American Oriental Bioengineering Inc. Announces Record Revenue and Earnings for the Second Quarter 2006; Revenue Increases 91% versus Last Year: Net Income Increases 74%, EPS of $0.09.HONG KONG Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. -- American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Oriental oriental having some connection with the Orient. oriental avian eye fluke see philophthalmusgralli. oriental blood fluke schistosomajaponicum. oriental cattle plague see rinderpest. Bioengineering bioengineering Application of engineering principles and equipment to biology and medicine. It includes the development and fabrication of life-support systems for underwater and space exploration, devices for medical treatment (see Inc. (AMEX AMEX See: American Stock Exchange : AOB AOB (on the agenda for a meeting) any other business ): Second Quarter 2006 Highlights --Organic Revenue growth of 66% during the quarter --Acquisition of GLP See gateway location protocol. was accretive to both revenues and net income during the second quarter and AOB anticipates an acceleration of growth and profitability in subsequent quarters from the subsidiary --GLP's gross margins and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increase by approximately 7% and 13% respectively in less than three months since acquisition --Company announces the acquisition of HQPL subsequent to the close of the second quarter American Oriental Bioengineering Inc. (AMEX: AOB), a leading Chinese manufacturer and distributor of plant-based pharmaceutical and nutraceutical nu·tra·ceu·ti·cal n. A food or naturally occurring food supplement thought to have a beneficial effect on human health. nutraceutical products, today announced financial results for the second quarter ended June 30, 2006.
Key Financial Indicators
(All numbers in thousands, except per-share amounts in USD)
Q2 2006 Q2 2005 Percentage Change
Revenues $22,762 $11,902 91.2%
Cost of goods sold $7,678 $4,189 83.3%
Gross Profit $15,083 $7,714 95.5%
Total Operating Expenses $8,078 $3,248 148.7%
Income from operations $7,006 $4,466 56.9%
Net Income $5,827 $3,356 73.7%
EPS -- Fully Diluted $0.09 $0.08 12.5%
Diluted Shares 62.8M 42.5M 47.7%
The U.S. dollar amounts are calculated based on the average conversion rate of US$1 to RMB RMB Right Mouse Button RMB Regional Management Board (USACE) RMB Rolf Maier Bode (musician, band) RMB Ren Min Bi (currency of People's Republic of China) 8.0 for the second quarter of 2006 and US $1 to RMB 8.3 for the second quarter of 2005. Second Quarter 2006 Results For the second quarter 2006, the company reported revenues of $22.8 million, an increase of 91.2 percent compared to $11.9 million in the second quarter of last year and up 19.3 percent compared to $19.1 million reported in the first quarter of 2006. Total revenues for the quarter increased both sequentially and year-over-year driven by strong organic growth in the company's Plant-based Pharmaceutical (PBP PBP picture by picture (TVs and monitors) PBP Penicillin Binding Protein PBP Play-By-Play PBP Paris-Brest-Paris (bicycle race) PBP Progressive Bulbar Palsy PBP Pay Back Period PBP Pay By Phone ) and Plant-based Nutraceutical (PBN PBN Paint By Number PBN Procurement Business Number PBN Pyrolytic Boron Nitride PBN Policy-Based Networking PBN Performance-Based Navigation PBN Progressive Bengali Network PBN Paintball Nation PBN Permanent Background Notices ) line of products and as a result of the recent acquisition of Guangxi Lingfeng Pharmaceutical Co. Ltd. (GLP) during the quarter. During the second quarter, PBP sales, including GLP products, increased by 113.5 percent to $15.8 million compared to the second quarter last year. Revenues within this segment continue to benefit from strong sales of the company's Cease Enuresis enuresis Repeated urination into bedding or clothing, usually at night, in a normal child old enough to have completed toilet training. Enuresis may be voluntary or involuntary. It may run in families. and Shuanghuanlian Injection Powder products, which increased 138.8 percent and 46.7 percent respectively from the year ago period. GLP revenues during the second quarter totaled $3.0 million, which included just over two months of contribution during the quarter. Sales of PBN products in the second quarter of 2006 totaled $6.9 million, representing a 54.3 percent increase from the $4.5 million reported during the comparable period last year as we believe that our marketing efforts led to further penetration and greater brand awareness within the marketplace. An increase of 84.2 percent in sales of Protein Peptide peptide, organic compound composed of amino acids linked together chemically by peptide bonds. The peptide bond always involves a single covalent link between the α-carboxyl (oxygen-bearing carbon) of one amino acid and the amino nitrogen of a second amino acid. series to $5.9 million had the biggest impact on PBN revenues during the second quarter 2006 as