American Oriental Bioengineering, Inc. Announces Record Revenue ...
-- Company Announces Private Offering Raising $60 Million in Gross Proceeds
-- Decreased Inventories Contributing to Improvements in Working Capital
American Oriental Bioengineering, Inc. (AMEX:AOB), an emerging Chinese company that produces and distributes a broad range of pharmaceutical and nutraceutical products, today announced financial results for the fourth quarter and full-year period ended December 31, 2005. -0-
(All numbers in thousands, except per-share amount in USD)
The US dollar amounts are calculated based on the average conversion
rate of US $1 to RMB 8.1734 for the year ended December 31, 2005, and
For the fourth quarter, the Company reported revenues of $19.8 million, an increase of 55.9 percent compared to the $12.7 million reported for the fourth quarter last year and up 47.5 percent compared to the $13.4 million reported in the third quarter of 2005. The increase in revenue was attributable to growth in both the Company's Plant-based Pharmaceutical (PBP) and Plant-based Nutraceutical (PBN) line of products. PBP products comprised $12.1 million, or 61.4 percent of total sales, while PBN products comprised $7.6 million, or 38.6 percent of total sales for the quarter. During the fourth quarter of 2005, the sales of PBP products increased approximately $4.0 million, or 49.1 percent compared to the same period in 2004. PBP revenues were driven by 143.8 percent increase in the Company's Cease Enuresis Soft Gel and Patch sales, the only first grade PBP approved by the Chinese Government for the treatment of bedwetting and nighttime urination and a 86.1 percent increase in Company's Double Grain beverage product recommended by people experiencing insomnia. During the fourth quarter of 2005, the Company also increased sales of its Shanghuanglian Anti-Virus Powder Injection by 7.4 percent, one of only two products approved by the Chinese Government for the treatment of respiratory infections, which was acquired with Heilongjiang Songhuajiang Pharmaceutical Co., Ltd ("HSPL") in September 2004. PBN sales increased by $3.4 million or 80.9 percent compared to last year as the Company continued to improve its marketing efforts geared towards educating consumers on the benefits of using soy-based peptide products and increased sales related to expanded distribution channels.
Cost of goods sold were $6.9 million, an increase of 33.1 percent compared to the $5.2 million reported during the fourth quarter of 2004, resulting in gross margins of 65.2 percent for the fourth quarter compared to gross margins of 59.3 percent for the fourth quarter last year and 63.4 percent for the third quarter of 2005. The increase in gross margins was related to improved efficiencies in regards to the integration of HSPL and a higher contribution as percent of revenues from PBN products which carry a higher overall gross margin.
Selling and marketing expenses increased 36.6 percent to $1.2 million, advertising expenses increased 420.6 percent to $3.1 million and general and administrative expenses increased 17.7 percent to $2.1 million compared to the fourth quarter of 2004. Collectively, total operating expenses were $6.7 million, an increase of 87.6 percent compared to the $3.6 million reported for the same period last year as the Company increased expenses to support operational growth.
Operating income increased to $6.2 million, up 57.1 percent from $4.0 million from the year ago quarter. Operating margins were 31.4 percent compared to 31.2 percent during the fourth quarter of 2004 and 34.6 percent in the third quarter 2005 as increases in gross profit were partially offset by the previously mentioned increase in operating expenses.
The Company had an effective tax rate during the quarter of 26.2 percent as compared to 28.9 percent last year. Net income increased 51.2 percent to $4.2 million or $0.08 per fully diluted share versus net income of $2.8 million or $0.08 per fully diluted share for the fourth quarter last year. The Company utilized 51.6 million weighted diluted shares in this calculation, representing a 51.8 percent increase from the 34.0 million weighted diluted shares for the fourth quarter of 2004. After the close of the private placement in January, the Company has 62.4 million fully diluted shares.
"We continue to grow our top line results by further expanding our distribution channels and product offering while increasing consumer awareness surrounding the benefits of traditional Chinese herbal remedies," commented Tony Liu, Chairman and CEO of American Oriental Bioengineering. "Our first retail location, 'Life Peptide,' had a very successful opening in Hong Kong where we are exclusively carrying AOB products, helping to increase overall brand awareness with consumers and contributing to the significant growth in our PBN revenues. During the year we also completed several initiatives to further integrate the HSPL acquisition, resulting in improved sales and profitability within our PBP segment. Overall, demand continues to remain strong for both PBP and PBN products helping to support our growth as we look to profitably expand into new regions and markets in China."
For the full-year period ended December 31, 2005, the Company announced revenue of $54.7 million, an increase of 71.2 percent compared to the $32.0 million reported for fiscal 2004. The Company's PBP division reported $34.2 million in revenue, up 114.4 percent compared to last year. Growth in this segment was driven by sales increases of 226.7 percent in Shanghuanglian Anti-Virus Powder Injection, 79.8 percent increase in sales of the Cease Enuresis Soft Gel and Patch and a 50.8 percent increase in double grain beverage sales. Sales of PBN products were $20.5 million, an increase of 28.2 percent as compared to last year as the Company saw increases in all related products due to increased marketing and distribution. Excluding the acquisition of HSPL organic revenues grew 42.5 percent for 2005 as compared to 2004.
