JERSEY CITY, N.J., Nov. 14, 2011 /PRNewswire-Asia-FirstCall/ -- American Oriental Bioengineering, Inc. (NYSE: AOB), (the "Company" or "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, today announced financial results for the third quarter ended September 30, 2011.
2011 Third Quarter Financial Results
Total Revenue for the third quarter of 2011 was $53.9 million, compared to $91.5 million in the same period of 2010. We strategically shift the products mix, decreasing the manufacturing of certain generic drugs from lower margin products toward higher-margin products in order to minimize the impact from the increased cost of certain raw materials and the continuing government price cut on certain products.
- Revenue from manufacturing business was $49.1 million for the third quarter of 2011, compared to $ 87.5 million in the same period of 2010.
- Revenue from pharmaceutical products was $40.3 million in the third quarter of 2011, compared to $77.2 million in the same period of 2010.
- Revenue from nutraceutical products was $8.8 million in the third quarter of 2011, compared to $10.3 million in the same period of 2010.
- Revenue from distribution business was $4.9 million for the third quarter of 2011, compared to $4.1 million in the same period of 2010.
Gross profit for the third quarter of 2011 was $25.2 million, compared to $47.3 million in the same period of 2010. Gross margin for the third quarter of 2011 was 46.7%, compared to 51.7% in the same period of 2010. The margin pressure was mainly caused by the increased costs of certain raw materials and newly levied urban construction and maintenance tax and educational surcharge to foreign invested companies in China since December, 2010.
Selling, general and administrative expenses for the third quarter of 2011 were $12.1 million, which represented a decrease of 42.3% from $20.9 million for the same period of 2010. As a percentage of total revenue, selling, general and administrative expenses decreased to 22.4% for the third quarter of 2011 from 22.9% in the same period of 2010. The decrease reflects management's continuing focus on the efficiency of the business through existing and newly identified process improvements and cost reduction initiatives.
Advertising expense for the third quarter of 2011 were $3.0 million, which represented a decrease of 73.0% from $ 11.0 million for the same period of 2010. As a percentage of total revenue, advertising expenses decreased to 5.5% for the third quarter of 2011 from 12.0% in the same period of 2010. The decrease reflects reduced advertising efforts on some of OTC drugs to correspond to the Company's selective product sales strategy and optimal product portfolio.
Research and development expenses for the third quarter of 2011 were $2.8 million, compared to $4.7 million for the same period of 2010. Expressed as a percentage of revenue, research and development costs were 5.2% for both the third quarter of 2011 and 2010. Our research and development activities consist of near term, middle term and long term stages which contribute to both our current and future business strategies.
Income from operations for the third quarter of 2011 was $8.2 million, compared to $ 9.0 million in the same period of 2010.
Net Income attributable to controlling interest for the third quarter of 2011 was $ 7.7 million, or $ 0.10 per diluted share, compared to $4.2 million, or $ 0.06 per diluted share, in the same period of 2010.
First Nine Months of 2011 Financial Performance
Total revenue for the nine months of 2011 was $ 160.0 million, compared to $ 222.6 million in the same period of 2010. Gross profit for the first nine months of 2011, was $76.1 million, compared to $ 115.4 million in the same period of 2010. Operating income for the nine months of 2011was $ 20.0 million, compared to $ 24.4 million in the same period of 2010. Net income attributable to controlling interest for the first nine months of 2011 was $ 11.2 million, or $ 0.15 per diluted share, compared to $ 12.5 million, or $ 0.17 per diluted share, in the same period of 2010.
Balance Sheet
Our cash position as of September 30, 2011 was $ 83.0 million, compared to $ 94.6 million as of December 31, 2010. The decrease was mainly attributable to the decrease of investing activities of $39.6 million and partially offset by the operating and financing activities of $ 20.8 million and $2.0 million.
The Company generated approximately $ 20.8 million of operating cash flow in the nine months of 2011, representing an increase of $ 13.5 million, compared to $ 7.3 million for the same period of 2010. The increase was primarily due to the collection of accounts and notes receivable of $16.6 million.
Our net cash used in investing activities amounted to $ 39.6 million in the nine months of 2011, including cash outflows for a deposit of $ 30.4 million, which allow us to have the right to establish a TCM raw material trading center in Northeast China approved by the China's SFDA amounted to $26,503,473. The investment is intended to be integrated with our competitive infrastructure and whole supply chain management, providing a platform for the Company to start a TCM raw material trading business, offering a long term steadier supply of quality raw materials with manageable costs.
We have paid $8.9 million construction in progress during the nine months of 2011, for the expansion and upgrade of our manufacturing facilities to complement capacity improvement and efficiency enhancement.
Our working capital decreased to $ 184.6 million as of September 30, 2011, compared to $200.7 million as of December 31, 2010. The decrease was primarily due to the decrease in cash and cash equivalents by $11.6 million and decrease in net accounts and notes receivable by $ 16.5 million, partially offset by the increase of net inventories at $ 11.5 million.
Mr. Tony Liu, Chairman and Chief Executive Officer of AOB, commented: "China remains as a major commercial opportunity with significant growth potential. Leaving aside near-term healthcare reform policy headwinds, we keep long-term positive view on the pharmaceutical business. The financial results demonstrate our ability to execute and deliver on a consistent basis. We are fully committed to executing our growth strategy, driving innovation and delivering value to our customers and our shareholders."
Conference Call
To be announced as soon as the conference call number is arranged, expected in the hour.
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.