Product and Business Acquisitions Drive Continued Corporate Growth
American Vanguard Corporation AVD today announced financial results for the third quarter and nine-month period that ended September 30, 2018.
Financial Highlights: Third Quarter of 2018 – versus Third Quarter of 2017
- Net sales of $112 million in 2018, compared to $90 million in 2017
- Net income of $6.5 million in 2018, compared to $4.1 million in 2017
- EBITDA1 of $17 million in 2018, compared to $12 million in 2017
- Earnings per diluted share of $0.22 in 2018, compared to $0.14 in 2017
Financial Highlights: First Nine-Months of 2018 – versus First Nine-Months of 2017
- Net sales of $323 million in 2018, compared to $239 million in 2017
- Net income of $16.7 million in 2018, compared to $11.8 million in 2017
- EBITDA of $45 million in 2018, compared to $34 million in 2017
- Earnings per diluted share of $0.56 in 2018, compared to $0.40 in 2017
Eric Wintemute, Chairman and CEO of American Vanguard commented, "Our overall financial performance for the third quarter and first nine months of 2018 improved at both the top and bottom lines. Net sales rose 24% in the quarter and 35% year-to-date due to businesses acquired in 2017, including OHP and AgriCenter. Net sales of pre-acquisition product lines were comparatively stable during both periods. In the quarter, we had strong performance from our cotton products and, on a year to date basis, our fumigants. Offsetting these performances, in the quarter, we recorded lower sales of Dibrom® mosquito adulticide - which, in the prior year, had experienced extraordinary demand in the aftermath of Hurricanes Harvey and Irma."
Mr. Wintemute continued, "Manufacturing performance continued its recent strength, contributing positively to our gross margin percentage of 41% in the third quarter and 40% year-to-date. Further, while our operating expenses rose on an absolute basis, they declined as a percentage of net sales, due in part to improved economies of scale across our businesses and in part to a G&A benefit from our quarterly revaluation of deferred purchase price consideration relating to 2017 acquisitions. Throughout the course of 2018, we have continued to integrate businesses acquired in 2017, launch innovative new products, maintain necessary regulatory compliance, and advance the development of our SIMPAS precision application technology. During the third quarter, we recorded a one-time charge related to a change in the original estimate for the transition tax section of the 2017 Tax Cuts and Jobs Act. Overall, our net income increased by 60% for the quarter and 42% for the first nine months and, during the same periods, EBITDA2 increased by 45% and 30%, respectively."
Mr. Wintemute concluded, "During the final quarter of 2018, we expect solid year-over-year sales of our soil fumigants and our Equus fungicide, as well as from our domestic non-crop and our Central America distribution businesses. Further, we anticipate continued demand for our products in fruits and vegetables and pre-season purchasing demand for our corn products leading into the 2019 spring planting season. Taken together we anticipate achieving sales revenues in the range of $450 - $460 million for full year 2018 and gross margins in line with our year to date performance. We will provide additional detail on our financial performance and business prospects during the earnings call."
Conference Call
Eric Wintemute, Chairman & CEO, Bob Trogele EVP & COO and David T. Johnson, VP & CFO, will conduct a conference call focusing on the financial results at 4:30 pm ET / 1:30 pm PT on Monday, November 5, 2018. Interested parties may participate in the call by dialing (201)-493-6744 please dial 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 and markets products for crop protection and management, turf and ornamentals management and public and animal health. 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.
