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): August 3, 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) |
| --- | --- |
| ☐ | 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>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 August 8, 2023, American Vanguard Corporation (“Registrant”) issued a press release announcing its preliminary, unaudited financial results for the three- and six-month periods ended June 30, 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 |
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On August 3, 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) granted a waiver with respect to an Existing Event of Default (as defined in the Credit Agreement) relating to the Company’s noncompliance with the Minimum Fixed Charge Coverage Ratio (“FCCR”) for the quarter ended June 30, 2023, subject to the terms and conditions of such waiver. The noncompliance arose largely from the expense of the Company’s share repurchase activity over the course of the twelve-month period ended on June 30, 2023.
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 August 8, 2023, of Registrant regarding financial results for the three- and six-month periods ended June 30, 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: August 9, 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 SECOND QUARTER & MIDYEAR 2023 RESULTS
Second Half Rebound Forecast After Lower-Than-Expected First Half Performance
Citing Industry-Wide Drop in Procurement Activity
Announces Share Repurchase Program
Newport Beach, CA – August 8, 2023 – American Vanguard Corporation (NYSE: AVD) today announced financial results for the second quarter and six months ended June 30, 2023.
| 3 Months Ended | June 30, 2023 | June 30, 2022 | Change | |||||
|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 132,790 | $ | 148,203 | $ | (15,413 | ) | |
| Net income | $ | (1,053 | ) | $ | 6,830 | $ | (7,883 | ) |
| EPS | $ | (0.04 | ) | $ | 0.23 | $ | (0.27 | ) |
| Adjusted EBITDA^1^ | $ | 10,655 | $ | 19,656 | $ | (9,001 | ) | |
| 6 Months Ended | June 30, 2023 | June 30, 2022 | Change | |||||
| Net sales | $ | 257,674 | $ | 297,797 | $ | (40,123 | ) | |
| Net income | $ | 865 | $ | 16,765 | $ | (15,900 | ) | |
| EPS | $ | 0.03 | $ | 0.55 | $ | (0.52 | ) | |
| Adjusted EBITDA^1^ | $ | 22,172 | $ | 42,523 | $ | (20,351 | ) |
Eric Wintemute, Chairman and CEO of American Vanguard stated: “During the second quarter of 2023, the Global Agriculture industry experienced a sharp, unexpected drop in procurement activity for crop inputs, as distribution, faced with higher interest rates, destocked inventory in order to limit carrying costs. We believe that this procurement pattern does not represent a loss of demand but, rather, a shift in timing of demand – to be closer to the planting season. We saw similar behavior in our non-crop business, as retailers broke with traditional stocking patterns in favor of just-in-time buying. Further, our businesses in Central America and Brazil faced a flood of low-priced, generic product from China-based suppliers. These factors taken together adversely affected our second quarter financial performance.”
Mr. Wintemute continued: “With stable commodity prices, a strong farm economy and channel inventory of many of our crop products at low levels, we expect that demand should improve significantly over the balance of 2023, as growers prepare for the 2024 planting season. While we are uncertain whether destocking activity has completely run its course, we can say that the distribution channel will need to replenish its stocks, and we are poised to meet the demand. Accordingly, we are revising our 2023 performance targets as indicated below.
| ^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 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. |
|---|
2023 Performance Targets
| Metric | 2023 Range | 2022 Actual | Change | ||||
|---|---|---|---|---|---|---|---|
| Net sales | $ | 615MM - 625MM | $ | 610MM | flat to up | ||
| Gross margin % | 32 | 32 | % | flat | |||
| Opex as % of sales | 25 | 25 | % | flat | |||
| Adjusted EBITDA | $ | 70MM - 75MM | $ | 73.0MM | Similar | ||
| Net income | $ | 20MM - 24MM | $ | 27.5MM | down |
All values are in US Dollars.
Mr. Wintemute concluded: “As a demonstration of our confidence in the company’s prospects, our board of directors has authorized us to enter into a 10b5-1 plan under which we may purchase up to $7.5 million of our common stock on the open market. We continue to see enduring value in our equity and believe that this repurchase program is a prudent allocation of capital. We encourage you to join us for our upcoming earnings call, during which we will give you a more detailed presentation of our first-half performance and full-year targets.”
