UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission file number
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(State or other jurisdiction of Incorporation or organization) |
(I.R.S. Employer Identification Number) |
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(Address of principal executive offices) |
(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer |
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Non-Accelerated Filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, $0.10 Par Value—
AMERICAN VANGUARD CORPORATION
INDEX
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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32 |
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2
PART I. FINANCIAL INFORMATION
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Item 1. |
FINANCIAL STATEMENTS |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
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For the three months ended March 31 |
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2022 |
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2021 |
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Net sales |
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$ |
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$ |
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Cost of sales |
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( |
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( |
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Gross profit |
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Operating expenses |
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( |
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( |
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Adjustment to bargain purchase gain on business acquisition |
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— |
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( |
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Operating income |
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Change in fair value of an equity investment |
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Other income |
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— |
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Interest expense, net |
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( |
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( |
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Income before provision for income taxes and loss on equity method investment |
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Income tax expense |
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( |
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( |
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Income before loss from equity method investment |
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Loss from equity method investment |
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— |
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( |
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Net income |
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$ |
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$ |
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Earnings per common share—basic |
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$ |
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$ |
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Earnings per common share—assuming dilution |
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$ |
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$ |
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Weighted average shares outstanding—basic |
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Weighted average shares outstanding—assuming dilution |
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See notes to the condensed consolidated financial statements.
3
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
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For the three months ended March 31 |
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2022 |
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2021 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment, net of tax effects |
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( |
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Comprehensive income |
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$ |
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$ |
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See notes to the condensed consolidated financial statements.
4
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS
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March 31, 2022 |
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December 31, 2021 |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables: |
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Trade, net of allowance for doubtful accounts of $ |
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Other |
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Total receivables, net |
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Inventories |
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Prepaid expenses |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Intangible assets, net of applicable amortization |
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Goodwill |
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Other assets |
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Deferred income tax assets, net |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Current installments of other liabilities |
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$ |
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$ |
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Accounts payable |
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Customer prepayments |
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Accrued program costs |
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Accrued expenses and other payables |
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Income taxes payable |
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Operating lease liabilities, current |
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Total current liabilities |
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Long-term debt, net |
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Operating lease liabilities, long term |
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Other liabilities, net of current installments |
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Deferred income tax liabilities, net |
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Total liabilities |
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Commitments and contingent liabilities |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Retained earnings |
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Less treasury stock at cost, |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See notes to the condensed consolidated financial statements.
5
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For The Three Months Ended March 31, 2022 and March 31, 2021
(In thousands, except share data)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated Other |
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Treasury Stock |
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Shares |
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Amount |
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Paid-in Capital |
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Comprehensive Loss |
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Retained Earnings |
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Shares |
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Amount |
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Total |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Stocks issued under ESPP |
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— |
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— |
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— |
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— |
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Cash dividends on common stock ($ |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Foreign currency translation adjustment, net |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
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( |
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( |
) |
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( |
) |
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— |
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— |
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— |
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— |
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( |
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Shares repurchased |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
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$ |
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Balance, December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
) |
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$ |
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Stocks issued under ESPP |
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— |
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— |
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— |
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— |
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Cash dividends on common stock ($ |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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Foreign currency translation adjustment, net |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
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( |
) |
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( |
) |
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( |
) |
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— |
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— |
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— |
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— |
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( |
) |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
) |
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$ |
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See notes to the condensed consolidated financial statements.
6
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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For the three months ended March 31 |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash used in operating activities: |
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Depreciation and amortization of fixed and intangible assets |
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Amortization of other long-term assets |
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Loss on disposal of property, plant and equipment |
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— |
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Accretion of discounted liabilities and deferred loan fees |
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Provision for bad debts |
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Loan principal and interest forgiveness |
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— |
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( |
) |
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Fair value adjustment of contingent consideration |
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— |
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Stock-based compensation |
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Decrease in deferred income taxes |
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( |
) |
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Change in fair value of an equity investment |
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( |
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( |
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Other |
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— |
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Net foreign currency adjustment |
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( |
) |
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Changes in assets and liabilities associated with operations: |
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Increase in net receivables |
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( |
) |
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( |
) |
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Increase in inventories |
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( |
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( |
) |
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Increase in prepaid expenses and other assets |
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( |
) |
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( |
) |
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Decrease in income tax receivable/payable, net |
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Decrease in net operating lease liability |
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( |
) |
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( |
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Increase in accounts payable |
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Decrease in customer prepayments |
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( |
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( |
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Increase in accrued program costs |
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Increase (decrease) in other payables and accrued expenses |
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( |
) |
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Net cash used in operating activities |
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( |
) |
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( |
) |
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Cash flows from investing activities: |
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Capital expenditures |
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( |
) |
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( |
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Proceeds from disposal of property, plant and equipment |
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— |
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Intangible assets |
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( |
) |
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( |
) |
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Net cash used in investing activities |
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( |
) |
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( |
) |
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Cash flows from financing activities: |
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Net borrowings under line of credit agreement |
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Net receipt from the issuance of common stock under ESPP |
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Net receipt from the exercise of stock options |
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— |
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Payment for tax withholding on stock-based compensation awards |
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( |
) |
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( |
) |
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Repurchase of common stock |
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( |
) |
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— |
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Payment of cash dividends |
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( |
) |
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( |
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Net cash provided by financing activities |
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Net increase (decrease) in cash and cash equivalents |
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( |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
|
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Cash and cash equivalents at end of period |
|
$ |
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$ |
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|
See notes to the condensed consolidated financial statements.