compared to the second quarter 2005. "We are very pleased with both our revenue performance during the second quarter from an organic standpoint The Standpoint is a newspaper published in the British Virgin Islands. It was originally published under the name Pennysaver, largely as a shopping-coupon promotional newspaper, but since emerged as one of the most influential sources of journalism in the and the initial contribution from our acquisition of GLP," commented Tony Liu, chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of AOB. "Our products continue to be well received by consumers looking to address specific ailments or to improve their overall health and well-being through traditional Chinese herbal herbal, early botanical book containing descriptions and illustrations of herbs and plants with their properties, chiefly those qualities that made them useful as medicines or condiments. Most of the herbals were written between c.1470 and c. remedies. We believe that the acquisition of HQPL announced last month will be accretive to future growth as it provides us with a significantly expanded distribution network encompassing all major regions within China." Cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold were $7.7 million during the second quarter, representing an increase of 83.3 percent, compared to $4.2 million in the same period last year. Gross margins for the period were 66.3 percent compared to 64.8 percent in the second quarter of 2005 and 65.9 percent in the first quarter of 2006. Gross margins increased both sequentially and year over year due to improved operating efficiencies across both PBP and PBN businesses. Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the second quarter were $8.1 million which represented an increase of 148.8 percent versus last year as the company increased expenses to support operational growth while also incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. additional expenses related to the GLP acquisition and integration. Selling and marketing expenses increased 255.5 percent to $2.0 million primarily related to the increased spending on promotional materials and higher marketing fees. Compared to the second quarter of last year advertising expenses increased 409.4 percent to $3.0 million, and general and administrative expenses increased 35.1 percent to $2.4 million. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased to $7.0 million, up 56.9 percent compared to $4.5 million in the year ago period. Operating margins were 30.8 percent as compared to 37.5 percent last year and 33.4 percent in the first quarter 2006. The company had an effective tax rate of 21.0 percent compared to 23.6 percent last year. This tax is in addition to the Value Added Tax value added tax n (BRIT) → impuesto sobre el valor añadido or agregado (LAM) value added tax n (Brit (VAT VAT See: Value-added tax VAT See value-added tax (VAT). ) of 17.0 percent deducted de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. from the company's gross revenues each quarter. Net income increased 73.7 percent to $5.8 million or $0.09 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share versus net income of $3.4 million or $0.08 per fully diluted share in the same period last year. Fully diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of increased 12.5 percent year over year. For the sixth month period ending June 30, 2006, revenues increased 93.7 percent to $41.8 million as compared to $21.6 million last year. Organic revenue growth for the period was 80.0 percent. Gross profit increased 101.1 percent to $27.6 million resulting in a gross margin of 66.1 percent as compared to 63.7 percent in the comparable period last year with operational efficiencies previously highlighted. Operating income increased 78.5 percent to $13.4 million with resulting operating margins of 32.0 percent versus 34.8 percent last year with the resulting year over year decrease as a result of higher overall expenses. Net income for the period totaled $10.7 million as compared to $5.5 million last year representing a 93.8 percent increase. Fully diluted earnings per share increased 30.8 percent to $0.17 for the six month period ending June 30, 2006, as compared to $0.13 last year despite the 46.2 percent increase in weighted average fully diluted shares outstanding to 62.1 million and 42.5 million respectively. The company completed the quarter with $70.3 million in cash and cash equivalents. Cash and cash equivalents increased $12.8 million from $57.5 million at the end of 2005 primarily as a result of $8.6 million in positive cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses through the first six months of 2006, $25.0 million in the receipt of cash proceeds from the second tranche Tranche One of several related securities offered at the same time. Tranches from the same offering usually have different risk, reward, and/or maturity characteristics. tranche A class of bonds. of the