NEW YORK, Nov. 9, 2010 /PRNewswire-Asia/ -- AgFeed Industries, Inc. , an international agribusiness with operations in the U.S. and China and one of the largest independent hog production and animal nutrient companies in China, announced its results for the third quarter of 2010.
AgFeed reports continued record results in its animal nutrition business segment with revenue and operating income increasing 59% and 37% respectively for the first three quarters of 2010 as compared to the same period in 2009 and achieving new record levels. AgFeed's U.S. hog production system, which commenced through its acquisition of M2P2 late in the third quarter generated results in line with the Company's plans. The performance of AgFeed's Chinese hog farms, acquired during 2007 and 2008, showed revenue declines and an operating loss.
AgFeed's Board of Directors, recognizing the weak performance of the Company's existing Chinese hog production system and the extreme operating conditions that the Company has experienced during 2010 has conducted a full review of its established Chinese hog production system, the farms acquired during 2007 and 2008, in connection with the preparation of its financial statements for the period ending September 30, 2010. This review has resulted in a number of actions regarding the management and organization of the business and has caused the board to reach the conclusion that while this existing production system can be operated profitably it cannot sustain a high enough level of profitability to support the original acquisition values of these assets and the resulting goodwill. As a result a determination has been made to write down the value of the intangible assets related to this production system by approximately $16.8 million.
In connection with the acquisition of M2P2 AgFeed has changed significantly from a company focused on China to an international company presented with global growth opportunities. AgFeed's board appreciates that these opportunities bring with them high performance standards regarding, improving and growing earnings and cash flow and building long term value for the Company's shareholders.
The Board of Directors has realigned members of the Company's management team in the furtherance of the opportunities presented by the market and in response to its review of operations.
Mr. Edward Pazdro, currently Chief Financial Officer of the Company's animal nutrition business and of its joint venture AgFeed International Protein Technology Corp., has been named acting Chief Financial Officer. The Board of Directors has relieved Ms. Selina Jin, the Company's Chief Financial Officer, of her duties with immediate effect and she will be reassigned.
In recognition of the growth opportunities for AgFeed's animal nutrition business, Mr. Gerry Daignault the Company's Chief Operating Officer has been assigned the additional duties of President and Chief Executive Officer of the animal nutrition business.
The Board of Directors has also installed a new management team for its existing Chinese hog production system. Mr. Yaoliang Tu and Dr. Ming Wei have replaced Mr. Zhengru Xiong, an AgFeed founder, with management responsibilities for this established production system. Mr. Tu and Dr. Wei have been charged with plotting a path to returned and sustainable profitability in this production system. Together these executives bring 43 years of experience to their responsibilities both within AgFeed and with other international hog production companies.
The AgFeed Board continues its commitment to the development of the Company's western-style hog production system in China with its initial production pods under construction in Dahua and Xinyu. Initial stocking of the first farm in the Dahua production pod is expected to take place in late December or early January. Based on the progress in Dahua and Xinyu to date, the Company expects to expand its "AgFeed, Government & Farmer" model to continue to roll out western production pods with other local governments as part of its initiative to lead the modernization of the Chinese hog production industry. The Company's Chairman, Dr. Songyan Li and its Chief Executive Officer, Mr. Junhong Xiong will be leading a dedicated team to focus on government relations and the development of opportunities to work with local governments in the development of the company's western-style hog production pods.
ABOUT AGFEED INDUSTRIES, INC.
NASDAQ Global Market Listed AgFeed Industries (http://www.agfeedinc.com/) is an international agribusiness with operations in the U.S. and China. AgFeed has two 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 companies in terms of revenues. In the U.S., AgFeed's hog production unit, M2P2, is a market leader in setting new standards for production efficiency and productivity. The transfer of these processes, procedures and techniques will allow our Chinese hog production units to set new standards for production in China. 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 swine 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
