AGFEED INDUSTRIES, INC. 
By NEW YORK, March 17, 2011 /PRNewswire-Asia/ -- AgFeed Industries, Inc. (Nasdaq: FEED, NYSE Alternext: ALHOG - News) ("AgFeed" or the "Company"), an international agribusiness company with operations in the U.S. and China and one of the large independent hog producers and manufacturers of animal nutrients in China announced record levels of revenue in both its animal nutrition and U.S. hog production units for the fourth quarter of 2010 and for the full year 2010. The Company's 2010 fourth quarter and year-end revenues were the highest in company history representing an increase over revenues for the same periods in 2009 of 77.2% and 40.7%, respectively.
AgFeed reported a fourth quarter 2010 loss of $20.2 million, or $(0.42) per fully diluted share, on revenues of $99.5 million. For the full year 2010 the Company reported a loss of $ 42.7 million, or $(0.90) per fully diluted share on revenues of $ 243.6 million. This loss was principally attributable to the performance of the Company's legacy Chinese hog production system, the hog farms acquired by former management during 2007 and 2008.
AgFeed's loss for 2010 is attributable to operating losses in its legacy Chinese hog production system of $14.9 million of which $8.9 million was attributable to eight legacy farms being closed and non-cash, non-recurring, write downs and reserves related to the restructuring of this business unit of $30.6 million. This $30.6 million in asset write downs is comprised of $16.8 million of goodwill written off during the third quarter of 2010, $4.8 million of goodwill written off during the fourth quarter of 2010 and fixed asset written down during the fourth quarter of 2010 of $9.0 million.
John A. Stadler, AgFeed's Chairman and Interim President and Chief Executive Officer stated, "While we are pleased with the continued operating excellence demonstrated by the performance of both our animal nutrition business and our U.S. hog production business, the performance of our legacy Chinese hog production system is unacceptable. The team at M2P2 has demonstrated great success in executing our U.S. business plan and has positioned us to pursue growth opportunities that present themselves domestically. This team is now fully engaged in leading the restructuring and execution of operational changes to return our legacy Chinese hog production system to profitability. Our plan is to add to our team international professionals to firmly establish AgFeed as a global agribusiness."
Recognizing the unacceptable performance of the Company's legacy Chinese hog production system, AgFeed's Board of Directors completed its detailed analysis and operational review of this business unit that commenced during the fall of 2010. This review has resulted in additional actions and asset-write downs to those announced by the Company in November 2010.
AgFeed's new Board of Directors has made the following management changes and implemented operational changes to support the execution of the Company's international strategic plan while aggressively addressing the operating issues confronted by the legacy Chinese hog production system.
-- Appointed John Stadler as the Company's Chairman and Interim President
and Chief Executive Officer;
-- Appointed Edward Pazdro as the Company's Chief Financial Officer;
-- Appointed McGladrey & Pullen, LLP as the Company's auditor;
-- Deployed managers and executives from its M2P2 subsidiary to lead the
restructuring and return to profitability of the legacy Chinese hog
production system;
-- Commenced the closing of eight legacy Chinese hog farms considered to be
of a configuration and quality that they were deemed incapable of
meeting AgFeed's long-term operating benchmarks;
-- Reduced overall headcount from 1,843 to 1,673.
The Company's Chief Financial Officer, Edward Pazdro, said, "We have worked closely with outside consultants, auditors and our new management team to thoroughly assess the long-term viability and profitability of our legacy Chinese hog farms, and based on current market conditions, believe that our asset values are appropriate and present a long-term picture of the value of our legacy farms." Mr. Pazdro stated further, "The combination of M2P2's operating discipline with our management information systems will allow us to monitor and execute our strategic plan."
Income from Operations
Summary by Segment
------------------
Legacy
Chinese Animal M2P2
Farms Nutrition ----
----- ---------
Non-Cash Items:
Goodwill ($21,612,398)
Asset Write Down ($9,021,583)
Audit
Adjustments:
Legacy Chinese
Farms ($1,721,417)
Legacy Chinese
Farms
to be Closed ($8,632,230)
Other Legacy
Chinese
Farms ($4,603,151)
Non-Capitalized
Investment in
Western
Style Chinese
Farms
Animal Nutrition $10,915,748
M2P2 (acquired
9/13/10) $1,657,490
Corporate
Overhead
Totals ($45,590,779) $10,915,748 $1,657,490
New Western-
Style Corporate
Chinese Farm Overhead
------------ --------
Non-Cash Items:
Goodwill
Asset Write Down
Audit
Adjustments:
Legacy Chinese
Farms
Legacy Chinese
Farms
to be Closed
Other Legacy
Chinese
Farms
Non-Capitalized
Investment in
Western
Style Chinese
Farms ($578,900)
Animal Nutrition
M2P2 (acquired
9/13/10)
Corporate
Overhead ($6,839,838)
Totals ($578,900) ($6,839,838)
ABOUT AGFEED INDUSTRIES, INC.
