American Oriental Bioengineering Reports Second Quarter 2010 Financial Results
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 theCompany's core prescription products.
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%, comparedto 58.4% in the prior year period and 52.5% in the prior quarter reflecting agreater proportion of generic product sales in the rural market. Further, theincreased purchase prices of certain raw materials increased the cost of salesalso contributed to lower gross profit.
Operating income in the second quarter of 2010 was $9.1 million, comparedto $18.0 million in the prior year period. Selling and marketing expensesincreased 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 quarterof 2010 from $7.8 million in the prior year period. General andadministrative expenses increased 28.1% to $5.2 million from $4.0 million inthe prior year period. Research and development expenses increased to $3.3million from $0.8 million in the prior year period, reflecting the Company'scontinued efforts in research and development activities. Our research anddevelopment activities consist of near term, middle team and long term stageswhich contribute to both our current and future business strategies.
Net income attributable to controlling interest for the second quarter of2010 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 perdiluted 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 $131.0million from $117.3 million in the first six months of 2009. During the sametime period, gross profit was $68.1 million, compared to $70.0 million in thefirst six months of 2009. Operating income in the first six months of 2010was $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 of2010 was $8.2 million, compared to $19.7 million in the prior year period. Inthe first six months of 2010, net income per diluted share was approximately$0.11.
As of June 30, 2010, the Company had $96.4 million in cash and cashequivalents, and generated approximately $7.7 million of operating cash flowduring the first half of 2010. Working capital was $147.0 million as of June30, 2010, reflecting an increase of 12.3% from $130.9 million as of December31, 2009.
Mr. Tony Liu, Chairman and Chief Executive Officer of American OrientalBioengineering, commented, "AOBO's prescription product division ramped upvery quickly in the second quarter of 2010. The double digit growth is aresult of our previous investment in new products as well as continued strongdemand for existing branded products. During the past quarter, we continuedto execute our R&D-driven strategy, which consumed 4.2% of total revenue. Ourfocus on upgrading existing products and developing new ones will proactivelyprepare AOB for both near term and long term growth. Furthermore, wecontinued to strengthen and integrate AOBO's unified mega brand through aneffective advertising campaign as well as fortify our presence in rural areaswith advanced sales network expansion. Meanwhile, we consistently monitoredour inventory of raw materials and assiduously controlled costs, whichpartially offset the two prevalent influences of rising raw material costs andlabor costs. These combined efforts are aimed to help AOBO more effectivelyadjust to policy changes and capitalize on emerging opportunities."
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. Awebcast will also be available through AOB's website athttp://www.bioaobo.com . A replay of the call will be available throughAugust 16, 2010. Listeners may access the replay by dialing 1-888-286-8010 or1-617-801-6888 for international callers, access code: 35043398.
About American Oriental Bioengineering, Inc.
American Oriental Bioengineering, Inc. is a pharmaceutical companydedicated to improving health through the development, manufacture andcommercialization of a broad range of prescription and over the counterproducts.
Safe Harbor Statement
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, may cause actual results or events to differ materially from thosedescribed in the forward looking statements in this press release. TheCompany undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, orotherwise.-- 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.
SOURCE American Oriental Bioengineering, Inc.
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