21,066,160 $60,624,909 $53,396,458 NET INCOME PER COMMON SHARE BASIC $0.10 $0.21 $0.62 $0.62 DILUTED $0.10 $0.20 $0.61 $0.61 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING BASIC 74,566,818 75,386,436 76,504,035 69,870,775 DILUTED 86,915,928 75,386,436 82,254,185 71,364,244 AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, DECEMBER 31, 2008 2007 CURRENT ASSETS Cash and cash equivalents $70,636,510 $166,410,075 Accounts receivable, net of reserve of $226,330 and $302,270 at December 31, 2008 and 2007, respectively 36,982,167 16,494,619 Inventories, net of provision for slow moving inventories 13,042,123 12,264,536 Advances to suppliers and prepaid expenses 3,593,979 4,309,352 Notes receivable 708,076 2,259,616 Refundable deposit 6,396,996 -- Deferred tax assets 347,216 -- Other current assets 744,903 5,134,118 Total Current Assets 132,451,970 206,872,316 LONG-TERM ASSETS Property, plant and equipment, net 98,154,443 48,496,760 Land use rights, net 148,988,870 46,310,240 Deposit for long-term assets 6,347,174 -- Construction in progress 25,385,835 755,614 Deferred tax assets 1,313,832 1,498,481 Intangible assets, net 23,690,440 26,972,166 Goodwill 28,543,226 22,566,768 Investments in and advances to equity investments 54,963,064 242,551 Unamortized financing costs 4,215,983 -- Total Long-Term Assets 391,602,867 146,842,580 TOTAL ASSETS $524,054,837 $353,714,896 LIABILITIES AND SHAREHOLDERS' EQUITY DECEMBER 31, DECEMBER 31, 2008 2007 CURRENT LIABILITIES Accounts payable $12,287,887 $3,436,352 Notes payables 3,262,877 72,254 Other payables and accrued expenses 19,766,652 7,786,157 Taxes payable 420,671 2,843,719 Short-term bank loans 7,140,148 6,289,222 Current portion of long-term bank loans 58,659 2,374,565 Other liabilities 2,253,440 3,548,776 Deferred tax liabilities 846,026 109,733 Total Current Liabilities 46,036,360 26,460,778 LONG-TERM LIABILITIES Long-term bank loans 804,521 1,263,483 Long-term notes payable 269,908 286,365 Deferred tax liabilities 16,083,768 12,621,180 Convertible Note 115,000,000 -- Total Long-Term Liabilities 132,158,197 14,171,028 TOTAL LIABILITIES 178,194,557 40,631,806 COMMITMENTS MINORITY INTERESTS 652,081 -- 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 December 31, 2008 and December 31, 2007, respectively 78,249 77,992 Common stock to be issued 376,335 1,611,333 Prepaid forward repurchase contract (29,998,616) -- Additional paid-in capital 195,741,544 193,007,987 Retained earnings (the restricted portion of retained earnings is $29,532,699 at December 31, 2008 and December 31, 2007) 149,923,681 102,117,792 Accumulated other comprehensive income 29,086,006 16,266,986 Total Shareholders' Equity 345,208,199 313,083,090 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $524,054,837 $353,714,896 AMERICAN ORIENTAL BIOENGINEERING, INC. Reconciliation of GAAP to Non-GAAP (In US$, except share data) Fourth Quarter Ended Year Ended December 31, December 31, 2008 2007 2008 2007 GAAP net income 8,041,149 15,232,616 47,805,889 43,290,881 Acquisition-related in-process research and development expense 12,255,248 -- 12,255,248 -- Interest expense 1,437,500 2,635,417 Non-GAAP net income 21,733,897 15,232,616 62,696,554 43,290,881 GAAP earnings per share -Basic 0.10 0.21 0.62 0.62 -Diluted 0.10 0.20 0.61 0.61 Non-GAAP earnings per share -Basic 0.27 0.20 0.79 0.62 -Diluted 0.25 0.20 0.76 0.61 Shares used in computation of GAAP / Non-GAAP earnings per share Ordinary shares -Basic 74,566,818 75,386,436 76,504,035 69,870,775 -Diluted 86,915,928 75,663,385 82,254,185 71,364,244

SOURCE American Oriental Bioengineering, Inc.
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