Conference Call
Eric Wintemute, Chairman & CEO and David T. Johnson, VP & CFO, will conduct a conference call focusing on the financial results and strategic themes at 5 pm ET on August 8, 2023. Interested parties may participate in the call by dialing 713-481-1320. 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, manufactures, and markets solutions for crop protection and nutrition, turf and ornamentals management, commercial and consumer pest control. Over the past 20 years, through product and business acquisitions, the Company has expanded its operations into 17 countries and now has over 1,000 product registrations in 56 nations worldwide. Its strategy rests on three growth initiatives – i) Core Business (through innovation of conventional products), ii) Green Solutions (with over 130 biorational products – including fertilizers, microbials, nutritionals and non-conventional products) and iii) Precision Agriculture innovation (including SIMPAS prescriptive application and Ultimus measure/record/verify technologies). 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 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 | Lena Cati |
| (949) 260-1200 | (212) 836-9611 |
| williamk@amvac.com | lcati@equityny.com |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS
| December 31,<br>2022 | |||||
|---|---|---|---|---|---|
| Current assets: | |||||
| Cash and cash equivalents | 14,632 | $ | 20,328 | ||
| Receivables: | |||||
| Trade, net of allowance for doubtful accounts of 6,135 and 5,136, respectively | 151,479 | 156,492 | |||
| Other | 11,473 | 9,816 | |||
| Total receivables, net | 162,952 | 166,308 | |||
| Inventories | 237,587 | 184,190 | |||
| Prepaid expenses | 17,546 | 15,850 | |||
| Income taxes receivable | 5,436 | 1,891 | |||
| Total current assets | 438,153 | 388,567 | |||
| Property, plant and equipment, net | 73,452 | 70,912 | |||
| Operating lease<br>right-of-use assets | 23,724 | 24,250 | |||
| Intangible assets, net | 178,624 | 184,664 | |||
| Goodwill | 48,219 | 47,010 | |||
| Other assets | 10,193 | 10,769 | |||
| Deferred income tax assets, net | 293 | 141 | |||
| Total assets | 772,658 | $ | 726,313 | ||
| LIABILITIES AND STOCKHOLDERS’<br>EQUITY | **** | ||||
| Current liabilities: | |||||
| Accounts payable | 78,876 | $ | 69,000 | ||
| Customer prepayments | 27,368 | 110,597 | |||
| Accrued program costs | 80,333 | 60,743 | |||
| Accrued expenses and other payables | 13,273 | 20,982 | |||
| Current operating lease liabilities | 5,493 | 5,279 | |||
| Total current liabilities | 205,343 | 266,601 | |||
| Long-term debt, net | 160,750 | 51,477 | |||
| Long-term operating lease liabilities | 18,884 | 19,492 | |||
| Other liabilities, net of current installments | 4,923 | 4,167 | |||
| Deferred income tax liabilities, net | 13,683 | 14,597 | |||
| Total liabilities | 403,583 | 356,334 | |||
| Commitments and contingent liabilities | |||||
| Stockholders’ equity: | |||||
| Preferred stock, .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 34,643,674 shares at<br>June 30, 2023 and 34,446,194 shares at December 31, 2022 | 3,464 | 3,444 | |||
| Additional paid-in capital | 106,719 | 105,634 | |||
| Accumulated other comprehensive loss | (6,131 | ) | (12,182 | ) | |
| Retained earnings | 327,911 | 328,745 | |||
| Less treasury stock at cost, 5,438,093 shares at June 30, 2023 and 5,029,892 shares at<br>December 31, 2022 | (62,888 | ) | (55,662 | ) | |
