SOURCE: AgFeed Industries, Inc.

May 15, 2008 06:05 ET

AgFeed Industries Reports Record First Quarter 2008 Financial Results, Raises Earnings Guidance for 2008

SHANGHAI, CHINA--(Marketwire - May 15, 2008) - AgFeed Industries, Inc. (NASDAQ: FEED), a market leader in China's pre-mix animal nutrition and hog raising industry, today announced record sales and earnings for the first quarter ended March 31, 2008. AgFeed's revenues were derived from the manufacturing and marketing of pre-mix animal feed as well as hog production.

During the first quarter, AgFeed expanded its sales channels and significantly increased pre-mix feed sales. On the hog production side, the Company acquired 5 commercial hog farms in January 2008. In April 2008, AgFeed acquired 16 additional hog farms which would be immediately accretive to earnings in our 2nd quarter and beyond. As of May 1, 2008, AgFeed has a total of 22 hog farms with total annual hog production of approximately 510,000 hogs.

The following are some of the key financial highlights of the Company for the quarter. AgFeed's revenue and income are generated in Chinese yuan Renminbi (RMB). In the first quarter, a weighted average exchange rate of RMB7.18 to USD1 was used to convert AgFeed's financial statements into US dollars for reporting in accordance with generally accepted accounting purposes. The current exchange rate is RMB6.98 to USD1.

FINANCIAL HIGHLIGHTS - COMPARING THE FIRST QUARTER OF 2008 TO THE FIRST QUARTER OF 2007:

--  Revenue grew by 144% to approximately $12.2 million from $4.98
    million.
--  Gross profit increased 123% to $3.43 million from $1.54 million.
--  Net income grew 18% to $919,297 (after deducting non-operating expense
    primarily associated with financing related non-cash accounting charges and
    deduction of certain minority interests in our hog farms), compared to
    $779,181 for the same period in 2007; net income from pre-mix sales
    represented an increase of 40% period to period.
--  Earnings per share remained unchanged on a fully diluted basis quarter
    to quarter.
--  Comprehensive income increased by 133% to $1.9 million for the first
    quarter of 2008.
--  Revenue from pre-mix sales increased 81% to $9 million from $5
    million.
    

Songyan Li, PhD, AgFeed's Chairman commented: "AgFeed continues to execute on our growth strategies, highlighted by the rapid acquisitions of hog farms, and by extracting premium sales value for our hogs. Our pre-mix feed sales growth increased 81% which exceeded our target of 25% annual revenue growth for the year. Our first quarter financial results reflected limited hog sales from five of our hog farms as we held our meat hogs longer in our farms while holding back sales in our breeder hog farm production in anticipation of rising hog prices in the second quarter. We anticipate rapid revenue growth in the latter half of 2008 as our recently acquired hog farms are expected to achieve minimum 2008 hog sales target of 400,000 heads. We have identified multiple additional hog farms to acquire. We are on track to exceed our 2008 hog sales targets."

In addition to the first quarter 2008 financial results posted by AgFeed, the Company benefited from economic factors, including hog sale prices in excess of $275 per hog on average hog weight of approximately 108 kilograms per hog, tax exempt status afforded China's hog raising industry and the relatively flat price of corn, a major component in hog feed, in the first quarter which contributed to expanded hog production profit margins that exceeded 30%. Management does not anticipate corn prices to increase significantly throughout the year, materially impacting the cost of AgFeed's hog production as China has abundant corn crops and restricts both ethanol production and corn export. China's domestic corn prices do not follow world market prices.

SUBSEQUENT EVENTS

--  AgFeed has acquired a majority interest in 16 commercial hog farms.
    Currently, AgFeed owns 22 hog farms and anticipates that its annual hog
    production at these facilities will reach 400,000 hogs for sale in 2008, on
    annual hog production capability of approximately 510,000 heads.
--  As of May 1, 2008, AgFeed had approximately $56 million in cash and
    over $80 million in shareholders equity without significant debt (exclusive
    of approximately $10 million in convertible notes from the Company's
    February 2008 placement that remain outstanding).
--  AgFeed recently opened its 700th independently owned retail
    distribution outlet.
--  AgFeed will hold its 2008 shareholders' meeting in New York City on
    June 3, 2008.
    

AGFEED RAISES 2008 GUIDANCE FOR NET INCOME

The Company has previously announced its intention to acquire additional identified hog farms. As a result, AgFeed has raised its 2008 net income estimate from approximately $30 million to a range of between $34 and $36 million (excluding non-cash accounting charges associated with our convertible note financing). AgFeed believes the Company has sufficient capital to achieve this revised 2008 net income guidance.