Certain statements regarding AgFeed Industries set forth in this press release contain forward-looking information and speak only as of the date of such statement. 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. This forward-looking information is subject to numerous material risks, uncertainties and assumptions, certain of which are beyond the control of AgFeed Industries, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, environmental risks, competition from other industry participants, stock market volatility, ability to access sufficient capital from internal and external sources. Readers are cautioned that the material assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise. Actual results, performance or achievement could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits that AgFeed Industries will derive therefrom. AgFeed Industries disclaim any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. For additional information and risk factors that could affect AgFeed Industries, see its 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 its Quarterly Report on Form 10-Q for the period ended September 30, 2010. The information contained in this press release is made as of the date of the press release, even if subsequently made available by AgFeed Industries 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 September 30, 2010 2009 ---- ---- (unaudited) (unaudited) Revenues $53,606,079 $45,115,442 Cost of goods sold 49,284,430 37,554,278 ---------- ---------- Gross profit 4,321,649 7,561,164 Operating expenses Selling expenses 1,062,866 960,574 General and administrative expenses 5,020,641 2,888,845 Impairment of intangible assets 16,752,201 Total operating expenses 22,835,708 3,849,419 Income (loss) from operations (18,514,059) 3,711,745 Non- operating income (expense): Other expense (192,828) (387,979) Interest income 54,903 75,344 Interest and financing costs (290,911) (192,963) Foreign currency transaction gain (loss) (35,380) (18,121) Total non-operating expense (464,216) (523,719) Income (loss) before provision for income taxes (18,978,275) 3,188,026 Provision for income taxes (1) 1,758,556 292,647 Net income (loss) including noncontrolling interest (20,736,831) 2,895,379 Less: Net income (loss) attributed to noncontrolling interest (100,966) (962) Net income (loss) attributed to AgFeed (20,635,865) 2,896,341 Other comprehensive income (loss) Foreign currency translation gain (loss) 2,282,185 168,640 Comprehensive Income (loss) $(18,353,680) $3,064,981 ============ ========== Weighted average shares outstanding : Basic 48,486,839 42,420,914 ========== ========== Diluted 48,486,839 43,329,228 ========== ========== Earnings (loss) per share attributed to AgFeed common stockholders: Basic $(0.43) $0.07 ====== ===== Diluted $(0.43) $0.07 ====== ===== Earnings before interest, taxes, depreciation and amortization (EBITDA) further adjusted for significant non-recurring charges: Net income (loss) $(20,635,865) $2,896,341 Interest 290,911 192,963 Taxes (1) 1,758,556 292,647 Depreciation 734,380 669,254 Amortization 55,194 10,507 Goodwill impairment 16,752,201 - EDITDA $(1,044,623) $4,061,712 =========== ========== Add significant non- recurring charges Acquisition costs related to M2P2 1,055,833 - Professional fees related to carve out of animal feed nutrition 393,638 - EBITDA adjusted for significant non- recurring charges $404,848 $4,061,712 ======== ========== Per share computations:: EDITDA per share $(0.02) $0.10 ====== ===== EBITDA adjusted for significant non- recurring charges $0.01 $0.10 ===== ===== Nine Months Ended September 30, 2010 2009 ---- ---- (unaudited) (unaudited) Revenues $144,127,101 $117,072,486 Cost of goods sold 130,926,892 98,486,258 ----------- ---------- Gross profit 13,200,209 18,586,228 Operating expenses Selling expenses 3,076,806 2,823,783 General and administrative expenses 12,193,722 6,606,537 Impairment of intangible assets 16,752,201 Total operating expenses 32,022,729 9,430,320 Income (loss) from operations (18,822,520) 9,155,908 Non-operating income (expense): Other expense (643,735) (384,503) Interest income 140,976 188,460 Interest and financing costs (555,752) (970,391) Foreign currency transaction gain (loss) (56,014) (14,819) Total non-operating expense (1,114,525) (1,181,253) Income (loss) before provision for income taxes (19,937,045) 7,974,655 Provision for income taxes (1) 2,853,275 794,155 Net income (loss) including noncontrolling interest (22,790,320) 7,180,500 Less: Net income (loss) attributed to noncontrolling interest (267,121) 39,067 Net income (loss) attributed to AgFeed (22,523,199) 7,141,433 Other comprehensive income (loss) Foreign currency translation gain (loss) 2,581,631 20,739 Comprehensive Income (loss) $(19,941,568) $7,162,172 ============ ========== Weighted average shares outstanding : Basic 46,137,142 39,984,438 Diluted 46,137,142 40,641,679 Earnings (loss) per share attributed to AgFeed common stockholders: Basic $(0.49) $0.18 Diluted $(0.49) $0.18 Earnings before interest, taxes, depreciation and amortization (EBITDA) further adjusted for significant non- recurring charges: Net income (loss) $(22,523,199) $7,141,433 Interest 555,752 970,391 Taxes (1) 2,853,275 794,155 Depreciation 2,310,313 1,952,213 Amortization 98,604 49,286 Goodwill impairment 16,752,201 - EDITDA $46,946 10,907,478 ======= ========== Add significant non-recurring charges Acquisition costs related to M2P2 1,055,833 - Professional fees related to carve out of animal feed nutrition 393,638 - EBITDA adjusted for significant non-recurring charges $1,496,417 $10,907,478 ========== =========== Per share computations:: EDITDA per share $0.00 $0.27 ===== ===== EBITDA adjusted for significant non-recurring