American Vanguard Reports Third Quarter and Nine-Month 2022 Results

Rhea-AI Summary

American Vanguard Corporation (NYSE: AVD) reported strong financial results for Q3 and the first nine months of 2022. Net sales increased by 3.4% in Q3 to $152 million, while net income rose 21.8% to $6.7 million. For the nine-month period, net sales reached $450 million (13.1% growth) and net income surged 71.5% to $23.5 million. The company attributed growth to high crop prices and strong international sales, particularly in Brazil and Mexico. However, domestic non-crop business faced challenges due to decreased consumer spending.

Positive

• Net sales increased 3.4% in Q3 2022 to $152 million.
• Net income increased 21.8% to $6.7 million in Q3 2022.
• Earnings per diluted share in Q3 rose 27.8% to $0.23.
• Adjusted EBITDA increased 11.2% to $18.9 million in Q3 2022.
• Year-to-date revenue performance exceeded full-year growth targets.
• Expecting significant year-end debt reduction and full-year adjusted EBITDA of approximately $80 million.

Negative

• Decrease in net sales in domestic non-crop business due to soft consumer spending.

YTD Revenues and Adjusted EBITDA¹ Exceed Guidance

Forecasting Continued Strategic Growth

NEWPORT BEACH, Calif.--(BUSINESS WIRE)-- American Vanguard Corporation (NYSE: AVD), today announced financial results for the third quarter and nine months ended September 30, 2022.

Financial Highlights Fiscal 2022 Third Quarter – versus Fiscal 2021 Third Quarter

• Net sales of $152 million in 2022, a 3.4% increase, compared with $147 million in 2021
• Net income of $6.7 million in 2022, a 21.8% increase, compared with $5.5 million in 2021
• Earnings per diluted share of $0.23 in 2022, a 27.8% increase, compared with $0.18 in 2021
• Adjusted EBITDA of $18.9 million in 2022, a 11.2% increase, compared with $17.0 million in 2021

Financial Highlights Fiscal 2022 Nine Months – versus Fiscal 2021 Nine Months

• Net sales of $450 million in 2022, a 13.1% increase, compared with $398 million in 2021
• Net income of $23.5 million in 2022, a 71.5% increase, compared with $13.7 million in 2021
• Earnings per diluted share of $0.78 in 2022, a 73.3% increase, compared with $0.45 in 2021
• Adjusted EBITDA of $61.4 million in 2022, a 29.8% increase, compared to $47.3 million in 2021

Eric Wintemute, Chairman and CEO of American Vanguard commented, “We achieved strong third quarter results and through the first nine months of 2022 and are on pace to meet or exceed our full year performance targets. High crop commodity prices, a strong farm economy and seasonal pest pressure (particularly in corn and cotton) fueled continued growth of our US Crop business. Similarly, our international business recorded strong sales, led by Brazil (particularly our Counter nematicide), Mexico (due largely to soil fumigant sales) and a range of products for use on bananas and pineapples in Central America. Partially offsetting these gains, we experienced a decrease in net sales of our domestic non-crop business, due largely to softening of consumer spending in the lawn and garden markets.”

Mr. Wintemute continued, “Our year-to-date revenue performance exceeds the full-year 2022 growth target for net sales that we had set last March (13% actual growth v. 8-11% target), as does net income (71% actual growth v. 60-70% target) and adjusted EBITDA (30% actual growth v. 24-28% target). Faced with inflationary cost increases, supply chain challenges and high demand, we were able to implement appropriate price increases while maximizing factory activity. These factors contributed to higher net income as a percent of net sales for both the quarter and the first nine months. Additionally, we expect significant year-end debt reduction and a full-year adjusted EBITDA of approximately $80 million or 13% of expected sales. Finally, through a combination of an Accelerated Share Repurchase Plan and a 10b5-1 purchase plan, we acquired 1.5 million shares of AVD common stock during the first nine months of the year. These repurchases demonstrate our belief in the company’s long-term value and serve to enhance shareholder investment.”

Mr. Wintemute concluded, “We continue to pursue strategic growth initiatives to expand our core business and develop new technologies, with particular emphasis on Green Solutions and Precision Application innovations. As we announced over the past few weeks, we have established an alliance with NewLeaf Symbiotics, which will complement our existing portfolio of patented biological plant nutrients and soil health enrichments. In addition, we secured registration approval for use of our Counter nematicide on soybeans in Brazil, which will improve market penetration with a proprietary product, while advancing the adoption of SIMPAS prescription application technology in the largest Agricultural market in the world. We look forward to providing details on current business trends and these growth initiatives in our upcoming quarterly conference call.”

