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American Vanguard Reports Q1 2023 Results

Reaffirms Double-Digit Full-Year 2023 EBITDA Growth Despite Lower-Than-Expected Q1 Performance

American Vanguard Corporation (NYSE: AVD) today announced financial results for the quarter ended March 31, 2023.

Q1 2023 Financial Performance – versus Q1 2022 (see table below):

Eric Wintemute, Chairman and CEO of American Vanguard, stated: “During 2023, we expect to achieve higher adjusted EBITDA (between $84MM - $86MM) than in 2022, despite a first quarter setback arising from delays in restarting our supply chain, which is now back at capacity. After experiencing multiple delays, our China-based supplier was unable to deliver intermediates in sufficient quantities for our leading corn soil insecticide, Aztec®, until early 2023. As a result, we were only able to produce and sell about one-third of seasonal demand for that product. This, coupled with a glut of generic herbicides (not sold by the Company) in the distribution channel, led to lower sales of domestic crop products during the quarter. While our domestic non-crop and international businesses recorded higher sales, the decrease in sales of higher-margin US crop products led to lower overall profitability.”

In thousands except for per share data

 

March 31, 2023

 

 

March 31, 2022

 

Change

 

Net sales

 

$

124,885

 

 

$

149,593

 

$

(24,708

)

Net income

 

$

1,918

 

 

$

9,935

 

$

(8,017

)

EPS

 

$

0.07

 

 

$

0.33

 

$

(0.26

)

Adjusted EBITDA1

 

$

11,511

 

 

$

22,867

 

$

(11,356

)

Mr. Wintemute continued, “Even after taking into account a lower-than-expected first quarter, we still expect full year 2023 will be stronger than 2022. With extremely low inventories of our domestic crop products in the distribution channel, we anticipate higher sales of US crop products in the second half of 2023. Further, we expect to continue the positive trajectories of our non-crop and international businesses. While below our original targets, our revised 2023 targets nevertheless show better year-over-year performance, as you can see from the table below.”

Mr. Wintemute continued, “For the sake of clarity, starting with this fiscal year, we have adopted an accounting change which is more prevalent among public companies in our sector under which outbound freight is classified as an element of cost of goods, as opposed to an operating expense. For us, these costs have typically been in the range of 7-8% of net sales. Thus, under this revised approach, our gross margin percent would decrease by that amount, and operating expenses as a percent of sales would decrease commensurately. This change has no effect upon operating income, adjusted EBITDA, net income or earnings per share.”

2023 Performance Targets

Metric

 

2023 Range

 

2022 Actual

 

% Change

Net sales

 

$640MM - $652MM

 

$610MM

 

5 to 7%

Gross margin %

 

33 to 35%

 

34%

 

Similar

Opex as % of sales

 

25 to 27%

 

25%

 

Similar

Adjusted EBITDA

 

$84MM - $86MM

 

$73MM

 

14 to 18%

Net income

 

$32MM - $34MM

 

$27.5MM

 

17 to 25%

Mr. Wintemute concluded: “We look forward to giving you a more detailed presentation during our upcoming earnings call, including with respect to our 2025 growth targets.”

Conference Call

Eric Wintemute, Chairman & CEO, Bob Trogele, COO, David T. Johnson, CFO, Scott Hendrix, U.S. Crop SVP and Jim Thompson, Leader of the Green Solutions Initiative, will conduct a conference call focusing on the financial results and strategic themes at 5:00 pm ET on May 9, 2023. Interested parties may participate in the call by dialing 713-481-1320. 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, manufactures, and markets solutions for crop protection and nutrition, turf and ornamentals management, commercial and consumer pest control. American Vanguard is included on the Russell 2000® & Russell 3000® Indexes and the Standard & Poors 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.

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

March 31,

2023

 

 

December 31,

2022

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,568

 

 

$

20,328

 

Receivables:

 

 

 

 

 

 

Trade, net of allowance for doubtful accounts of $5,692 and $5,136, respectively

 

 

166,120

 

 

 

156,492

 

Other

 

 

9,999

 

 

 

9,816

 

Total receivables, net

 

 

176,119

 

 

 

166,308

 

Inventories

 

 

219,080

 

 

 

184,190

 

Prepaid expenses

 

 

15,324

 

 

 

15,850

 

Income taxes receivable

 

 

4,879

 

 

 

1,891

 

Total current assets

 

 

434,970

 

 

 

388,567

 

Property, plant and equipment, net

 

 

71,538

 

 

 

70,912

 

Operating lease right-of-use assets

 

 

24,460

 

 

 

24,250

 

Intangible assets, net

 

 

181,909

 

 

 

184,664

 

Goodwill

 

 

47,366

 