| Total stockholders’ equity | 369,075 | 369,979 | |||
| Total liabilities and stockholders’ equity | 772,658 | $ | 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<br>Months<br>Ended June 30, | For the Six Months<br>Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Net sales | $ | 132,790 | $ | 148,203 | $ | 257,674 | $ | 297,797 | ||||
| Cost of sales | (89,881 | ) | (98,872 | ) | (176,230 | ) | (197,070 | ) | ||||
| Gross profit | 42,909 | 49,331 | 81,444 | 100,727 | ||||||||
| Operating expenses | (39,155 | ) | (38,518 | ) | (74,423 | ) | (75,165 | ) | ||||
| Operating income | 3,754 | 10,813 | 7,021 | 25,562 | ||||||||
| Change in fair value of equity investment | (55 | ) | (486 | ) | (77 | ) | (403 | ) | ||||
| Interest expense, net | (3,211 | ) | (772 | ) | (4,898 | ) | (1,170 | ) | ||||
| Income before provision for income taxes | 488 | 9,555 | 2,046 | 23,989 | ||||||||
| Income tax expense | (1,541 | ) | (2,725 | ) | (1,181 | ) | (7,224 | ) | ||||
| Net income (loss) | $ | (1,053 | ) | $ | 6,830 | $ | 865 | $ | 16,765 | |||
| Net income (loss) per common share—basic | $ | (.04 | ) | $ | .23 | $ | .03 | $ | .57 | |||
| Net income (loss) per common share—assuming dilution | $ | (.04 | ) | $ | .23 | $ | .03 | $ | .55 | |||
| Weighted average shares outstanding—basic | 28,428 | 29,602 | 28,397 | 29,639 | ||||||||
| Weighted average shares outstanding—assuming dilution | 28,428 | 30,225 | 28,985 | 30,289 |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
ANALYSIS OF SALES
(Inthousands)
(Unaudited)
| For the Three Months<br>Ended June 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | Change | %<br>Change | |||||||
| Net sales: | ||||||||||
| U.S. crop | $ | 56,212 | $ | 63,513 | $ | (7,301 | ) | -11 | % | |
| U.S. non-crop | 16,878 | 20,996 | (4,118 | ) | -20 | % | ||||
| U.S. total | 73,090 | 84,509 | (11,419 | ) | -14 | % | ||||
| International | 59,700 | 63,694 | (3,994 | ) | -6 | % | ||||
| Net sales: | $ | 132,790 | $ | 148,203 | $ | (15,413 | ) | -10 | % | |
| Gross profit: | ||||||||||
| U.S. crop | $ | 21,703 | $ | 23,913 | $ | (2,210 | ) | -9 | % | |
| U.S. non-crop | 7,109 | 9,244 | (2,135 | ) | -23 | % | ||||
| U.S. total | 28,812 | 33,157 | (4,345 | ) | -13 | % | ||||
| International | 14,097 | 16,174 | (2,077 | ) | -13 | % | ||||
| Total gross profit: | $ | 42,909 | $ | 49,331 | $ | (6,422 | ) | -13 | % | |
| For the Six Months<br>Ended June 30, | ||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2023 | 2022 | Change | %Change | |||||||
| Net sales: | ||||||||||
| U.S. crop | $ | 118,105 | $ | 151,349 | $ | (33,244 | ) | -22 | % | |
| U.S. non-crop | 30,759 | 34,753 | (3,994 | ) | -11 | % | ||||
| U.S. total | 148,864 | 186,102 | (37,238 | ) | -20 | % | ||||
| International | 108,810 | 111,695 | (2,885 | ) | -3 | % | ||||
| Net sales: | $ | 257,674 | $ | 297,797 | $ | (40,123 | ) | -13 | % | |
| Gross profit: | ||||||||||
| U.S. crop | $ | 40,585 | $ | 56,186 | $ | (15,601 | ) | -28 | % | |
| U.S. non-crop | 14,298 | 16,730 | (2,432 | ) | -15 | % | ||||
| U.S. total | 54,883 | 72,916 | (18,033 | ) | -25 | % | ||||
| International | 26,561 | 27,811 | (1,250 | ) | -4 | % | ||||
| Total gross profit: | $ | 81,444 | $ | 100,727 | $ | (19,283 | ) | -19 | % |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| For the Six MonthsEnded June 30, | ||||||
|---|---|---|---|---|---|---|
| 2023 | 2022 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 865 | $ | 16,765 | ||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||
