American Vanguard Reports Q2 2024 Results

Published 4 months ago via Business Wire

Office of the CEO Kickstarts Liquidity and Transformation Initiatives

New Credit Agreement Bolsters Working Capital Needs

American Vanguard Corporation (NYSE: AVD) today announced financial results for the second quarter ended June 30, 2024.

Second Quarter 2024 Financial Highlights – versus Second Quarter 2023:

  • Net sales of $128.2 million v. $132.8 million
  • Adjusted EBITDA1 of $6.2 million v. $10.7 million
  • Earnings per share of $(0.42) v. $(0.04)

First Half of 2024 Financial Highlights – versus First Half of 2023:

  • Net sales of $263.4 million v. $257.7 million
  • Adjusted EBITDA of $21.7 million v. $22.2 million
  • Earnings per diluted share of $(0.36) v. $0.03

“In the face of adverse market conditions, quarterly net sales were slightly below, and first half net sales were slightly above, those of the comparable periods last year. We did record double-digit increases in net sales of our domestic non-crop business and Green Solutions products, driven by strong demand in Central America. However, our profitability was reduced largely due to non-recurring charges, including severance compensation for the former CEO and other one-time costs including various expenses in support of our business transformation activity. That said, the company does not find these results to be acceptable and is focused on changing direction with urgency,” stated Timothy Donnelly, Acting CEO of American Vanguard.

Mr. Donnelly continued, “We have taken immediate steps to enhance liquidity and improve our cost structure. On August 8, 2024, the company entered into an amended credit facility with our senior lenders to relax our EBITDA-based covenant through Q3 of 2025, while significantly upsizing the amount of non-recurring charges that we can exclude from our adjusted EBITDA calculation. These measures will improve our borrowing capacity in light of trailing four-quarter performance. The amended agreement includes an increase in interest rates at the highest leverage ratios and adds a requirement for lender consent in connection with share repurchases, dividends and acquisitions. We thank the lender group for moving quickly and for their continued support.”

Mr. Donnelly continued, “In addition, after a detailed review, we have recently trimmed our workforce by about 4% and set in motion multiple initiatives to maximize cash while managing inventory downward, including selling out select non-strategic inventory positions to generate cash, building to demand and controlling the accounts receivable/accounts payable cycle. Further, we have redoubled our effort to reduce controllable expenses over the second half, including selling expenses, travel and entertainment and use of contractors.”

Mr. Donnelly added, “With respect to recent developments affecting our product, Dacthal, as reported widely by the press earlier in the week, the EPA has issued an emergency suspension of that product which prevents its sale, distribution and use. As you may recall, we had voluntarily suspended sales of Dacthal last April and submitted a mitigated label in an effort to meet the agency’s concerns. In light of our cessation of sales at that time, we removed Dacthal sales from our 2024 forecast assumptions. We are, of course, working in good faith with both EPA and our customers to ensure compliance with the suspension order and will have more to report on this in the near term.”

Mark Basset, board member on special assignment with the Company’s Office of the CEO, stated, “We’ve done a lot of hard work laying the foundation for a successful business transformation that touches every aspect of the company from a new organizational design, to new commercial strategies, to more cost effective operations. Now is the time to begin to implement those plans with sense of urgency and purpose.”

Dr. Basset continued, “Accordingly, in the interest of allocating capital prudently, we are seeking a partner within the precision application space to take over the broader commercialization and funding of SIMPAS. In addition, working with our consultant Kearney, we are pursuing multiple paths toward improving operating leverage, including material procurement, manufacturing efficiency, SKU rationalization, customer and pricing strategies and structural reorganization, which, we believe, will meaningfully improve our cost structure, in an effort to push our adjusted EBITDA margins to 15% on a fully-realized basis in 2026.”

Mr. Donnelly concluded, “In light of the current state of the market and forecasted demand, which we expect to be stable, we are lowering our full year 2024 targets to adjusted EBITDA of $40 - $50 million (compared to our previous estimate of $60 - $70 million) and net sales to be down 2%-to-flat (compared to our previous estimate of sales up 6% to 9%) or $565 million to $580 million. On a related note, we continue to make progress in our effort to hire a CEO. However, during the pendency of the search, the Office of the CEO has a mandate to improve liquidity and change the company for the better and to do so with a sense of urgency. Please join us on our earnings call for more details.”