 

 

47,010

 

Other assets

 

 

10,610

 

 

 

10,769

 

Deferred income tax assets, net

 

 

220

 

 

 

141

 

Total assets

 

$

771,073

 

 

$

726,313

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

74,887

 

 

$

69,000

 

Customer prepayments

 

 

70,338

 

 

 

110,597

 

Accrued program costs

 

 

71,379

 

 

 

60,743

 

Accrued expenses and other payables

 

 

38,038

 

 

 

20,982

 

Operating lease liabilities, current

 

 

5,367

 

 

 

5,279

 

Total current liabilities

 

 

260,009

 

 

 

266,601

 

Long-term debt, net

 

 

97,000

 

 

 

51,477

 

Operating lease liabilities, long term

 

 

19,614

 

 

 

19,492

 

Other liabilities, net of current installments

 

 

4,648

 

 

 

4,167

 

Deferred income tax liabilities, net

 

 

14,808

 

 

 

14,597

 

Total liabilities

 

 

396,079

 

 

 

356,334

 

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 34,463,829 shares at March 31, 2023 and 34,446,194 shares at December 31, 2022

 

 

3,446

 

 

 

3,444

 

Additional paid-in capital

 

 

107,591

 

 

 

105,634

 

Accumulated other comprehensive loss

 

 

(9,636

)

 

 

(12,182

)

Retained earnings

 

 

329,812

 

 

 

328,745

 

Less treasury stock at cost, 5,057,727 shares at March 31, 2023 and 5,029,892 shares at December 31, 2022

 

 

(56,219

)

 

 

(55,662

)

Total stockholders’ equity

 

 

374,994

 

 

 

369,979

 

Total liabilities and stockholders' equity

 

$

771,073

 

 

$

726,313

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 
 

 

 

For the three months

ended March 31

 

 

 

2023

 

 

2022

 

Net sales

 

$

124,885

 

 

$

149,593

 

Cost of sales

 

 

(86,348

)

 

 

(98,198

)

Gross profit

 

 

38,537

 

 

 

51,395

 

Operating expenses

 

 

(35,272

)

 

 

(36,646

)

Operating income

 

 

3,265

 

 

 

14,749

 

Change in fair value of an equity investment

 

 

(22

)

 

 

83

 

Interest expense, net

 

 

(1,686

)

 

 

(398

)

Income before provision for income taxes

 

 

1,557

 

 

 

14,434

 

Income tax benefit (expense)

 

 

361

 

 

 

(4,499

)

Net income

 

$

1,918

 

 

$

9,935

 

Earnings per common share—basic

 

$

0.07

 

 

$

0.33

 

Earnings per common share—assuming dilution

 

$

0.07

 

 

$

0.33

 

Weighted average shares outstanding—basic

 

 

28,367

 

 

 

29,677

 

Weighted average shares outstanding—assuming dilution

 

 

29,073

 

 

 

30,349

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

ANALYSIS OF SALES

(Unaudited)

 

 

 

For the three Months Ended

March 31

 

 

 

2023

 

 

2022

 

 

Change

 

 

% Change

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. crop

 

$

61,876

 

 

$

88,193

 

 

$

(26,317

)

 

 

-30

%

U.S. non-crop

 

 

13,899

 

 

 

13,396

 

 

 

503

 

 

 

4

%

Total U.S.

 

 

75,775

 

 

 

101,589

 

 

 

(25,814

)

 

 

-25

%

International

 

 

49,110

 

 

 

48,004

 

 

 

1,106

 

 

 

2

%

Total net sales:

 

$

124,885

 

 

$

149,593

 

 

$

(24,708

)

 

 

-17

%

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. crop

 

$

20,622

 

 

$

33,993

 

 

$

(13,371

)

 

 

-39

%

U.S. non-crop

 

 

5,446

 

 

 

5,767

 

 

 

(321

)

 

 

-6

%

Total U.S.

 

 

26,068

 

 

 

39,760

 

 

 

(13,692

)

 

 

-34

%

International

 

 

12,469

 

 

 

11,635

 

 

 

834

 

 

 

7

%

Total gross profit:

 

$

38,537

 

 

$

51,395

 

 

$

(12,858

)

 

 

-25

%

Gross margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. crop

 

 

33

%

 

 

39

%

 

 

 

 

 

 

 

 

U.S. non-crop

 

 

39

%

 

 

43

%

 

 

 

 

 

 

 

 

Total U.S.

