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American Vanguard Reports Third Quarter and YTD 2023 Results

Q3 Sales in line with prior year, Rebound Expected in Q4, Transformation Plan Underway

American Vanguard Corporation (NYSE: AVD) today announced financial results for the third quarter and nine months ended September 30, 2023, and a transformation plan for future growth, operational efficiency and profitability.

Flat Quarterly Sales in Spite of Global Destocking

Chairman and CEO, Eric Wintemute stated: “With respect to our financial performance, in spite of global destocking by customers to limit inventory carrying costs, we recorded sales that were about even with those of the prior year quarter. With channel inventory at historic lows, sales of our premier corn soil insecticide Aztec were strong, as were those of soil fumigants used on high-value crops in the Pacific Northwest. Within our US non-crop business, we are seeing more normalized trends in nursery, ornamental and professional products. Our International businesses are still feeling the effects of low-priced generic products in certain regions (especially Central America), while Mexico and Australia remain strong.”

3 Months Ended

 

September 30, 2023

 

 

September 30, 2022

 

Net sales

 

$

149,516

 

 

$

152,267

 

Net income (loss)

 

$

(325

)

 

$

6,741

 

EPS

 

$

(0.01

)

 

$

0.23

 

Adjusted EBITDA

 

$

11,364

 

 

$

18,912

 

 

 

 

 

 

 

 

 

 

9 Months Ended

 

September 30, 2023

 

 

September 30, 2022

 

Net sales

 

$

407,191

 

 

$

450,063

 

Net income

 

$

540

 

 

$

23,506

 

EPS

 

$

0.02

 

 

$

0.78

 

Adjusted EBITDA

 

$

33,536

 

 

$

61,435

 

Fourth Quarter Expected to Rebound

Mr. Wintemute added, “As we reported in our last earnings call, we anticipate improved sales and profitability in the fourth quarter as compared to the first nine months of this fiscal year. Even now, early in the quarter, we are experiencing strong sales, particularly within our US Crop business. This is the quarter in which many of our customers make commitments in order to qualify for program discounts, including early pay. In light of stronger US crop demand, more normalized US non-crop demand and continued international pressure, we are targeting full year financial performance as per the table below.”

Metric

 

2023 Range

 

2022 Actual

Net sales

 

$580MM - $590MM

 

$610MM

Gross margin %

 

30% - 32%

 

32%

Adjusted EBITDA

 

$55MM - $59MM

 

$73.0MM

Company Announces Three-Part Transformation Plan for Growth and Profitability

Mr. Wintemute continued, “We are committed to returning greater value to investors despite current market conditions. To that end, members of the board and senior management have developed a three-pronged plan to improve operating leverage and align people and processes with enhanced profit. First, we have taken time one-on-one with each functional group to scrutinize operating expenses and identified approximately $15 million in operating profit and interest savings to which we will be holding our managers accountable. These measures include enhanced working capital management, greater factory efficiency, reduced operating expenses, decreases in freight and raw materials expense and lower debt and interest expense.”

“Second, working with our ERP sponsor, QAD, and global business consultant, Kearney, we are implementing a complete digital transformation across all business centers and processes. Through this initiative, we will improve data integrity, enhance accounting efficiency and improve management reporting so that we can make faster, better-informed decisions in the face of volatile markets, supply chains, climate and geopolitical shifts.”

“Third, we are launching an organizational transformation in which we evaluate how we are structured, how we are incentivized to operate and how we can best gain the greatest efficiencies and operating leverage. To that end, the Company has initiated a search (led by our newly-appointed Senior Vice President of Human Resources, Shirin Khosravi) for a Chief Transformation Officer who, working with both our internal team and external consultants, will lead the transformation project, recommend and implement appropriate changes and define key performance indicators to achieve better business results.”