7
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(In thousands, except share data)
(Unaudited)
1. Summary of Significant Accounting Policies — The accompanying unaudited condensed consolidated financial statements of American Vanguard Corporation and Subsidiaries (“AVD” or “the Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of consolidating adjustments, eliminations and normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The financial statements and related notes do not include all information and footnotes required by US GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2021.
The Company is closely monitoring the impact of the novel coronavirus (COVID-19) pandemic on all aspects of its business, including how the pandemic will impact its customers, business partners, and employees. The Company is considered an essential business by most governments in the jurisdictions and territories in which the Company operates and, as a result, did not incur significant disruptions from the COVID-19 pandemic during the three-months ended March 31, 2022 and 2021. During the three-month period ended March 31, 2022, the Company experienced strong demand for its domestic crop and international products, significant favorable movements on foreign exchange rates and, generally more normal business activities including face-to-face meetings with customers and suppliers etc. The Company established a pandemic working group at the start of the COVID-19 pandemic.
Looking forward, the Company is unable to predict the impact that the pandemic may have on its future financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its customers in the near term will depend on future developments, which are highly uncertain and, beyond extrapolating our experience since the start of the pandemic, cannot be predicted with confidence. The Company continues to monitor its business for adverse impacts of the pandemic, including some continuing volatility in foreign exchange markets, supply-chain disruptions in certain markets, and increased costs of employee safety, among others.
2. Leases — The Company has operating leases for warehouses, manufacturing facilities, offices, cars, railcars and certain equipment. The lease term includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not terminate) that the Company is reasonably certain to exercise. The Company has leases with a lease term ranging from
Finance leases are immaterial to the accompanying condensed consolidated financial statements. There were no lease transactions with related parties as of and for the three-month periods presented in the table below.
The operating lease expense for the three months ended March 31, 2022 and 2021 was $
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Three months ended March 31, 2022 |
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Three months ended March 31, 2021 |
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Cash paid for amounts included in the measurement of lease liabilities |
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$ |
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$ |
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ROU assets obtained in exchange for new liabilities |
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$ |
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$ |
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Weighted-average remaining lease term (in years) |
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Weighted-average discount rate |
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% |
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% |
8
Future minimum lease payments under non-cancellable operating leases as of March 31, 2022 were as follows:
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2022 (excluding three months ended March 31, 2022) |
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$ |
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2023 |
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2024 |
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2025 |
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2026 |
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Thereafter |
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Total lease payments |
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$ |
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Less: imputed interest |
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Total |
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$ |
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Amounts recognized in the condensed consolidated balance sheet: |
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Operating lease liabilities, current |
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$ |
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Operating lease liabilities, long term |
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$ |
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3. Revenue Recognition —The Company recognizes revenue from the sale of its products, which include crop and non-crop products. The Company sells its products to customers, which include distributors, retailers, and growers. In addition, the Company recognizes royalty income from licensing agreements. Based on similar economic and operational characteristics, the Company’s business is aggregated into
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Three Months Ended March 31, |
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2022 |
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2021 |
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Net sales: |
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U.S. crop |
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$ |
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$ |
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U.S. non-crop |
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Total U.S. |
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International |
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Total net sales: |
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$ |
149,435 |
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$ |
116,155 |
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Timing of revenue recognition: |
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Goods and services transferred at a point in time |
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$ |
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$ |
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Goods and services transferred over time |
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Total net sales: |
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$ |
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$ |
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Contract assets amounted to $
The Company sometimes receives payments from its customers in advance of goods and services being provided in return for early cash incentive programs. These payments are included in customer prepayments on the condensed consolidated balance sheets. Revenue recognized for the three months ended March 31, 2022, that was included in customer prepayments at the beginning of 2022, was $
9
4. Property, Plant and Equipment —
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March 31, 2022 |
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December 31, 2021 |
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Land |
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$ |
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$ |
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Buildings and improvements |
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Machinery and equipment |
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Office furniture, fixtures and equipment |
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Automotive equipment |
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Construction in progress |
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Total |
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