UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For The Year Ended December 31, 20202021

OR

For The Transition Period From                      To                      

Commission file number 001-13795

AMERICAN VANGUARD CORPORATION

(949) 260-1200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act.    Yes  ☐    No  ☒

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.    Yes  ☒    No  ☐

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).    Yes  ☒    No  ☐

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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

The aggregate market value of the voting stock of the registrant held by non-affiliates is $404.6$523.8 million. This figure is estimated as of June 30, 20202021 at which date the closing price of the registrant’s Common Stock on the New York Stock Exchange was $13.76$17.51 per share. For purposes of this calculation, shares owned by executive officers, directors, and 5% stockholders known to the registrant have been deemed to be owned by affiliates. The number of shares of $.10 par value Common Stock outstanding as of June 30, 2020,2021, was 30,178,057.31,200,611. The number of shares of $.10 par value Common Stock outstanding as of February 24, 2021March 1, 2022 was 30,902,319.30,944,838.

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K

December 31, 20202021

i

AMERICAN VANGUARD CORPORATION

AND SUBSIDIARIES

(Dollars in thousands, except per share data)

PART I

Unless otherwise indicated or the context otherwise requires, the terms “Company,” “we,” “us,” and “our” refer to American Vanguard Corporation and its consolidated subsidiaries (“AVD”).

Forward-looking statements in this report, including without limitation, statements relating to the Company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties. (Refer to Part I, Item 1A, Risk Factors and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, included in this Annual Report.)

All dollar amounts reflected in the consolidated financial statements are expressed in thousands, except per share data.

American Vanguard Corporation (“AVD”) was incorporated under the laws of the State of Delaware in January 1969 and operates as a holding company. Unless the context otherwise requires, references to the “Company” or the “Registrant,” in this Annual Report refer to AVD. The Company conducts its business through its principle operating subsidiaries, including AMVAC Chemical Corporation (“AMVAC”) for its domestic business and AMVAC Netherlands BV (“AMVAC BV”) for its international business.

The subsidiaries in the U.S. include: AMVAC, GemChem, Inc. (“GemChem”), Envance Technologies, LLC (“Envance”), TyraTech Inc. (“TyraTech”) and OHP Inc. (“OHP”).

Internationally, the Company operates its business through the following subsidiaries: AMVAC BV, AMVAC C.V. (“AMVAC CV”), AMVAC Hong Kong Limited (“AMVAC Hong Kong”), AMVAC Mexico Sociedad de Responsabilidad Limitada (“AMVAC M”), AMVAC de Costa Rica Sociedad de Responsabilidad Limitada (“AMVAC CR Srl”), AMVAC Singapore Pte, Ltd (“AMVAC Sgpr”), Huifeng AMVAC Innovation Co. Limited (“Hong Kong JV”), Grupo AgriCenter (including the parent AgriCenter S.A. and its subsidiaries) (“AgriCenter”), AMVAC do Brasil Representácoes Ltda (“AMVAC do Brasil”), Agrovant Comércio de Produtos Agrícolas Ltda.AMVAC do Brazil 3p LTDA (“Agrovant”), Defensive – Indústria, Comérico & Representação Comerial Ltda. (“Defensive”AMVAC 3p”), American Vanguard Australia PTY Ltd (“AVD Australia”), AgNova Technologies PTY Ltd (“AgNova”), and the Agrinos group (“Agrinos”).

Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable segment. Refer to Part II, Item 7 for selective enterprise information.

AMVAC is a California corporation that traces its history from 1945 and is a specialtymanufacturer of chemical, manufacturerbiological and biorational products that develops and markets productssolutions for agricultural, commercial and consumer uses. It manufacturessynthesizes and formulates chemicals and ferments and extracts microbial products for crops, turf and ornamental plants, and human and animal health protection. These chemicals,products, which include insecticides, fungicides, herbicides, soil health, plant nutrition, molluscicides, growth regulators, and soil fumigants, are marketed in liquid, powder, and granular forms. AMVAC primarily synthesizes, formulates, and distributes its own proprietary products or custom manufactures, formulates or distributes for others. In addition, the Company has carved out a leadership position in closed delivery systems, currently offers certain of its products in SmartBox, Lock ‘n Load and EZ Load systems, and is commercializing a precision application technology known as SIMPAS (see “Intellectual Property” below) which permits the delivery of multiple products (from AMVAC and/or other companies) at variable rates in a single pass. AMVAC has historically expanded its business through both the acquisition of established chemistries, the development and commercialization of new formulations or compounds through licensing arrangements, self-funded research and by expandingdevelopment of precision application technology and the expansion of its global distribution network to gain broader market access.

