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s

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                      

Commission file number 001-13795

 

AMERICAN VANGUARD CORPORATION

 

 

Delaware

95-2588080

(State or other jurisdiction of

Incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

4695 MacArthur Court, Newport Beach, California

92660

(Address of principal executive offices)

(Zip Code)

(949) 260-1200

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $.10 par value

 

AVD

 

New York Stock Exchange

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

Accelerated Filer

Non-Accelerated Filer

 

Smaller reporting company

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $.10 Par Value—30,179,139 shares as of July 29, 2020.

 

 

 

 


 

AMERICAN VANGUARD CORPORATION

INDEX

 

 

 

 

Page Number

PART I—FINANCIAL INFORMATION

 

3

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

3

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months and six months ended June 30, 2020 and 2019

 

3

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months and six months ended June 30, 2020 and 2019

 

4

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019

 

5

 

 

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the three months and six months ended June 30, 2020

 

6

 

 

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity for the three months and six months ended June 30, 2019

 

7

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

 

8

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

29

 

 

 

 

Item 4.

Controls and Procedures

 

29

 

 

 

PART II—OTHER INFORMATION

 

30

 

 

 

 

Item 1.

Legal Proceedings

 

30

 

 

 

 

Item 1A.

Risks Factors

 

30

 

 

 

 

Item 2.

Purchase of Equity Securities by the Issuer

 

30

 

Item 6.

Exhibits

 

31

 

 

 

SIGNATURES

 

32

 

 

2


 

PART I. FINANCIAL INFORMATION

Item 1.

FINANCIAL STATEMENTS

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

 

$

104,555

 

 

$

113,104

 

 

$

200,517

 

 

$

212,780

 

Cost of sales

 

 

64,249

 

 

 

71,451

 

 

 

121,830

 

 

 

129,425

 

Gross profit

 

 

40,306

 

 

 

41,653

 

 

 

78,687

 

 

 

83,355

 

Operating expenses

 

 

33,555

 

 

 

35,362

 

 

 

70,100

 

 

 

70,162

 

Operating income

 

 

6,751

 

 

 

6,291

 

 

 

8,587

 

 

 

13,193

 

Interest expense, net

 

 

1,274

 

 

 

1,925

 

 

 

2,782

 

 

 

3,537

 

Income before provision for income taxes and loss on equity method

   investment

 

 

5,477

 

 

 

4,366

 

 

 

5,805

 

 

 

9,656

 

Income tax expense

 

 

1,565

 

 

 

1,224

 

 

 

1,360

 

 

 

2,584

 

Income before loss on equity method investment

 

 

3,912

 

 

 

3,142

 

 

 

4,445

 

 

 

7,072

 

Loss from equity method investment

 

 

25

 

 

 

36

 

 

 

38

 

 

 

60

 

Net income attributable to American Vanguard

 

$

3,887

 

 

$

3,106

 

 

$

4,407

 

 

$

7,012

 

Earnings per common share—basic

 

$

.13

 

 

$

.11

 

 

$

.15

 

 

$

.24

 

Earnings per common share—assuming dilution

 

$

.13

 

 

$

.11

 

 

$

.15

 

 

$

.24

 

Weighted average shares outstanding—basic

 

 

29,413

 

 

 

29,001

 

 

 

29,350

 

 

 

28,989

 

Weighted average shares outstanding—assuming dilution

 

 

29,854

 

 

 

29,540

 

 

 

29,904

 

 

 

29,560

 

 

See notes to the Condensed Consolidated Financial Statements.

 

3


 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

For the Three Months

Ended June 30,

 

 

For the Six Months

Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

3,887

 

 

$

3,106

 

 

$

4,407

 

 

$

7,012

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

324

 

 

 

657

 

 

 

(8,739

)

 

 

(1,112

)

Comprehensive income (loss)

 

$

4,211

 

 

$

3,763

 

 

$

(4,332

)

 

$

5,900

 

 

See notes to the Condensed Consolidated Financial Statements.

