AVD - American Vanguard Reports Second Quarter and Mid-Year 2018 Results

August, 06 2018 04:05 PM American Vanguard Corporation

2017 Product and Business Acquisitions Drive Growth

American Vanguard Corporation (NYSE:AVD), today announced financial results for the second quarter and 6-month period that ended June 30, 2018.

Financial Highlights: 2018 Second Quarter — versus 2017 Second Quarter

Net sales of $107.0 million in 2018, compared with $77.9 million in 2017
Net income of $5.6 million in 2018, compared with $4.3 million in 2017
EBITDA¹ of $14.0 million in 2018, compared to $11.9 million in 2017
Earnings per diluted share of $0.19 in 2018, compared with $0.15 in 2017

Financial Highlights: First 6-Months of 2018 — versus First 6-Months of 2017

Net sales of $211.2 million in 2018, compared to $148.6 million in 2017
Net income of $10.3 million in 2018, compared to $7.8 million in 2017
EBITDA¹ of $27.3 million in 2018, compared to $22.4 million in 2017
Earnings per diluted share of $0.34 in 2018, compared to $0.26 in 2017

Eric Wintemute, Chairman and CEO of American Vanguard commented, “Our overall financial performance for this year’s second quarter and first half improved at both the top and bottom lines. Quarterly net sales rose 37%, and first-half net sales rose 42% due, in both periods, to the addition of new product lines from acquisitions that we completed in 2017. Net sales of pre-existing product lines were mixed during both periods. For example, while we recorded stronger sales from soil fumigants, bromacil (for high value fruits), Folex (for cotton), Impact herbicide (for corn) and Dacthal herbicide (for fruits and vegetables), we saw decreases in net sales of Bidrin (in light of high channel inventory and reduced pest pressure), AztecÂ® corn soil insecticide and Thimet (in light of reduced peanut acres).”

Mr. Wintemute continued, “Our manufacturing performance during the quarter was one of the best in recent history with factory activity fully absorbing manufacturing costs and yielding a net benefit during the period. We achieved a gross margin percentage of 40% in both the second quarter and first half of 2018, due to higher volume sales of lower margin, newly-acquired products. 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 acquisition liabilities. Throughout the course of 2018, we have continued to integrate newly-acquired businesses, launch new products, maintain the regulatory defense of important products, and advance the development of our SIMPAS precision application technology. With modest interest expense and a reduced tax rate, our net income increased by 30% for the quarter and 32% for the first half. Also EBITDA² increased during the quarter and half-year by 17% and 22%, respectively.”

Mr. Wintemute concluded, “During the balance of 2018, we anticipate strong performance from a number of key components of our business, including seasonally higher sales of soil fumigants and our cotton defoliant Folex. Also, our Central American region and non-crop business are both primed to deliver improved sales in next two quarters. Further, we anticipate continued demand for our products in fruit and vegetables, strong sales of our DibromÂ® mosquito adulticide and stable demand for our corn products leading into the 2019 spring planting season. Taken together, these factors should enable us to generate annual net sales within the range of $450 - $470 million for 2018 with little or no change in gross margin. 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, August 6, 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 2000Â® and Russell 3000Â® 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.

______________________________

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.

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









June 30, 2018


Dec. 31, 2017

Current assets:








Cash and cash equivalents

$
7,099


$
11,337

Receivables:








Trade, net of allowance for doubtful accounts of $259 and $46, respectively


94,933



102,534

Other


12,011



7,071

Total receivables, net


106,944



109,605

Inventories


163,180



123,124

Prepaid expenses


11,290



10,817

Total current assets


288,513



254,883

Property, plant and equipment, net


48,399



49,321

Intangible assets, net of applicable amortization


177,512



180,950

Goodwill


21,837



22,184

Other assets


25,753



28,254

Total assets

$
562,014


$
535,592










LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:








Current installments of other liabilities

$
3,534


$
5,395

Accounts payable


64,842



53,748

Deferred revenue


7,320



14,574

Accrued Program costs


54,093



39,054

Accrued expenses and other payables


9,786



12,061

Income taxes payable


1,085



1,370

Total current liabilities


140,660



126,202

Long-term debt, net of deferred loan fees


74,258



77,486

Other liabilities, excluding current installments


9,641



10,306

Deferred income tax liabilities


17,224



16,284

Total liabilities


241,783



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 32,743,504 shares at June 30, 2018 and 32,241,866 shares at December 31, 2017


3,275



3,225

Additional paid-in capital


79,721



75,658

Accumulated other comprehensive loss


(4,733
)


(4,507
)
Retained earnings


250,068



238,953




328,331



313,329

Less treasury stock at cost, 2,450,634 shares at June 30, 2018 and December 31, 2017


(8,269
)