Conference Call

Timothy Donnelly, Acting CEO, Mark Bassett, Board Member and David T. Johnson, VP & CFO, will conduct a conference call focusing on the financial results and strategic themes at 4:30 pm ET / 1:30 pm PT on Thursday, August 8, 2024. Interested parties may participate in the call by dialing 201-493-6744. Please call in 10 minutes before the scheduled start time 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. Over the past 20 years, through product and business acquisitions, the Company has expanded its operations into 21 countries and now has over 1,000 product registrations in 56 nations worldwide. Its strategy rests on three growth initiatives – i) Core Business (through innovation of conventional products) and ii) Green Solutions (with over 120 biorational products – including fertilizers, microbials, nutritionals and non-conventional products). American Vanguard is included on the Russell 2000® and Russell 3000® Indexes. 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,

2024

 

 

December 31,

2023

 

Current assets:

 

 

 

 

 

 

Cash

 

$

17,949

 

 

$

11,416

 

Receivables:

 

 

 

 

 

 

Trade, net of allowance for credit losses of $7,982 and $7,107, respectively

 

 

192,081

 

 

 

182,613

 

Other

 

 

6,287

 

 

 

8,356

 

Total receivables, net

 

 

198,368

 

 

 

190,969

 

Inventories

 

 

244,935

 

 

 

219,551

 

Prepaid expenses

 

 

9,146

 

 

 

6,261

 

Income taxes receivable

 

 

7,183

 

 

 

3,824

 

Total current assets

 

 

477,581

 

 

 

432,021

 

Property, plant and equipment, net

 

 

74,652

 

 

 

74,560

 

Operating lease right-of-use assets, net

 

 

22,635

 

 

 

22,417

 

Intangible assets, net of amortization

 

 

166,958

 

 

 

172,508

 

Goodwill

 

 

48,878

 

 

 

51,199

 

Deferred income tax assets

 

 

3,367

 

 

 

2,849

 

Other assets

 

 

13,384

 

 

 

11,994

 

Total assets

 

$

807,455

 

 

$

767,548

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

93,912

 

 

$

68,833

 

Customer prepayments

 

 

12,090

 

 

 

65,560

 

Accrued program costs

 

 

86,094

 

 

 

68,076

 

Accrued expenses and other payables

 

 

14,444

 

 

 

16,354

 

Operating lease liabilities, current

 

 

6,612

 

 

 

6,081

 

Income taxes payable

 

 

1,776

 

 

 

5,591

 

Total current liabilities

 

 

214,928

 

 

 

230,495

 

Long-term debt

 

 

211,254

 

 

 

138,900

 

Operating lease liabilities, long term

 

 

16,735

 

 

 

17,113

 

Deferred income tax liabilities

 

 

8,670

 

 

 

7,892

 

Other liabilities

 

 

2,643

 

 

 

3,138

 

Total liabilities

 

 

454,230

 

 

 

397,538

 

Commitments and contingent liabilities

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.10 par value per share; authorized 400,000 shares; none issued

 

 

—

 

 

 

—

 

Common stock, $0.10 par value per share; authorized 40,000,000 shares; issued 34,655,429 shares at June 30, 2024 and 34,676,787 shares at December 31, 2023

 

 

3,465

 

 

 

3,467

 

Additional paid-in capital

 

 

113,165

 

 

 

110,810

 

Accumulated other comprehensive loss

 

 

(13,256

)

 

 

(5,963

)

Retained earnings

 

 

321,052

 

 

 

332,897

 

Less treasury stock at cost, 5,915,182 shares at June 30, 2024 and December 31, 2023

 

 

(71,201

)

 

 

(71,201

)

Total stockholders’ equity

 

 

353,225

 

 

 

370,010

 

Total liabilities and stockholders’ equity

 

$

807,455

 

 

$

767,548

 

 

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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net sales

 

$

128,209

 

 

$

132,790

 

 

$

263,352

 

 

$

257,674

 

Cost of sales

 

 

(90,446

)

 

 