Cost of goods sold were $19.6 million, an increase of 74.0 percent compared to the $11.3 million from the same period a year ago. The Company's gross margin was 64.2 percent for the year, essentially flat compared to gross margin of 64.8 percent for the same period last year despite the inclusion of HSPL products which initially carried a lower gross margin than the Company's existing businesses. Total operating expenses were $16.8 million, an increase of 57.5 percent compared to the $10.7 million reported for the same period last year. Operating income was $18.3 million, an increase of 82.6 percent compared to $10.0 million reported in the prior year. Operating margins were 33.5 percent compared to 31.4 percent as the Company benefited from a faster rate of growth in sales and gross profits compared to expenses. Net income was $13.4 million compared to net income of $7.8 million, representing a 72.8 percent increase. Earnings were $0.31 per weighted fully diluted share, based on 43.8 million shares, compared to $0.23 per fully diluted share for 2004 based on 34.0 million shares.
The Company completed the quarter with $57.5 million in cash and cash equivalents, inclusive of the $11.2 million received from calling its class "B" warrants in October, 2005, and the Company's $60 million private placement in December, 2005. The Company received the first traunche in connection with its private placement consummated in the fourth quarter resulting in gross proceeds of $33.5 million with the remaining $26.5 million of gross proceeds received by the Company in January 2006. Net total proceeds received from the private placement in December 2005 and January 2006 were $56.4 million. This compares to $11.4 million in cash as of December 31, 2004. Short-term debt decreased $1.3 million to $3.7 million at the end of 2005 as compared to 2004. During the fourth quarter inventory declined by 53.2 percent and 13.3 percent as compared to the third quarter 2005 and fourth quarter 2004 respectively as the Company improved overall efficiency yielding increased inventory turns and reduced inventory days versus both periods. During 2005, the Company generated $11.6 million in positive cash flow from operations. The Company's current ratio as of December 31, 2005, was 8.80 to 1 compared to a current ratio or 2.55 to 1 on December 31, 2004.
"In 2005, we took steps to further strengthen our company's competitive positioning by completing a private placement which has allowed us to expand existing operations and grow organically while also providing the opportunity to seek complementary acquisitions," Mr. Liu continued. "We continue to explore multiple acquisition opportunities aimed at either increasing our distribution points or improving the breadth of our product offering in either the plant-based pharmaceutical or nutraceutical markets. We are confident that our efforts in this regard will be successful in 2006."
Mr. Liu continued, "We are pleased with the clear progress we have made in integrating the HSPL acquisition, improving our internal processes and driving further growth in revenue and profits during the year. Based on our planned organic growth and potential acquisitions strategies, we feel we are appropriately positioned to capitalize on the growth in the Chinese Economy and the increasing addressable consumer market."
Management will conduct a conference call at 10 a.m. ET on March 31, 2006, to discuss these results. Interested participants should call 877-502-9274 when calling within the United States or 913-981-5584 when calling internationally. There will be a playback available until April 7, 2006. To listen to the playback, please call 888-203-1112 when calling within the United States or 719-457-0820 when calling internationally. Please use pass code 2807144 for the replay.
This call is being webcast by ViaVid Broadcasting and can be accessed at American Oriental Bioengineering's web site at http://www.bioaobo.com. The webcast may also be accessed at ViaVid's website at www.viavid.net. The webcast can be accessed until April 30, 2006, on either site.
American Oriental Bioengineering, Inc. (AOB) is engaged in the development and production of plant-based pharmaceutical products and plant-based nutraceutical products widely distributed throughout China. For more information, visit http://www.bioaobo.com.
This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in statements filed from time to time with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof. -0-
AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES
Cash and cash equivalents $ 57,532,049 $ 11,404,149
Other payable and accrued expenses 1,604,096 1,064,411
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AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES
REVENUES $19,779,068 $12,683,793 $ 54,732,557 $ 31,966,927
GROSS PROFIT 12,891,137 7,514,889 35,125,317 20,699,280
Advertising -3,077,562 -591,132 -5,238,186 -2,926,629
administrative -2,107,433 -1,799,644 -7,076,139 -4,582,388
OPERATIONS 6,210,282 3,953,402 18,339,949 10,044,738
INCOME TAXES 5,664,210 3,884,780 17,827,251 9,988,008
INCOME TAXES -1,486,499 -1,122,232 -4,400,870 -2,216,626
Contact America Oriental Bioengineering, Inc. Lily Li, 212-786-7568 (U.S.) or +86-451-86688139 (China) aobo@bioaobo.com or Hayden Communications Matt Hayden, 858-704-5065 (Investors) Matt@haydenir.com
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