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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

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 EBITDA1

 

$

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 EBITDA1

 

$

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.

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

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.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

ASSETS

 

 

June 30,

2023

 

 

December 31,

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 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’ 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 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 December 31, 2022

 

 

(62,888

)

 

 

(55,662

)

Total stockholders’ equity

 

 

369,075

 

 

 

369,979

 

Total liabilities and stockholders' equity

 

$

772,658

 

 

$

726,313

 

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,

 

 

 

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

(In thousands)

(Unaudited)

 

 

 

For the Three Months

Ended June 30,

 

 

 

 

 

 

 

 

2023

 

 

2022

 

 

Change

 

 

% 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

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 Months Ended 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 Ended

June 30,

 

Six Months Ended

June 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 EBITDA2

 

$

10,655

 

 

$

19,656

 

$

22,172

 

 

$

42,523

1 Adjusted earnings before interest, taxes, depreciation, amortization, 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 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 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 the Company’s competitors) may define Adjusted EBITDA differently.

2 Adjusted earnings before interest, taxes, depreciation, amortization, 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 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 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 the Company’s competitors) may define Adjusted EBITDA differently.

Contacts

Company Contact:

American Vanguard Corporation

William A. Kuser, Director of Investor Relations

(949) 260-1200

williamk@amvac.com



Investor Representative

The Equity Group Inc.

Lena Cati

(212) 836-9611

lcati@equityny.com

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