American Vanguard Reports Third Quarter and Nine-Month 2018 Results

American Vanguard Corporation (NYSE: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.

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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 Companys 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 Companys 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 & Poors Small Cap 600 Index. To learn more about American Vanguard, please reference the Companys 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 Companys management and are subject to various risks and uncertainties that may cause results to differ from managements current expectations. Such factors include weather conditions, changes in regulatory policy and other risks as detailed from time-to-time in the Companys SEC reports and filings. All forward-looking statements, if any, in this release represent the Companys judgment as of the date of this release.

_______________

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 Companys 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 Companys senior credit facility, it gives investors a sense of the Companys 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 Companys 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 sharebasic $ .22 $ .14 $ .57 $ .41
Earnings per common shareassuming dilution $ .22 $ .14 $ .56 $ .40
Weighted average shares outstandingbasic   29,399   29,193   29,340   29,064
Weighted average shares outstandingassuming 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
 

_______________

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 Companys competitors) may define EBITDA differently.

Company:
American Vanguard Corporation
William A.
Kuser, Director of Investor Relations
(949) 260-1200
[email protected]
or
Investor
Representative:

The Equity Group Inc.
www.theequitygroup.com
Lena
Cati, (212) 836-9611
[email protected]

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