8-K
AMERICAN VANGUARD CORP (AVD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): November 8, 2022
AMERICAN VANGUARD CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-13795 | 95-2588080 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | Commission<br> <br>File Number | (I.R.S. Employer<br>Identification No.) |
4695 MacArthur Court
Newport Beach, California 92660
(Address of principal executive offices)
Registrant’s telephone number: (949) 260-1200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol | Exchanges<br> <br>on which registered |
|---|---|---|
| Common Stock, $.10 par value | AVD | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b02 of the Securities Exchange Act of 1934 (§240.12b02 of this chapter).
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition |
|---|
On November 8, 2022, American Vanguard Corporation (“Registrant”) issued a press release announcing its preliminary, unaudited financial results for the three- and nine-month periods ended September 30, 2022. The full text of the press release is linked hereto as Exhibit 99.1 and is incorporated herein by reference.
The information contained in this Current Report on Form 8-K, including the Exhibits linked hereto, is being furnished under Items 2.02 and 9.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits
| Exhibit 99.1 | Press release dated November 8, 2022, of Registrant regarding financial results for the three- and nine-month periods ended September 30, 2022. |
|---|---|
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, American Vanguard Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AMERICAN VANGUARD CORPORATION | ||
|---|---|---|
| Date: November 10, 2022 | ||
| By: | /s/ Timothy J. Donnelly | |
| Timothy J. Donnelly | ||
| Chief Administrative Officer, General Counsel & Secretary |
EX-99.1
Exhibit 99.1
FOR IMMEDIATE RELEASE
AMERICAN VANGUARD REPORTS THIRD QUARTER AND NINE-MONTH 2022 RESULTS
YTD Revenues and Adjusted EBITDA^1^ Exceed Guidance
Forecasting Continued Strategic Growth
Newport Beach, CA – November 8, 2022 – American Vanguard Corporation (NYSE: AVD), today announced financial results for the third quarter and nine months ended September 30, 2022.
Financial Highlights Fiscal 2022 Third Quarter – versus Fiscal 2021 Third Quarter
• Net sales of $152 million in 2022, a 3.4% increase, compared with $147 million in 2021
• Net income of $6.7 million in 2022, a 21.8% increase, compared with $5.5 million in 2021
• Earnings per diluted share of $0.23 in 2022, a 27.8% increase, compared with $0.18 in 2021
• Adjusted EBITDA of $18.9 million in 2022, a 11.2% increase, compared with $17.0 million in 2021
Financial Highlights Fiscal 2022 Nine Months – versus Fiscal 2021 Nine Months
• Net sales of $450 million in 2022, a 13.1% increase, compared with $398 million in 2021
• Net income of $23.5 million in 2022, a 71.5% increase, compared with $13.7 million in 2021
• Earnings per diluted share of $0.78 in 2022, a 73.3% increase, compared with $0.45 in 2021
• Adjusted EBITDA of $61.4 million in 2022, a 29.8% increase, compared to $47.3 million in 2021
Eric Wintemute, Chairman and CEO of American Vanguard commented, “We achieved strong third quarter results and through the first nine months of 2022 and are on pace to meet or exceed our full year performance targets. High crop commodity prices, a strong farm economy and seasonal pest pressure (particularly in corn and cotton) fueled continued growth of our US Crop business. Similarly, our international business recorded strong sales, led by Brazil (particularly our Counter nematicide), Mexico (due largely to soil fumigant sales) and a range of products for use on bananas and pineapples in Central America. Partially offsetting these gains, we experienced a decrease in net sales of our domestic non-crop business, due largely to softening of consumer spending in the lawn and garden markets.”
| ^1^ | Adjusted earnings before interest, taxes, depreciation, amortization,<br>non-cash stock compensation, and proxy contest activities. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should<br>not be considered as an alternative to net income (loss), operating income (loss) or any other financial measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The items excluded<br>from Adjusted EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define Adjusted EBITDA differently.<br> |
|---|
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Mr. Wintemute continued, “Our year-to-date revenue performance exceeds the full-year 2022 growth target for net sales that we had set last March (13% actual growth v. 8-11% target), as does net income (71% actual growth v. 60-70% target) and adjusted EBITDA (30% actual growth v. 24-28% target). Faced with inflationary cost increases, supply chain challenges and high demand, we were able to implement appropriate price increases while maximizing factory activity. These factors contributed to higher net income as a percent of net sales for both the quarter and the first nine months. Additionally, we expect significant year-end debt reduction and a full-year adjusted EBITDA of approximately $80 million or 13% of expected sales. Finally, through a combination of an Accelerated Share Repurchase Plan and a 10b5-1 purchase plan, we acquired 1.5 million shares of AVD common stock during the first nine months of the year. These repurchases demonstrate our belief in the company’s long-term value and serve to enhance shareholder investment.”