 

 

4


 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

ASSETS

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,600

 

 

$

6,581

 

Receivables:

 

 

 

 

 

 

 

 

Trade, net of allowance for doubtful accounts of $2,658 and $2,300, respectively

 

 

123,406

 

 

 

136,075

 

Other

 

 

9,324

 

 

 

16,949

 

Total receivables, net

 

 

132,730

 

 

 

153,024

 

Inventories, net

 

 

180,993

 

 

 

163,313

 

Prepaid expenses

 

 

12,502

 

 

 

10,457

 

Income taxes receivable

 

 

1,925

 

 

 

2,824

 

Total current assets

 

 

336,750

 

 

 

336,199

 

Property, plant and equipment, net

 

 

59,161

 

 

 

56,521

 

Operating lease right-of-use assets

 

 

10,034

 

 

 

11,258

 

Intangible assets, net of amortization

 

 

194,357

 

 

 

198,377

 

Goodwill

 

 

41,278

 

 

 

46,557

 

Other assets

 

 

19,754

 

 

 

21,186

 

Total assets

 

$

661,334

 

 

$

670,098

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Current installments of other liabilities

 

$

217

 

 

$

1,513

 

Accounts payable

 

 

52,599

 

 

 

64,881

 

Deferred revenue

 

 

4,347

 

 

 

6,826

 

Accrued program costs

 

 

60,264

 

 

 

47,699

 

Accrued expenses and other payables

 

 

9,610

 

 

 

12,815

 

Operating lease liabilities, current

 

 

4,771

 

 

 

4,904

 

Total current liabilities

 

 

131,808

 

 

 

138,638

 

Long-term debt, net of deferred loan fees

 

 

159,407

 

 

 

148,766

 

Operating lease liabilities, long-term

 

 

5,419

 

 

 

6,503

 

Other liabilities, excluding current installments

 

 

10,595

 

 

 

12,890

 

Deferred income tax liabilities

 

 

14,445

 

 

 

19,145

 

Total liabilities

 

 

321,674

 

 

 

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

   33,229,078 shares at June 30, 2020 and 33,233,614 shares at December 31, 2019

 

 

3,324

 

 

 

3,324

 

Additional paid-in capital

 

 

90,994

 

 

 

90,572

 

Accumulated other comprehensive loss

 

 

(14,437

)

 

 

(5,698

)

Retained earnings

 

 

277,939

 

 

 

274,118

 

 

 

 

357,820

 

 

 

362,316

 

Less treasury stock at cost, 3,061,040 shares at June 30, 2020 and

   December 31, 2019

 

 

(18,160

)

 

 

(18,160

)

Total stockholders’ equity

 

 

339,660

 

 

 

344,156

 

Total liabilities and stockholders' equity

 

$

661,334

 

 

$

670,098

 

 

See notes to the Condensed Consolidated Financial Statements.

 

 

5


 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For The Three and Six Months Ended June 30, 2020

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Comprehensive

Loss

 

 

Retained

Earnings

 

 

Shares

 

 

Amount

 

 

Total

 

Balance, December 31, 2019

 

 

33,233,614

 

 

$

3,324

 

 

$

90,572

 

 

$

(5,698

)

 

$

274,118

 

 

 

3,061,040

 

 

$

(18,160

)

 

$

344,156

 

Common stock issued under ESPP

 

 

22,776

 

 

 

2

 

 

 

350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

352

 

Cash dividends on common stock ($0.02 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(586

)

 

 

 

 

 

 

 

 

(586

)

Foreign currency translation adjustment, net

 

 

 

 

 

 

 

 

 

 

 

(9,063

)

 

 

 

 

 

 

 

 

 

 

 

(9,063

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,357

 

Stock options exercised; grants, termination

   and vesting of restricted stock units

   (net of shares in lieu of taxes)

 

 

(67,969

)

 

 

