American Vanguard Reports Second Quarter and Mid-year 2019 Results

Performance Affected By Unfavorable North American Weather

NEWPORT BEACH, Calif.--()--American Vanguard Corporation (NYSE:AVD), today announced financial results for the quarter and half-year ended June 30, 2019.

Financial Highlights Fiscal 2019 Second Quarter – versus Fiscal 2018 Second Quarter

  • Net sales of $113 million in 2019, compared with $107 million in 2018
  • Net income of $3.1 million in 2019, compared with $5.6 million in 2018
  • Earnings per diluted share of $0.11 in 2019, compared with $0.19 in 2018
  • EBITDA1 of $11.9 million in 2019, compared with $14 million in 2018

Financial Highlights Fiscal 2019 First Six Months – versus Fiscal 2018 First Six Months

  • Net sales of $213 million in 2019, compared with $211 million in 2018
  • Net income of $7 million in 2019, compared with $10.25 million in 2018
  • Earnings per diluted share of $0.24 in 2019, compared with $0.34 in 2018
  • EBITDA of $24.5 million in 2019, compared to $27.3 million in 2018

Eric Wintemute, Chairman and CEO of American Vanguard commented, “Our overall financial performance in this year’s second quarter and first half was significantly affected by widespread unfavorable weather in the U.S. Persistent cold and rainfall had a negative influence on our U.S. crop business particularly in both the Midwest and Southeastern regions, where there were planting delays, several million unplanted acres and sluggish crop protection procurement. By contrast, both our domestic non-crop and international businesses posted double-digit growth allowing us to record a 6% quarterly net sales increase over the prior year.”

Mr. Wintemute continued, “Our second quarter gross profit margin was 37% (versus 40% in 2Q2018) as we began moderating manufacturing output in order to achieve significant second-half inventory reductions. As you may recall, recent inventory levels have been driven largely by both the need to stock products in newly acquired businesses and the expedited purchase of goods from China to minimize tariffs. We expect that through inventory reduction and operating performance during the second half, we will be able to reduce debt by $50 million by year end.”

Mr. Wintemute concluded, “As indicated in our earlier announcement, in the second half of the year, we expect solid performance from our soil fumigants, cotton harvest products and the Central and South American businesses. We reiterate our full-year 2019 guidance of approximately $500 million in net sales; gross profit margins around 38%; operating expenses near $155 million; interest expense at $8 million; and a comprehensive tax of 26%. Given the probable reduction of 2019 U.S. harvest results and reduced levels of our products in channel inventory, the domestic market may be poised for a rebound in 2020. We look forward to providing investors with additional information during our earning 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 Tuesday, August 6, 2019. 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.

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.

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

ASSETS

 

June 30,
2019

 

 

December 31,
2018

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,307

 

 

$

6,168

 

Receivables:

 

 

 

 

 

 

 

 

Trade, net of allowance for doubtful accounts of $1,707 and $1,263, respectively

 

 

118,351

 

 

 

123,320

 

Other

 

 

12,679

 

 

 

10,709

 

Total receivables, net

 

 

131,030

 

 

 

134,029

 

Inventories, net

 

 

193,393

 

 

 

159,895

 

Prepaid expenses

 

 

11,717

 

 

 

10,096

 

Income taxes receivable

 

 

445

 

 

 

 

Total current assets

 

 

342,892

 

 

 

310,188

 

Property, plant and equipment, net

 

 

53,637

 

 

 

49,252

 

Operating lease right-of-use assets

 

 

12,420

 

 

 

 

Intangible assets, net of amortization

 

 

194,337

 

 

 

186,583

 

Goodwill

 

 

39,436

 

 

 

25,790

 

Other assets

 

 

23,087

 

 

 

21,774

 

Total assets

 

$

665,809

 

 

$

593,587

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Current installments of other liabilities

 

$

1,320

 

 

$

1,609

 

Accounts payable

 

 

62,220

 

 

 

66,535

 

Deferred revenue

 

 

751

 

 

 

20,043

 

Accrued program costs

 

 

49,172

 

 

 

37,349

 

Accrued expenses and other payables

 

 

11,085

 

 

 

15,962

 

Operating lease liabilities, current

 

 

4,749

 

 

 

 

Income taxes payable

 

 

 

 

 

4,030

 

Total current liabilities

 

 

129,297

 

 

 

145,528

 

Long-term debt, net of deferred loan fees

 

 

164,574

 

 

 

96,671

 

Operating lease liabilities, long-term

 

 

7,744

 

 

 

 

Other liabilities, excluding current installments

 

 

10,982

 

 

 

6,795

 

Deferred income tax liabilities

 

 

19,364

 

 

 

15,363

 

Total liabilities

 

 

331,961

 

 

 

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 33,204,191 shares at June 30, 2019 and 32,752,827 shares at December 31, 2018

 

 

3,321

 

 

