American Vanguard Reports Second Quarter And Mid-Year 2020 Results - American Vanguard (NYSE:AVD)

American Vanguard Corporation AVD, today announced financial results for the quarter and half-year ended June 30, 2020.

Financial Highlights Fiscal 2020 Second Quarter – versus Fiscal 2019 Second Quarter

Net sales of $105 million in 2020, compared with $113 million in 2019
Net income of $3.9 million in 2020, compared with $3.1 million in 2019
Earnings per diluted share of $0.13 in 2020, compared with $0.11 in 2019
EBITDA¹ of $12.7 million in 2020, compared with $11.9 million in 2019

Financial Highlights Fiscal 2020 Six Months – versus Fiscal 2019 Six Months

Net sales of $201 million in 2020, compared with $213 million in 2019
Net income of $4.4 million in 2020, compared with $7 million in 2019
Earnings per diluted share of $0.15 in 2020, compared with $0.24 in 2019
EBITDA of $20.3 million in 2020, compared with $24.5 million in 2019

Eric Wintemute, Chairman and CEO of American Vanguard commented, "During the quarter we recorded improved profitability on lower sales, in spite of pandemic-related effects on new product launches and reduced demand for crop commodities used by restaurants. In the face of market uncertainty, our team responded by maintaining operations without disruption, generating a profitable sales mix, improving manufacturing efficiency and reducing operating expenses in a disciplined fashion. Consequently, we have been able to generate a quarterly improvement in net income, earnings per share and EBITDA. In addition, we recorded lower working capital, improved net cash from operations by $32 million and thereby reduced debt, as compared to the same period in 2019."

Mr. Wintemute continued, "In light of second quarter profitability and improvement of our balance sheet, I am encouraged by the direction of our financial performance during this unusual time. However, the year got off to a slow start. Thus, our first half results trailed those of the prior year with net sales down approximately 6% and higher operating expenses as a percent of net sales, due largely to a credit taken for deferred purchase price consideration in 2019. Gross margin remained flat at 39%, while factory performance was improved during the first half of 2020 versus that of 2019."

Mr. Wintemute continued, "We are well-positioned to address our markets over the balance of 2020 and remain poised to perform in line with our peers. Factors that could materially affect our performance include our mosquito control business, which should benefit from forecasted hurricane activity expected to impact the South and Southeastern United States this summer, the strength of our soil fumigants, improved supply of Krovar® and Hyvar® herbicides, and growth of our corn and soybean franchises. At the same time, we will continue to pursue our key strategic initiatives for future growth, including the development and launch of new product formulations, further successful collaboration with respect to Proctor & Gamble's Zevo® product line, and the expanded full commercial launch of our SIMPAS® precision application system later this year. We look forward to providing investors with additional information during our earnings conference 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 Thursday, August 6, 2020. 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.

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

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

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES ANALYSIS OF SALES For the three and six months ended June 30, 2020 and 2019 (In thousands) (Unaudited)

	For the three months ended June 30,
	2020		2019		Change			% Change
Net sales:
US crop	$	44,670	$	47,575	$	(2,905	)	-6	%
US non-crop		13,872		16,955		(3,083	)	-18	%
US total		58,542		64,530		(5,988	)	-9	%
International		46,013		48,574		(2,561	)	-5	%
Net sales:	$	104,555	$	113,104	$	(8,549	)	-8	%
Gross profit:
US crop	$	21,758	$	18,719	$	3,039		16	%
US non-crop		7,029		8,558		(1,529	)	-18	%
US total		28,787		27,277		1,510		6	%
International		11,519		14,376		(2,857	)	-20	%
Total gross profit:	$	40,306	$	41,653	$	(1,347	)	-3	%

	For the six months ended June 30,
	2020		2019		Change			% Change
Net sales:
US crop	$	95,032	$	97,845	$	(2,813	)	-3	%
US non-crop		24,865		28,222		(3,357	)	-12	%
US total		119,897		126,067		(6,170	)	-5	%
International		80,620		86,713		(6,093	)	-7	%
Net sales:	$	200,517	$	212,780	$	(12,263	)	-6	%
Gross profit:
US crop	$	46,003	$	42,214	$	3,789		9	%
US non-crop		11,748		14,872		(3,124	)	-21	%
US total		57,751		57,086		665		1	%
International		20,936		26,269		(5,333	)	-20	%
Total gross profit:	$	78,687	$	83,355	$	(4,668	)	-6	%

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
Change in deferred income taxes		(1,562	)		(572	)
Loss from equity method investment		38			60
Net foreign currency adjustment		594			86
Changes in assets and liabilities associated with operations:
Decrease in net receivables		16,421			7,841
Increase in inventories		(21,706	)		(27,635	)
Increase in prepaid expenses and other assets		(2,297	)		(1,844	)
Increase in net operating lease liability		7			73
Decrease (increase) in income tax receivable		899			(4,480	)
Decrease in accounts payable		(12,351	)		(10,224	)
Decrease in deferred revenue		(2,431	)		(19,438	)
Increase in accrued program costs		12,577			11,823
Decrease in other payables and accrued expenses		(3,621	)		(6,719	)
Net cash provided by (used in) operating activities		5,688			(32,086	)
Cash flows from investing activities:
Capital expenditures		(6,386	)		(7,216	)
Acquisition of business, product lines, and intangible assets		(3,889	)		(24,302	)
Investments		(1,190	)		—
Net cash used in investing activities		(11,465	)		(31,518	)
Cash flows from financing activities:
Net borrowings under line of credit agreement		10,502			67,800
Net payments from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding)		(2,123	)		(513	)
Repurchase of common stock		—			(2,604	)
Payment of cash dividends		(1,168	)		(1,160	)
Net cash provided by financing activities		7,211			63,523
Net increase (decrease) in cash and cash equivalents		1,434			(81	)
Effect of exchange rate changes on cash and cash equivalents		585			220
Cash and cash equivalents at beginning of period		6,581			6,168
Cash and cash equivalents at end of period	$	8,600		$	6,307
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	2,902		$	3,339
Income taxes, net	$	1,901		$	7,583

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA For the three and six months June 30, 2020 and 2019 (Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net income attributable to American Vanguard, as reported	$	3,887	$	3,106	$	4,407	$	7,012
Provision for income taxes		1,565		1,224		1,360		2,584
Interest expense, net		1,274		1,925		2,782		3,537
Depreciation and amortization		5,981		5,688		11,769		11,379
EBITDA²	$	12,707	$	11,943	$	20,318	$	24,512

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 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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