American Vanguard Reports Second Quarter & Midyear 2023 Results

Rhea-AI Summary

American Vanguard Corporation (NYSE: AVD) announced lower-than-expected financial results for the second quarter and six months ended June 30, 2023. Net sales decreased by $15,413 and $40,123 for the respective periods compared to the previous year. Net income also declined by $7,883 and $15,900, while EPS decreased by $0.27 and $0.52. The company attributes the decline to a drop in procurement activity in the Global Agriculture industry and a flood of low-priced products from China-based suppliers. However, American Vanguard expects a rebound in the second half of 2023 as demand is expected to improve significantly. The company has revised its 2023 performance targets and announced a share repurchase program of up to $7.5 million.

Positive

• American Vanguard expects a significant improvement in demand over the balance of 2023, as growers prepare for the 2024 planting season.
• The company has revised its 2023 performance targets, with a range of $615MM - $625MM for net sales and $70MM - $75MM for adjusted EBITDA.
• American Vanguard's board of directors has authorized a share repurchase program of up to $7.5 million, demonstrating confidence in the company's prospects.

Negative

• Net sales decreased by $15,413 and $40,123 for the second quarter and six months ended June 30, 2023, respectively, compared to the previous year.
• Net income declined by $7,883 and $15,900 for the respective periods, while EPS decreased by $0.27 and $0.52.
• The drop in procurement activity in the Global Agriculture industry and the influx of low-priced products from China-based suppliers adversely affected American Vanguard's second quarter financial performance.

Second Half Rebound Forecast After Lower-Than-Expected First Half Performance

Citing Industry-Wide Drop in Procurement Activity

Announces Share Repurchase Program

NEWPORT BEACH, Calif.--(BUSINESS WIRE)-- 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230808491623/en/

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

Source: American Vanguard Corporation

FAQ

What were American Vanguard's net sales for the second quarter and six months ended June 30, 2023?

American Vanguard's net sales for the second quarter and six months ended June 30, 2023 were $132,790 and $257,674, respectively.

What were American Vanguard's net income and EPS for the second quarter and six months ended June 30, 2023?

American Vanguard's net income for the second quarter and six months ended June 30, 2023 was $(1,053) and $865, respectively. The EPS for the same periods was $(0.04) and $0.03.

What is American Vanguard's revised range for net sales in 2023?

American Vanguard has revised its 2023 performance targets, with a range of $615MM - $625MM for net sales.

What is American Vanguard's share repurchase program?

American Vanguard's board of directors has authorized a share repurchase program under which the company may purchase up to $7.5 million of its common stock on the open market.