AMVAC BV is a Netherlands Corporation that was established in 2012 and is based in Utrecht, near Amsterdam in the Netherlands. AMVAC BV sells product both directly and through its network of subsidiaries in various international territories.

Below is a description of the Company’s acquisition/licensing activity over the past fourthree years.

On July 1, 2021, the Company completed the purchase of certain assets from Syngenta Crop Protection related to the herbicide trifloxysulfuron (Envoke), including end-use registrations, data compensation claims, trademarks, formulation know-how, and books and records.

2

On October 8, 2020, the Company’s Australian subsidiary, AVD Australia, completed the purchase of all the outstanding shares of AgNova. AgNova, is an Australian company that sources, develops, and distributes specialty crop protection and production solutions for agricultural and horticultural producers and for selected non-crop users. AgNova has an established reputation for cost-effective product development from original concept through evaluation, registration, marketing, and sales, with new technologies flowing from its development pipeline. AgNova is committed to the provision of innovative, value-adding solutions for agriculture and related industries. The acquired assets included product registration, trade names and trademarks, customer lists, workforce, fixed assets, and existing working capital.

2

On October 2, 2020, the Company’s principal operating subsidiary, AMVAC, completed the purchase of all the outstanding shares of the Agrinos Group Companies (Agrinos), except for Agrinos AS. from  Agrinos AS, was taken under administration as a bankruptcy estate by theNorwegian holding company, from a liquidation proceeding of that entity before a Norwegian bankruptcy court in Oslo.Oslo, Norway. In addition to the shares of Agrinos, AMVAC acquired certain intellectual property rights.a bank of microbial and micronutrients, as well as about 150 pending or issued patents. Agrinos is a fully integrated biological input supplier with proprietary technology, internal manufacturing facilities, and global distribution capabilities. Its High Yield Technology® product platform works in conjunction with other nutritional crop inputs to increase crop yield, improve soil health and reduce the environmental footprint of traditional agricultural practices. The acquired assets included product registration, trade names and trademarks, customer lists, workforce, fixed assets, two factories and existing working capital.

On April 1, 2020, the Company’s principal operating subsidiary, AMVAC, acquired 6,250,000 common shares of Clean Seed Capital Group Ltd. (Clean Seed), representing an ownership of approximately 8%. In addition, AMVAC licensed from Clean Seed certain intellectual property rights related to Clean Seed’s SMART planting technologies.

On December 20, 2019, the Company’s principal operating subsidiary, AMVAC, completed the purchase of certain assets related to four herbicide products from E.I. du Pont de Nemours and Company doing-business-as Corteva Agriscience and Dow Agrosciences, LLC., for use in the U.S.. The purchased assets included end-use registrations, registration data, trademarks (specifically, Classic®, First Rate®, Python® and Hornet®), on-hand inventory, commercial sales information, know-how and certain product supply arrangements.

On July 1, 2019, the Company completed the acquisition of three crop protection products for the U.S. market from Raymat Crop Science, Inc. and its affiliate, Esstar Crop Science, Inc. The acquired products are the miticide etoxazole (Stifle), the insect growth regulator Diflubenzuron,diflubenzuron (Cavalier), and a rice herbicide bispyribac sodium (Arroz). The acquired assets included product registrations, trademarks and trade names, customer lists and associated on-hand inventory.   

On January 10, 2019, the Company’s international subsidiary AMVAC do Brazil completed the purchase of Defensivethe shares of Agrovant and Agrovant,Defensive, two distribution companies based in Brazil. DefensiveAgrovant and AgrovantDefensive market and distribute crop protection products and micronutrients with focus on the fruit and vegetable market segments throughout Brazil. The acquired entities are holdingheld assets that consist in part, of product registration,registrations, trade names and trademarks, customer lists, workforce, fixed assets, and existing working capital.

On December 28, 2018, the Company’s international subsidiary Agrovant and Defensive were merged in 2020 and renamed to AMVAC BV completed the purchase of certain assets related to the Quizalofop product family from E.I. du Pont de Nemours and Company. Quizalofop is an herbicide marketed under the name Assure II for use on canola, soybeans and pulse (among other things) in Canada and the U.S.. The acquired assets included product rights, registration data, trademarks, and on-hand inventory. Subsequently, AMVAC BV transferred the acquired assets related to the U.S. market to AMVAC.