2024 Targets Significant Improvement

Mr. Wintemute continued, “There is a general sense of optimism for 2024 within the Agriculture industry. Commodity prices remain relatively stable, the farm economy is sound, interest rates appear to have peaked, and we have observed strong demand for proprietary products, of which we have many in our portfolio. For that reason, we are targeting 8% - 12% growth in sales and 25% - 35% growth in adjusted EBITDA for full year 2024. We will provide greater clarity on our outlook for 2024 and beyond this January.”

Concluding Thoughts

Mr. Wintemute stated further, “In light of higher interest expense and in order to ensure that we have ample borrowing capacity from our senior credit facility, we reached out to our senior lenders, led by BMO, to negotiate an expansion of our financial covenants. I am pleased to report that our senior lenders were, as usual, very supportive and have agreed to an amendment that gives us a secure runway through September 2024. We thank BMO and our other lenders for their support.”

Mr. Wintemute concluded, “Times like this call for more effort, more innovation and more openness to change. We will continue to draw from our experience to provide high value products to our customers, to exercise strict financial discipline and to invest in our digital platform while transforming our global business into an optimized, agile and efficient enterprise. Please join us for our upcoming earnings call, during which we will give you more detail on our plans, our performance and our outlook.”

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 November 8, 2023. Interested parties may participate in the call by dialing 201-493-6744. 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 21 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 in the Russell 2000® and Russell 3000® Indexes. 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,

2023

 

 

December 31,

2022

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,529

 

 

$

20,328

 

Receivables:

 

 

 

 

 

 

Trade, net of allowance for doubtful accounts of $6,274 and $5,136, respectively

 

 

185,619

 

 

 

156,492

 

Other

 

 

11,919

 

 

 

9,816

 

Total receivables, net

 

 

197,538

 

 

 

166,308

 

Inventories

 

 

247,932

 

 

 

184,190

 

Prepaid expenses

 

 

8,517

 

 

 

15,850

 

Income taxes receivable

 

 

6,071

 

 

 

1,891

 

Total current assets

 

 

471,587

 

 

 

388,567

 

Property, plant and equipment, net

 

 

73,205

 

 

 

70,912

 

Operating lease right-of-use assets, net

 

 

22,907

 

 

 

24,250

 

Intangible assets, net

 

 

174,918

 

 

 

184,664

 

Goodwill

 

 

47,426

 

 

 

47,010

 

Other assets

 

 

12,435

 

 

 

10,769

 

Deferred income tax assets, net

 

 

366

 

 

 

141

 

Total assets

 

$

802,844

 

 

$

726,313

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

71,054

 

 

$

69,000

 

Customer prepayments

 

 

5,998

 

 

 

110,597

 

Accrued program costs

 

 

90,367

 

 

 

60,743

 

Accrued expenses and other payables

 

 

16,555

 

 

 

20,982

 

Current operating lease liabilities

 

 

5,553

 

 

 

5,279

 

Total current liabilities

 

 

189,527

 

 

 

266,601

 

Long-term debt, net

 

 

218,000

 

 

 

51,477

 

Long-term operating lease liabilities

 

 

18,102

 

 

 

19,492

 

Other liabilities, net of current installments

 

 

4,805

 

 

 

4,167

 

Deferred income tax liabilities, net

 

 

13,709

 

 

 

14,597

 

Total liabilities

 

 

444,143

 

 

 

356,334

 

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 34,666,431 shares at September 30, 2023 and 34,446,194 shares at December 31, 2022

 

 

3,467

 

 

 

3,444

 

Additional paid-in capital

 

 

108,937

 

 

 

105,634

 

Accumulated other comprehensive loss

 

 

(9,254

)

 

 

(12,182

)

Retained earnings

 

 

326,752

 

 

 

328,745

 

Less treasury stock at cost, 5,915,182 shares at September 30, 2023 and 5,029,892 shares at December 31, 2022

 

 

(71,201

)

 

 

(55,662

)

Total stockholders’ equity

 

 

358,701

 

 

 

369,979

 

Total liabilities and stockholders' equity

 

$

802,844

 

 

$

726,313

 

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net sales

 

$

149,516

 

 

$

152,267

 

 