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 8, 2022. Interested parties may participate in the call by dialing 201-493-6744 – 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 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 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, 2022				December 31, 2021
Current assets:
Cash and cash equivalents		$	20,808			$	16,285
Receivables:
Trade, net of allowance for doubtful accounts of $4,535 and $3,938, respectively			194,515				149,326
Other			10,022				9,595
Total receivables, net			204,537				158,921
Inventories			192,309				154,306
Prepaid expenses			16,967				12,488
Income taxes receivable			2,180				—
Total current assets			436,801				342,000
Property, plant and equipment, net			68,598				66,111
Operating lease right-of-use assets			25,402				25,386
Intangible assets, net			187,207				197,841
Goodwill			46,215				46,260
Other assets			11,936				16,292
Deferred income tax assets, net			16				270
Total assets		$	776,175			$	694,160
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current installments of other liabilities		$	—			$	802
Accounts payable			81,919				67,140
Customer prepayments			222				63,064
Accrued program costs			108,016				63,245
Accrued expenses and other payables			24,390				20,745
Income taxes payable			—				3,006
Current operating lease liabilities			5,329				5,059
Total current liabilities			219,876				223,061
Long-term debt, net			148,414				52,240
Long-term operating lease liabilities			20,536				20,780
Other liabilities, net of current installments			5,457				5,335
Deferred income tax liabilities, net			19,324				20,006
Total liabilities			413,607				321,422
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 34,463,947 shares at September 30, 2022 and 34,248,218 shares at December 31, 2021			3,446				3,426
Additional paid-in capital			101,426				101,450
Accumulated other comprehensive loss			(15,532	)			(13,784	)
Retained earnings			325,698				304,385
Less treasury stock at cost, 4,884,200 shares at September 30, 2022 and 3,361,040 shares at December 31, 2021			(52,470	)			(22,739	)
Total stockholders’ equity			362,568				372,738
Total liabilities and stockholders' equity		$	776,175			$	694,160

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,
		2022				2021				2022				2021
Net sales		$	152,117			$	147,298			$	449,636			$	398,063
Cost of sales			(90,733	)			(90,234	)			(267,280	)			(243,729	)
Gross profit			61,384				57,064				182,356				154,334
Operating expenses			(50,140	)			(48,410	)			(145,550	)			(132,934	)
Adjustment to bargain purchase gain on business acquisition			—				292				—				171
Operating income			11,244				8,946				36,806				21,571
Change in fair value of equity investments			(454	)			(668	)			(857	)			103
Other income			—				—				—				672
Interest expense, net			(1,086	)			(962	)			(2,256	)			(2,921	)
Income before provision for income taxes and loss on equity method investment			9,704				7,316				33,693				19,425
Income tax expense			(2,963	)			(1,517	)			(10,187	)			(5,324	)
Income before loss on equity method investment			6,741				5,799				23,506				14,101
Loss on equity method investment			—				(301	)			—				(388	)
Net income		$	6,741			$	5,498			$	23,506			$	13,713
Earnings per common share—basic		$	.23			$	.18			$	.80			$	.46
Earnings per common share—assuming dilution		$	.23			$	.18			$	.78			$	.45
Weighted average shares outstanding—basic			29,214				29,892				29,496				29,854
Weighted average shares outstanding—assuming dilution			29,805				30,390				30,128				30,470

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES ANALYSIS OF SALES (In thousands) (Unaudited)
		For the three months ended September 30,
		2022				2021				Change				% Change
Net sales:
U.S. crop		$	69,115			$	66,722			$	2,393				4	%
U.S. non-crop			18,936				21,622				(2,686	)			-12	%
U.S. total			88,051				88,344				(293	)			0	%
International			64,066				58,954				5,112				9	%
Net sales:		$	152,117			$	147,298			$	4,819				3	%
Gross profit:
U.S. crop		$	34,502			$	30,237			$	4,265				14	%
U.S. non-crop			8,811				8,882				(71	)			-1	%
U.S. total			43,313				39,119				4,194				11	%
International			18,071				17,945				126				1	%
Total gross profit:		$	61,384			$	57,064			$	4,320				8	%

