American Vanguard Reports Third Quarter and Nine-Month 2020 Results

Rhea-AI Summary

American Vanguard Corporation (NYSE:AVD) reported financial results for Q3 and nine months ending September 30, 2020. Q3 net sales were $117 million, down from $125 million in 2019. Net income decreased to $2.9 million from $3.1 million, while earnings per diluted share dipped to $0.10 from $0.11. For the nine months, net sales totaled $318 million compared to $338 million, with net income falling to $7.3 million from $10.2 million. The CEO emphasized controlled expenses and sequential sales improvement, anticipating better conditions in Q4 due to rising crop prices and increased demand for soil fumigation products.

Positive

• Lower operating expenses and interest costs have contributed to maintaining net income levels.
• Sequential sales improvement noted since the beginning of 2020 despite pandemic challenges.
• Anticipated growth in the Agriculture sector due to rising crop commodity prices.
• Increased demand for soil fumigation products.

Negative

• Decline in net sales for Q3 and nine months compared to the previous year.
• Lower net income for both Q3 and nine months compared to 2019.
• Earnings per diluted share decreased year-over-year.

NEWPORT BEACH, Calif.--(BUSINESS WIRE)--American Vanguard Corporation (NYSE:AVD), today announced financial results for the third quarter and nine months ended September 30, 2020.

Financial Highlights Fiscal 2020 Third Quarter – versus Fiscal 2019 Third Quarter

• Net sales of $117 million in 2020, compared with $125 million in 2019
• Net income of $2.9 million in 2020, compared with $3.1 million in 2019
• Earnings per diluted share of $0.10 in 2020, compared with $0.11 in 2019
• EBITDA¹ of $10.4 million in 2020, compared with $12.4 million in 2019

Financial Highlights Fiscal 2020 Nine Months – versus Fiscal 2019 Nine Months

• Net sales of $318 million in 2020, compared with $338 million in 2019
• Net income of $7.3 million in 2020, compared with $10.2 million in 2019
• Earnings per diluted share of $0.25 in 2020, compared with $0.34 in 2019
• EBITDA of $30.8 million in 2020, compared to $36.9 million in 2019

Eric Wintemute, Chairman and CEO of American Vanguard commented, “Our net income for the third quarter was nearly even with that of the comparable period in 2019, despite a modest decline in our top line due largely to conservative procurement in the distribution channel, lower commodity prices and a strained farm economy. During the quarter we continued to maintain tight control over operating expenses, closely manage working capital and optimize our manufacturing assets. We also benefited from lower interest and tax expenses. While the first nine months of 2020 trended below those of 2019, we have recorded sequential top-line improvement since the start of the year in spite of a global pandemic.”

Mr. Wintemute continued, “Looking forward into the fourth quarter, we are already seeing greater optimism in the Agriculture sector spurred, in part, by rising crop commodity prices for corn, soybeans, and cotton, which bodes well for improved grower profitability. In the Midwest, with less crop rotation and more continuous corn planting, we are also beginning to see a resurgence of soil insect pressure. In addition, demand for our industry-leading soil fumigation products continues to rise. Based upon these trends and current sales activity, barring unforeseen weather or pandemic factors, we are encouraged by our prospects for the fourth quarter and into the 2021 season.”

Mr. Wintemute concluded, “While endeavoring to maximize our financial performance, we continue to pursue strategic initiatives in technology development, portfolio expansion and market access. Please listen in to our upcoming earnings call during which I will be devoting my time to our three-to-five-year outlook with a particular focus on new product development, our growing portfolio of green products and our SIMPAS prescription application technology.”

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 Monday, November 9, 2020. Interested parties may participate in the call by dialing (800) 381 7839 or (212) 231-2900 – 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 Company’s web site at www.american-vanguard.com. To listen to the live webcast, which this quarter will be accompanied by slides, go to the web site at least 15 minutes early to register, download and install any necessary audio software. Additionally, presentation slides will be available for download at http://www.american-vanguard.com. 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
		September 30, 2020				December 31, 2019
Current assets:
Cash and cash equivalents		$	9,581			$	6,581
Receivables:
Trade, net of allowance for doubtful accounts of $3,046 and $2,300, respectively			145,374				136,075
Other			9,064				16,949
Total receivables, net			154,438				153,024
Inventories, net			176,287				163,313
Prepaid expenses			10,738				10,457
Income taxes receivable			1,972				2,824
Total current assets			353,016				336,199
Property, plant and equipment, net			59,801				56,521
Operating lease right-of-use assets			12,128				11,258
Intangible assets, net of amortization			191,133				198,377
Goodwill			40,737				46,557
Other assets			18,926				21,186
Total assets		$	675,741			$	670,098
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current installments of other liabilities		$	210			$	1,513
Accounts payable			61,283				64,881
Deferred revenue			5,689				6,826
Accrued program costs			67,745				47,699
Accrued expenses and other payables			11,266				12,815
Operating lease liabilities, current			4,312				4,904
Total current liabilities			150,505				138,638
Long-term debt, net of deferred loan fees			149,362				148,766
Operating lease liabilities, long-term			7,979				6,503
Other liabilities, excluding current installments			9,087				12,890
Deferred income tax liabilities			14,014				19,145
Total liabilities			330,947				325,942
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 33,337,075 shares at September 30, 2020 and 33,233,614 shares at December 31, 2019			3,335				3,324
Additional paid-in capital			93,273				90,572
Accumulated other comprehensive loss			(14,520	)			(5,698	)
Retained earnings			280,866				274,118
			362,954				362,316
Less treasury stock at cost, 3,061,040 shares at September 30, 2020 and December 31, 2019			(18,160	)			(18,160	)
Total stockholders’ equity			344,794				344,156
Total liabilities and stockholders' equity		$	675,741			$	670,098

