American Oriental Bioengineering Reports Fourth Quarter and Full Year 2010 Financial Results

NEW YORK, March 14, 2011 /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 fourth quarter and fiscal year ended December 31, 2010.

Fourth Quarter 2010 Financial Performance

In the fourth quarter of 2010, revenue decreased to $83.4 million from $100.0 million in the same period of 2009, primarily caused by decreased sales from pharmaceutical products, partially offset by increased sales from distribution business.

• The Company generated $79.4 million from its manufacturing business, in the fourth quarter of 2010, compared with $96.4 million in the prior year period.  Revenue from pharmaceutical products decreased 19.7% to $68.3 million from $85.0 million in the prior year period. Nutraceutical products generated revenue of approximately $11.1 million in the fourth quarter of 2010, down 2.8% from $11.4 million in the prior year period.  The revenue performance reflects the Company's strategic shift of revenue mix toward higher-margin products to minimize the impact from the increased cost of certain raw materials and the continuing government price cut on certain products.

• The Company generated $3.9 million from its distribution business, Nuo Hua, in the fourth quarter of 2010, an increase of 10.2% from $3.6 million in the prior year period, primarily due to Nuo Hua's expanding market coverage.

Gross profit in the fourth quarter of 2010 was $42.4 million compared to $52.6 million in the fourth quarter of 2009. Gross margin was 50.9%, compared to 52.6% in the prior year period. The Company continued its efforts to manage the margin pressure, which was mainly caused as a result of the combined impact of the increased cost of certain raw materials, the government's pricing control on EDL drugs, and increased labor costs.

Operating income in the fourth quarter of 2010 decreased to $5.9 million compared with $14.9 million in the prior year period. Selling, general and administrative expenses were $18.1 million, or 21.7% of total revenue, compared to $21.2 million, or 21.2% of total revenue in the prior year period. This is primarily driven by management's continuing efforts at cost control. Advertising expense increased to $12.0 million in the fourth quarter of 2010, compared to $9.5 million in the prior year period, driven by increased efforts to increase brand awareness and market recognition. Research and development expenses were $4.6 million, or 5.5% of total revenue, compared with $5.4 million, or 5.4% of total revenue, in the prior year period. The company emphasizes the importance of science and technology and continues investment in R&D spending related to create new products, and improve existing product portfolio.

Net income attributable to controlling interest for the fourth quarter of 2010 was $2.8 million, or $0.04 per diluted share, compared to $11.7 million, or $0.14 per diluted share, in the prior year period.

2010 Financial Performance

Revenue for the fiscal year 2010 increased 3.3% to $305.9 million from $296.2 million in 2009, primarily resulted from continuing customer demand and increased sales coverage. Prescription pharmaceutical products generated revenue of $129.2 million, up 11.6% from $115.8 million in the year 2009, and OTC pharmaceutical products generated revenue of $120.9 million, down 5.8% from $128.4 million in 2009. Revenue from nutraceutical products increased 4.8% to $41.0 million from $39.1 million in the year before.  Revenue from Nuo Hua's distribution business was $14.8 million compared to $12.9 million in 2009, primarily resulted from expanded sales coverage and distribution network especially in the rural areas. During the same time period, gross profit decreased by 5.4% to $157.8 million from $166.8 million in the year 2009.

Operating income in the year 2010 was $30.4 million compared to $58.8 million in the year 2009. Net income attributable to controlling interest for the year 2010 was $16.3 million, or $0.22 per diluted share, compared to $41.4 million, or $0.53 per diluted share, in the prior year period.

Balance Sheet

As of December 31, 2010, the Company had $94.6 million in cash and cash equivalents, and generated approximately $8.0 million of operating cash flow during the year of 2010. Working capital was $162.2 million in 2010, reflecting an increase of 23.9% compared to $130.9 million in 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "We are pleased with our fiscal year 2010 financial results in which we demonstrated steady growth despite the increasingly challenging economic environment worldwide and China's rapidly changing regulatory environment. Our growth in 2010 was consistent with our expectations and reflects our continued efforts on profitability focus and cost control. We dynamically adjust our product mix to minimize the negative impact from the increased cost of certain raw materials, as well as the government's price cut on certain drugs. In addition, our long-term investments in science and technology have achieved initial results, which were demonstrated by the strong sales from the new products supported by our R&D efforts. Overall, we remain enthusiastic about the tremendous opportunities in China's healthcare sector, and we are looking forward to more progress in the fiscal year ahead."

Conference Call

The Company will hold a conference call at 8:00 am ET on Tuesday, March 15, 2011, to discuss its results. Listeners may access the call by dialing 1-800-901-5231 or 1-617-786-2961 for international callers, access code: 57286885. A webcast will also be available through AOB's website at www.bioaobo.com. A replay of the call will be available through March 22, 2011. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 91403928.

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.

Safe Harbor Statement

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, 2010, 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.