(89,881

)

 

 

(183,171

)

 

 

(176,230

)

Gross profit

 

 

37,763

 

 

 

42,909

 

 

 

80,181

 

 

 

81,444

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

(31,051

)

 

 

(29,742

)

 

 

(60,520

)

 

 

(56,140

)

Research, product development and regulatory

 

 

(8,599

)

 

 

(9,413

)

 

 

(14,305

)

 

 

(18,283

)

Transformation

 

 

(7,345

)

 

 

—

 

 

 

(8,497

)

 

 

—

 

Operating (loss) income

 

 

(9,232

)

 

 

3,754

 

 

 

(3,141

)

 

 

7,021

 

Change in fair value of equity investment

 

 

(125

)

 

 

(55

)

 

 

513

 

 

 

(77

)

Interest expense, net

 

 

(3,917

)

 

 

(3,211

)

 

 

(7,610

)

 

 

(4,898

)

(Loss) income before provision for income taxes

 

 

(13,274

)

 

 

488

 

 

 

(10,238

)

 

 

2,046

 

Income tax benefit (expense)

 

 

1,553

 

 

 

(1,541

)

 

 

69

 

 

 

(1,181

)

Net (loss) income

 

$

(11,721

)

 

$

(1,053

)

 

$

(10,169

)

 

$

865

 

Net (loss) income per common share—basic

 

$

(0.42

)

 

$

(0.04

)

 

$

(0.36

)

 

$

0.03

 

Net (loss) income per common share—assuming dilution

 

$

(0.42

)

 

$

(0.04

)

 

$

(0.36

)

 

$

0.03

 

Weighted average shares outstanding—basic

 

 

28,024

 

 

 

28,428

 

 

 

27,934

 

 

 

28,397

 

Weighted average shares outstanding—assuming dilution

 

 

28,024

 

 

 

28,428

 

 

 

27,934

 

 

 

28,985

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

ANALYSIS OF SALES

(In thousands)

(Unaudited)

 

 

 

For the three months

ended June 30,

 

 

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

 

% Change

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. crop

 

$

52,289

 

 

$

56,212

 

 

$

(3,923

)

 

 

-7

%

U.S. non-crop

 

 

19,011

 

 

 

16,878

 

 

 

2,133

 

 

 

13

%

U.S. total

 

 

71,300

 

 

 

73,090

 

 

 

(1,790

)

 

 

-2

%

International

 

 

56,909

 

 

 

59,700

 

 

 

(2,791

)

 

 

-5

%

Total net sales

 

$

128,209

 

 

$

132,790

 

 

$

(4,581

)

 

 

-3

%

Total cost of sales

 

$

(90,446

)

 

$

(89,881

)

 

$

(565

)

 

 

1

%

Total gross profit

 

$

37,763

 

 

$

42,909

 

 

$

(5,146

)

 

 

-12

%

Gross margin

 

 

29

%

 

 

32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the six months

ended June 30,

 

 

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

Change

 

 

% Change

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. crop

 

$

119,542

 

 

$

118,105

 

 

$

1,437

 

 

 

1

%

U.S. non-crop

 

 

36,787

 

 

 

30,759

 

 

 

6,028

 

 

 

20

%

U.S. total

 

 

156,329

 

 

 

148,864

 

 

 

7,465

 

 

 

5

%

International

 

 

107,023

 

 

 

108,810

 

 

 

(1,787

)

 

 

-2

%

Total net sales

 

$

263,352

 

 

$

257,674

 

 

$

5,678

 

 

 

2

%

Total cost of sales

 

$

(183,171

)

 

$

(176,230

)

 

$

(6,941

)

 

 

4

%

Total gross profit

 

$

80,181

 

 

$

81,444

 

 

$

(1,263

)

 

 

-2

%

Gross margin

 

 

30

%

 

 

32

%

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the Six Months

Ended June 30,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(10,169

)

 

$

865

 

Adjustments to reconcile net (loss) income to net cash used in operating

activities:

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

4,365

 

 

 

4,322

 

Amortization of intangibles assets

 

 

6,539

 

 

 

6,707

 

Amortization of other long-term assets

 

 

194

 

 

 

1,117

 

