8-K

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): November 5, 2019

AMERICAN VANGUARD CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-13795	95-2588080
(State or other jurisdiction of incorporation)	Commission File Number	(I.R.S. Employer 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))

☐ 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 November 5, 2019, American Vanguard Corporation issued a press release announcing its financial results for the three and nine month periods ended September 30, 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 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 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1 Press release dated November 5, 2019 of American Vanguard Corporation regarding financial results for the three and nine month periods ended September 30, 2019.

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: November 6, 2019
	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 THIRD QUARTER AND NINE-MONTH 2019 RESULTS

Newport Beach, CA – November 5, 2019 – 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.”

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.

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.

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 (212) 836-9611
williamk@amvac-chemical.com	Lcati@equityny.com

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

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.