American Vanguard Reports Third Quarter and Nine-Month 2018 Results - American Vanguard (NYSE:AVD)

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)
ASSETS

	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)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	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)

	Three Months Ended September 30,				Nine Months Ended September 30,
	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)

	For the Nine Months Ended September 30,
	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:
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)

	For the Three Months Ended Sept 30,				For the Nine Months Ended Sept 30,
	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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