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

Share Name	Share Symbol	Market	Type
American Oriental Bioengineering, Inc.	NYSE:AOB	NYSE	Ordinary Share

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American Oriental Bioengineering, Inc. (NYSE:AOB)
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Revenue Increased 68% to $96.3 Million in 4Q08 and 65% to $264.6 Million in FY08 FY08 Non-GAAP Net Income up 45% to $62.7 Million, or $0.76 per Diluted Share 4Q08 Non-GAAP Net Income up 43% $21.7 Million, or $0.25 per Diluted Share NEW YORK, March 9 /PRNewswire-Asia-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 fourth quarter and fiscal year ended December 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 the Company's core prescription and OTC pharmaceutical products. Revenue from pharmaceutical products increased 69.9% to $81.2 million from $47.8 million in the prior year's fourth quarter, driven by increased demand for the Jinji Series of products, Shuanghuanglian Injection Powder, and the Cease Enuresis Soft Gel and Patch. Prescription pharmaceutical products generated $28.5 million in revenue during the fourth quarter, up 39.8% year over year, and OTC pharmaceutical products generated $52.6 million in revenue during the fourth quarter, up 92.3% year over year. Nutraceutical products generated revenue of approximately $9.6 million in the fourth quarter of 2008, roughly flat compared to the prior year period. Revenue from nutraceutical products as a percentage of total revenue decreased to approximately 10.0% from approximately 16.6% in the fourth quarter of last year, as the Company continued to focus more on pharmaceutical product sales. The Company generated $5.5 million in distribution revenue since acquiring Nuo Hua on October 18, 2008. Gross profit in the fourth quarter of 2008 increased 53.9% to $60.0 million from $39.0 million in the fourth quarter of 2007. Gross margin was 62.4%, compared with 68.1% in the prior year's period, reflecting lower margin distribution 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 million expense for in-process R&D at GuangXi HuiKe ("GHK"), which the Company acquired in the fourth quarter. In line with accounting policies at the time of the acquisition, the Company was required to expense, not capitalize, the estimated future value of GHK's intangible assets. General and administration expenses as well as selling and marketing expenses increased 77% to $22.3 million from $12.6 million in the prior year period. The increase primarily reflects marketing and promotional initiatives related to Jinji and Boke products. Net income for the fourth quarter of 2008 was $8.0 million, or $0.10 per diluted share. Non-GAAP net income, which excludes interest expense related to the Company's outstanding convertible debt as well as the in-process R&D expense described above, increased 42.7% to $21.7 million, from $15.2 million in 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 diluted share in the prior year period. Please refer to the Company's GAAP to Non-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 generated revenue of $87.4 million, up 48.1% from $59.0 million in the year 2007, and OTC 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 businesses began contributing to revenue in the third and fourth quarters of 2007. Revenue from nutraceutical products increased 4.9% to $34.3 million from $32.7 million 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 diluted share. 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 net income per diluted share increased to $0.76 per diluted share from $0.61 per diluted share in the prior year. Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "In 2008, we strengthened our leading brands, enhanced our product portfolio, and diversified our operations in a way that lends flexibility to our business model, so that we can navigate China's rapidly changing regulatory environment. We achieved these successes despite the increasingly challenging economic environment worldwide, and we are cautiously optimistic that China's healthcare industry remains somewhat insulated from the global economic crisis. Going into 2009 and 2010, we'll continue to strengthen our core competencies in production, sales and marketing and distribution reach, as well as focus on R&D efforts and our infrastructure, to ensure that we are well-prepared to capitalize on the many opportunities 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 to discuss fiscal fourth quarter and full year 2008 results. Listeners may access the call by dialing 1-866-203-2528 or 1-617-213-8847 for international callers, access code: 34183253. A webcast will also be available through AOB's website at http://www.bioaobo.com/ . A replay of the call will be available through March 16, 2009. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 73734657. About American Oriental Bioengineering, Inc. American Oriental Bioengineering, Inc. is a China-based 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. 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 DATASOURCE: American Oriental Bioengineering, Inc. CONTACT: Ashley M. Ammon of Integrated Corporate Relations, Inc., +1-203-682-8208, for American Oriental Bioengineering, Inc. Web site: http://www.bioaobo.com/

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AOB American Oriental Bioengineering, Inc.