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): May 8, 2023
AMERICAN VANGUARD CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-13795 | 95-2588080 |
|---|---|---|
| (State or other jurisdiction<br> <br>of incorporation) | Commission<br> <br>File Number | (I.R.S. Employer<br> <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) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | 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> <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 May 9, 2023, American Vanguard Corporation (“Registrant”) issued a press release announcing its preliminary, unaudited financial results for the three-month period ended March 31, 2023. The full text of the press release is linked hereto as Exhibit 99.1 and is incorporated herein by reference.
| Item 8.01 | Other Events |
|---|
On May 8, 2023, with respect to that certain Third Amended and Restated Loan Agreement dated as of August 5, 2021 (the “Credit Agreement”), led by BMO Harris, N.A., as successor to Bank of the West, the Lenders (as defined in the Credit Agreement) approved the Fifth Amendment thereto, which both: a) adjusted the Minimum Fixed Charge Coverage Ratio (“FCCR”) downward from 1.25-to-1 to 1-to-1 for the four quarters ending June 30, 2023, and b) granted the Company a waiver with respect to its noncompliance with the FCCR for the quarter ended March 31, 2023, subject to the terms and conditions of such amendment. The noncompliance arose largely from the expense of the Company’s share repurchase activity in 2022, which remains in the calculation of the FCCR on a 12-month trailing basis.
The information contained in this Item 8.01 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 May 9, 2023, of Registrant regarding financial results for the three-month period ended March 31, 2023. |
|---|---|
| 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: May 10, 2023 | ||
| 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 Q1 2023 RESULTS
Reaffirms Double-Digit Full-Year 2023 EBITDA Growth
Despite Lower-Than-Expected Q1 Performance
Newport Beach, CA – May 9, 2023 – American Vanguard Corporation (NYSE: AVD) today announced financial results for the quarter ended March 31, 2023.
Q1 2023 Financial Performance – versus Q1 2022 (see table below):
Eric Wintemute, Chairman and CEO of American Vanguard, stated: “During 2023, we expect to achieve higher adjusted EBITDA (between $84MM - $86MM) than in 2022, despite a first quarter setback arising from delays in restarting our supply chain, which is now back at capacity. After experiencing multiple delays, our China-based supplier was unable to deliver intermediates in sufficient quantities for our leading corn soil insecticide, Aztec^®^, until early 2023. As a result, we were only able to produce and sell about one-third of seasonal demand for that product. This, coupled with a glut of generic herbicides (not sold by the Company) in the distribution channel, led to lower sales of domestic crop products during the quarter. While our domestic non-crop and international businesses recorded higher sales, the decrease in sales of higher-margin US crop products led to lower overall profitability.”
| In thousands except for per share data | March 31, 2023 | March 31, 2022 | Change | ||||
|---|---|---|---|---|---|---|---|
| Net sales | $ | 124,885 | $ | 149,593 | $ | (24,708 | ) |
| Net income | $ | 1,918 | $ | 9,935 | $ | (8,017 | ) |
| EPS | $ | 0.07 | $ | 0.33 | $ | (0.26 | ) |
| Adjusted EBITDA^1^ | $ | 11,511 | $ | 22,867 | $ | (11,356 | ) |
Mr. Wintemute continued, “Even after taking into account a lower-than-expected first quarter, we still expect full year 2023 will be stronger than 2022. With extremely low inventories of our domestic crop products in the distribution channel, we anticipate higher sales of US crop products in the second half of 2023. Further, we expect to continue the positive trajectories of our non-crop and international businesses. While below our original targets, our revised 2023 targets nevertheless show better year-over-year performance, as you can see from the table below.”
