8-K
AMERICAN VANGUARD CORP (AVD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENTREPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): March 5, 2020
AMERICAN VANGUARD CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 001-13795 | 95-2588080 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | Commission<br><br><br>File Number | (I.R.S. Employer<br><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<br>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)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Exchanges 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 March 9, 2020, American Vanguard Corporation (“Registrant”) issued a press release announcing its financial results for the three months and full year ended December 31, 2019. 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, 8.01 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 8.01 Other Events
Dividend Declaration. On March 9, 2020, Registrant issued a press release announcing that its Board of Directors had, on March 5, 2020, declared a cash dividend in the amount of $0.02 per share of common stock for holders of record as of March 26, 2020 for distribution on April 16, 2020. The full text of the press release is linked hereto as Exhibit 99.2 and is incorporated herein by reference.
2020 Annual Meeting Date. Further, on March 5, 2020, Registrant’s Board of Directors set the date of Registrant’s 2020 Annual Meeting of Stockholders to take place at 11:00 a.m. Pacific on June 3, 2020 with a record date of April 9, 2020. The annual meeting will be a virtual meeting, and the business of the meeting will be described in Registrant’s proxy statement which is to be distributed in the latter half of April, 2020.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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.
| Date: March 10, 2020 | AMERICAN VANGUARD CORPORATION | |
|---|---|---|
| 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 FOURTH QUARTER AND FULL YEAR 2019 RESULTS
Newport Beach, CA – March 9, 2020 – American Vanguard Corporation (NYSE: AVD) today announced financial results for the fourth quarter and full year ended December 31, 2019.
Fiscal 2019 Fourth Quarter Financial Highlights – versus Fiscal 2018 Fourth Quarter: ****
| • | Net sales of $131 million in 2019, as compared to $131 million in 2018 |
|---|---|
| • | Net income of $3.4 million in 2019, as compared to $7.4 million in 2018 |
| --- | --- |
| • | Earnings per diluted share of $0.12 in 2019, as compared to $0.25 in 2018 |
| --- | --- |
| • | EBITDA^1^ of $12.0 million in 2019, as compared to<br>$16.6 million in 2018 |
| --- | --- |
Fiscal 2019 Full Year Financial Highlights – versus Fiscal 2018 Full Year: ****
| • | Net sales of $468 million in 2019, as compared to $454 million in 2018 |
|---|---|
| • | Net income of $13.6 million in 2019, as compared to $24.2 million in 2018 |
| --- | --- |
| • | Earnings per diluted share of $0.46 in 2019, as compared to $0.81 in 2018 |
| --- | --- |
| • | EBITDA^1^ of $48.9 million in 2019, as compared to<br>$61.1 million in 2018 |
| --- | --- |
Eric Wintemute, Chairman and CEO of American Vanguard, stated, “Our 2019 financial performance closely corresponds to the guidance that we provided during the fourth quarter and updated in January. In the face of adverse weather, tariffs and supply disruptions that affected the entire industry, we achieved mixed results, with a modestly higher top line and declining profitability as compared to 2018. As has been the case for the past several quarters, revenue growth was driven by our international business, which now constitutes nearly 40% of our consolidated revenue. This growth was partially offset by weather-related declines in our domestic sales.”
Mr. Wintemute continued, “Our gross profit margin came in where predicted, while both operating expenses and overall corporate tax rate were more favorable than had been anticipated. However, higher volume sales of lower-margin products in our international businesses, higher interest costs from acquisition-related borrowing and reduced factory activity led to reduced net income for the year.”
Mr. Wintemute concluded, “With respect to our 2020 outlook, assuming a return to more normal weather patterns and minimal disruption in trade and supply from COVID-19 or other factors, we are targeting our global revenues to grow at a low double-digit rate, aided by larger corn acreage in the U.S., renewed availability of bromacil herbicides, ten new product introductions, and the growth of our LATAM businesses. At the same time, we will continue to exercise financial discipline in order to strengthen our balance sheet. We look forward toward giving you a more detailed presentation on 2020 during our upcoming earnings call.”
| ^1^ | The Company believes that the use of EBITDA (earnings before interest, taxes, depreciation and amortization) is<br>useful to investors in that it is one of the primary bases upon which borrowing capacity is calculated under the Company’s senior credit facility, it gives investors a sense of the Company’s financial condition and results of operations<br>without giving effect to the cost of increased acquisition activity and is commonly used by investors and others as a basis for supporting overall business valuations. Nevertheless, investors should not consider EBITDA in isolation or a substitute<br>for analysis of the Company’s results as reported in accordance with GAAP. |
|---|
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 and strategic themes…at 4:30 pm ET on March 9, 2020. Interested parties may participate in the call by dialing (201) 493-6744. Please call 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.