Contact:
ICR, LLC
Christine Duan or Ashley Ammon
203-682-8200

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
		THREE MONTHS ENDED DECEMBER 31				TWELVE MONTHS ENDED DECEMBER 31
		2010		2009		2010		2009
Revenues	$	83,365,061	$	100,032,887	$	305,944,085	$	296,150,780
Cost of sales		40,966,778		47,425,009		148,186,531		129,367,775
GROSS PROFIT		42,398,283		52,607,878		157,757,554		166,783,005
Selling, general and administrative expenses		18,112,902		21,163,863		66,439,702		62,164,936
Advertising costs		11,971,242		9,536,612		38,920,905		31,896,992
Research and development costs		4,610,737		5,417,834		15,365,131		7,922,357
Depreciation and amortization expenses		1,760,232		1,591,061		6,662,237		6,038,625
Total operating expenses		36,455,113		37,709,370		127,387,975		108,022,910
INCOME FROM OPERATIONS		5,943,170		14,898,508		30,369,579		58,760,095
Equity in earnings (losses) from unconsolidated entities		196,134		2,374,211		384,991		2,075,139
Interest expense, net		(1,506,962)		(1,440,239)		(5,900,055)		(5,746,382)
Other expenses, net		(119,396)		(405,558)		(204,736)		(569,661)
INCOME BEFORE INCOME TAXES		4,512,946		15,426,922		24,649,779		54,519,191
Income tax		1,758,188		3,753,893		8,336,366		13,216,986
NET INCOME		2,754,758		11,673,029		16,313,413		41,302,205
Net loss (income) attributable to non-controlling interest		8,382		79		27,937		118,945
NET INCOME ATTRIBUTABLE TO CONTROLLING INTEREST		2,763,140		11,673,108		16,341,350		41,421,150
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain		6,350,139		706,638		16,076,027		1,362,038
OTHER COMPREHENSIVE INCOME		6,350,139		706,638		16,076,027		1,362,038
COMPREHENSIVE INCOME	$	9,113,279	$	12,379,746	$	32,417,377	$	42,783,188
EARNINGS PER COMMON SHARE
Basic	$	0.04	$	0.16	$	0.22	$	0.56
Diluted	$	0.04	$	0.14	$	0.22	$	0.53
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		74,956,648		74,673,067		74,810,016		74,612,602
Diluted		75,983,964		89,494,201		75,724,826		89,286,621

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
			DECEMBER 31,		DECEMBER 31,
			2010		2009
CURRENT ASSETS
Cash and cash equivalents		$	94,568,520	$	91,126,486
Restricted Cash			537,297		3,298,379
Accounts and notes receivable, net			80,598,919		57,504,454
Inventories, net			12,665,586		10,015,711
Advances to suppliers and prepaid expenses			14,246,144		13,901,180
Deferred tax assets			649,503		824,451
Other current assets			2,986,005		1,246,647
Total Current Assets			206,251,974		177,917,308
LONG-TERM ASSETS
Property, plant and equipment, net			109,547,616		95,468,265
Land use rights, net			155,433,311		153,604,196
Other long term assets			8,167,880		7,909,086
Construction in progress			22,516,044		28,975,386
Other intangible assets, net			14,889,127		18,695,554
Goodwill			33,164,121		33,164,121
Investments in and advances to equity investments			59,068,491		57,325,887
Deferred tax assets			147,024		134,268
Unamortized financing costs			2,359,404		3,287,694
Total Long-Term Assets			405,293,018		398,564,457
TOTAL ASSETS		$	611,544,992	$	576,481,765
LIABILITIES AND SHAREHOLDERS’ EQUITY
			DECEMBER 31,		DECEMBER 31,
			2010		2009
CURRENT LIABILITIES
Accounts payable		$	10,716,686	$	7,497,143
Notes payable			537,297		3,392,575
Other payables and accrued expenses			18,039,557		22,320,757
Taxes payable			1,237,169		947,338
Short-term bank loans			6,957,258		10,384,368
Current portion of long-term bank loans			61,405		60,108
Other liabilities			6,284,107		2,199,280
Deferred tax liabilities			243,304		172,473
Total Current Liabilities			44,076,783		46,974,042
LONG-TERM LIABILITIES
Long-term bank loans, net of current portion			679,866		743,957
Deferred tax liabilities			15,837,479		15,961,465
Unrecognized tax benefits			5,050,157		2,746,561
Convertible Notes			115,000,000		115,000,000
Total Long-Term Liabilities			136,567,502		134,451,983
TOTAL LIABILITIES			180,644,285		181,426,025
EQUITY
SHAREHOLDERS’ EQUITY
Preferred stock, $0.001 par value; 2,000,000 shares authorized;
	1,000,000 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively		1,000		1,000
Common stock, $0.001 par value; 150,000,000 shares authorized;
	78,598,604 and 78,321,439 shares issued and outstanding at December 31, 2010 and December 31, 2009, respectively.		78,598		78,321
Common stock to be issued			350,500		388,000
Prepaid forward repurchase contract			(29,998,616)		(29,998,616)
Additional paid-in capital			203,322,671		199,829,921
Retained earnings (the restricted portion of retained earnings is
	$26,471,124 and $23,757,901 at December 31, 2010 and December 31, 2009, respectively)		207,515,104		191,173,754
Accumulated other comprehensive income			49,126,251		33,050,224
Total Shareholders’ Equity			430,395,508		394,522,604
Non-controlling Interest			505,199		533,136
TOTAL EQUITY			430,900,707		395,055,740
TOTAL LIABILITIES AND EQUITY		$	611,544,992	$	576,481,765
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SOURCE American Oriental Bioengineering, Inc.

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