		For the nine months ended September 30,
		2022				2021				Change				% Change
Net sales:
U.S. crop		$	220,503			$	184,052			$	36,451				20	%
U.S. non-crop			53,648				60,563				(6,915	)			-11	%
U.S. total			274,151				244,615				29,536				12	%
International			175,485				153,448				22,037				14	%
Net sales:		$	449,636			$	398,063			$	51,573				13	%
Gross profit:
U.S. crop		$	104,599			$	78,313			$	26,286				34	%
U.S. non-crop			24,826				28,047				(3,221	)			-11	%
U.S. total			129,425				106,360				23,065				22	%
International			52,931				47,974				4,957				10	%
Total gross profit:		$	182,356			$	154,334			$	28,022				18	%

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
		For the Nine Months Ended September 30,
		2022				2021
Cash flows from operating activities:
Net income		$	23,506			$	13,713
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property, plant and equipment and intangible assets			16,649				17,045
Amortization of other long-term assets			2,656				2,981
Loss on disposal of property, plant and equipment			265				—
Accretion of discounted liabilities			28				(10	)
Amortization of deferred loan fees			174				294
Provision for bad debts			597				1,202
Loan principal and interest forgiveness			—				(672	)
Fair value adjustment to contingent consideration			621				520
Stock-based compensation			4,396				5,309
Change in deferred income taxes			(64	)			(560	)
Change in fair value of equity investments			857				(103	)
Loss on equity method investment			—				388
Adjustment to bargain purchase gain on business acquisition			—				(171	)
Net foreign currency adjustments			218				(330	)
Changes in assets and liabilities associated with operations:
Increase in net receivables			(46,289	)			(42,979	)
Increase in inventories			(38,987	)			(4,325	)
Increase in prepaid expenses and other assets			(4,272	)			(2,194	)
(Increase) decrease in income tax receivable/payable, net			(5,201	)			2,031
Increase in net operating lease liability			10				183
Increase in accounts payable			14,418				7,769
Decrease in customer prepayments			(62,831	)			(38,272	)
Increase in accrued program costs			45,016				33,982
Increase in other payables and accrued expenses			2,555				4,025
Net cash used in operating activities			(45,678	)			(174	)
Cash flows from investing activities:
Capital expenditures			(8,946	)			(7,963	)
Proceeds from disposal of property, plant and equipment			46				—
Acquisition of product line			—				(10,000	)
Intangible assets			(1,078	)			(285	)
Investments			—				(183	)
Net cash used in investing activities			(9,978	)			(18,431	)
Cash flows from financing activities:
Payments under line of credit agreement			(64,000	)			(57,408	)
Borrowings under line of credit agreement			160,000				86,000
Payment of contingent consideration			—				(250	)
Net receipt from the issuance of common stock under ESPP			837				743
Net receipt from the exercise of stock options			783				172
Payment for tax withholding on stock-based compensation awards			(2,020	)			(2,915	)
Repurchase of common stock			(33,731	)			(4,579	)
Payment of cash dividends			(2,072	)			(1,789	)
Net cash provided by financing activities			59,797				19,974
Net increase in cash and cash equivalents			4,141				1,369
Effect of exchange rate changes on cash and cash equivalents			382				(574	)
Cash and cash equivalents at beginning of period			16,285				15,923
Cash and cash equivalents at end of period		$	20,808			$	16,718

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Net income, as reported		$	6,741			$	5,498			$	23,506			$	13,713
Provision for income taxes			2,963				1,517				10,187				5,324
Interest expense, net			1,086				962				2,256				2,921
Depreciation and amortization			6,562				7,285				19,305				20,026
Stock compensation			1,560				1,711				4,396				5,309
Proxy contest activities			—				—				1,785				—
Adjusted EBITDA2		$	18,912			$	16,973			$	61,435			$	47,293

_____________________________
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 measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. 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/20221108006150/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.

www.theequitygroup.com

Lena Cati (212) 836-9611

Lcati@equityny.com

Source: American Vanguard Corporation

FAQ

What were American Vanguard's Q3 2022 revenues?

American Vanguard reported Q3 2022 revenues of $152 million, a 3.4% increase from $147 million in Q3 2021.

What is the earnings per share of AVD for Q3 2022?

Earnings per diluted share for Q3 2022 were $0.23, a 27.8% increase compared to $0.18 in Q3 2021.

How much did net income increase for AVD in Q3 2022?

Net income for Q3 2022 increased by 21.8% to $6.7 million, compared to $5.5 million in Q3 2021.

What are American Vanguard's full-year performance expectations for 2022?

American Vanguard expects to meet or exceed full-year performance targets, with year-to-date growth rates surpassing initial targets.

What challenges did American Vanguard's non-crop business face?

The domestic non-crop business experienced a decrease in net sales due to a softening of consumer spending in the lawn and garden markets.