charges $0.03 $0.27 ===== ===== (1) Provision for income taxes for the three and nine months ended September 30, 2010 includes a one-time tax of $1,314,652 related to the corporate reorganization to facilitate the animal nutrition "carve-out". AGFEED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, December 31, 2010 2009 ---- ---- (unaudited) ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $19,100,754 $37,580,154 Accounts receivable, net of allowance for doubtful accounts of $536,110 and $415,765 19,928,454 14,397,793 Advances to suppliers 3,162,906 1,173,941 Other receivables 2,997,889 2,186,643 Inventory 85,479,143 23,835,412 Prepaid expenses 3,466,898 1,325,150 Debt issue costs 12,201 34,706 Total current assets 134,148,245 80,533,799 PROPERTY AND EQUIPMENT, net 59,772,190 26,991,851 CONSTRUCTION-IN-PROCESS 3,885,369 7,615,132 INTANGIBLE ASSETS, net 33,369,685 43,808,499 OTHER ASSETS 9,649,949 3,998,739 TOTAL ASSETS $240,825,438 $162,948,020 LIABILITIES AND EQUITY ---------------------- CURRENT LIABILITIES: Short-term loan $4,491,000 $4,401,000 Accounts payable 10,874,229 6,162,385 Other payables 10,197,392 1,892,858 Unearned revenue 225,970 582,266 Accrued expenses 2,757,467 83,649 Accrued payroll 1,628,990 975,485 Tax and welfare payable 1,926,760 396,370 Interest payable 409,391 120,419 Current portion of long-term debt 1,400,000 - Convertible notes, net of discount of $28,713 971,287 - Total current liabilities 34,882,486 14,614,432 CONVERTIBLE NOTES, net of debt discount of $81,675 - 918,325 ACQUISITION NOTE PAYABLE 9,621,434 - LINE OF CREDIT 36,007,752 - LONG-TERM DEBT 15,749,697 - TOTAL LIABILITIES 96,261,369 15,532,757 ---------- ---------- COMMITMENTS AND CONTINGENCIES (Note 14) - - --- --- EQUITY: AgFeed stockholders' equity: Common stock, $0.001 per share; 75,000,000 shares authorized; 51,736,908 issued and 51,350,213 outstanding at September 30, 2010 44,510,558 issued and 44,143,263 outstanding at December 31, 2009 51,738 44,511 Additional paid-in capital 128,774,415 109,281,086 Deferred compensation (2,710,840) - Other comprehensive income 6,758,081 4,176,450 Statutory reserve 5,477,401 4,685,115 Treasury stock (386,695 shares) (1,858,942) (1,811,746) Retained earnings 7,895,078 31,210,563 Total AgFeed stockholders' equity 144,386,931 147,585,979 Noncontrolling interest (deficit) 177,138 (170,716) ------- -------- Total equity 144,564,069 147,415,263 TOTAL LIABILITIES AND EQUITY $240,825,438 $162,948,020 AGFEED INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2010 2009 ---- ---- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) including non-controlling interest $(22,790,320) $7,180,500 Adjustments to reconcile net income (loss) including non- controlling interest to net cash provided by (used in) operating activities: Depreciation 2,310,313 1,952,213 Amortization 98,604 49,286 Loss on disposal of assets 1,345,688 882,854 Impairment of intangible asset 16,752,201 - Stock based compensation 225,844 427,551 Issuance of common stock for services 1,127,160 - Amortization of debt issuance costs 22,505 203,932 Amortization of discount on convertible debt 52,962 479,920 (Increase) /decrease in assets: Accounts receivable (1,315,378) (6,759,546) Other receivables (978,420) 1,201,329 Inventory 289,980 (1,777,302) Advances to suppliers (1,931,073) (716,870) Prepaid expenses (516,064) (340,333) Other assets - (244,980) Increase /(decrease) in current liabilities: Accounts payable 329,240 1,624,279 Other payables (1,747,900) (2,347,476) Unearned revenue (361,807) 43,465 Accrued expenses 1,128,689 287,838 Accrued payroll (198,908) (132,716) Tax and welfare payable 1,518,678 (80,312) Interest payable 155,375 (18,608) Net cash provided by (used in) operating activities (4,482,631) 1,915,024 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases/deposits for property and equipment (15,226,109) (7,486,470) Purchase of intangible assets (117,854) (35,314) Cash paid for purchase of subsidiaries (11,322,824) (2,518,089) Cash acquired with acquisition of subsidiary 211,124 - Cash from the sale of subsidiary - 835,770 Net cash used in investing activities (26,455,663) (9,204,103) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the sale of common stock 13,000,000 10,000,000 Offering costs paid - (1,740,072) Purchase of treasury stock (47,196) - Repayment of borrowings under line of credit facility, net (767,669) - Proceeds from short-term loans - 4,541,500 Proceeds from exercise of warrants - 6,580,010 Capital contributed by noncontrolling interest holders 401,282 118,664 Repayment of contribution of noncontrolling interest holders - (586,800) Purchase of noncontrolling interest in majority owed hog farms (406,103) - Net cash provided by (used in) financing activities 12,180,314 18,913,302 ---------- ---------- Effect of exchange rate changes on cash and cash equivalents 278,580 16,652 ------- ------ NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (18,479,400) 11,640,875 CASH & CASH EQUIVALENTS, BEGINNING BALANCE 37,580,154 24,839,378 ---------- ---------- CASH & CASH EQUIVALENTS, ENDING BALANCE $19,100,754 $36,480,253 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid $214,609 $212,414 ======== ======== Income taxes paid $1,483,837 $616,693 ========== ========
AgFeed Industries, Inc.
CONTACT: Investor Relations: AgFeed Industries, Inc., +1-917-804-3584,
ir@agfeedinc.com
Web Site: http://www.agfeedinc.com/