About AgFeed Industries, Inc.

Through its China-based operating subsidiaries, NASDAQ-listed AgFeed Industries (www.agfeedinc.com) is a market leader in China's fast growing pre-mix animal feed and hog raising industries. The pre-mix market in which Agfeed operates is an approximately $1.6 billion segment of China's $40 billion per year animal feed market, according to the China Feed Industry Association. There are approximately 600 million hogs raised in China each year, compared to approximately 100 million in the U.S. Approximately 75% of China's total hog supply is from backyard individual hog farmers, while approximately 65% of China's total meat consumption is pork.

Safe Harbor Statement

All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. AgFeed's actual results may differ from its projections. Further, preliminary results are subject to normal year-end adjustments. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect AgFeed's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in AgFeed's filings with the Securities and Exchange Commission.

                 AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEET
                AS OF MARCH 31, 2008 AND DECEMBER 31, 2007


                                                   March 31,   December 31,
                                                      2008         2007
                                                  ------------ ------------
                                                  (unaudited)
                   ASSETS
                   ------

CURRENT ASSETS:
  Cash & cash equivalents                         $ 36,924,135 $  7,696,209
  Accounts receivable, net of allowance for
   doubtful accounts of $222,879 and $191,497        8,073,297    6,107,491
  Advances to suppliers                                151,175      442,851
  Other receivable                                   1,213,871      459,034
  Inventory                                          6,475,186    2,728,160
  Prepaid expense                                      157,758      644,183
  Debt issue costs                                   1,661,845            -

                                                  ------------ ------------
    Total current assets                            54,657,267   18,077,928

PROPERTY AND EQUIPMENT, net                          6,537,575    3,930,715
CONSTRUCTION-IN-PROCESS                              1,039,692      221,819
INTANGIBLE ASSETS                                    4,117,589      839,802

                                                  ------------ ------------
  TOTAL ASSETS                                    $ 66,352,123 $ 23,070,264
                                                  ============ ============

     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------

CURRENT LIABILITIES:
  Accounts payable                                $  2,601,268 $  1,458,010
  Other payables                                     1,369,598      705,150
  Unearned revenue                                      48,916       99,848
  Accrued expenses                                     222,951       18,223
  Accrued payroll                                      134,573      168,560
  Short term loans                                   1,155,165    1,110,413
  Advance from related party                           287,055            -
  Tax and welfare payable                              104,479        9,534
  Interest payable                                     125,409            -

                                                  ------------ ------------
    Total current liabilities                        6,049,414    3,569,738

CONVERTIBLE NOTES, net of debt discount of
 $3,910,874 and $0                                  15,089,126            -

                                                  ------------ ------------
TOTAL LIABILITIES                                   21,138,540    3,569,738
                                                  ------------ ------------

MINORITY INTEREST                                    1,158,704            -
                                                  ------------ ------------

STOCKHOLDERS' EQUITY:
  Common stock, $0.001 per share; 75,000,000
   shares authorized; 29,558,091 and 27,026,756
   shares issued and outstanding                        29,558       27,027
  Additional paid-in capital                        32,714,919   10,094,095
  Other comprehensive income                         1,792,608      780,907
  Statutory reserve                                    811,785      752,225
  Retained earnings                                  8,706,009    7,846,272

                                                  ------------ ------------
    Total stockholders' equity                      44,054,879   19,500,526

                                                  ------------ ------------
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 66,352,123 $ 23,070,264
                                                  ============ ============

 The accompanying notes are an integral part of these consolidated
 financial statements


                 AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
        FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2008 AND 2007


                                                Three Month Periods Ended
                                                        March 31,
                                                --------------------------
                                                    2008          2007
                                                ------------  ------------
                                                (unaudited)   (unaudited)

Net Revenue                                     $ 12,147,084  $  4,978,295

Cost of Revenue                                    8,714,123     3,435,089
                                                ------------  ------------

Gross profit                                       3,432,961     1,543,206

Operating expenses
  Selling expenses                                   753,622       343,391
  General and administrative expenses                954,221       221,924
                                                ------------  ------------
    Total operating expenses                       1,707,843       565,315

                                                ------------  ------------
Income from operations                             1,725,118       977,891

Non-operating income (expense):
  Other income (expense)                             (14,571)        9,070
  Interest income                                     50,175        10,167
  Interest and financing costs                      (326,642)      (42,649)
  Foreign currency transaction loss                 (224,473)