$

407,191

 

 

$

450,063

 

Cost of sales

 

 

(106,432

)

 

 

(102,629

)

 

 

(282,662

)

 

 

(299,698

)

Gross profit

 

 

43,084

 

 

 

49,638

 

 

 

124,529

 

 

 

150,365

 

Operating expenses

 

 

(38,893

)

 

 

(38,394

)

 

 

(113,317

)

 

 

(113,559

)

Operating income

 

 

4,191

 

 

 

11,244

 

 

 

11,212

 

 

 

36,806

 

Change in fair value of equity investments

 

 

(247

)

 

 

(454

)

 

 

(324

)

 

 

(857

)

Interest expense, net

 

 

(3,384

)

 

 

(1,086

)

 

 

(8,282

)

 

 

(2,256

)

Income before provision for income taxes

 

 

560

 

 

 

9,704

 

 

 

2,606

 

 

 

33,693

 

Income tax expense

 

 

(885

)

 

 

(2,963

)

 

 

(2,066

)

 

 

(10,187

)

Net income (loss)

 

$

(325

)

 

$

6,741

 

 

$

540

 

 

$

23,506

 

Net income (loss) per common share—basic

 

$

(.01

)

 

$

.23

 

 

$

.02

 

 

$

.80

 

Net income (loss) per common share—assuming dilution

 

$

(.01

)

 

$

.23

 

 

$

.02

 

 

$

.78

 

Weighted average shares outstanding—basic

 

 

27,919

 

 

 

29,214

 

 

 

28,236

 

 

 

29,496

 

Weighted average shares outstanding—assuming dilution

 

 

27,919

 

 

 

29,805

 

 

 

28,656

 

 

 

30,128

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

ANALYSIS OF SALES

(In thousands)

(Unaudited)

 

Quarter Ended September 30, 2023 and 2022:

 

 

 

2023

 

 

2022

 

 

Change

 

 

% Change

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. crop

 

$

67,749

 

 

$

69,101

 

 

$

(1,352

)

 

 

-2

%

U.S. non-crop

 

 

19,250

 

 

 

18,946

 

 

 

304

 

 

 

2

%

Total U.S.

 

 

86,999

 

 

 

88,047

 

 

 

(1,048

)

 

 

-1

%

International

 

 

62,517

 

 

 

64,220

 

 

 

(1,703

)

 

 

-3

%

Total net sales

 

 

149,516

 

 

 

152,267

 

 

 

(2,751

)

 

 

-2

%

Total cost of sales

 

 

(106,432

)

 

 

(102,629

)

 

 

(3,803

)

 

 

4

%

Total gross profit

 

$

43,084

 

 

$

49,638

 

 

$

(6,554

)

 

 

-13

%

Total gross margin

 

 

29

%

 

 

33

%

 

 

 

 

 

 

 

Nine months ended September 30, 2023, and 2022

 

 

 

2023

 

 

2022

 

 

Change

 

 

% Change

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. crop

 

$

185,823

 

 

$

220,303

 

 

$

(34,480

)

 

 

-16

%

U.S. non-crop

 

 

50,041

 

 

 

53,844

 

 

 

(3,803

)

 

 

-7

%

Total U.S.

 

 

235,864

 

 

 

274,147

 

 

 

(38,283

)

 

 

-14

%

International

 

 

171,327

 

 

 

175,916

 

 

 

(4,589

)

 

 

-3

%

Total net sales

 

 

407,191

 

 

 

450,063

 

 

 

(42,872

)

 

 

-10

%

Total cost of sales

 

 

(282,662

)

 

 

(299,698

)

 

 

17,036

 

 

 

-6

%

Total gross profit

 

$

124,529

 

 

$

150,365

 

 

$

(25,836

)

 

 

-17

%

Total gross margin

 

 

31

%

 

 

33

%

 

 

 

 

 

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the Nine Months Ended

September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

540

 

 

$

23,506

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization of property, plant and equipment

 

 

6,396

 

 

 