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1 | Earnings before interest, taxes, depreciation and amortization. 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 measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The items excluded from EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company's competitors) may define EBITDA differently. | |
2 | The Company believes that the use of EBITDA is useful to investors in that it is one of the primary bases upon which borrowing capacity is calculated under the Company's senior credit facility, it gives investors a sense of the Company's financial conditions and results of operation without giving effect to the cost of increased acquisition activity in 2017 and it is commonly used by investors and others as a basis for supporting overall business valuations. Nevertheless, investors should not consider EBITDA in isolation or a substitute for analysis of the Company's results as reported in accordance with GAAP. | |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) |
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ASSETS |
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September 30, | December 31, | |||||||
2018 | 2017 | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 9,368 | $ | 11,337 | ||||
Receivables: | ||||||||
Trade, net of allowance for doubtful accounts of $587 and $46, respectively | 125,046 | 102,534 | ||||||
Other | 12,282 | 7,071 | ||||||
Total receivables, net | 137,328 | 109,605 | ||||||
Inventories, net | 162,760 | 123,124 | ||||||
Prepaid expenses | 11,352 | 10,817 | ||||||
Total current assets | 320,808 | 254,883 | ||||||
Property, plant and equipment, net | 48,315 | 49,321 | ||||||
Intangible assets, net of applicable amortization | 174,801 | 180,950 | ||||||
Goodwill | 21,837 | 22,184 | ||||||
Other assets | 24,150 | 28,254 | ||||||
Total assets | $ | 589,911 | $ | 535,592 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Current installments of other liabilities | $ | 481 | $ | 5,395 | ||||
Accounts payable | 59,769 | 53,748 | ||||||
Deferred revenue | 609 | 14,574 | ||||||
Accrued program costs | 61,936 | 39,054 | ||||||
Accrued expenses and other payables | 11,686 | 12,061 | ||||||
Income taxes payable | 3,446 | 1,370 | ||||||
Total current liabilities | 137,927 | 126,202 | ||||||
Long-term debt, net of deferred loan fees | 97,313 | 77,486 | ||||||
Other liabilities, excluding current installments | 8,831 | 10,306 | ||||||
Deferred income tax liabilities | 17,216 | 16,284 | ||||||
Total liabilities | 261,287 | 230,278 | ||||||
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 32,757,098 shares at September 30, 2018 and 32,241,866 shares at December 31, 2017 | 3,276 | 3,225 | ||||||
Additional paid-in capital | 81,573 | 75,658 | ||||||
Accumulated other comprehensive loss | (4,095 | ) | (4,507 | ) | ||||
Retained earnings | 256,005 | 238,953 | ||||||
336,759 | 313,329 | |||||||
Less treasury stock at cost, 2,450,634 shares at September 30, 2018 and December 31, 2017 |
(8,269 | ) | (8,269 | ) | ||||
American Vanguard Corporation stockholders' equity | 328,490 | 305,060 | ||||||
Non-controlling interest | 134 | 254 | ||||||
Total stockholders' equity | 328,624 | 305,314 | ||||||
Total liabilities and stockholders' equity | $ | 589,911 | $ | 535,592 | ||||
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
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For the Three Months |
For the Nine Months |
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2018 | 2017 | 2018 | 2017 | |||||||||||||
Net sales | $ | 111,780 | $ | 89,975 | $ | 322,934 | $ | 238,553 | ||||||||
Cost of sales | 66,480 | 51,943 | 193,286 | 136,102 | ||||||||||||
Gross profit | 45,300 | 38,032 | 129,648 | 102,451 | ||||||||||||
Operating expenses | 33,635 | 31,570 | 102,011 | 84,175 | ||||||||||||
Operating income | 11,665 | 6,462 | 27,637 | 18,276 | ||||||||||||
Interest expense, net | 1,116 | 375 | 2,961 | 1,073 | ||||||||||||
Income before provision for income taxes and loss on equity method investments |
10,549 | 6,087 | 24,676 | 17,203 | ||||||||||||
Income tax expense | 3,526 | 1,954 | 6,966 | 5,015 | ||||||||||||
Income before loss on equity method investments | 7,023 | 4,133 | 17,710 | 12,188 | ||||||||||||
Loss from equity method investments | 533 | 115 | 1,051 | 226 | ||||||||||||
Net income | 6,490 | 4,018 | 16,659 | 11,962 | ||||||||||||
Net (loss) income attributable to non-controlling interest | 35 | 71 | 120 | (117 | ) | |||||||||||
Net income attributable to American Vanguard | $ | 6,525 | $ | 4,089 | $ | 16,779 | $ | 11,845 | ||||||||
Earnings per common share—basic | $ | .22 | $ | .14 | $ | .57 | $ | .41 | ||||||||
Earnings per common share—assuming dilution | $ | .22 | $ | .14 | $ | .56 | $ | .40 | ||||||||