NASDAQ Global Market Listed AgFeed Industries (www.agfeedinc.com) is an international agribusiness with operations in the U.S. and China. AgFeed has two business lines animal nutrition in premix, concentrates and complete feeds and hog production. In the U.S., AgFeed's hog production unit, M2P2, is a market leader in setting new standards for production efficiency and productivity. AgFeed believes the transfer of these processes, procedures and techniques will allow its new Western-style Chinese hog production units to set new standards for production in China. China is the world's largest pork market consuming 50% of global production and over 62% of total protein consumed in China is pork. Hog production in China enjoys income tax free status.
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 7. 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 Annual Report on Form 10-K for the period ended December 31, 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 BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
2010 2009
---- ----
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $12,399,916 $37,580,154
Accounts receivable, net of allowance
for doubtful accounts
of $707,968 and $415,765 21,872,121 14,397,793
Advances to suppliers 1,708,637 1,173,941
Other receivables - 2,186,643
Inventory 84,579,778 23,835,412
Prepaid expenses and other current
assets 2,251,181 1,359,856
Deferred tax asset 83,685
Total current assets 122,895,318 80,533,799
PROPERTY AND EQUIPMENT, net 66,003,779 34,606,983
INTANGIBLE ASSETS, net 5,785,471 1,064,252
GOODWILL 22,365,414 42,744,247
DEFERRED TAX ASSET 2,329,548 -
OTHER ASSETS 4,115,132 3,998,739
TOTAL ASSETS $223,494,662 $162,948,020
LIABILITIES AND EQUITY
----------------------
CURRENT LIABILITIES:
Short-term loan $4,551,000 $4,401,000
Accounts payable 9,664,374 6,162,385
Other payables 3,736,931 1,892,858
Unearned revenue 542,856 582,266
Accrued expenses 6,731,854 83,649
Accrued payroll 1,209,120 975,485
Tax and welfare payable 1,920,389 396,370
Interest payable 121,392 120,419
Current portion of long-term debt 1,703,658 -
Convertible notes, net of discount of
$10,864 989,136 -
Total current liabilities 31,170,710 14,614,432
CONVERTIBLE NOTES, net of debt
discount of $81,675 - 918,325
ACQUISITION NOTE PAYABLE 9,621,434 -
LINE OF CREDIT 42,231,176 -
LONG-TERM DEBT 15,024,666 -
TOTAL LIABILITIES 98,047,986 15,532,757
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note
15) - -
--- ---
EQUITY:
AgFeed stockholders' equity:
Common stock, $0.001 per share; 75,000,000 shares
authorized;
51,756,907 issued and 51,370,212 outstanding at
December 31, 2010
44,510,558 issued and 44,143,263
outstanding at December 31, 2009 51,758 44,511
Additional paid-in capital 125,788,151 109,281,086
Accumulated other comprehensive
income 8,120,628 4,176,450
Statutory reserve 5,621,937 4,685,115
Treasury stock (386,695 shares) (1,858,942) (1,811,746)
Retained earnings (accumulated
deficit) (12,430,229) 31,210,563
----------- ----------
Total AgFeed stockholders' equity 125,293,303 147,585,979
Noncontrolling interest (deficit) 153,373 (170,716)
------- --------
Total equity 125,446,676 147,415,263
TOTAL LIABILITIES AND EQUITY $223,494,662 $162,948,020
AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
(LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
2010 2009 2008
---- ---- ----
Revenues $243,614,119 $173,203,271 $143,661,485
Cost of goods
sold 228,942,742 146,660,232 109,269,960
----------- ----------- -----------
Gross profit 14,671,377 26,543,039 34,391,525
Operating
expenses
Selling expenses 4,386,259 3,934,047 3,941,247
General and
administrative
expenses 20,087,416 10,945,838 6,510,238
Impairment of
long-term
assets 9,021,583 - -
Impairment of
goodwill 21,612,398 - -
Total operating
expenses 55,107,656 14,879,885 10,451,485
Income (loss)
from operations (40,436,279) 11,663,154 23,940,040
Non-operating
income
(expense):
Other income
(expense) (75,551) 486,299 90,208
Interest income 117,457 213,018 190,965
Interest and
financing costs (1,364,706) (1,022,626) (5,704,358)
Foreign currency
transaction loss (5,261) (17,943) (559,299)
Total non-
operating income
(expense) (1,328,061) (341,252) (5,982,484)
Income (loss)
before income
taxes (41,764,340) 11,321,902 17,957,556
Income tax
expense 1,234,725 1,142,105 587,222