| ^1^ | Earnings before interest, taxes, depreciation, amortization and non-cash stock<br>compensation. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or<br>any other financial measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. We provide these measures because we believe that they provide helpful comparisons to other companies in<br>our industry and peer group. The items excluded from Adjusted EBITDA are detailed in the reconciliation attached to this news release, and reflect an elimination of taxes, interest, depreciation, amortization, the effects of equity compensation, and<br>the proxy contest costs. Other companies (including the Company’s competitors) may define EBITDA differently. |
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Mr. Wintemute continued, “For the sake of clarity, starting with this fiscal year, we have adopted an accounting change which is more prevalent among public companies in our sector under which outbound freight is classified as an element of cost of goods, as opposed to an operating expense. For us, these costs have typically been in the range of 7-8% of net sales. Thus, under this revised approach, our gross margin percent would decrease by that amount, and operating expenses as a percent of sales would decrease commensurately. This change has no effect upon operating income, adjusted EBITDA, net income or earnings per share.”
2023 Performance Targets
| Metric | 2023 Range | 2022 Actual | % Change | |||||
|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 640MM - 652MM | $ | 610MM | 5 to 7 | % | ||
| Gross margin % | 33 to 35 | 34 | % | Similar | ||||
| Opex as % of sales | 25 to 27 | 25 | % | Similar | ||||
| Adjusted EBITDA | $ | 84MM - 86MM | $ | 73MM | 14 to 18 | % | ||
| Net income | $ | 32MM - 34MM | $ | 27.5MM | 17 to 25 | % |
All values are in US Dollars.
Mr. Wintemute concluded: “We look forward to giving you a more detailed presentation during our upcoming earnings call, including with respect to our 2025 growth targets.”
Conference Call
Eric Wintemute, Chairman & CEO, Bob Trogele, COO, David T. Johnson, CFO, Scott Hendrix, U.S. Crop SVP and Jim Thompson, Leader of the Green Solutions Initiative, will conduct a conference call focusing on the financial results and strategic themes at 5:00 pm ET on May 9, 2023. Interested parties may participate in the call by dialing 713-481-1320. Please call in 10 minutes before the scheduled start time 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, manufactures, and markets solutions for crop protection and nutrition, turf and ornamentals management, commercial and consumer pest control. American Vanguard is included on the Russell 2000^®^ & Russell 3000^®^ Indexes and the Standard & Poors Small Cap 600 Index. To learn more about American Vanguard, please reference the Company’s web site at www.american-vanguard.com.
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 | the Equity Group Inc. |
| William A. Kuser, Director of Investor Relations | www.theequitygroup.com |
| (949) 260-1200 | Lena Cati /<br>212-836-9611 |
| williamk@amvac-chemical.com | Lcati@equityny.com |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Inthousands, except share data)
(Unaudited)
| December 31,2022 | |||||
|---|---|---|---|---|---|
| Current assets: | |||||
| Cash and cash equivalents | 19,568 | $ | 20,328 | ||
| Receivables: | |||||
| Trade, net of allowance for doubtful accounts of 5,692 and 5,136, respectively | 166,120 | 156,492 | |||
| Other | 9,999 | 9,816 | |||
| Total receivables, net | 176,119 | 166,308 | |||
| Inventories | 219,080 | 184,190 | |||
| Prepaid expenses | 15,324 | 15,850 | |||
| Income taxes receivable | 4,879 | 1,891 | |||
| Total current assets | 434,970 | 388,567 | |||
| Property, plant and equipment, net | 71,538 | 70,912 | |||
| Operating lease right-of-use<br>assets | 24,460 | 24,250 | |||
| Intangible assets, net | 181,909 | 184,664 | |||
