AgFeed Industries, Inc. Announces First Half Results

NEW YORK, August 10, 2010 AgFeed Industries, Inc. (Nasdaq: FEED, NYSE Alternext: ALHOG - News), 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 lead 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: ir@agfeedinc.com

The Company's policy is to handle all questions by email to ir@agfeedinc.com 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

EDITDA

$

(1,389,430)

$

2,834,977

$

1,091,569

6,845,766

EDITDA 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 December31, 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

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