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 Securities and Exchange Commission 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 |
| williamk@amvac-chemical.com | Lcati@equityny.com |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2019 and 2018 (Unaudited)
(In thousands, except share data)
| 2018 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Current assets: | |||||
| Cash and cash equivalents | 6,581 | $ | 6,168 | ||
| Receivables: | |||||
| Trade, net of allowance for doubtful accounts of 2,300 and 1,263, respectively | 136,075 | 123,320 | |||
| Other | 16,949 | 10,709 | |||
| 153,024 | 134,029 | ||||
| Inventories, net | 163,313 | 159,895 | |||
| Prepaid expenses | 10,457 | 10,096 | |||
| Income taxes receivable | 2,824 | — | |||
| Total current assets | 336,199 | 310,188 | |||
| Property, plant and equipment, net | 56,521 | 49,252 | |||
| Operating lease<br>right-of-use assets | 11,258 | — | |||
| Intangible assets, net | 198,377 | 186,583 | |||
| Goodwill | 46,557 | 25,790 | |||
| Other assets | 21,186 | 21,774 | |||
| Total assets | 670,098 | $ | 593,587 | ||
| Liabilities and Stockholders’ Equity | |||||
| Current liabilities: | |||||
| Current installments of other liabilities | 1,513 | $ | 1,609 | ||
| Accounts payable | 64,881 | 66,535 | |||
| Deferred revenue | 6,826 | 20,043 | |||
| Accrued program costs | 47,699 | 37,349 | |||
| Accrued expenses and other payables | 12,815 | 15,962 | |||
| Operating lease liabilities, current | 4,904 | — | |||
| Income taxes payable | — | 4,030 | |||
| Total current liabilities | 138,638 | 145,528 | |||
| Long-term debt, net of deferred loan fees | 148,766 | 96,671 | |||
| Other liabilities, excluding current installments | 12,890 | 6,795 | |||
| Operating lease liabilities, long-term | 6,503 | — | |||
| Deferred income tax liabilities, net | 19,145 | 15,363 | |||
| Total liabilities | 325,942 | 264,357 | |||
| 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 33,233,614 shares in<br>2019 and 32,752,827 shares in 2018 | 3,324 | 3,276 | |||
| Additional paid-in capital | 90,572 | 83,177 | |||
| Accumulated other comprehensive loss | (5,698 | ) | (4,507 | ) | |
| Retained earnings | 274,118 | 262,840 | |||
| 362,316 | 344,786 | ||||
| Less treasury stock at cost, 3,061,040 shares in 2019 and 2,902,992 shares in 2018 | (18,160 | ) | (15,556 | ) | |
| Total stockholders’ equity | 344,156 | 329,230 | |||
| Total liabilities and stockholders’ equity | 670,098 | $ | 593,587 |
All values are in US Dollars.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2019, 2018 and 2017 (Unaudited)
(In thousands, except per share data)
| 2019 | 2018 | 2017 | |||||
|---|---|---|---|---|---|---|---|
| Net sales | $ | 468,186 | $ | 454,272 | $ | 355,047 | |
| Cost of sales | 290,832 | 271,641 | 207,655 | ||||
| Gross profit | 177,354 | 182,631 | 147,392 | ||||
| Operating expenses | 151,133 | 143,610 | 120,598 | ||||
| Operating income | 26,221 | 39,021 | 26,794 | ||||
| Change in fair value of derivative instrument | — | 1,401 | — | ||||
| Interest expense, net | 7,209 | 4,024 | 1,941 | ||||
| Income before provision for income taxes and loss on equity method investments | 19,012 | 33,596 | 24,853 | ||||
| Provision for income taxes | 5,202 | 9,145 | 4,443 | ||||
| Income before loss on equity method investments | 13,810 | 24,451 | 20,410 | ||||
| Less net loss from equity method investments | 209 | 389 | 49 | ||||
| Net income | 13,601 | 24,062 | 20,361 | ||||
| Net loss (income) attributable to non-controlling<br>interest | — | 133 | (87 | ) | |||
| Net income attributable to American Vanguard | $ | 13,601 | $ | 24,195 | $ | 20,274 | |
| Earnings per common share—basic | $ | 0.47 | $ | 0.83 | $ | 0.70 | |
| Earnings per common share—assuming dilution | $ | 0.46 | $ | 0.81 | $ | 0.68 | |
