American Vanguard Reports Third Quarter and Nine-Month 2019 Results

American Vanguard Corporation (NYSE:AVD), today announced financial results for the three- and nine-month periods ended September 30, 2019.

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

• Net sales of $125 million in 2019, compared with $112 million in 2018
• Net income of $3.2 million in 2019, compared with $6.5 million in 2018
• Earnings per diluted share of $0.11 in 2019, compared with $0.22 in 2018
• EBITDA¹ of $12 million in 2019, compared with $17 million in 2018

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

• Net sales of $338 million in 2019, compared with $323 million in 2018
• Net income of $10.2 million in 2019, compared with $16.8 million in 2018
• Earnings per diluted share of $0.34 in 2019, compared with $0.56 in 2018
• EBITDA of $37 million in 2019, compared to $45 million in 2018

Eric Wintemute, Chairman and CEO of American Vanguard commented, “As we noted in our pre-announcement, driven largely by our international business, consolidated net sales for the quarter grew by 12%. At the same time, net income declined for the period, with earnings per share at $0.11 for the quarter. This was due to lower factory activity, higher operating expenses and a comparatively higher benefit in the comparable quarter of 2018 relating to the reassessment of deferred purchase price consideration.”

Mr. Wintemute continued, “Our overall performance was mixed. On the one hand, our international business grew by 27% during the quarter. With further integration of relatively early-stage business operations, we experienced expansion in Central America, Brazil, Mexico and Canada. On the other hand, the domestic business was held to only 3% growth in the quarter due to extreme weather conditions that have set back the entire industry. Persistent rains and cold during the first half of 2019 delayed plantings, pushed harvest times back and reduced demand for post-harvest fumigants. This was followed by record-setting heat in the Southern region during the third quarter that reduced demand for defoliants, fungicides and insecticides. Notwithstanding these weather challenges, our domestic Ag sales increased by 1% in the third quarter and we recorded a 10% increase in our domestic non-crop sales, led by our mosquito adulticide and pest strip product lines.”

Mr. Wintemute continued, “Focusing on full year 2019 results, we expect consolidated sales to increase by about 5% year-over-year with mixed performance among our major markets. International sales should increase by about 25% for the full year. However, our domestic sales will likely decrease by about 5% on a per annum basis, which we believe is consistent with industry-wide forecasts that show domestic markets receding by 6% to 12% for the year. With these considerations in mind, we are expecting full year 2019 net sales of approximately $475 million, gross profit margins around 38%, operating expenses of approximately $155 million and a full corporate tax rate of approximately 29%.”

Mr. Wintemute concluded, “During our earnings conference call, we will cover current and near-term market conditions, provide our preliminary outlook for 2020 and outline continued efforts to improve our balance sheet. We will also update listeners on technology development with a focus on biological products and SIMPAS.”

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
		September 30, 2019				December 31, 2018
Current assets:
Cash and cash equivalents		$	5,887			$	6,168
Receivables:
Trade, net of allowance for doubtful accounts of $1,988 and $1,263, respectively			140,220				123,320
Other			13,783				10,709
Total receivables, net			154,003				134,029
Inventories, net			186,285				159,895
Prepaid expenses			10,731				10,096
Income tax receivable			88				—
Total current assets			356,994				310,188
Property, plant and equipment, net			55,330				49,252
Operating lease right-of-use assets			12,186				—
Intangible assets, net of amortization			196,542				186,583
Goodwill			38,435				25,790
Other assets			21,810				21,774
Total assets		$	681,297			$	593,587
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current installments of other liabilities		$	1,305			$	1,609
Accounts payable			67,188				66,535
Deferred revenue			368				20,043
Accrued program costs			57,512				37,349
Accrued expenses and other payables			11,912				15,962
Operating lease liabilities, current			4,889				—
Income taxes payable			—				4,030
Total current liabilities			143,174				145,528
Long-term debt, net of deferred loan fees			165,008				96,671
Other liabilities, excluding current installments			9,808				6,795
Operating lease liabilities, long-term			7,414				—
Deferred income tax liabilities			17,907				15,363
Total liabilities			343,311				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 33,235,938 shares at September 30, 2019 and 32,752,827 shares at December 31, 2018			3,325				3,276
Additional paid-in capital			88,257				83,177
Accumulated other comprehensive loss			(6,699	)			(4,507	)
Retained earnings			271,263				262,840
			356,146				344,786
Less treasury stock at cost, 3,061,040 shares at September 30, 2019 and 2,902,992 shares at December 31, 2018			(18,160	)			(15,556	)
Total stockholders’ equity			337,986				329,230
Total liabilities and stockholders' equity		$	681,297			$	593,587

