AgFeed Industries, Inc. Announces First Half Results

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Aug 10, 2010, 06:55 ET

NEW YORK, Aug. 10 /PRNewswire-Asia/ -- AgFeed Industries, Inc. (Nasdaq: FEED, NYSE Alternext: ALHOG), one of the largest independent hog production and animal nutrient companies in China, today announced its results for the first half of 2010. Revenue for the first half reached $90.5 million an increase of 26% compared to the first half of 2009. Production volumes increased by 92% in the Company's animal nutrition division, and decreased 15% in its Hog Division as compared to the same period in 2009.

During the second quarter the Company faced an extremely difficult operating environment as a result of a series of severe floods throughout its area of operations. The floods led to significant operating disruptions on the Company's farms and on the transportation infrastructure supporting the operations. The movement of feed and live animals was severely disrupted. These factors led to the loss of over 16,000 live animals in addition to the planned culling of 3,000 sows.

Dr. Songyan Li, AgFeed's Chairman stated, "In my life time I have never experienced flooding and devastation of the magnitude that we faced from late April into early June. We are still in the process of repairing the infrastructure damaged in and around our facilities in Fujian, Jiangxi and Hainan. I have been very proud of our team and the way that they have rallied to answer the challenge faced by our Company and nation." Dr. Li went on to observe that, "The domestic inventory of hogs has changed dramatically and we are already seeing a rapid rise in market prices; we are optimistic about our operating performance for the balance of the year."

Mr. Junhong Xiong, AgFeed's President added, "Our investment in our western farm projects in both Dahua and Xinyu continue apace as we simultaneously modernize our legacy farm system reducing the amount of personnel required on these farms. In spite of the challenges that our customers faced throughout the recent months we have successfully brought our working capital accounts back in line by reducing our accounts receivable and accounts payable during the second quarter."

Mr. Gerry Daignault, AgFeed's COO emphasized, "While AgFeed has supported its customers with extended payment terms from time to time, in light of the industry wide operating pressures we limited this practice during the quarter and reduced accounts receivable by over $5.6 million from March 31st. We also reduced our payables by approximately $3.4 million while also continuing our capital investment program to support of expansion in an amount over $3.3 million."

ABOUT AGFEED INDUSTRIES, INC.

NASDAQ Global Market Listed. AgFeed Industries (www.agfeedinc.com) is a U.S. company with its primary operations in China. AgFeed has two profitable business lines -- animal nutrients in premix, concentrates and complete feeds and hog production. AgFeed is one of China's largest commercial hog producers in terms of total annual hog production as well as one of the largest premix feed company in terms of revenues. China is the world's largest hog producing country that produced over 645 million hogs in 2009, compared to approximately 100 million hogs produced annually in the U.S. China also has the world's largest consumer base for pork consumption. Over 62% of total meat consumed in China is pork. Hog production in China enjoys income tax free status. The feed markets in which AgFeed operates represent a $20 billion segment of China's $58 billion per year animal feed market.

SAFE HARBOR DISCLOSURE NOTICE

This press release may contain forward-looking information about the Company. You can identify these statements by the fact that they use words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "forecast" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance or business plans and prospects. Readers are cautioned not to place undue reliance on forward-looking statements because actual results may differ materially from those expressed in, or implied by, the statements. For a list of factors that could affect the Company's results, see the Company's filings with the Securities and Exchange Commission, including "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," including "Cautionary Statement for Forward-Looking Statements," set forth in the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2010. Any forward-looking statement that the Company makes speaks only as of the date of such statement, and the Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. The information contained in this press release is made as of the date of the press release, even if subsequently made available by the Company on its website or otherwise.

Contact: Investor Relations: AgFeed Industries, Inc. Tel: (917) 804-3584 Email: [email protected]

The Company's policy is to handle all questions by email to [email protected] and they will be answered as soon as possible.


AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)


			Three Months Ended June 30,				Six Months Ended June 30,
			2010		2009		2010		2009
			(unaudited)		(unaudited)		(unaudited)		(unaudited)

Revenues		$	37,661,955	$	38,527,770	$	90,521,022	$	71,957,044

Cost of goods sold			35,102,677		33,306,111		81,642,462		60,931,980

Gross profit			2,559,278		5,221,659		8,878,560		11,025,064

Operating expenses
	Selling expenses		983,317		999,342		2,013,940		1,863,209
	General and administrative expenses		3,508,696		1,960,520		7,173,081		3,717,692
	Total operating expenses		4,492,013		2,959,862		9,187,021		5,580,901

Income (loss) from operations			(1,932,735)		2,261,797		(308,461)		5,444,163

Non-operating income (expense):
	Other expense		(354,534)		(189,205)		(450,907)		3,476
	Interest income		38,062		52,554		86,073		113,116
	Interest and financing costs		(139,930)		(624,514)		(264,841)		(777,428)
	Foreign currency transaction gain (loss)		(34,437)		5,133		(20,634)		3,302

	Total non-operating expense		(490,839)		(756,032)		(650,309)		(657,534)

Income (loss) before provision for income taxes			(2,423,574)		1,505,765		(958,770)		4,786,629

Provision for income taxes			641,139		285,958		1,094,719		501,508

Net income (loss) including noncontrolling interest			(3,064,713)		1,219,807		(2,053,489)		4,285,121

Less: Net income (loss) attributed to noncontrolling interest			(109,961)		(6,445)		(166,155)		40,029

Net income (loss) attributed to AgFeed			(2,954,752)		1,226,252		(1,887,334)		4,245,092

Other comprehensive income (loss)
Foreign currency translation gain (loss)			298,682		5,953		299,446		(147,901)

Comprehensive Income (loss)		$	(2,656,070)	$	1,232,205	$	(1,587,888)	$	4,097,191

Weighted average shares outstanding :
	Basic		45,015,351		39,549,944		44,942,821		38,746,009
	Diluted		45,015,351		41,446,344		44,942,821		39,581,891

Earnings (loss) per share attributed to AgFeed common stockholders:
	Basic	$	(0.07)	$	0.03	$	(0.04)	$	0.11
	Diluted	$	(0.07)	$	0.03	$	(0.04)	$	0.11



Earnings before interest, taxes, depreciation and amortization:

Net income (loss)		$	(2,954,752)	$	1,226,252	$	(1,887,334)	$	4,245,092
Interest			139,930		624,514		264,841		777,428
Taxes			641,139		285,958		1,094,719		501,508
Depreciation			764,034		672,253		1,575,933		1,282,959
Amortization			20,219		26,000		43,410		38,779
EBITDA		$	(1,389,430)	$	2,834,977	$	1,091,569		6,845,766

EBITDA per share		$	(0.03)	$	0.07	$	0.02	$	0.18


AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS



				June 30,		December 31,
				2010		2009
				(unaudited)
ASSETS

CURRENT ASSETS:
	Cash and cash equivalents		$	24,027,490	$	37,580,154
	Accounts receivable, net of allowance for doubtful accounts of $609,980 and $415,765			17,415,553		14,397,793
	Advances to suppliers			289,829		1,173,941
	Other receivables			1,820,684		2,186,643
	Inventory			27,287,750		23,835,412
	Prepaid expenses			1,388,865		1,325,150
	Debt issue costs			19,785		34,706

		Total current assets		72,249,956		80,533,799

PROPERTY AND EQUIPMENT, net				33,913,168		26,991,851
CONSTRUCTION-IN-PROCESS				5,595,137		7,615,132
INTANGIBLE ASSETS, net				43,944,086		43,808,499
OTHER ASSETS				7,149,532		3,998,739

	TOTAL ASSETS		$	162,851,879	$	162,948,020

LIABILITIES AND EQUITY

CURRENT LIABILITIES:
	Short-term loan		$	4,419,000	$	4,401,000
	Accounts payable			6,800,705		6,162,385
	Other payables			2,282,587		1,892,858
	Unearned revenue			328,855		582,266
	Accrued expenses			144,092		83,649
	Accrued payroll			734,515		975,485
	Tax and welfare payable			472,577		396,370
	Interest payable			155,614		120,419
	Convertible notes, net of discount of $46,561			953,439		-