Mr. Wintemute concluded, “We continue to pursue strategic growth initiatives to expand our core business and develop new technologies, with particular emphasis on Green Solutions and Precision Application innovations. As we announced over the past few weeks, we have established an alliance with NewLeaf Symbiotics, which will complement our existing portfolio of patented biological plant nutrients and soil health enrichments. In addition, we secured registration approval for use of our Counter nematicide on soybeans in Brazil, which will improve market penetration with a proprietary product, while advancing the adoption of SIMPAS prescription application technology in the largest Agricultural market in the world. We look forward to providing details on current business trends and these growth initiatives in our upcoming quarterly conference call.”
Conference Call
Eric Wintemute, Chairman & CEO, Bob Trogele EVP & COO and David T. Johnson, VP & CFO, will conduct a conference call focusing on the financial results at 4:30 pm ET / 1:30 pm PT on Monday, November 8, 2022. Interested parties may participate in the call by dialing 201-493-6744 – please dial in 10 minutes before the call is scheduled to begin and ask for the American Vanguard call. The conference call will also be webcast live via the News and Media section of the Company’s web site at www.american-vanguard.com. To listen to the live webcast, go to the web site at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the Company’s web site.
About American Vanguard
American Vanguard Corporation is a diversified specialty and agricultural products company that develops and markets products for crop protection and management, turf and ornamentals management and public and animal health. American Vanguard is included on the Russell 2000^®^ and Russell 3000^®^ Indexes and the Standard & Poor’s Small Cap 600 Index. To learn more about American Vanguard, please reference the Company’s web site at www.american-vanguard.com.
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The Company, from time to time, may discuss forward-looking information. Except for the historical information contained in this release, all forward-looking statements are estimates by the Company’s management and are subject to various risks and uncertainties that may cause results to differ from management’s current expectations. Such factors include weather conditions, changes in regulatory policy and other risks as detailed from time-to-time in the Company’s SEC reports and filings. All forward-looking statements, if any, in this release represent the Company’s judgment as of the date of this release.
| Company Contact: | Investor Representative |
|---|---|
| American Vanguard Corporation<br> <br>William A.<br>Kuser, Director of Investor Relations<br> <br>(949) 260-1200<br><br><br>williamk@amvac.com | The Equity Group Inc.<br><br><br>www.theequitygroup.com<br> <br>Lena Cati (212) 836-9611<br> <br>Lcati@equityny.com |
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
| ASSETS | December 31,<br>2021 | ||||
|---|---|---|---|---|---|
| Current assets: | |||||
| Cash and cash equivalents | 20,808 | $ | 16,285 | ||
| Receivables: | |||||
| Trade, net of allowance for doubtful accounts of 4,535 and 3,938, respectively | 194,515 | 149,326 | |||
| Other | 10,022 | 9,595 | |||
| Total receivables, net | 204,537 | 158,921 | |||
| Inventories | 192,309 | 154,306 | |||
| Prepaid expenses | 16,967 | 12,488 | |||
| Income taxes receivable | 2,180 | — | |||
| Total current assets | 436,801 | 342,000 | |||
| Property, plant and equipment, net | 68,598 | 66,111 | |||
| Operating lease<br>right-of-use assets | 25,402 | 25,386 | |||
| Intangible assets, net | 187,207 | 197,841 | |||
| Goodwill | 46,215 | 46,260 | |||
| Other assets | 11,936 | 16,292 | |||
| Deferred income tax assets, net | 16 | 270 | |||
| Total assets | 776,175 | $ | 694,160 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Current installments of other liabilities | — | $ | 802 | ||
| Accounts payable | 81,919 | 67,140 | |||
| Customer prepayments | 222 | 63,064 | |||
| Accrued program costs | 108,016 | 63,245 | |||
| Accrued expenses and other payables | 24,390 | 20,745 | |||
| Income taxes payable | — | 3,006 | |||
| Current operating lease liabilities | 5,329 | 5,059 | |||
| Total current liabilities | 219,876 | 223,061 | |||
| Long-term debt, net | 148,414 | 52,240 | |||
| Long-term operating lease liabilities | 20,536 | 20,780 | |||