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2019				2018				2019				2018
Net sales		$	124,884			$	111,780			$	337,664			$	322,934
Cost of sales			77,421				66,480				206,846				193,286
Gross profit			47,463				45,300				130,818				129,648
Operating expenses			40,677				33,635				110,839				102,011
Operating income			6,786				11,665				19,979				27,637
Interest expense, net			2,070				1,116				5,606				2,961
Income before provision for income taxes and loss on equity method investments			4,716				10,549				14,373				24,676
Income tax expense			1,474				3,526				4,059				6,966
Income before loss on equity method investments			3,242				7,023				10,314				17,710
Loss from equity method investments			89				533				149				1,051
Net income			3,153				6,490				10,165				16,659
Net loss attributable to non-controlling interest			—				35				—				120
Net income attributable to American Vanguard		$	3,153			$	6,525			$	10,165			$	16,779
Earnings per common share—basic		$	.11			$	.22			$	.35			$	.57
Earnings per common share—assuming dilution		$	.11			$	.22			$	.34			$	.56
Weighted average shares outstanding—basic			29,057				29,399				29,013				29,340
Weighted average shares outstanding—assuming dilution			29,650				30,209				29,591				30,146

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
ANALYSIS OF SALES
For the three months and nine months ended September 30, 2019 and 2018
(In thousands)
(Unaudited)
		For the three months ended September 30,
		2019				2018				Change				% Change
Net sales:
US crop		$	55,952			$	55,285			$	667				1	%
US non-crop			18,036				16,426				1,610				10	%
US total			73,988				71,711				2,277				3	%
International			50,896				40,069				10,827				27	%
Net sales:		$	124,884			$	111,780			$	13,104				12	%
Gross profit:
US crop		$	23,926			$	27,106			$	(3,180	)			-12	%
US non-crop			9,491				7,991				1,500				19	%
US total			33,417				35,097				(1,680	)			-5	%
International			14,046				10,203				3,843				38	%
Total gross profit:		$	47,463			$	45,300			$	2,163				5	%
Gross margin domestic			45	%			49	%
Gross margin international			28	%			25	%
Gross margin total			38	%			41	%
		For the nine months ended September 30,
		2019				2018				Change				% Change
Net sales:
US crop		$	152,512			$	166,397			$	(13,885	)			-8	%
US non-crop			47,543				39,492				8,051				20	%
US total			200,055				205,889				(5,834	)			-3	%
International			137,609				117,045				20,564				18	%
Net sales:		$	337,664			$	322,934			$	14,730				5	%
Gross profit:
US crop		$	66,140			$	78,439			$	(12,299	)			-16	%
US non-crop			24,363				19,843				4,520				23	%
US total			90,503				98,282				(7,779	)			-8	%
International			40,315				31,366				8,949				29	%
Total gross profit:		$	130,818			$	129,648			$	1,170				1	%
Gross margin domestic			45	%			48	%
Gross margin international			29	%			27	%
Gross margin total			39	%			40	%

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		For the Nine Months Ended September 30,
		2019				2018
Cash flows from operating activities:
Net income		$	10,165			$	16,659
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property, plant and equipment and intangible assets			13,892				14,233
Amortization of other long term assets			3,174				3,630
Amortization of discounted liabilities			41				314
Provision for bad debts			728				540
Reassessment of deferred consideration			(3,539	)			(5,437	)
Stock-based compensation			5,159				4,235
Deferred income taxes			(459	)			(34	)
Loss from equity method investments			149				1,051
Changes in assets and liabilities associated with operations:
Increase in net receivables			(15,983	)			(24,922	)
Increase in inventories			(19,713	)			(39,305	)
Increase in prepaid expenses and other assets			(849	)			(959	)
Increase in net operating lease liability			117				—
(Decrease) increase in income tax receivable/payable, net			(4,477	)			2,069
(Decrease) increase in accounts payable			(5,516	)			5,711
Decrease in deferred revenue			(19,800	)			(13,965	)
Increase in accrued program costs			20,163				22,882
Decrease in other payables and accrued expenses			(4,936	)			(1,792	)
Net cash used in operating activities			(21,684	)			(15,090	)
Cash flows from investing activities:
Capital expenditures			(10,546	)			(5,154	)
Acquisition of business, product lines, and intangible assets			(31,836	)			(1,634	)
Net cash used in investing activities			(42,382	)			(6,788	)
Cash flows from financing activities:
Payments under line of credit agreement			(73,800	)			(71,125	)
Borrowings under line of credit agreement			142,000				90,800
Net payments from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding)			(30	)			1,731
Repurchase of common stock			(2,604	)			—
Payment of cash dividends			(1,741	)			(1,611	)
Net cash provided by financing activities			63,825				19,795
Net decrease in cash and cash equivalents			(241	)			(2,083	)
Effect of exchange rate changes on cash and cash equivalents			(40	)			114
Cash and cash equivalents at beginning of period			6,168				11,337
Cash and cash equivalents at end of period		$	5,887			$	9,368

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA
For the three months and nine months ended September 30, 2019 and 2018
(Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2019				2018				2019				2018
Net income attributable to American Vanguard, as reported		$	3,153			$	6,525			$	10,165			$	16,779
Provision for income taxes			1,474				3,526				4,059				6,966
Interest expense, net			2,070				1,116				5,606				2,961
Depreciation and amortization			5,687				6,034				17,066				17,863
EBITDA2		$	12,384			$	17,201			$	36,896			$	44,569

___________________________

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.

 

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