                                                ------------  ------------
    Total non-operating income (expense)            (515,511)      (23,412)

Income before minority interest and provision
 for income taxes                                  1,209,607       954,479

Minority Interest in Subsidiaries                   (194,047)            -

                                                ------------  ------------
Income before provision for income taxes           1,015,560       954,479

Provision for income taxes                            96,263       175,298

                                                ------------  ------------
Net income                                      $    919,297  $    779,181

Other comprehensive income
  Foreign currency translation gain                1,011,701        50,906

                                                ------------  ------------
Comprehensive Income                            $  1,930,998  $    830,087
                                                ============  ============

Weighted average shares outstanding :
  Basic                                           27,802,640    24,344,447
                                                ============  ============
  Diluted                                         28,046,455    24,344,447
                                                ============  ============

Earnings per share:
  Basic                                         $       0.03  $       0.03
                                                ============  ============
  Diluted                                       $       0.03  $       0.03
                                                ============  ============

 The accompanying notes are an integral part of these consolidated
 financial statements


                 AGFEED INDUSTRIES, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF CASH FLOWS
            FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007


                                                Three Month Periods Ended
                                                        March 31,
                                                    2008          2007
                                                ------------  ------------
                                                (unaudited)   (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                    $    919,297  $    779,181
  Adjustments to reconcile net income to net
   cash provided in operating activities:
    Depreciation                                     185,753        39,845
    Amortization                                      12,598        46,360
    Loss on disposal of assets                        16,774             -
    Stock based compensation                          16,108             -
    Amortization of debt issuance costs               54,821             -
    Amortization of discount on convertible
     debt                                            129,011             -
    Gain attributed to minority interest in
     subsidiaries                                    194,047             -
    (Increase) / decrease in assets:
      Accounts receivable                         (2,082,250)   (1,626,525)
      Other receivable                              (641,521)      124,790
      Inventory                                   (3,077,865)     (143,070)
      Advances to suppliers                          304,242      (165,678)
      Prepaid expense                                490,590      (150,247)
      Other assets                                         -           535
    Increase / (decrease) in current
     liabilities:
      Accounts payable                             1,482,467       519,177
      Unearned revenue                               (54,019)      (31,388)
      Other payables                                 539,211       (12,995)
      Accrued expenses                               177,017       (44,618)
      Accrued payroll                                (40,086)      (13,371)
      Tax and welfare payable                         92,948       128,147
      Due to related party                           287,055             -
      Interest payable                               125,409             -

                                                ------------  ------------
  Net cash used in operating activities             (868,393)     (549,857)
                                                ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Acquisition of property and equipment           (635,952)      (24,125)
    Acquisition of intangible assets                 (70,654)            -
    Cash paid for purchase of subsidiary          (5,290,747)            -

                                                ------------  ------------
  Net cash used in investing activities           (5,997,353)      (24,125)
                                                ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Advances from stockholders                             -      (753,521)
    Advance to related parties                             -       930,623
    Proceeds from the sale of common stock        22,000,032     3,000,000
    Offering costs                                (3,432,670)     (276,335)
    Payment on note payable                                -    (1,102,004)
    Collection on subscription receivable                  -       226,083
    Proceeds from the issuance of convertible
     notes                                        19,000,000             -
    Issuance costs for convertible notes          (1,716,666)            -

                                                ------------  ------------
  Net cash provided by financing activities       35,850,696     2,024,846
                                                ------------  ------------

Effect of exchange rate changes on cash and
 cash equivalents                                    242,976        17,925
                                                ------------  ------------

NET INCREASE IN CASH & CASH EQUIVALENTS           29,227,926     1,468,789

CASH & CASH EQUIVALENTS, BEGINNING BALANCE         7,696,209     1,204,100
                                                ------------  ------------

CASH & CASH EQUIVALENTS, ENDING BALANCE         $ 36,924,135  $  2,672,889
                                                ============  ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
  Interest paid                                 $     51,223  $     42,649
                                                ============  ============
  Income taxes paid                             $          -  $
                                                ============  ============

The accompanying notes are an integral part of these consolidated
 financial statements

Contact Information

  • Contact:

    U.S. Contact:
    Mr. Arnold Staloff
    Independent Board Member
    AgFeed Industries, Inc.
    Tel: 212-631-3510

    Corporate Contact:
    AgFeed Industries, Inc.
    Mr. Sam Zhou
    Corporate Development
    Tel: 011-86-13925912908
    Email: info@agfeedinc.com