(8,269
)
American Vanguard Corporation stockholders’ equity


320,062



305,060

Non-controlling interest


169



254

Total stockholders’ equity


320,231



305,314

Total liabilities and stockholders' equity

$
562,014


$
535,592


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,



2018


2017


2018


2017

Net sales

$
107,046


$
77,905


$
211,154


$
148,578

Cost of sales


63,749



43,570



126,806



84,159

Gross profit


43,297



34,335



84,348



64,419

Operating expenses


34,718



27,654



68,418



52,605

Operating income


8,579



6,681



15,930



11,814

Interest expense, net


966



400



1,803



698

Income before provision for income taxes and loss on equity method investments


7,613



6,281



14,127



11,116

Income tax expense


1,748



1,681



3,440



3,061

Income before loss on equity method investments


5,865



4,600



10,687



8,055

Loss from equity method investments


301



69



518



111

Net income


5,564



4,531



10,169



7,944

Net loss (income) attributable to non-controlling interest


35



(227
)


85



(188
)
Net income attributable to American Vanguard

$
5,599


$
4,304


$
10,254


$
7,756

Earnings per common share–basic

$
.19


$
.15


$
.35


$
.27

Earnings per common share–assuming dilution

$
.19


$
.15


$
.34


$
.26

Weighted average shares outstanding–basic


29,330



29,050



29,309



28,999

Weighted average shares outstanding–assuming dilution


30,190



29,605



30,113



29,561


ANALYSIS OF SALES
For the three and six months ended June 30, 2018 and 2017
(In thousands)
(Unaudited)








Three Months Ended June 30,


Six Months Ended June 30,


2018


2017


2018


2017
Net sales:















Crop:















Insecticides

$
32,665


$
39,442


$
73,958


$
77,384
Herbicides/soil fumigants/fungicides


31,401



16,045



63,586



36,066
Other, including plant growth regulators


30,377



10,096



48,217



13,488
Total crop:


94,443



65,583



185,761



126,938
Non-crop


12,603



12,322



25,393



21,640
Total net sales:

$
107,046


$
77,905


$
211,154


$
148,578
Net sales:















US

$
64,363


$
55,760


$
134,178


$
108,004
International


42,683



22,145



76,976



40,574
Total net sales:

$
107,046


$
77,905


$
211,154


$
148,578


AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)






For the Six Months Ended June 30,



2018


2017

Cash flows from operating activities:








Net income

$
10,169


$
7,944

Adjustments to reconcile net income to net cash provided by operating activities:








Depreciation and amortization of fixed and intangible assets


9,516



8,094

Amortization of other long term assets


2,313



2,777

Amortization of discounted liabilities


202



13

Stock-based compensation


2,778



2,322

Change in deferred income taxes


(26
)


7

Loss from equity method investments


518



111

Changes in assets and liabilities associated with operations:








Decrease in net receivables


5,478



20,749

Increase in inventories


(40,194
)


(5,506
)
Increase in prepaid expenses and other assets


(707
)


(2,658
)
(Increase) in income tax receivable/payable, net


(271
)


(12,752
)
Increase in accounts payable


11,309



579

Decrease in deferred revenue


(7,254
)


(2,126
)
Increase in accrued Program costs


15,039



18,819

Decrease in other payables and accrued expenses


(5,151
)


(4,256
)
Net cash provided by operating activities


3,719



34,117

Cash flows from investing activities:








Capital expenditures


(3,230
)


(4,155
)
Investment


–



(950
)
Acquisition of other intangible assets and businesses


(1,631
)


(13,400
)
Net cash used in investing activities


(4,861
)


(18,505
)
Cash flows from financing activities:








Payments under line of credit agreement


(62,125
)


(59,025
)
Borrowings under line of credit agreement


58,800



45,000

Payments on other long-term liabilities


–



(26
)
Net receipts from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding)


1,335



(1,214
)
Payment of cash dividends


(1,024
)


(724
)
Net cash used by financing activities


(3,014
)


(15,989
)
Net decrease in cash and cash equivalents


(4,156
)


(377
)
Effect of exchange rate changes on cash and cash equivalents


(82
)


105

Cash and cash equivalents at beginning of period


11,337



7,869

Cash and cash equivalents at end of period

$
7,099


$
7,597


Unaudited Reconciliation of Net Income to EBITDA
For the three and six months ended June 30, 2018 and June 30, 2017
(Unaudited)








For the Three Months Ended June 30,


For the Six Months Ended June 30,


2018


2017


2018


2017
Net income attributable to American Vanguard, as reported

$
5,599


$
4,304


$
10,254


$
7,756
Provision for income taxes


1,748



1,681



3,440



3,061
Interest expense, net


966



400



1,803



698
Depreciation and amortization


5,683



5,509



11,829



10,871
EBITDA³

$
13,996


$
11,894


$
27,326


$
22,386

______________________________

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180806005534/en/

American Vanguard Corporation
William A. Kuser, Director of Investor Relations
(949) 260-1200
williamk@amvac-chemical.com
or
Investor Representative
The Equity Group Inc.
www.theequitygroup.com
Lena Cati (212) 836-9611
Lcati@equityny.com

Company Name:	American Vanguard Corporation
Stock Symbol:	AVD
Market:	NYSE
Website:	american-vanguard.com

Twitter