Weighted average shares outstanding—basic | 29,399 | 29,193 | 29,340 | 29,064 | ||||||||||||
Weighted average shares outstanding—assuming dilution | 30,209 | 29,783 | 30,146 | 29,648 | ||||||||||||
ANALYSIS OF SALES For the three and nine months ended September 30, 2018 and 2017 (In thousands) (Unaudited) |
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Three Months Ended |
Nine Months Ended |
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2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales: | |||||||||||||||
Insecticides | $ | 25,475 | $ | 24,866 | $ | 99,433 | $ | 102,249 | |||||||
Herbicides/soil fumigants/fungicides | 34,577 | 32,717 | 98,163 | 68,783 | |||||||||||
Other, including plant growth regulators | 35,302 | 17,191 | 83,519 | 30,680 | |||||||||||
Total crop: | 95,354 | 74,774 | 281,115 | 201,712 | |||||||||||
Non-crop | 16,426 | 15,201 | 41,819 | 36,841 | |||||||||||
Total net sales: | $ | 111,780 | $ | 89,975 | $ | 322,934 | $ | 238,553 | |||||||
Net sales: | |||||||||||||||
US | $ | 71,711 | $ | 65,842 | $ | 205,889 | $ | 173,877 | |||||||
International | 40,069 | 24,133 | 117,045 | 64,676 | |||||||||||
Total net sales: | $ | 111,780 | $ | 89,975 | $ | 322,934 | $ | 238,553 | |||||||
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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For the Nine Months Ended |
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2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 16,659 | $ | 11,962 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization of fixed and intangible assets | 14,233 | 12,358 | ||||||
Amortization of other long term assets | 3,630 | 3,995 | ||||||
Amortization of discounted liabilities | 314 | 20 | ||||||
Stock-based compensation | 4,235 | 3,585 | ||||||
(Decrease) increase in deferred income taxes | (34 | ) | 6 | |||||
Loss from equity method investments | 1,051 | 226 | ||||||
Changes in assets and liabilities associated with operations: | ||||||||
Increase in net receivables | (24,382 | ) | (15,746 | ) | ||||
Increase in inventories | (39,305 | ) | (2,213 | ) | ||||
Increase in prepaid expenses and other assets | (959 | ) | (3,678 | ) | ||||
Increase (decrease) in income tax receivable/payable, net | 2,069 | (12,137 | ) | |||||
Increase in accounts payable | 5,711 | 4,556 | ||||||
Decrease in deferred revenue | (13,965 | ) | (3,848 | ) | ||||
Increase in accrued program costs | 22,882 | 22,720 | ||||||
Decrease in other payables and accrued expenses | (7,229 | ) | (3,562 | ) | ||||
Net cash (used) provided by operating activities | (15,090 | ) | 18,244 | |||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (5,154 | ) | (5,333 | ) | ||||
Investments | — | (950 | ) | |||||
Acquisition of product lines and other intangible assets | (1,634 | ) | (25,904 | ) | ||||
Net cash used in investing activities | (6,788 | ) | (32,187 | ) | ||||
Cash flows from financing activities: | ||||||||
Payments under line of credit agreement | (71,125 | ) | (59,025 | ) | ||||
Borrowings under line of credit agreement | 90,800 | 76,000 | ||||||
Payments on other long-term liabilities | — | (26 | ) | |||||
Net payments from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding) |
1,731 | (820 | ) | |||||
Payment of cash dividends | (1,611 | ) | (1,161 | ) | ||||
Net cash provided by financing activities | 19,795 | 14,968 | ||||||
Net (decrease) increase in cash and cash equivalents | (2,083 | ) | 1,025 | |||||
Effect of exchange rate changes on cash and cash equivalents | 114 | 151 | ||||||
Cash and cash equivalents at beginning of period | 11,337 | 7,869 | ||||||
Cash and cash equivalents at end of period | $ | 9,368 | $ | 9,045 | ||||
UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA For the three and nine months ended September 30, 2018 and September 30, 2017 (Unaudited) |
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For the Three Months |
For the Nine Months |
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2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income attributable to American Vanguard, as reported | $ | 6,525 | $ | 4,089 | $ | 16,779 | $ | 11,845 | |||||||
Provision for income taxes | 3,526 | 1,954 | 6,966 | 5,015 | |||||||||||
Interest expense, net | 1,116 | 375 | 2,961 | 1,073 | |||||||||||
Depreciation and amortization | 6,034 | 5,482 | 17,863 | 16,353 | |||||||||||
EBITDA3 |
$ | 17,201 | $ | 11,900 | $ | 44,569 | $ | 34,286 | |||||||
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3 |
Earnings before interest, taxes, depreciation and amortization. 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. The items excluded from EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company's competitors) may define EBITDA differently. |
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