| Other liabilities, net of current installments | 5,457 | 5,335 | |||
| Deferred income tax liabilities, net | 19,324 | 20,006 | |||
| Total liabilities | 413,607 | 321,422 | |||
| Commitments and contingent liabilities | |||||
| Stockholders’ equity: | |||||
| Preferred stock, .10 par value per share; authorized 400,000 shares; none issued | — | — | |||
| Common stock, .10 par value per share; authorized 40,000,000 shares; issued<br>34,463,947 shares at September 30, 2022 and 34,248,218 shares at December 31, 2021 | 3,446 | 3,426 | |||
| Additional paid-in capital | 101,426 | 101,450 | |||
| Accumulated other comprehensive loss | (15,532 | ) | (13,784 | ) | |
| Retained earnings | 325,698 | 304,385 | |||
| Less treasury stock at cost, 4,884,200 shares at September 30, 2022 and 3,361,040 shares at<br>December 31, 2021 | (52,470 | ) | (22,739 | ) | |
| Total stockholders’ equity | 362,568 | 372,738 | |||
| Total liabilities and stockholders’ equity | 776,175 | $ | 694,160 |
All values are in US Dollars.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| For the Three MonthsEnded September 30, | For the Nine Months EndedSeptember 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Net sales | $ | 152,117 | $ | 147,298 | $ | 449,636 | $ | 398,063 | ||||
| Cost of sales | (90,733 | ) | (90,234 | ) | (267,280 | ) | (243,729 | ) | ||||
| Gross profit | 61,384 | 57,064 | 182,356 | 154,334 | ||||||||
| Operating expenses | (50,140 | ) | (48,410 | ) | (145,550 | ) | (132,934 | ) | ||||
| Adjustment to bargain purchase gain on business acquisition | — | 292 | — | 171 | ||||||||
| Operating income | 11,244 | 8,946 | 36,806 | 21,571 | ||||||||
| Change in fair value of equity investments | (454 | ) | (668 | ) | (857 | ) | 103 | |||||
| Other income | — | — | — | 672 | ||||||||
| Interest expense, net | (1,086 | ) | (962 | ) | (2,256 | ) | (2,921 | ) | ||||
| Income before provision for income taxes and loss on equity<br><br><br>method investment | 9,704 | 7,316 | 33,693 | 19,425 | ||||||||
| Income tax expense | (2,963 | ) | (1,517 | ) | (10,187 | ) | (5,324 | ) | ||||
| Income before loss on equity method investment | 6,741 | 5,799 | 23,506 | 14,101 | ||||||||
| Loss on equity method investment | — | (301 | ) | — | (388 | ) | ||||||
| Net income | $ | 6,741 | $ | 5,498 | $ | 23,506 | $ | 13,713 | ||||
| Earnings per common share—basic | $ | .23 | $ | .18 | $ | .80 | $ | .46 | ||||
| Earnings per common share—assuming dilution | $ | .23 | $ | .18 | $ | .78 | $ | .45 | ||||
| Weighted average shares outstanding—basic | 29,214 | 29,892 | 29,496 | 29,854 | ||||||||
| Weighted average shares outstanding—assuming dilution | 29,805 | 30,390 | 30,128 | 30,470 |
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
ANALYSIS OF SALES
(Inthousands)
(Unaudited)
| For the three months<br>ended September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | Change | % Change | |||||||
| Net sales: | ||||||||||
| U.S. crop | $ | 69,115 | $ | 66,722 | $ | 2,393 | 4 | % | ||
| U.S. non-crop | 18,936 | 21,622 | (2,686 | ) | -12 | % | ||||
| U.S. total | 88,051 | 88,344 | (293 | ) | 0 | % | ||||
| International | 64,066 | 58,954 | 5,112 | 9 | % | |||||
| Net sales: | $ | 152,117 | $ | 147,298 | $ | 4,819 | 3 | % | ||
| Gross profit: | ||||||||||
| U.S. crop | $ | 34,502 | $ | 30,237 | $ | 4,265 | 14 | % | ||
| U.S. non-crop | 8,811 | 8,882 | (71 | ) | -1 | % | ||||
| U.S. total | 43,313 | 39,119 | 4,194 | 11 | % | |||||
| International | 18,071 | 17,945 | 126 | 1 | % | |||||
| Total gross profit: | $ | 61,384 | $ | 57,064 | $ | 4,320 | 8 | % | ||
| For the nine months<br>ended September 30, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2022 | 2021 | Change | % Change | |||||||
| Net sales: | ||||||||||
| U.S. crop | $ | 220,503 | $ | 184,052 | $ | 36,451 | 20 | % | ||
| U.S. non-crop | 53,648 | 60,563 | (6,915 | ) | -11 | % | ||||
| U.S. total | 274,151 | 244,615 | 29,536 | 12 | % | |||||
| International | 175,485 | 153,448 | 22,037 | 14 | % | |||||
| Net sales: | $ | 449,636 | $ | 398,063 | $ | 51,573 | 13 | % | ||
| Gross profit: | ||||||||||
| U.S. crop | $ | 104,599 | $ | 78,313 | $ | 26,286 | 34 | % | ||
| U.S. non-crop | 24,826 | 28,047 | (3,221 | ) | -11 | % | ||||
| U.S. total | 129,425 | 106,360 | 23,065 | 22 | % | |||||
| International | 52,931 | 47,974 | 4,957 | 10 | % | |||||
| Total gross profit: | $ | 182,356 | $ | 154,334 | $ | 28,022 | 18 | % |
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| For the Nine Months EndedSeptember 30, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 23,506 | $ | 13,713 | ||