Net income (loss) (42,999,065) 10,179,797 17,370,334
Less: Net income
(loss)
attributed to
noncontrolling
interest (295,095) (168,569) 421,519
Net income
attributed
to AgFeed $(42,703,970) $10,348,366 $16,948,815
Comprehensive
income (loss)
Net income
(loss) $(42,999,065) $10,179,797 $17,370,334
Foreign currency
translation gain 3,956,321 7,935 3,476,562
Comprehensive
income (loss) $(39,042,744) $10,187,732 $20,846,896
Weighted average
shares
outstanding :
Basic 47,458,026 40,978,457 31,557,742
========== ========== ==========
Diluted 47,458,026 41,214,070 31,713,977
========== ========== ==========
Earnings per
share attributed
to AgFeed common
stockholders:
Basic $(0.90) $0.25 $0.54
Diluted $(0.90) $0.25 $0.53
AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
2010 2009 2008
---- ---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $(42,999,065) $10,179,797 $17,370,334
Adjustments to reconcile
net income (loss)
to net cash provided by
(used in) operating
activities:
Depreciation 3,420,945 2,596,689 1,580,843
Amortization of
intangible assets 226,110 92,740 86,543
Loss on disposal of
assets 2,658,823 1,292,480 17,248
Impairment of long-term
assets 9,021,583 - -
Impairment of goodwill 21,612,398 - -
Stock based compensation 224,636 572,605 231,368
Issuance of common stock
for services 1,508,969 - -
Value of re-priced
warrants - - 22,782
Value of change in
conversion price of
convertible notes - - 267,748
Amortization of debt
issuance costs 30,089 211,517 1,470,443
Amortization of discount
on convertible debt 70,811 497,769 3,460,441
Change in working capital
components, net of
effects of acquisitions
Accounts receivable (3,000,232) (4,936,388) (2,324,978)
Other receivables 2,298,738 (2,110,081) (5,464,327)
Inventory 1,459,054 (3,592,137) (8,815,870)
Advances to suppliers (501,481) (679,134) (44,147)
Prepaid expenses 240,567 (159,176) (499,047)
Deferred taxes (2,413,233) - -
Other assets - (1,356,005) (2,239,491)
Accounts payable (2,149,043) 1,048,356 3,300,773
Other payables (7,473,558) (44,890) 8,509,638
Unearned revenue (61,264) 260,441 211,081
Accrued expenses 5,103,218 (80,828) 119,325
Accrued payroll (641,830) 157,338 626,587
Tax and welfare payable 1,513,971 (69,463) 447,753
Interest payable (132,624) (720) 121,139
Net cash provided by
(used in) operating
activities (9,982,418) 3,880,910 18,456,186
---------- --------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment (21,136,415) (9,810,142) (10,696,569)
Purchase of intangible
assets (450,059) (67,551) (140,580)
Cash paid for the
purchase of business,
net of cash acquired (11,983,170) - (67,490,049)
Proceeds from the sale of
subsidiary - 835,770 -
Net cash used in
investing activities (33,569,644) (9,041,923) (78,327,198)
----------- ---------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from the sale of
common stock 13,000,000 10,000,000 65,950,069
Offering costs paid (42,005) (1,740,072) (7,030,261)
Proceeds from exercise of
warrants - 8,062,510 2,138,848
Repayment of borrowings
under line of credit
facility, net 5,455,755 - -
Proceeds from short-term
loans - 4,541,500 -
Proceeds from issuance of
convertible notes - - 19,000,000
Issuance costs for
convertible notes - - (1,716,666)
Payment on note payable (421,373) - (1,161,297)
Purchase of treasury
shares (47,196) - (1,811,746)
Capital contributed by
noncontrolling interest
holders 401,282 118,664 1,097,690
Purchase of
noncontrolling interest
in majority owed hog
farms (406,103) (2,518,089) -
Repayment of contribution
of noncontrolling
interest holder - (586,800) -
Net cash provided by
financing activities 17,940,360 17,877,713 76,466,637
---------- ---------- ----------
Effect of exchange rate
changes on cash and cash
equivalents 431,464 24,076 547,544
------- ------ -------
NET INCREASE (DECREASE)
IN CASH & CASH
EQUIVALENTS (25,180,238) 12,740,776 17,143,169
CASH & CASH EQUIVALENTS,
BEGINNING BALANCE 37,580,154 24,839,378 7,696,209
---------- ---------- ---------
CASH & CASH EQUIVALENTS,
ENDING BALANCE $12,399,916 $37,580,154 $24,839,378
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Interest paid, net of
amounts capitalized $826,485 $312,620 $363,191
======== ======== ========
Income taxes paid $1,960,804 $1,211,610 $408,435
========== ========== ========
SOURCE AgFeed Industries, Inc.