| Weighted average shares outstanding—basic | 29,030 | 29,326 | 29,100 | ||||
| Weighted average shares outstanding—assuming dilution | 29,656 | 30,048 | 29,703 |
ANALYSIS OF SALES
Years Ended December 31, 2019, 2018 and 2017 (Unaudited)
(In thousands)
| 2019 | 2018 | 2017 | ||||
|---|---|---|---|---|---|---|
| Net sales: | ||||||
| Insecticides | $ | 153,448 | $ | 150,595 | $ | 134,377 |
| Herbicides/soil fumigants/fungicides | 181,686 | 183,350 | 124,529 | |||
| Other, including plant growth regulators | 67,266 | 58,360 | 42,503 | |||
| Total crop | 402,400 | 392,305 | 301,409 | |||
| Non-crop | 65,786 | 61,967 | 53,638 | |||
| $ | 468,186 | $ | 454,272 | $ | 355,047 | |
| Gross profit: | ||||||
| Crop | $ | 140,806 | $ | 150,986 | $ | 117,892 |
| Non-crop | 36,548 | 31,645 | 29,500 | |||
| $ | 177,354 | $ | 182,631 | $ | 147,392 |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2019, 2018 and 2017 (Unaudited)
(In thousands)
| 2019 | 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Increase cash | |||||||||
| Cash flows from operating activities: | |||||||||
| Net income | $ | 13,601 | $ | 24,062 | $ | 20,361 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization of property, plant and equipment and intangible assets | 18,643 | 18,891 | 16,959 | ||||||
| Amortization of other long term assets | 4,207 | 4,884 | 5,221 | ||||||
| Amortization of discounted liabilities | 72 | 359 | 110 | ||||||
| Provision for bad debts | 1,035 | 1,216 | 5 | ||||||
| Reassessment of deferred consideration | (4,120 | ) | (6,050 | ) | — | ||||
| Stock-based compensation | 7,160 | 5,805 | 4,714 | ||||||
| Increase (decrease) in deferred income taxes | 2,616 | (561 | ) | 398 | |||||
| Loss from equity method investments | 209 | 389 | 49 | ||||||
| Changes in assets and liabilities associated with operations, net of business<br>combinations: | |||||||||
| (Increase) decrease in net receivables | (11,383 | ) | (22,536 | ) | 749 | ||||
| (Increase) decrease in inventories | 3,817 | (31,440 | ) | 16,183 | |||||
| (Increase) decrease in income tax receivable, net | (6,855 | ) | 2,655 | (12,073 | ) | ||||
| (Increase) decrease in prepaid expenses and other assets | (876 | ) | 186 | 647 | |||||
| Increase in net operating lease liability | 149 | — | — | ||||||
| Increase (decrease) in accounts payable | (7,977 | ) | 9,097 | 3,322 | |||||
| Increase (decrease) in deferred revenue | (13,355 | ) | 5,468 | 10,726 | |||||
| Increase (decrease) in accrued program costs | 5,797 | (1,705 | ) | (4,529 | ) | ||||
| Increase (decrease) in other payables and accrued expenses | (3,337 | ) | 626 | (3,841 | ) | ||||
| Net cash provided by operating activities | 9,403 | 11,346 | 59,001 | ||||||
| Cash flows from investing activities: | |||||||||
| Capital expenditures | (12,985 | ) | (8,050 | ) | (6,666 | ) | |||
| Investments | — | — | (950 | ) | |||||
| Acquisitions of businesses and product lines, and intangible assets addition | (41,852 | ) | (19,647 | ) | (81,896 | ) | |||
| Net cash used in investing activities | (54,837 | ) | (27,697 | ) | (89,512 | ) | |||
| Cash flows from financing activities: | |||||||||
| Net borrowings under line of credit agreement | 51,900 | 18,975 | 37,025 | ||||||
| Debt issuance cost | — | — | (751 | ) | |||||
| Cash paid to acquire non-controlling interest | — | (73 | ) | — | |||||
| Payment on deferred consideration | (850 | ) | — | (26 | ) | ||||
| Net receipt (payment) from the issuance of common stock (sale of stock under ESPP, exercise of<br>stock options and shares purchased for tax withholding) | 283 | 1,717 | (713 | ) | |||||
| Repurchase of common stock | (2,604 | ) | (7,287 | ) | — | ||||
| Payment of cash dividends | (2,323 | ) | (2,199 | ) | (1,600 | ) | |||
| Net cash provided by financing activities | 46,406 | 11,133 | 33,935 | ||||||