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,
		2020				2019				2020				2019
Net sales		$	117,439			$	124,884			$	317,956			$	337,664
Cost of sales			74,174				77,421				196,004				206,846
Gross profit			43,265				47,463				121,952				130,818
Operating expenses			38,782				40,677				108,882				110,839
Operating income			4,483				6,786				13,070				19,979
Interest expense, net			1,022				2,070				3,804				5,606
Income before provision for income taxes and loss on equity method investment			3,461				4,716				9,266				14,373
Income tax expense			492				1,474				1,852				4,059
Income before loss on equity method investment			2,969				3,242				7,414				10,314
Loss from equity method investment			42				89				80				149
Net income attributable to American Vanguard		$	2,927			$	3,153			$	7,334			$	10,165
Earnings per common share—basic		$	.10			$	.11			$	.25			$	.35
Earnings per common share—assuming dilution		$	.10			$	.11			$	.25			$	.34
Weighted average shares outstanding—basic			29,501				29,057				29,401				29,013
Weighted average shares outstanding—assuming dilution			29,973				29,650				29,926				29,591

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
ANALYSIS OF SALES
For the three and nine months ended September 30, 2020 and 2019
(In thousands)
(Unaudited)
		For the three-months ended September 30,
		2020				2019				Change				% Change
Net sales:
US crop		$	48,361			$	55,072			$	(6,711	)			-12	%
US non-crop			18,251				18,995				(744	)			-4	%
US total			66,612				74,067				(7,455	)			-10	%
International			50,827				50,817				10				0	%
Net sales		$	117,439			$	124,884			$	(7,445	)			-6	%
Gross profit:
US crop		$	20,146			$	23,710			$	(3,564	)			-15	%
US non-crop			8,758				9,860				(1,102	)			-11	%
US total			28,904				33,570				(4,666	)			-14	%
International			14,361				13,893				468				3	%
Total gross profit		$	43,265			$	47,463			$	(4,198	)			-9	%

		For the nine-months ended September 30,
		2020				2019				Change				% Change
Net sales:
US crop		$	148,630			$	158,068			$	(9,438	)			-6	%
US non-crop			37,881				42,068				(4,187	)			-10	%
US total			186,511				200,136				(13,625	)			-7	%
International			131,445				137,528				(6,083	)			-4	%
Net sales		$	317,956			$	337,664			$	(19,708	)			-6	%
Gross profit:
US crop		$	68,119			$	69,059			$	(940	)			-1	%
US non-crop			18,535				21,444				(2,909	)			-14	%
US total			86,654				90,503				(3,849	)			-4	%
International			35,298				40,315				(5,017	)			-12	%
Total gross profit		$	121,952			$	130,818			$	(8,866	)			-7	%

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		For the Nine-Months Ended September 30,
		2020				2019
Cash flows from operating activities:
Net income		$	7,334			$	10,165
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization of property, plant and equipment and intangible assets			14,584				13,892
Amortization of other long-term assets and deferred loan fees			3,185				3,174
Amortization of discounted liabilities			9				41
Provision for bad debts			777				728
Revision of deferred consideration			—				(3,539	)
Stock-based compensation			3,776				5,159
Change in deferred income taxes			(1,757	)			(459	)
Change in investment fair value			(281	)			—
Loss from equity method investment			80				149
Net foreign currency adjustment			(711	)			550
Changes in assets and liabilities associated with operations:
Increase in net receivables			(5,089	)			(15,839	)
Increase in inventories			(16,941	)			(19,713	)
Increase in prepaid expenses and other assets			(532	)			(849	)
Decrease (increase) in income tax receivable			873				(4,477	)
Increase in net operating lease liability			14				117
Decrease in accounts payable			(1,759	)			(5,548	)
Decrease in deferred revenue			(1,079	)			(19,800	)
Increase in accrued program costs			20,058				20,163
Decrease in other payables and accrued expenses			(3,344	)			(4,967	)
Net cash provided by (used in) operating activities			19,197				(21,053	)
Cash flows from investing activities:
Capital expenditures			(8,988	)			(10,546	)
Acquisition of business, product lines, and intangible assets			(3,942	)			(31,836	)
Investment			(1,190	)			—
Net cash used in investing activities			(14,120	)			(42,382	)
Cash flows from financing activities:
Net borrowings under line of credit agreement			377				68,200
Net payments from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding)			(1,064	)			(30	)
Repurchase of common stock			—				(2,604	)
Payment of cash dividends			(1,168	)			(1,741	)
Net cash (used in) provided by financing activities			(1,855	)			63,825
Net increase (decrease) in cash and cash equivalents			3,222				390
Effect of exchange rate changes on cash and cash equivalents			(222	)			(671	)
Cash and cash equivalents at beginning of period			6,581				6,168
Cash and cash equivalents at end of period		$	9,581			$	5,887
Supplemental cash flow information:
Cash paid during the period for:
Interest		$	3,960			$	5,524
Income taxes, net		$	2,868			$	8,066

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA
For the three and nine months September 30, 2020 and 2019
(Unaudited)
		Three-Months Ended September 30,								Nine-Months Ended September 30,
		2020				2019				2020				2019
Net income attributable to American Vanguard, as reported		$	2,927			$	3,153			$	7,334			$	10,165
Provision for income taxes			492				1,474				1,852				4,059
Interest expense, net			1,022				2,070				3,804				5,606
Depreciation and amortization			6,000				5,688				17,769				17,066
EBITDA2		$	10,441			$	12,385			$	30,759			$	36,896

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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.

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.