6,207

 

Amortization of intangibles assets

 

 

10,009

 

 

 

10,442

 

Amortization of other long-term assets

 

 

1,445

 

 

 

2,656

 

Loss on disposal of property, plant and equipment

 

 

7

 

 

 

265

 

Accretion of discounted liabilities

 

 

 

 

 

28

 

Amortization of deferred loan fees

 

 

174

 

 

 

174

 

Provision for bad debts

 

 

952

 

 

 

597

 

Fair value adjustment to contingent consideration

 

 

 

 

 

621

 

Stock-based compensation

 

 

4,257

 

 

 

4,396

 

Change in deferred income taxes

 

 

(977

)

 

 

(64

)

Changes in liabilities for uncertain tax positions or unrecognized tax benefits

 

 

467

 

 

 

 

Change in fair value of equity investments

 

 

324

 

 

 

857

 

Net foreign currency adjustments

 

 

199

 

 

 

218

 

Changes in assets and liabilities associated with operations:

 

 

 

 

 

 

Increase in net receivables

 

 

(29,055

)

 

 

(46,289

)

Increase in inventories

 

 

(58,163

)

 

 

(38,987

)

Increase in prepaid expenses and other assets

 

 

(633

)

 

 

(4,272

)

Increase in income tax receivable/payable, net

 

 

(4,046

)

 

 

(5,201

)

Increase in net operating lease liability

 

 

227

 

 

 

10

 

Increase in accounts payable

 

 

1,240

 

 

 

14,418

 

Decrease in customer prepayments

 

 

(104,590

)

 

 

(62,831

)

Increase in accrued program costs

 

 

29,779

 

 

 

45,016

 

(Decrease) increase in other payables and accrued expenses

 

 

(4,406

)

 

 

2,555

 

Net cash used in operating activities

 

 

(145,854

)

 

 

(45,678

)

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(8,589

)

 

 

(8,946

)

Proceeds from disposal of property, plant and equipment

 

 

200

 

 

 

46

 

Intangible assets

 

 

(759

)

 

 

(1,078

)

Net cash used in investing activities

 

 

(9,148

)

 

 

(9,978

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments under line of credit agreement

 

 

(62,800

)

 

 

(64,000

)

Borrowings under line of credit agreement

 

 

228,500

 

 

 

160,000

 

Net receipt from the issuance of common stock under ESPP

 

 

980

 

 

 

837

 

Net receipt from the exercise of stock options

 

 

46

 

 

 

783

 

Payment for tax withholding on stock-based compensation awards

 

 

(1,957

)

 

 

(2,020

)

Repurchase of common stock

 

 

(15,539

)

 

 

(33,731

)

Payment of cash dividends

 

 

(2,550

)

 

 

(2,072

)

Net cash provided by financing activities

 

 

146,680

 

 

 

59,797

 

Net (decrease) increase in cash and cash equivalents

 

 

(8,322

)

 

 

4,141

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(477

)

 

 

382

 

Cash and cash equivalents at beginning of period

 

 

20,328

 

 

 

16,285

 

Cash and cash equivalents at end of period

 

$

11,529

 

 

$

20,808

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

 

$

(325

)

 

$

6,741

 

 

$

540

 

 

$

23,506

 

Provision for income taxes

 

 

885

 

 

 

2,963

 

 

 

2,066

 

 

 

10,187

 

Interest expense, net

 

 

3,384

 

 

 

1,086

 

 

 

8,282

 

 

 

2,256

 

Depreciation and amortization

 

 

5,704

 

 

 

6,562

 

 

 

17,850

 

 

 

19,305

 

Stock compensation

 

 

1,716

 

 

 

1,560

 

 

 

4,257

 

 

 

4,396

 

Proxy contest activities

 

 

-

 

 

 

-

 

 

 

541

 

 

 

1,785

 

Adjusted EBITDA1

 

$

11,364

 

 

$

18,912

 

 

$

33,536

 

 

$

61,435

 

____________________________

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 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.

 

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