| Net increase (decrease) in cash and cash equivalents | 972 | (5,218 | ) | 3,424 | |||||
| Effect of exchange rate changes on cash and cash equivalents | (559 | ) | 49 | 44 | |||||
| Cash and cash equivalents at beginning of year | 6,168 | 11,337 | 7,869 | ||||||
| Cash and cash equivalents at end of year | $ | 6,581 | $ | 6,168 | $ | 11,337 | |||
| Supplemental cash flow information: | |||||||||
| Cash paid during the year for: | |||||||||
| Interest | $ | 7,121 | $ | 3,319 | $ | 1,500 | |||
| Income taxes, net | $ | 9,276 | $ | 8,449 | $ | 17,841 | |||
| Non-cash investing activities: | |||||||||
| Consideration paid in January 2019 in connection with an asset acquisition completed in<br>2018 | $ | — | $ | 3,530 | $ | — |
RECONCILIATION OF NET INCOME TO EBITDA
Quarters ended December 31, 2019, 2018 and 2017 (Unaudited)
(In thousands)
| 2019 | 2018 | 2017 | |||||
|---|---|---|---|---|---|---|---|
| Net income attributable to American Vanguard | $ | 3,436 | $ | 7,416 | $ | 8,429 | |
| Provision for income taxes | 1,143 | 2,179 | (572 | ) | |||
| Interest expense, net | 1,603 | 1,063 | 868 | ||||
| Depreciation and amortization | 5,784 | 5,912 | 5,827 | ||||
| EBITDA^2^ | $ | 11,966 | $ | 16,570 | $ | 14,552 |
Years ended December 31, 2019, 2018 and 2017 (Unaudited)
(In thousands)
| 2019 | 2018 | 2017 | ||||
|---|---|---|---|---|---|---|
| Net income attributable to American Vanguard | $ | 13,601 | $ | 24,195 | $ | 20,274 |
| Provision for income taxes | 5,202 | 9,145 | 4,443 | |||
| Interest expense, net | 7,209 | 4,024 | 1,941 | |||
| Depreciation and amortization | 22,850 | 23,775 | 22,180 | |||
| EBITDA^2^ | $ | 48,862 | $ | 61,139 | $ | 48,838 |
| ^2^ | EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted<br>accounting principles (GAAP) and should 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<br>measure of liquidity. The items excluded from EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define EBITDA differently. | |||||
| --- | --- |
EX-99.2
Exhibit 99.2
FOR IMMEDIATE RELEASE
AMERICAN VANGUARD DECLARES QUARTERLY DIVIDEND
Newport Beach, CA – March 9, 2020 – American Vanguard Corp. (NYSE:AVD) announced that its Board of Directors has declared a $0.02 cash dividend payment to be distributed on April 16, 2020 to shareholders of record as of March 26, 2020.
Eric Wintemute, Chairman and CEO of American Vanguard, stated, “This dividend payment continues our history of providing cash returns to shareholders based on successful operational and financial performance. It also reflects the confidence that the Board of Directors has in our longer-term strategic initiatives including product portfolio extension, geographic market expansion, consumer pest control and the commercialization of SIMPAS precision application technology. We appreciate the support of our shareholders as we develop and deliver important solutions that enhance agricultural productivity and safeguard public health worldwide.”
| Annual Cash Dividend Payments : ****Based on Date of Cash Distribution | |
|---|---|
| 2020 — Payments Year-to-Date | $0.040 (including pending payment) |
| --- | --- |
| 2019 — Full Calendar Year | $0.080 |
| 2018 — Full Calendar Year | $0.075 |
| 2017 — Full Calendar Year | $0.055 |
| 2016 — Full Calendar Year | $0.020 |
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^®^ & 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.
In its public commentary, the Company 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 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 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.
| Contact Information: | |
|---|---|
| American Vanguard Corporation<br> <br>William A. Kuser,<br>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 |