(7

)

 

 

(2,522

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,529

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

520

 

 

 

 

 

 

 

 

 

520

 

Balance, March 31, 2020

 

 

33,188,421

 

 

 

3,319

 

 

 

89,757

 

 

 

(14,761

)

 

 

274,052

 

 

 

3,061,040

 

 

 

(18,160

)

 

 

334,207

 

Foreign currency translation adjustment, net

 

 

 

 

 

 

 

 

 

 

 

324

 

 

 

 

 

 

 

 

 

 

 

 

324

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,188

 

Stock options exercised; grants, termination

   and vesting of restricted stock units

   (net of shares in lieu of taxes)

 

 

40,657

 

 

 

5

 

 

 

49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

54

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,887

 

 

 

 

 

 

 

 

 

3,887

 

Balance, June 30, 2020

 

 

33,229,078

 

 

$

3,324

 

 

$

90,994

 

 

$

(14,437

)

 

$

277,939

 

 

 

3,061,040

 

 

$

(18,160

)

 

 

339,660

 

 

See notes to the Condensed Consolidated Financial Statements.

 

 

6


 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

For The Three and Six Months Ended June 30, 2019

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Treasury Stock

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Comprehensive

Loss

 

 

Retained

Earnings

 

 

Shares

 

 

Amount

 

 

AVD

Total

 

Balance, December 31, 2018

 

 

32,752,827

 

 

$

3,276

 

 

$

83,177

 

 

$

(4,507

)

 

$

262,840

 

 

 

2,902,992

 

 

$

(15,556

)

 

$

329,230

 

Common stock issued under ESPP

 

 

22,441

 

 

 

2

 

 

 

336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

338

 

Cash dividends on common stock ($0.02 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(580

)

 

 

 

 

 

 

 

 

(580

)

Foreign currency translation adjustment, net

 

 

 

 

 

 

 

 

 

 

 

(1,769

)

 

 

 

 

 

 

 

 

 

 

 

(1,769

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,485

 

Stock options exercised; grants, termination

   and vesting of restricted stock units

   (net of shares in lieu of taxes)

 

 

419,295

 

 

 

42

 

 

 

(930

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(888

)

Shares repurchased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

158,048

 

 

 

(2,604

)

 

 

(2,604

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,906

 

 

 

 

 

 

 

 

 

3,906

 

Balance, March 31, 2019

 

 

33,194,563

 

 

 

3,320

 

 

 

84,068

 

 

 

(6,276

)

 

 

266,166

 

 

 

3,061,040

 

 

 

(18,160

)

 

 

329,118

 

Cash dividends on common stock ($0.02 per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(580

)

 

 

 

 

 

 

 

 

(580

)

Foreign currency translation adjustment, net

 

 

 

 

 

 

 

 

 

 

 

657

 

 

 

 

 

 

 

 

 

 

 

 

657

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,510

 

Stock options exercised; grants, termination

   and vesting of restricted stock units

   (net of shares in lieu of taxes)

 

 

9,628

 

 

 

1

 

 

 

36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,106

 

 

 

 

 

 

 

 

 

3,106

 

Balance, June 30, 2019

 

 

33,204,191

 

 

$

3,321

 

 

$

85,614

 

 

$

(5,619

)

 

$

268,692

 

 

 

3,061,040

 

 

$

(18,160

)

 

$

333,848

 

 

 

See notes to the Condensed Consolidated Financial Statements.

 

 

 

 

 

7


 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

4,407

 

 

$

7,012

 

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

 

 

9,665

 

 

 

9,233

 

Amortization of other long-term assets and deferred loan fees

 

 

2,104

 

 

 

2,146

 

Amortization of discounted liabilities

 

 

7

 

 

 

 

Provision for bad debts

 

 

392

 

 

 

445

 

Revision of deferred consideration

 

 

 

 

 

(2,888

)

Stock-based compensation

 

 

2,545

 

 

 

2,995