private placement effected in December 2005, offset by the net cash purchase price of GLP for $18.1 million. Free cash flow for the sixth-month period ending June 2006 was $7.9 million. Inventory at the end of the second quarter totaled $10.4 million, representing a 111.0 percent and 28.3 percent increase respectively as compared to the end of second quarter 2005 and the end of fourth quarter 2005. Management believes inventory is at acceptable levels given the revenue growth experienced during the first six months of 2006 versus last year and future growth plans. The company continues to have quality receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed with overall Days Sales Outstanding In accountancy, Days Sales Outstanding is a company's average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Typically it is looked at either quarterly or yearly (90 or 365 days). (DSO See CSO. ) decreasing 11 days from both the end of 2005 and the first quarter 2006 to 34 days. Regarding the ongoing opportunity to derive value from the recent GLP acquisition, Liu commented, "Similar to our experience with the acquisition of HSPL HSPL High-Speed Perceptual Learning , and based on initial GLP results, we have identified significant operational synergies which we expect will translate into improved margins for both GLP and AOB on a combined basis. Our expectation is that GLP margins can be comparable to that of AOB by the end of 2006." Liu concluded, "We have continued to make significant operational and organizational improvements to AOB during the past year. By significantly expanding both our product portfolio and distribution channels we believe that we have built a solid foundation to leverage these assets into incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. future revenue, margin and net income growth opportunities." Conference Call Information The company will hold a conference call at 4:45 p.m. ET to discuss second quarter 2006 results. Interested participants should call 877-692-2591 when calling within the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. or 973-582-2845 when calling internationally. There will be a playback Playback could mean:
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 Web site at www.viavid.net. The webcast can be accessed until Sept. 14, 2006, on either site. About American Oriental Bioengineering Inc. American Oriental Bioengineering Inc. (AOB) uses proprietary processes for producing soybean soybean, soya bean, or soy pea, leguminous plant (Glycine max, G. soja, or Soja max) of the family Leguminosae (pulse family), native to tropical and warm temperate regions of Asia, where it has been protein peptide more efficiently than traditional extracting techniques. These techniques are used to manufacture and formulate formulate /for·mu·late/ (for´mu-lat) 1. to state in the form of a formula. 2. to prepare in accordance with a prescribed or specified method. supplemental and medicinal products medicinal product, n a substance administered to humans or animals through injection, application, oral ingestion, inhalation, and so forth, whose purpose is to ultimately restore health or eliminate disease in an individual. . Soybean peptides are used widely in general food, health food products and medicines, among other applications. AOB also produces Cease-Enuresis Soft Gel, the only Chinese FDA-approved first grade, prescription medicine that is specially formulated for·mu·late tr.v. for·mu·lat·ed, for·mu·lat·ing, for·mu·lates 1. a. To state as or reduce to a formula. b. To express in systematic terms or concepts. c. to help alleviate Alleviate To make something easier to be endured. Mentioned in: Kinesiology, Applied bed-wetting Bed-Wetting Definition Bed-wetting is the unintentional (involuntary) discharge of urine during the night. Although most children between the ages of three and five begin to stay dry at night, the age at which children are physically and emotionally and incontinence incontinence Inability to control excretion. Starting and stopping urination relies on normal function in pelvic and abdominal muscles, diaphragm, and control nerves. Babies' nervous systems are too immature for urinary control. Later incontinence may reflect disorders (e.g. . The company is a leading producer of products in both the nutraceuticals and pharmaceuticals areas in China. For more information, visit http://www.bioaobo.com. This news release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as defined by the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" .
AMERICAN ORIENTAL BIOENGINEERING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
JUNE 30, DEC. 31,
2006 2005
------------ -----------
UNAUDITED
CURRENT ASSETS
Cash and cash equivalents $ 70,342,537 $57,532,049
Accounts receivable, net of reserve of
$216,891 and $266,248 at June 30,
2006, and Dec. 31, 2005, respectively 8,702,038 8,168,420
Inventories, net of $860,838 and
$842,112 provision for obsolete
