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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 September 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—30,287,577 shares as of October 29, 2020.

 

 

 

 


 

AMERICAN VANGUARD CORPORATION

INDEX

 

 

 

 

Page Number

PART I—FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

3

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

 

4

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

5

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

8

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

9

 

 

 

 

Item 2.

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

 

23

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

31

 

 

 

 

Item 4.

Controls and Procedures

 

31

 

 

 

PART II—OTHER INFORMATION

 

32

 

 

 

 

Item 1.

Legal Proceedings

 

32

 

 

 

 

Item 1A.

Risk Factors

 

32

 

 

 

 

Item 2.

Purchase of Equity Securities by the Issuer

 

32

 

 

 

 

 

 

 

 

 

 

 

 

Item 6.

Exhibits

 

33

 

 

 

 

SIGNATURES

 

34

 

 

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 September 30,

 

 

For the Nine-Months

Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

 

$

117,439

 

 

$

124,884

 

 

$

317,956

 

 

$

337,664

 

Cost of sales

 

 

74,174

 

 

 

77,421

 

 

 

196,004

 

 

 

206,846

 

Gross profit

 

 

43,265

 

 

 

47,463

 

 

 

121,952

 

 

 

130,818

 

Operating expenses

 

 

38,782

 

 

 

40,677

 

 

 

108,882

 

 

 

110,839

 

Operating income

 

 

4,483

 

 

 

6,786

 

 

 

13,070

 

 

 

19,979

 

Interest expense, net

 

 

1,022

 

 

 

2,070

 

 

 

3,804

 

 

 

5,606

 

Income before provision for income taxes and loss on equity method

   investment

 

 

3,461

 

 

 

4,716

 

 

 

9,266

 

 

 

14,373

 

Income tax expense

 

 

492

 

 

 

1,474

 

 

 

1,852

 

 

 

4,059

 

Income before loss on equity method investment

 

 

2,969

 

 

 

3,242

 

 

 

7,414

 

 

 

10,314

 

Loss from equity method investment

 

 

42

 

 

 

89

 

 

 

80

 

 

 

149

 

Net income attributable to American Vanguard

 

$

2,927

 

 

$

3,153

 

 

$

7,334

 

 

$

10,165

 

Earnings per common share—basic

 

$

.10

 

 

$

.11

 

 

$

.25

 

 

$

.35

 

Earnings per common share—assuming dilution

 

$

.10

 

 

$

.11

 

 

$

.25

 

 

$

.34

 

Weighted average shares outstanding—basic

 

 

29,501

 

 

 

29,057

 

 

 

29,401

 

 

 

29,013

 

Weighted average shares outstanding—assuming dilution

 

 

29,973

 

 

 

29,650

 

 

 

29,926

 

 

 

29,591

 

 

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 September 30,

 

 

For the Nine-Months

Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

2,927

 

 

$

3,153

 

 

$

7,334

 

 

$

10,165

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(83

)

 

 

(1,080

)

 

 

(8,822

)

 

 

(2,192

)

Comprehensive income (loss)

 

$

2,844

 

 

$

2,073

 

 

$

(1,488

)

 

$

7,973

 

 

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

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,581

 

 

$

6,581

 

Receivables:

 

 

 

 

 

 

 

 

Trade, net of allowance for doubtful accounts of $3,046 and $2,300, respectively

 

 

145,374

 

 

 

136,075

 

Other

 

 

9,064

 

 

 

16,949

 

Total receivables, net

 

 

154,438

 

 

 

153,024

 

Inventories, net

 

 

176,287

 

 

 

163,313

 

Prepaid expenses

 

 

10,738

 

 

 

10,457

 

Income taxes receivable

 

 

1,972

 

 

 

2,824

 

Total current assets

 

 

353,016

 

 

 

336,199

 

Property, plant and equipment, net

 

 

59,801

 

 

 

56,521

 

Operating lease right-of-use assets

 

 

12,128

 

 

 

11,258

 

Intangible assets, net of amortization

 

 

191,133

 

 

 

198,377

 

Goodwill

 

 

40,737

 

 

 

46,557

 

Other assets

 

 

18,926

 

 

 

21,186

 

Total assets

 

$

675,741

 

 

$

670,098

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

 

 

 

 

 

 

 

Current installments of other liabilities

 

$

210

 

 

$

1,513

 

Accounts payable

 

 

61,283

 

 

 

64,881

 

Deferred revenue

 

 

5,689

 

 

 

6,826

 

Accrued program costs

 

 

67,745

 

 

 

47,699

 

Accrued expenses and other payables

 

 

11,266

 

 

 

12,815

 

Operating lease liabilities, current

 

 

4,312

 

 

 

4,904

 

Total current liabilities

 

 

150,505

 

 

 

138,638

 

Long-term debt, net of deferred loan fees

 

 

149,362

 

 

 

148,766

 

Operating lease liabilities, long-term

 

 

7,979

 

 

 

6,503

 

Other liabilities, excluding current installments

 

 

9,087

 

 

 

12,890

 

Deferred income tax liabilities

 

 

14,014

 

 

 

19,145

 

Total liabilities

 

 

330,947

 

 

 

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 33,337,075 shares at September 30, 2020 and 33,233,614 shares

   at December 31, 2019

 

 

3,335

 

 

 

3,324

 

Additional paid-in capital

 

 

93,273

 

 

 

90,572

 

Accumulated other comprehensive loss

 

 

(14,520

)

 

 

(5,698

)

Retained earnings

 

 

280,866

 

 

 

274,118

 

 

 

 

362,954

 

 

 

362,316

 

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

   December 31, 2019

 

 

(18,160

)

 

 

(18,160

)

Total stockholders’ equity

 

 

344,794

 

 

 

344,156

 

Total liabilities and stockholders' equity

 

$

675,741

 

 

$

670,098

 

 

See notes to the Condensed Consolidated Financial Statements.

 

 

5


 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(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

 

Common stock issued under ESPP

 

 

26,892

 

 

 

3

 

 

 

366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

369

 

Foreign currency translation adjustment, net

 

 

 

 

 

 

 

 

 

 

 

(83

)

 

 

 

 

 

 

 

 

 

 

 

(83

)

Stock-based compensation

 

 

 

 

 

 

 

 

1,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,231

 

Stock options exercised; grants, termination

   and vesting of restricted stock units

   (net of shares in lieu of taxes)

 

 

81,105

 

 

 

8

 

 

 

682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

690

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,927

 

 

 

 

 

 

 

 

 

2,927

 

Balance, September 30, 2020

 

 

33,337,075

 

 

$

3,335

 

 

$

93,273

 

 

$

(14,520

)

 

$

280,866

 

 

 

3,061,040

 

 

$

(18,160

)

 

$

344,794

 

 

See notes to the Condensed Consolidated Financial Statements.

 

 

6


 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(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