Second Half Rebound Forecast After
Lower-Than-Expected First Half Performance Citing
Industry-Wide Drop in Procurement Activity Announces Share
Repurchase Program
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
American Vanguard (NYSE:AVD)
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