On December 14, 2018, AMVAC completed the purchase of certain assets related to the trichlorfon product line from Bayer AG and Bayer CropScience AG (“Bayer”). Trichlorfon is an insecticide marketed under the name Dylox in turf, ornamental and other markets. This transaction included product registrations, trademarks and manufacturing know-how. AMVAC manufactures and supplies formulated end use products to Bayer (for the professional turf market) and to SBM (for the consumer lawn market).

On November 9, 2018, AMVAC completed the purchase of all of the outstanding shares of TyraTech, Inc. and, in the process, delisted TyraTech from the AIM market of the London Stock Exchange. TyraTech develops non-toxic insecticides and green solutions for pest control. Their patented technology platform leverages synergistic essential oil combinations to target invertebrate pest receptors that are not active in humans and other mammals.

On June 20, 2018, AMVAC completed the purchase of certain intangible assets related to the bromacil product family including end use registrations in the U.S.. The assets were purchased from Bayer AG. Bromacil is a broad-spectrum residual herbicide used for non-agricultural industrial vegetation control and on many crops such as pineapples, citrus, agave and asparagus. Marketed under the Hyvar^® and Krovar^® brands, bromacil herbicides are valued and long-established weed control tools. Amvac already owned these registrations for markets outside the U.S. and Canada through a prior purchase.3p.

Seasonality

The agricultural chemical industry, in general, is cyclical in nature. The demand for AVD’s products tends to be seasonal. Seasonal usage, however, does not necessarily follow calendar dates, but more closely follows growing patterns, weather conditions, geography, weather related pressure from pests and customer marketing programs. Further, growing seasons vary by geographical region; thus, there is no single seasonal cycle affecting our sales. Rather, multiple seasons transpire over the course of the calendar year.

3

Backlog

AVD primarily sells its products based on the basis of purchase orders. The purchase orders are typically fulfilled within a short time frame. As a result, backlog is not considered a significant factor of, or a valid metric for, AVD’s business. The 2021 year, however, did end with a significantly larger than normal backlog of orders that is expected to result in a strong start to the 2022 financial year as demand for the Company’s products remains high.

Customers

The Company’s largest three customers accounted for 17%, 12%14% and 10%8% of the Company’s sales in 2021; 17%, 12% and 10% in 2020; and 18%, 14% and 7% in 2019; and 12%, 9% and 8% in 2018.2019.

3

Distribution

In the U.S. AMVAC predominantly distributes its products through national distribution companies and buying groups or co-operatives, which purchase AMVAC’s goods on a purchase order basis and, in turn, sell them to retailers/growers/end-users.

Internationally, AMVAC BV has sales offices or wholly owned distributors in Mexico, Central America, Brazil, Australia, and India, and sales force executives or sales agents in a number ofseveral other territories. The Company’s domestic and international distributors, agents and customers typically have long-established relationships with retailers/end-users, far-reaching logistics, transportation capabilities and/or customer service expertise. The markets for AVDAVD’s products vary by region, target crop, use and type of distribution channel. AVD’s customers are experts at addressing these various markets.

Competition

In its many marketplaces, AVD faces competition from both domestic and foreign manufacturers. Many of our competitors are larger and have substantially greater financial and technical resources than AVD. AVD’s capacity to compete depends on its ability to develop additional applications (including delivery systems and precision application technologies) for its current products and/or expand its product lines and customer base. AVD competes principally based on the basis of quality, product efficacy, price, technical service and customer support. In some cases, AVD has positioned itself in smaller niche markets, which are no longer addressed by larger companies. In other cases, for example in the Midwest corn and soybean markets, the Company competes directly withagainst larger competitors.

Manufacturing

Through its six manufacturing facilities (see Item 2, Properties), AVD synthesizes many of the technical grade active ingredients that are in its end-use products. Further, the Company formulates and packages its end useend-use products at four of its own facilities or at the facilities of third-party formulators in the U.S. and at various international locations. Furthermore, we noted earlier that, in October 2020,In addition, the Company completed the purchase of Agrinos. That biological business owns two manufacturingbiological fermentation sites, one site in the U.S., and the secondone in Mexico, and, in addition, has a product manufacturedmanufacturing arrangement at a third-party facility in India.