 

3,276

 

Additional paid-in capital

 

 

85,614

 

 

 

83,177

 

Accumulated other comprehensive loss

 

 

(5,619

)

 

 

(4,507

)

Retained earnings

 

 

268,692

 

 

 

262,840

 

 

 

 

352,008

 

 

 

344,786

 

Less treasury stock at cost, 3,061,040 shares at June 30, 2019 and 2,902,992 shares at December 31, 2018

 

 

(18,160

)

 

 

(15,556

)

Total stockholders’ equity

 

 

333,848

 

 

 

329,230

 

Total liabilities and stockholders' equity

 

$

665,809

 

 

$

593,587

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

 

 

For the Three Months
Ended June 30,

 

 

For the Six Months
Ended June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

Net sales

 

$

113,104

 

 

$

107,046

 

 

$

212,780

 

 

$

211,154

Cost of sales

 

 

71,451

 

 

 

63,749

 

 

 

129,425

 

 

 

126,806

Gross profit

 

 

41,653

 

 

 

43,297

 

 

 

83,355

 

 

 

84,348

Operating expenses

 

 

35,362

 

 

 

34,718

 

 

 

70,162

 

 

 

68,418

Operating income

 

 

6,291

 

 

 

8,579

 

 

 

13,193

 

 

 

15,930

Interest expense, net

 

 

1,925

 

 

 

966

 

 

 

3,537

 

 

 

1,803

Income before provision for income taxes and loss on equity method investments

 

 

4,366

 

 

 

7,613

 

 

 

9,656

 

 

 

14,127

Income tax expense

 

 

1,224

 

 

 

1,748

 

 

 

2,584

 

 

 

3,440

Income before loss on equity method investments

 

 

3,142

 

 

 

5,865

 

 

 

7,072

 

 

 

10,687

Loss from equity method investments

 

 

36

 

 

 

301

 

 

 

60

 

 

 

518

Net income

 

 

3,106

 

 

 

5,564

 

 

 

7,012

 

 

 

10,169

Net income attributable to non-controlling interest

 

 

 

 

 

35

 

 

 

 

 

 

85

Net income attributable to American Vanguard

 

$

3,106

 

 

$

5,599

 

 

$

7,012

 

 

$

10,254

Earnings per common share—basic

 

$

.11

 

 

$

.19

 

 

$

.24

 

 

$

.35

Earnings per common share—assuming dilution

 

$

.11

 

 

$

.19

 

 

$

.24

 

 

$

.34

Weighted average shares outstanding—basic

 

 

29,001

 

 

 

29,330

 

 

 

28,989

 

 

 

29,309

Weighted average shares outstanding—assuming dilution

 

 

29,540

 

 

 

30,190

 

 

 

29,560

 

 

 

30,113

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

ANALYSIS OF SALES

For the three months and six months ended June 30, 2019 and 2018

(In thousands)

(Unaudited)

 

 

 

For the three months ended
June 30,

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

%
Change

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US crop

 

$

47,311

 

 

$

51,760

 

 

$

(4,449

)

 

 

-9

%

US non-crop

 

 

17,219

 

 

 

12,603

 

 

 

4,616

 

 

 

37

%

US total

 

 

64,530

 

 

 

64,363

 

 

 

167

 

 

 

0

%

International

 

 

48,574

 

 

 

42,683

 

 

 

5,891

 

 

 

14

%

Net sales:

 

$

113,104

 

 

$

107,046

 

 

$

6,058

 

 

 

6

%

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US crop

 

$

18,719

 

 

$

26,222

 

 

$

(7,503

)

 

 

-29

%

US non-crop

 

 

8,558

 

 

 

6,352

 

 

 

2,206

 

 

 

35

%

US total

 

 

27,277

 

 

 

32,574

 

 

 

(5,297

)

 

 

-16

%

International

 

 

14,376

 

 

 

10,723

 

 

 

3,653

 

 

 

34

%

Total gross profit:

 

$

41,653

 

 

$

43,297

 

 

$

(1,644

)

 

 

-4

%

 

 

 

For the six months ended
June 30,

 

 

 

 

 

 

 

 

 

 

 

2019

 

 

2018

 

 

Change

 

 

%
Change

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US crop

 

$

96,560

 

 

$

108,785

 

 

$

(12,225

)

 

 

-11

%

US non-crop

 

 

29,507

 

 

 

25,393

 

 

 

4,114

 

 

 

16

%

US total

 

 

126,067

 

 

 

134,178

 

 

 

(8,111

)

 

 

-6

%

International

 

 

86,713

 

 

 

76,976

 

 

 

9,737

 

 

 

13

%

Net sales:

 

$

212,780

 

 

$

211,154

 

 

$

1,626

 

 

 

1

%

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US crop

 

$

42,214

 

 

$

50,753

 

 

$

(8,539

)

 

 

-17

%

US non-crop

 