| Goodwill | 47,366 | 47,010 | |||
| Other assets | 10,610 | 10,769 | |||
| Deferred income tax assets, net | 220 | 141 | |||
| Total assets | 771,073 | $ | 726,313 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Accounts payable | 74,887 | $ | 69,000 | ||
| Customer prepayments | 70,338 | 110,597 | |||
| Accrued program costs | 71,379 | 60,743 | |||
| Accrued expenses and other payables | 38,038 | 20,982 | |||
| Operating lease liabilities, current | 5,367 | 5,279 | |||
| Total current liabilities | 260,009 | 266,601 | |||
| Long-term debt, net | 97,000 | 51,477 | |||
| Operating lease liabilities, long term | 19,614 | 19,492 | |||
| Other liabilities, net of current installments | 4,648 | 4,167 | |||
| Deferred income tax liabilities, net | 14,808 | 14,597 | |||
| Total liabilities | 396,079 | 356,334 | |||
| Commitments and contingent liabilities | |||||
| Stockholders’ equity: | |||||
| Preferred stock, 0.10 par value per share; authorized 400,000 shares; none issued | — | — | |||
| Common stock, 0.10 par value per share; authorized 40,000,000 shares; issued 34,463,829 shares at<br>March 31, 2023 and 34,446,194 shares at December 31, 2022 | 3,446 | 3,444 | |||
| Additional paid-in capital | 107,591 | 105,634 | |||
| Accumulated other comprehensive loss | (9,636 | ) | (12,182 | ) | |
| Retained earnings | 329,812 | 328,745 | |||
| Less treasury stock at cost, 5,057,727 shares at March 31, 2023 and 5,029,892 shares at<br>December 31, 2022 | (56,219 | ) | (55,662 | ) | |
| Total stockholders’ equity | 374,994 | 369,979 | |||
| Total liabilities and stockholders’ equity | 771,073 | $ | 726,313 |
All values are in US Dollars.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
| For the three months<br>ended March 31 | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Net sales | $ | 124,885 | $ | 149,593 | ||
| Cost of sales | (86,348 | ) | (98,198 | ) | ||
| Gross profit | 38,537 | 51,395 | ||||
| Operating expenses | (35,272 | ) | (36,646 | ) | ||
| Operating income | 3,265 | 14,749 | ||||
| Change in fair value of an equity investment | (22 | ) | 83 | |||
| Interest expense, net | (1,686 | ) | (398 | ) | ||
| Income before provision for income taxes | 1,557 | 14,434 | ||||
| Income tax benefit (expense) | 361 | (4,499 | ) | |||
| Net income | $ | 1,918 | $ | 9,935 | ||
| Earnings per common share—basic | $ | 0.07 | $ | 0.33 | ||
| Earnings per common share—assuming dilution | $ | 0.07 | $ | 0.33 | ||
| Weighted average shares outstanding—basic | 28,367 | 29,677 | ||||
| Weighted average shares outstanding—assuming dilution | 29,073 | 30,349 |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
ANALYSIS OF SALES
(Unaudited)
| For the three Months Ended<br>March 31 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | Change | %Change | |||||||||
| Net sales: | ||||||||||||
| U.S. crop | $ | 61,876 | $ | 88,193 | $ | (26,317 | ) | -30 | % | |||
| U.S. non-crop | 13,899 | 13,396 | 503 | 4 | % | |||||||
| Total U.S. | 75,775 | 101,589 | (25,814 | ) | -25 | % | ||||||
| International | 49,110 | 48,004 | 1,106 | 2 | % | |||||||
| Total net sales: | $ | 124,885 | $ | 149,593 | $ | (24,708 | ) | -17 | % | |||
| Gross profit: | ||||||||||||
| U.S. crop | $ | 20,622 | $ | 33,993 | $ | (13,371 | ) | -39 | % | |||
| U.S. non-crop | 5,446 | 5,767 | (321 | ) | -6 | % | ||||||
| Total U.S. | 26,068 | 39,760 | (13,692 | ) | -34 | % | ||||||
| International | 12,469 | 11,635 | 834 | 7 | % | |||||||
| Total gross profit: | $ | 38,537 | $ | 51,395 | $ | (12,858 | ) | -25 | % | |||
| Gross margin: | ||||||||||||
| U.S. crop | 33 | % | 39 | % | ||||||||
| U.S. non-crop | 39 | % | 43 | % | ||||||||
| Total U.S. | 34 | % | 39 | % | ||||||||
| International | 25 | % | 24 | % | ||||||||
| Gross margin: | 31 | % | 34 | % |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| For the three monthsended March 31 | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 1,918 | $ | 9,935 | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||