 

 

34

%

 

 

39

%

 

 

 

 

 

 

 

 

International

 

 

25

%

 

 

24

%

 

 

 

 

 

 

 

 

Gross margin:

 

 

31

%

 

 

34

%

 

 

 

 

 

 

 

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

For the three months

ended March 31

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

1,918

 

 

$

9,935

 

Adjustments to reconcile net income to net cash used in operating

activities:

 

 

 

 

 

 

Depreciation and amortization of property, plant and equipment and intangible assets

 

 

5,539

 

 

 

5,230

 

Amortization of other long-term assets

 

 

714

 

 

 

1,173

 

Provision for bad debts

 

 

581

 

 

 

494

 

Fair value adjustment of contingent consideration

 

 

 

 

 

599

 

Stock-based compensation

 

 

1,474

 

 

 

1,563

 

Change in deferred income taxes

 

 

122

 

 

 

207

 

Change in liabilities for uncertain tax positions or unrecognized tax benefits

 

 

371

 

 

 

 

Other

 

 

94

 

 

 

2

 

Foreign currency transaction gains

 

 

(446

)

 

 

(261

)

Changes in assets and liabilities associated with operations:

 

 

 

 

 

 

Increase in net receivables

 

 

(8,779

)

 

 

(33,660

)

Increase in inventories

 

 

(33,731

)

 

 

(11,738

)

Decrease (increase) in prepaid expenses and other assets

 

 

600

 

 

 

(800

)

Change in income tax receivable/payable, net

 

 

(2,965

)

 

 

3,046

 

Increase in accounts payable

 

 

5,655

 

 

 

9,677

 

Decrease in customer prepayments

 

 

(22,759

)

 

 

(44,528

)

Increase in accrued program costs

 

 

10,660

 

 

 

24,601

 

(Decrease) increase in other payables and accrued expenses

 

 

(500

)

 

 

2,145

 

Net cash used in operating activities

 

 

(41,452

)

 

 

(32,315

)

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(2,590

)

 

 

(3,294

)

Proceeds from disposal of property, plant and equipment

 

 

 

 

 

54

 

Acquisition of a product line

 

 

(703

)

 

 

 

Intangible assets

 

 

(15

)

 

 

(1,010

)

Net cash used in investing activities

 

 

(3,308

)

 

 

(4,250

)

Cash flows from financing activities:

 

 

 

 

 

 

Payments under line of credit agreement

 

 

(27,300

)

 

 

(12,000

)

Borrowings under line of credit agreement

 

 

72,000

 

 

 

58,000

 

Net receipt from the issuance of common stock under ESPP

 

 

480

 

 

 

436

 

Net receipt from the exercise of stock options

 

 

18

 

 

 

 

Receipt payment for tax withholding on stock-based compensation awards

 

 

(13

)

 

 

(2,174

)

Repurchase of common stock

 

 

(557

)

 

 

(6,219

)

Payment of cash dividends

 

 

(851

)

 

 

(594

)

Net cash provided by financing activities

 

 

43,777

 

 

 

37,449

 

Net (decrease) increase in cash and cash equivalents

 

 

(983

)

 

 

884

 

Effect of exchange rate changes on cash and cash equivalents

 

 

223

 

 

 

672

 

Cash and cash equivalents at beginning of period

 

 

20,328

 

 

 

16,285

 

Cash and cash equivalents at end of period

 

$

19,568

 

 

$

17,841

 

 

 

 

 

 

 

 

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME TO EBITDA

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

Reconciliation of Net Income to EBITDA

 

2023

 

 

2022

 

Net income, as reported

 

$

1,918

 

 

$

9,935

 

Provision for income taxes

 

 

(361

)

 

 

4,499

 

Interest expense, net

 

 

1,686

 

 

 

398

 

Proxy costs

 

 

541

 

 

 

 

Depreciation and amortization

 

 

6,253

 

 

 

6,472

 

Stock compensation

 

 

1,474

 

 

 

1,563

 

Adjusted EBITDA2

 

$

11,511

 

 

$

22,867

 

1 Earnings before interest, taxes, depreciation, amortization and non-cash stock compensation. 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. We provide these measures because we believe that they provide helpful comparisons to other companies in our industry and peer group. The items excluded from Adjusted EBITDA are detailed in the reconciliation attached to this news release, and reflect an elimination of taxes, interest, depreciation, amortization, the effects of equity compensation, and the proxy contest costs. Other companies (including the Company’s competitors) may define EBITDA differently.

2 Earnings before interest, taxes, depreciation, amortization and non-cash stock compensation. 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. We provide these measures because we believe that they provide helpful comparisons to other companies in our industry and peer group. The items excluded from Adjusted EBITDA are detailed in the reconciliation attached to this news release, and reflect an elimination of taxes, interest, depreciation, amortization, the effects of equity compensation, and the proxy contest costs. Other companies (including the Company’s competitors) may define EBITDA differently.

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