 

14,872

 

 

 

12,432

 

 

 

2,440

 

 

 

20

%

US total

 

 

57,086

 

 

 

63,185

 

 

 

(6,099

)

 

 

-10

%

International

 

 

26,269

 

 

 

21,163

 

 

 

5,106

 

 

 

24

%

Total gross profit:

 

$

83,355

 

 

$

84,348

 

 

$

(993

)

 

 

-1

%

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

7,012

 

 

$

10,169

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization of property, plant and equipment and intangible assets

 

 

9,233

 

 

 

9,516

 

Amortization of other long term assets

 

 

2,146

 

 

 

2,313

 

Amortization of discounted liabilities

 

 

 

 

 

202

 

Provision for bad debts

 

 

445

 

 

 

181

 

Revision of deferred compensation

 

 

(2,888

)

 

 

(1,468

)

Stock-based compensation

 

 

2,995

 

 

 

2,778

 

Change in deferred income taxes

 

 

(572

)

 

 

(26

)

Loss from equity method investments

 

 

60

 

 

 

518

 

Changes in assets and liabilities associated with operations:

 

 

 

 

 

 

 

 

Decrease in net receivables

 

 

7,841

 

 

 

5,297

 

Increase in inventories

 

 

(27,635

)

 

 

(40,194

)

Increase in prepaid expenses and other assets

 

 

(1,844

)

 

 

(707

)

Increase in net operating lease liability

 

 

73

 

 

 

 

Increase in income tax receivable/payable, net

 

 

(4,480

)

 

 

(271

)

(Decrease) increase in accounts payable

 

 

(10,138

)

 

 

11,309

 

Decrease in deferred revenue

 

 

(19,438

)

 

 

(7,254

)

Increase in accrued program costs

 

 

11,823

 

 

 

15,039

 

Decrease in other payables and accrued expenses

 

 

(6,719

)

 

 

(3,683

)

Net cash (used in) provided by operating activities

 

 

(32,086

)

 

 

3,719

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(7,216

)

 

 

(3,230

)

Acquisition of business, product lines, and intangible assets

 

 

(24,302

)

 

 

(1,631

)

Net cash used in investing activities

 

 

(31,518

)

 

 

(4,861

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payments under line of credit agreement

 

 

(54,200

)

 

 

(62,125

)

Borrowings under line of credit agreement

 

 

122,000

 

 

 

58,800

 

Net (payments) receipts from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding)

 

 

(513

)

 

 

1,335

 

Repurchase of common stock

 

 

(2,604

)

 

 

 

Payment of cash dividends

 

 

(1,160

)

 

 

(1,024

)

Net cash provided by (used in) financing activities

 

 

63,523

 

 

 

(3,014

)

Net decrease in cash and cash equivalents

 

 

(81

)

 

 

(4,156

)

Effect of exchange rate changes on cash and cash equivalents

 

 

220

 

 

 

(82

)

Cash and cash equivalents at beginning of period

 

 

6,168

 

 

 

11,337

 

Cash and cash equivalents at end of period

 

$

6,307

 

 

$

7,099

 

 

 

 

 

 

 

 

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA

For the three months and six months ended June 30, 2019 and 2018

(Unaudited)

 

 

 

Three Months
Ended June 30,

 

 

Six Months Ended
June 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

Net income attributable to American Vanguard, as reported

 

$

3,106

 

 

$

5,599

 

 

$

7,012

 

 

$

10,254

Provision for income taxes

 

 

1,224

 

 

 

1,748

 

 

 

2,584

 

 

 

3,440

Interest expense, net

 

 

1,925

 

 

 

966

 

 

 

3,537

 

 

 

1,803

Depreciation and amortization

 

 

5,688

 

 

 

5,683

 

 

 

11,379

 

 

 

11,829

EBITDA2

 

$

11,943

 

 

$

13,996

 

 

$

24,512

 

 

$

27,326

___________________________
1
Earnings before interest, taxes, depreciation and amortization. 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 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 from EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define EBITDA differently. The Company believes that the use of EBITDA is 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 conditions and results of operation without giving effect to the cost of increased acquisition activity and it 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 for analysis of the Company’s results as reported in accordance with GAAP.

2 Earnings before interest, taxes, depreciation and amortization. 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 any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a 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.

Contacts

Company:
American Vanguard Corporation
William A. Kuser, Director of Investor Relations
(949) 260-1200
williamk@amvac-chemical.com

Investor Representative
The Equity Group Inc.
www.theequitygroup.com
Lena Cati (212) 836-9611
Lcati@equityny.com

Contacts

Company:
American Vanguard Corporation
William A. Kuser, Director of Investor Relations
(949) 260-1200
williamk@amvac-chemical.com

Investor Representative
The Equity Group Inc.
www.theequitygroup.com
Lena Cati (212) 836-9611
Lcati@equityny.com