| Depreciation of property, plant and equipment | 4,322 | 4,077 | ||||
| Amortization of intangibles assets | 6,707 | 6,927 | ||||
| Amortization of other long-term assets | 1,117 | 1,739 | ||||
| Provision for bad debts | 902 | 470 | ||||
| Fair value adjustment to contingent consideration | — | 635 | ||||
| Stock-based compensation | 2,541 | 2,836 | ||||
| Change in deferred income taxes | (1,015 | ) | 109 | |||
| Changes in liabilities for uncertain tax positions or unrecognized tax benefits | 419 | — | ||||
| Change in fair value of equity investments | 77 | 403 | ||||
| Other | 117 | 412 | ||||
| Net foreign currency adjustments | (382 | ) | (20 | ) | ||
| Changes in assets and liabilities associated with operations: | ||||||
| Decrease (increase) in net receivables | 6,092 | (18,645 | ) | |||
| Increase in inventories | (50,900 | ) | (27,774 | ) | ||
| Increase in prepaid expenses and other assets | (1,749 | ) | (3,652 | ) | ||
| Change in income tax receivable/payable, net | (3,510 | ) | (3,526 | ) | ||
| Increase (decrease) in net operating lease liability | 132 | (21 | ) | |||
| Increase in accounts payable | 9,105 | 19,439 | ||||
| Decrease in customer prepayments | (83,225 | ) | (62,789 | ) | ||
| Increase in accrued program costs | 19,607 | 35,987 | ||||
| Decrease in other payables and accrued expenses | (7,824 | ) | (602 | ) | ||
| Net cash used in operating activities | (96,602 | ) | (27,230 | ) | ||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (6,498 | ) | (5,654 | ) | ||
| Proceeds from disposal of property, plant and equipment | 44 | 27 | ||||
| Intangible assets | (718 | ) | (1,044 | ) | ||
| Net cash used in investing activities | (7,172 | ) | (6,671 | ) | ||
| Cash flows from financing activities: | ||||||
| Payments under line of credit agreement | (54,050 | ) | (56,600 | ) | ||
| Borrowings under line of credit agreement | 162,500 | 105,000 | ||||
| Receipt from the issuance of common stock under ESPP | 480 | 436 | ||||
| Net receipt from the exercise of stock options | 32 | 765 | ||||
| Payment for tax withholding on stock-based compensation awards | (1,948 | ) | (2,012 | ) | ||
| Repurchase of common stock | (7,226 | ) | (6,232 | ) | ||
| Payment of cash dividends | (1,702 | ) | (1,330 | ) | ||
| Net cash provided by financing activities | 98,086 | 40,027 | ||||
| Net (decrease) increase in cash and cash equivalents | (5,688 | ) | 6,126 | |||
| Effect of exchange rate changes on cash and cash equivalents | (8 | ) | (354 | ) | ||
| Cash and cash equivalents at beginning of period | 20,328 | 16,285 | ||||
| Cash and cash equivalents at end of period | $ | 14,632 | $ | 22,057 |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(Unaudited)
| Three Months EndedJune 30, | Six Months EndedJune 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | ||||||
| Net income, as reported | $ | (1,053 | ) | $ | 6,830 | $ | 865 | $ | 16,765 |
| Provision for income taxes | 1,541 | 2,725 | 1,181 | 7,224 | |||||
| Interest expense, net | 3,211 | 772 | 4,898 | 1,170 | |||||
| Depreciation and amortization | 5,889 | 6,271 | 12,146 | 12,743 | |||||
| Stock compensation | 1,067 | 1,273 | 2,541 | 2,836 | |||||
| Proxy contest activities | — | 1,785 | 541 | 1,785 | |||||
| Adjusted EBITDA^2^ | $ | 10,655 | $ | 19,656 | $ | 22,172 | $ | 42,523 | |
| ^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. | ||||||||
| --- | --- |