Raw Materials

AVD utilizes numerous companies to supply the various raw materials and components used in manufacturing its products. Many of these materials are readily available from domestic sources. In those instances where there is a single source of supply or where the source is not domestic, AVD seeks to secure its supply by either long-term (multi-year) arrangements or purchasing on long lead times from its suppliers. Further, where the availability or cost of certain raw materials may be subject to the effect of tariffs and/or supply chain disruption, the Company may order goods at times or in volumes out of the ordinary course in order to optimize pricing and to ensure supply.

Intellectual Property

AVD’s proprietary product formulations are protected, to the extent possible, as trade secrets and, to a lesser extent, by patents. Certain of the Company’s closed delivery systems are patented, and the Company has both pending and issued patents relating to its equipment portfolio, particularly with respect to its SIMPAS and UltimusULTIMUS technology. In addition, the Company owns multiple issued patents relating to both its low-impact Envance solutions as well as its Agrinos biological and microbial solutions. Further, AVD’s trademarks bring value to its products in both domestic and foreign markets. AVD considers that, in the aggregate, its product registrations, trademarks, licenses, customer lists and patents constitute valuable assets. While it does not regard its current business as being materially dependent upon any single product registration, trademark, license, or patent, it believes that patents will play an increasingly important role in its developmental equipment technology in future years, including with respect to its Envance essential oils technology.and green solution technologies.

4

EPA Registrations

In the U.S., AVD’s products also receive protection afforded by the terms of the Federal Insecticide, Fungicide and Rodenticide Act (“FIFRA”), pursuant to which it is unlawful to sell any pesticide in the U.S., unless such pesticide has first been registered by the U.S. Environmental Protection Agency (“USEPA”). Most of the Company’s products that are sold in the U.S. are subject to USEPA registration and periodic re-registration requirements and are registered in accordance with FIFRA. This registration by USEPA is based, among other things, on data demonstrating that the product will not cause unreasonable adverse effects on human health or the environment, when used according to approved label directions. In addition, each state requires a specific registration before any of AVD’s products can be marketed or used in that state. State registrations are predominantly renewed annually with a smaller number of registrations that are renewed on a multiple year basis. Foreign jurisdictions typically have similar registration requirements by statute.

4

In addition, certain of the Company’s biological products are labeled organic under the Organic Materials Review Institute (“OMRI”), Washington State Department of Agriculture (“WSDA”) and/or California Department of Food and Agriculture (“CDFA”) and, as such, are subject to the requirements of those certification standards, including with respect to raw materials and processes. As is the case with synthetic products, these biological products are also subject to specific labeling requirements that may vary from state to state.

The USEPA, state, and foreign agencies have required, and may require in the future, that certain scientific data requirements be performed on registered products sold by AVD. AVD, on its own behalf and in joint efforts with other registrants, has furnished, and is currently furnishing, required data relative to specific products. Under FIFRA, the federal government requires registrants to submit a wide range of scientific data to support U.S. registrations.registrations, including in the case of adding labeled uses. This requirement results in operating expenses in such areas as regulatory compliance, with USEPA and other such bodies in the markets in which the Company sells its products. In addition, at times, the Company is required to generate new formulations of existing products and/or to produce new products in order to remain compliant. The Company expensed $16,568, $15,613 and $13,989, during 2021, 2020 and $16,047, during 2020, 2019, and 2018, respectively, on these activities.

Environmental

Commerce Site

During 2020, AMVAC continued activities to address environmental issues associated with its facility in Commerce, CA. (the “Facility”). An outline of the history of those activities follows.

In 1995, the California Department of Toxic Substances Control (“DTSC”) conducted a Resource Conservation and Recovery Act (“RCRA”) Facility Assessment (“RFA”) of those facilities having hazardous waste storage permits. In March 1997, the RFA culminated in DTSC accepting the Facility into its Expedited Remedial Action Program. Under this program, the Facility was required to conduct an environmental investigation and health risk assessment. This activity then took two paths: first, the RCRA permit closure and second, the larger site characterization.

With respect to the RCRA permit closure, in 1998, AMVAC began the formal process to close its hazardous waste permit at the Facility (which had allowed AMVAC to store hazardous waste longer than 90 days) as required by federal regulations. Formal regulatory closure actions began in 2005 and were completed in 2008, as evidenced by DTSC’s October 1, 2008 acknowledgement of AMVAC’s Closure Certification Report.