| Adjustments to reconcile net income to net cash used in operating<br><br><br>activities: | ||||||
| Depreciation and amortization of property, plant and equipment and intangible assets | 16,649 | 17,045 | ||||
| Amortization of other long-term assets | 2,656 | 2,981 | ||||
| Loss on disposal of property, plant and equipment | 265 | — | ||||
| Accretion of discounted liabilities | 28 | (10 | ) | |||
| Amortization of deferred loan fees | 174 | 294 | ||||
| Provision for bad debts | 597 | 1,202 | ||||
| Loan principal and interest forgiveness | — | (672 | ) | |||
| Fair value adjustment to contingent consideration | 621 | 520 | ||||
| Stock-based compensation | 4,396 | 5,309 | ||||
| Change in deferred income taxes | (64 | ) | (560 | ) | ||
| Change in fair value of equity investments | 857 | (103 | ) | |||
| Loss on equity method investment | — | 388 | ||||
| Adjustment to bargain purchase gain on business acquisition | — | (171 | ) | |||
| Net foreign currency adjustments | 218 | (330 | ) | |||
| Changes in assets and liabilities associated with operations: | ||||||
| Increase in net receivables | (46,289 | ) | (42,979 | ) | ||
| Increase in inventories | (38,987 | ) | (4,325 | ) | ||
| Increase in prepaid expenses and other assets | (4,272 | ) | (2,194 | ) | ||
| (Increase) decrease in income tax receivable/payable, net | (5,201 | ) | 2,031 | |||
| Increase in net operating lease liability | 10 | 183 | ||||
| Increase in accounts payable | 14,418 | 7,769 | ||||
| Decrease in customer prepayments | (62,831 | ) | (38,272 | ) | ||
| Increase in accrued program costs | 45,016 | 33,982 | ||||
| Increase in other payables and accrued expenses | 2,555 | 4,025 | ||||
| Net cash used in operating activities | (45,678 | ) | (174 | ) | ||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (8,946 | ) | (7,963 | ) | ||
| Proceeds from disposal of property, plant and equipment | 46 | — | ||||
| Acquisition of product line | — | (10,000 | ) | |||
| Intangible assets | (1,078 | ) | (285 | ) | ||
| Investments | — | (183 | ) | |||
| Net cash used in investing activities | (9,978 | ) | (18,431 | ) | ||
| Cash flows from financing activities: | ||||||
| Payments under line of credit agreement | (64,000 | ) | (57,408 | ) | ||
| Borrowings under line of credit agreement | 160,000 | 86,000 | ||||
| Payment of contingent consideration | — | (250 | ) | |||
| Net receipt from the issuance of common stock under ESPP | 837 | 743 | ||||
| Net receipt from the exercise of stock options | 783 | 172 | ||||
| Payment for tax withholding on stock-based compensation awards | (2,020 | ) | (2,915 | ) | ||
| Repurchase of common stock | (33,731 | ) | (4,579 | ) | ||
| Payment of cash dividends | (2,072 | ) | (1,789 | ) | ||
| Net cash provided by financing activities | 59,797 | 19,974 | ||||
| Net increase in cash and cash equivalents | 4,141 | 1,369 | ||||
| Effect of exchange rate changes on cash and cash equivalents | 382 | (574 | ) | |||
| Cash and cash equivalents at beginning of period | 16,285 | 15,923 | ||||
| Cash and cash equivalents at end of period | $ | 20,808 | $ | 16,718 |
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
| Three Months EndedSeptember 30, | Nine Months EndedSeptember 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||
| Net income, as reported | $ | 6,741 | $ | 5,498 | $ | 23,506 | $ | 13,713 |
| Provision for income taxes | 2,963 | 1,517 | 10,187 | 5,324 | ||||
| Interest expense, net | 1,086 | 962 | 2,256 | 2,921 | ||||
| Depreciation and amortization | 6,562 | 7,285 | 19,305 | 20,026 | ||||
| Stock compensation | 1,560 | 1,711 | 4,396 | 5,309 | ||||
| Proxy contest activities | — | — | 1,785 | — | ||||
| Adjusted EBITDA^2^ | $ | 18,912 | $ | 16,973 | $ | 61,435 | $ | 47,293 |
| ^2^ | Adjusted earnings before interest, taxes, depreciation, amortization,<br>non-cash stock compensation, and proxy contest activities. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should<br>not be considered as an alternative to net income (loss), operating income (loss) or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. We provide these<br>measures because we believe that they provide helpful comparisons to other companies in our industry and peer group. The items excluded from Adjusted EBITDA are detailed in the reconciliation attached to this news release. Other companies (including<br>the Company’s competitors) may define Adjusted EBITDA differently. | |||||||
| --- | --- |
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