		Total current liabilities		16,291,384		14,614,432

CONVERTIBLE NOTES, net of debt discount of $81,675				-		918,325

TOTAL LIABILITIES				16,291,384		15,532,757

COMMITMENTS AND CONTINGENCIES (Note 10)				-		-

EQUITY:
AgFeed stockholders' equity:
	Common stock, $0.001 per share; 75,000,000 shares authorized; 45,420,558 issued and 45,053,263 outstanding at June 30, 2010 44,510,558 issued and 44,143,263 outstanding at December 31, 2009			45,421		44,511
	Additional paid-in capital			112,903,436		109,281,086
	Deferred compensation			(3,086,560)		-
	Other comprehensive income			4,475,896		4,176,450
	Statutory reserve			5,207,997		4,685,115
	Treasury stock (367,295 shares)			(1,811,746)		(1,811,746)
	Retained earnings			28,800,347		31,210,563
		Total AgFeed stockholders' equity		146,534,791		147,585,979
Noncontrolling interest (deficit)				25,704		(170,716)
		Total equity		146,560,495		147,415,263

	TOTAL LIABILITIES AND EQUITY		$	162,851,879	$	162,948,020


AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS


					Six Months Ended June 30,
					2010		2009
					(unaudited)		(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss) including noncontrolling interest			$	(2,053,489)	$	4,285,121
	Adjustments to reconcile net income (loss) including noncontrolling interest to net cash provided by (used in) operating activities:
		Depreciation			1,575,933		1,282,959
		Amortization			43,410		38,779
		Loss on disposal of assets			1,321,838		524,409
		Stock based compensation			150,562		282,497
		Issuance of common stock for services			751,440		-
		Amortization of debt issuance costs			14,921		196,348
		Amortization of discount on convertible debt			35,114		462,073
		(Increase) / decrease in assets:
			Accounts receivable		(2,945,382)		(5,163,082)
			Other receivables		618,255		1,530,631
			Inventory		(3,340,955)		(1,932,432)
			Advances to suppliers		885,238		(171,112)
			Prepaid expenses		(59,691)		(186,209)
			Other assets		-		139,541
		Increase / (decrease) in current liabilities:
			Accounts payable		610,581		1,150,362
			Other payables		(137,439)		(2,011,532)
			Unearned revenue		(254,731)		(57,926)
			Accrued expenses		58,106		138,378
			Accrued payroll		(243,862)		(155,514)
			Tax and welfare payable		74,277		(182,459)
			Interest payable		35,195		(36,497)

	Net cash provided by (used in) operating activities				(2,860,679)		134,335

CASH FLOWS FROM INVESTING ACTIVITIES:
		Purchases/deposits for property and equipment			(10,759,297)		(6,336,942)
		Purchase of intangible assets			-		(35,309)
		Cash paid for purchase of subsidiaries			-		(1,266,374)
		Cash from the sale of subsidiary			-		307,650

	Net cash used in investing activities				(10,759,297)		(7,330,975)

CASH FLOWS FROM FINANCING ACTIVITIES:
		Proceeds from the sale of common stock			-		10,000,000
		Offering costs paid			-		(1,380,720)
		Proceeds from short-term loans			-		4,541,500
		Capital contributed by noncontrolling interest holders			401,282		118,664
		Purchase of noncontrolling interest in majority owed hog farms			(406,103)		-

	Net cash provided by (used in) financing activities				(4,821)		13,279,444

Effect of exchange rate changes on cash and cash equivalents					72,133		(10,101)

NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS					(13,552,664)		6,072,703

CASH & CASH EQUIVALENTS, BEGINNING BALANCE					37,580,154		24,839,378

CASH & CASH EQUIVALENTS, ENDING BALANCE				$	24,027,490	$	30,912,081

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Interest paid			$	204,969	$	147,982
	Income taxes paid			$	492,843	$	416,012