Form 8-K - Current report

AMERICAN VANGUARD CORPORATION

Date: August 9, 2023

/s/ Timothy J. Donnelly

Timothy J. Donnelly

Chief Administrative Officer, General Counsel & Secretary

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): August 3, 2023

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 August 8, 2023, American Vanguard Corporation (“Registrant”) issued a press release announcing its preliminary, unaudited financial results for the three- and six-month periods ended June 30, 2023. The full text of the press release is linked hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 8.01

Other Events

On August 3, 2023, with respect to that certain Third Amended and Restated Loan Agreement dated as of August 5, 2021 (the “Credit Agreement”), led by BMO Harris, N.A., as successor to Bank of the West, the Lenders (as defined in the Credit Agreement) granted a waiver with respect to an Existing Event of Default (as defined in the Credit Agreement) relating to the Company’s noncompliance with the Minimum Fixed Charge Coverage Ratio (“FCCR”) for the quarter ended June 30, 2023, subject to the terms and conditions of such waiver. The noncompliance arose largely from the expense of the Company’s share repurchase activity over the course of the twelve-month period ended on June 30, 2023.

The information contained in this Item 8.01 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 August 8, 2023, of Registrant regarding financial results for the three- and six-month periods ended June 30, 2023.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

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.

Exhibit 99.1

LOGO

FOR IMMEDIATE RELEASE

AMERICAN VANGUARD REPORTS SECOND QUARTER & MIDYEAR 2023 RESULTS

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

Citing Industry-Wide Drop in Procurement Activity

Announces Share Repurchase Program

Newport Beach, CA – August 8, 2023 – 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.

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.

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.


Company Contact:		Investor Representative
American Vanguard Corporation		The Equity Group Inc.
William A. Kuser, Director of Investor Relations		Lena Cati
(949) 260-1200		(212) 836-9611
williamk@amvac.com		lcati@equityny.com

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

Document and Entity Information	Aug. 03, 2023
Cover [Abstract]
Entity Registrant Name	AMERICAN VANGUARD CORP
Amendment Flag	false
Entity Central Index Key	0000005981
Document Type	8-K
Document Period End Date	Aug. 03, 2023
Entity Incorporation State Country Code	DE
Entity File Number	001-13795
Entity Tax Identification Number	95-2588080
Entity Address, Address Line One	4695 MacArthur Court
Entity Address, City or Town	Newport Beach
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92660
City Area Code	(949)
Local Phone Number	260-1200
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false
Security 12b Title	Common Stock, $.10 par value
Trading Symbol	AVD
Security Exchange Name	NYSE
Entity Emerging Growth Company	false