| Depreciation and amortization of property, plant and equipment and intangible assets | 5,539 | 5,230 | ||||
| Amortization of other long-term assets | 714 | 1,173 | ||||
| Provision for bad debts | 581 | 494 | ||||
| Fair value adjustment of contingent consideration | — | 599 | ||||
| Stock-based compensation | 1,474 | 1,563 | ||||
| Change in deferred income taxes | 122 | 207 | ||||
| Change in liabilities for uncertain tax positions or unrecognized tax benefits | 371 | — | ||||
| Other | 94 | 2 | ||||
| Foreign currency transaction gains | (446 | ) | (261 | ) | ||
| Changes in assets and liabilities associated with operations: | ||||||
| Increase in net receivables | (8,779 | ) | (33,660 | ) | ||
| Increase in inventories | (33,731 | ) | (11,738 | ) | ||
| Decrease (increase) in prepaid expenses and other assets | 600 | (800 | ) | |||
| Change in income tax receivable/payable, net | (2,965 | ) | 3,046 | |||
| Increase in accounts payable | 5,655 | 9,677 | ||||
| Decrease in customer prepayments | (22,759 | ) | (44,528 | ) | ||
| Increase in accrued program costs | 10,660 | 24,601 | ||||
| (Decrease) increase in other payables and accrued expenses | (500 | ) | 2,145 | |||
| Net cash used in operating activities | (41,452 | ) | (32,315 | ) | ||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (2,590 | ) | (3,294 | ) | ||
| Proceeds from disposal of property, plant and equipment | — | 54 | ||||
| Acquisition of a product line | (703 | ) | — | |||
| Intangible assets | (15 | ) | (1,010 | ) | ||
| Net cash used in investing activities | (3,308 | ) | (4,250 | ) | ||
| Cash flows from financing activities: | ||||||
| Payments under line of credit agreement | (27,300 | ) | (12,000 | ) | ||
| Borrowings under line of credit agreement | 72,000 | 58,000 | ||||
| Net receipt from the issuance of common stock under ESPP | 480 | 436 | ||||
| Net receipt from the exercise of stock options | 18 | — | ||||
| Receipt payment for tax withholding on stock-based compensation awards | (13 | ) | (2,174 | ) | ||
| Repurchase of common stock | (557 | ) | (6,219 | ) | ||
| Payment of cash dividends | (851 | ) | (594 | ) | ||
| Net cash provided by financing activities | 43,777 | 37,449 | ||||
| Net (decrease) increase in cash and cash equivalents | (983 | ) | 884 | |||
| Effect of exchange rate changes on cash and cash equivalents | 223 | 672 | ||||
| Cash and cash equivalents at beginning of period | 20,328 | 16,285 | ||||
| Cash and cash equivalents at end of period | $ | 19,568 | $ | 17,841 |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA
(Inthousands)
(Unaudited)
| Three Months Ended March 31, | |||||
|---|---|---|---|---|---|
| Reconciliation of Net Income to EBITDA | 2023 | 2022 | |||
| Net income, as reported | $ | 1,918 | $ | 9,935 | |
| Provision for income taxes | (361 | ) | 4,499 | ||
| Interest expense, net | 1,686 | 398 | |||
| Proxy costs | 541 | — | |||
| Depreciation and amortization | 6,253 | 6,472 | |||
| Stock compensation | 1,474 | 1,563 | |||
| Adjusted EBITDA^2^ | $ | 11,511 | $ | 22,867 | |
| ^2^ | Earnings before interest, taxes, depreciation, amortization and non-cash stock<br>compensation. Adjusted EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or<br>any other financial measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. We provide these measures because we believe that they provide helpful comparisons to other companies in<br>our industry and peer group. The items excluded from Adjusted EBITDA are detailed in the reconciliation attached to this news release, and reflect an elimination of taxes, interest, depreciation, amortization, the effects of equity compensation, and<br>the proxy contest costs. Other companies (including the Company’s competitors) may define EBITDA differently. | ||||
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