inventories at June 30, 2006, and
Dec. 31, 2005, respectively 10,373,263 4,916,500
Advances to suppliers 2,690,070 3,494,320
Other receivables 1,079,105 102,611
Marketable securities 3,593 -
Due from employees 954,724 409,159
Deferred consulting expenses 404,300 752,620
------------ -----------
Total Current Assets 94,549,630 75,375,679
PLANT AND EQUIPMENT, NET 23,280,626 13,386,439
LAND USE RIGHTS, NET 32,546,914 7,925,763
CONSTRUCTION IN PROGRESS 1,724,613 1,655,349
DEFERRED TAX ASSETS 1,677,565 614,336
LICENSE, NET 422,107 464,673
GOODWILL 2,197,553 -
INVESTMENT AND ADVANCE TO INVESTEE 204,182 -
------------ -----------
TOTAL ASSETS $156,603,190 $99,422,239
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
JUNE 30, DEC. 31,
2006 2005
------------ -----------
UNAUDITED
CURRENT LIABILITIES
Accounts payable $ 2,369,356 $ 1,230,767
Other payables and accrued expenses 2,652,475 1,604,096
Taxes payable 1,389,134 1,485,872
Short-term bank loans 7,504,127 3,717,380
Current portion of long-term bank loans 625,344 -
Customer deposits 1,668,602 355,975
Notes payable 370,940 -
Stock to be issued 5,868,642 141,044
Other liabilities 900,967 27,036
------------ -----------
Total current liabilities 23,349,587 8,562,170
LONG-TERM BANK LOANS 1,375,757 -
DEFERRED TAX LIABILITIES 4,698,332 232,505
OTHER LIABILITIES 16,098 23,018
------------ -----------
TOTAL LIABILITIES 29,439,774 8,817,693
------------ -----------
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value;
2,000,000 shares authorized; 1,000,000
shares issued and outstanding at June 30,
2006, and Dec. 31, 2005, respectively 1,000 1,000
Common stock, $0.001 par value;
150,000,000 shares authorized; 62,665,788
and 57,109,188 shares issued and
outstanding, at June 30, 2006, and
Dec. 31, 2005, respectively 62,666 57,109
Additional paid-in capital 84,673,795 59,491,393
Retained earnings (the restricted
portion of retained earnings is
$4,104,115 at June 30, 2006, and
Dec. 31, 2005) 40,357,292 29,625,765
Accumulated other comprehensive income 2,068,663 1,429,279
------------ -----------
Total Shareholders' Equity 127,163,416 90,604,546
------------ -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $156,603,190 $99,422,239
============ ===========
AMERICAN ORIENTAL BIOENGINEERING INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
----------------------------
2006 2005
REVENUES $ 22,761,882 $ 11,902,470
COST OF GOODS SOLD 7,678,437 4,188,755
------------- ------------
GROSS PROFIT 15,083,445 7,713,715
Selling and marketing 1,956,629 550,446
Advertising 3,001,974 589,350
General and administrative 2,437,645 1,803,799
Depreciation and amortization 681355 303,946
------------- ------------
INCOME FROM OPERATIONS 7,005,842 4,466,174
INTEREST INCOME (EXPENSE), NET 361,951 65,401
OTHER INCOME (EXPENSE), NET 10,136 7,277
------------- ------------
INCOME BEFORE INCOME TAXES 7,377,929 4,393,496
INCOME TAXES 1,550,708 1,037,779
------------- ------------
NET INCOME 5,827,221 3,355,717
------------- ------------
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain 378,670 -
Unrealized gain on marketable security 1,089 -
------------- ------------
Other comprehensive income before tax 379,759
Income tax expense related to other
comprehensive income 125,320 -
------------- ------------
TOTAL OTHER COMPREHENSIVE INCOME,
NET OF TAX 254,439 -
------------- ------------
COMPREHENSIVE INCOME $ 6,081,660 $ 3,355,717
============= ============
NET INCOME PER SHARE
BASIC $ 0.09 $ 0.08
DILUTED $ 0.09 $ 0.08
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
BASIC 62,657,876 39,927,624
DILUTED 62,795,439 42,506,207
SIX MONTHS ENDED
JUNE 30,
----------------------------
2006 2005
REVENUES $ 41,808,826 $ 21,555,252
COST OF GOODS SOLD 14,173,998 7,816,319
------------- ------------
GROSS PROFIT 27,634,828 13,738,933
Selling and marketing 3,655,169 1,205,821
Advertising 5,222,067 1,404,084
General and administrative 4,316,287 3,029,193
Depreciation and amortization 1,067,548 608,927
------------- ------------
INCOME FROM OPERATIONS 13,373,757 7,490,908
INTEREST INCOME (EXPENSE), NET 443,514 157,075
OTHER INCOME (EXPENSE), NET 3,829 7,277
------------- ------------
INCOME BEFORE INCOME TAXES 13,826,415 7,326,556
INCOME TAXES 3,094,888 1,787,646
------------- ------------
NET INCOME 10,731,527 5,538,910
------------- ------------
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain 638,295 -
Unrealized gain on marketable security 1,089 -
----------------------------
Other comprehensive income before tax 639,384
Income tax expense related to other
comprehensive income 210,997 -
------------- ------------
TOTAL OTHER COMPREHENSIVE INCOME,
NET OF TAX 428,387 -
------------- ------------
COMPREHENSIVE INCOME $ 11,159,914 $ 5,538,910
============= ============
NET INCOME PER SHARE
BASIC $ 0.17 $ 0.14
DILUTED $ 0.17 $ 0.13
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
BASIC 61,944,618 39,837,225
DILUTED 62,060,700 42,447,551
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