Provision for bad debts

 

 

883

 

 

 

902

 

Stock-based compensation

 

 

2,752

 

 

 

2,541

 

Change in deferred income taxes

 

 

(276

)

 

 

(1,015

)

Changes in liabilities for uncertain tax positions or unrecognized tax benefits

 

 

71

 

 

 

419

 

Change in equity investment fair value

 

 

(513

)

 

 

77

 

Other

 

 

213

 

 

 

117

 

Foreign currency transaction gains

 

 

(127

)

 

 

(382

)

Changes in assets and liabilities associated with operations:

 

 

 

 

 

 

Decrease (increase) in net receivables

 

 

(11,962

)

 

 

6,092

 

Increase in inventories

 

 

(27,770

)

 

 

(50,900

)

Increase in prepaid expenses and other assets

 

 

(3,730

)

 

 

(1,749

)

Change in income tax receivable/payable, net

 

 

(7,129

)

 

 

(3,510

)

Increase (decrease) in net operating lease liability

 

 

(66

)

 

 

132

 

Increase in accounts payable

 

 

27,197

 

 

 

9,105

 

Decrease in customer prepayments

 

 

(53,468

)

 

 

(83,225

)

Increase in accrued program costs

 

 

18,209

 

 

 

19,607

 

Decrease in other payables and accrued expenses

 

 

(1,665

)

 

 

(7,824

)

Net cash used in operating activities

 

 

(56,452

)

 

 

(96,602

)

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(4,944

)

 

 

(6,498

)

Proceeds from disposal of property, plant and equipment

 

 

75

 

 

 

44

 

Intangible assets

 

 

(1,529

)

 

 

(718

)

Net cash used in investing activities

 

 

(6,398

)

 

 

(7,172

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments under line of credit agreement

 

 

(64,005

)

 

 

(54,050

)

Borrowings under line of credit agreement

 

 

136,359

 

 

 

162,500

 

Net receipt from the issuance of common stock under ESPP

 

 

430

 

 

 

480

 

Net receipt from the exercise of stock options

 

 

—

 

 

 

32

 

Net payment for tax withholding on stock-based compensation awards

 

 

(829

)

 

 

(1,948

)

Repurchase of common stock

 

 

—

 

 

 

(7,226

)

Payment of cash dividends

 

 

(1,670

)

 

 

(1,702

)

Net cash provided by financing activities

 

 

70,285

 

 

 

98,086

 

Net increase (decrease) in cash and cash equivalents

 

 

7,435

 

 

 

(5,688

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(902

)

 

 

(8

)

Cash and cash equivalents at beginning of period

 

 

11,416

 

 

 

20,328

 

Cash and cash equivalents at end of period

 

$

17,949

 

 

$

14,632

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA

(Unaudited)

 

 

 

Three Months

Ended June 30,

 

 

Six Months

Ended June 30,

 

 

2024

 

 

2023

 

 

2024

 

 

2023

Net (loss) income

 

$

(11,721

)

 

$

(1,053

)

 

$

(10,169

)

 

$

865

Income tax (benefit) expense

 

 

(1,553

)

 

 

1,541

 

 

 

(69

)

 

 

1,181

Interest expense, net

 

 

3,917

 

 

 

3,211

 

 

 

7,610

 

 

 

4,898

Depreciation and amortization

 

 

5,463

 

 

 

5,889

 

 

 

11,093

 

 

 

12,146

Stock compensation

 

 

748

 

 

 

1,067

 

 

 

2,752

 

 

 

2,541

Transformation costs & legal reserves

 

 

9,310

 

 

 

—

 

 

 

10,462

 

 

 

—

Proxy contest activities

 

 

—

 

 

 

—

 

 

 

—

 

 

 

541

Adjusted EBITDA2

 

$

6,164

 

 

$

10,655

 

 

$

21,679

 

 

$

22,172

_____________________________ 

1 Adjusted earnings before interest, taxes, depreciation, and amortization. Adjusted 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 adjusted EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define adjusted EBITDA differently.

 

2 Adjusted earnings before interest, taxes, depreciation, and amortization. Adjusted 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 adjusted EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define adjusted EBITDA differently.

 

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