With respect to the larger site characterization, soil and groundwater characterization activities began in December 2002 in accordance with the Site Investigation Plan that was approved by DTSC. Additional activities were conducted from 2003 to 2014, with oversight provided by DTSC. In 2014, the Company submitted a remedial action plan (“RAP”) to DTSC, under the provisions of which, the Company proposed not to disturb sub-surface contaminants, but to continue monitoring, maintain the cover above affected soil, enter into restrictive covenants regarding the potential use of the property in the future, and provide financial assurances relating to the requirements of the RAP.  In January 2017, the RAP was circulated for public comment.  DTSC responded to those comments and, on September 29, 2017, approved the RAP as submitted by the Company. The Company continues to conduct groundwater monitoring and maintain the cover above affected soil and is working with DTSC to prepare an operation and maintenance plan, to record covenants on certain affected parcels and to obtain further clarification on financial assurance obligations relating to the RAP.  At this stage, the Company does not believe that costs to be incurred in connection with the RAP will be material and has not recorded a loss contingency for these activities.

5

Other Environmental

AMVACAVD is subject to numerous federal and state laws and governmental regulations concerning environmental matters and employee health and safety at its six manufacturing facilities both in the U.S. and abroad. The Company continually adapts its manufacturing, storage, transportation, handling and disposal processes to the environmental control standards of the various regulatory and other agencies to which it is subject. The USEPA and other foreign, federal and state agencies have the authority to promulgate regulations that could have an impact on the Company’s operations.

AMVACAVD expends substantial funds to minimize the risk of discharge of materials in the environment and to comply with the governmental regulations relating to protection of the environment. Wherever feasible, the Company recovers and recycles raw materials and increases product yield in order to partially offset increasing pollution abatement costs.

The Company is committed to a long-term environmental protection program that reduces emissions of hazardous materials into the environment, as well as to the remediation of identified existing environmental concerns.

Human Capital Resources

We believe that, beyond being essential to our operations, our people have inestimable worth independent of our business. As outlined in our Human Rights Policy (see, www.american-vanguard.com under ESG tab), we believe that it is fundamental to our corporate responsibility and, indeed, to our humanity, that we recognize, respect and nurture the freedom and dignity of all persons. Accordingly, we have insinuated that belief throughout the fabric of our operations in our approach toward our employees. Indeed, the first two core values underlying our commitment to sustainability (see, 2017/2018Update to Corporate Sustainability Report, www.american-vanguard.com under ESG tab) are “Safety First” – which is a culture that begins with highly-regulated manufacturing plants, continues into the design of science-backed products and extends into market-leading delivery systems – and “Making a Difference” – under which, by rewarding achievement and giving our employees a voice, we attract diverse employees who want to make a difference in their careers, in the company and in the communities that we serve.

The most salient feature of success in managing human capital has been our ability to attract and retain excellent talent. We are not the largest company within our sector – in fact, we are possibly the smallest public company dedicated to crop inputs and precision application technology. However, we have consistently drawn high-achieving, successful personnel from much larger competitors, largely due to the fact that we are not only collegial and nimble, but also offer employees the chance to make a difference, to be themselves, to think creatively.

Another important practice in managing human capital is that we offer among the most generous healthy benefits in the industry – minimal employee contribution, copays, out-of-pocket limits. (See also the Compensation Discussion & Analysis in our 2020 Proxy Statement at www.american-vanguard.com, click on SEC filings). We also provide a comprehensive wellnessOur Human Capital program with annual biometric testing and incentives for health coaching. These programs serve to keep the employee population and their families healthy. Further, these programs are, for the most part, self-insured and represent a direct and important investment in our people.

We are also oneconsists of the only public companies of which we are aware that gives awards of our common stock to the entire full-time workforce. Most public companies limit their stock awards to those in the highest echelon. We do not. Rather, we believe that all employees should share in our long-term success and that those who work for the company should have the perspective of both employee and shareholder. This practice also engenders a sense of greater permanency in the work relationship through which employees are more inclined to propose plans and solutions for the future. Similarly, unlike many public companies, we allocate our incentive compensation throughout the entire workforce, thereby rewarding their contribution to our companywide performance.As of December 31, 2020, the Company employed 771 employees. following elements:

5

The Company employed 671804 employees as of December 31, 20192021, and 624771 employees as of December 31, 2018.2020. From time to time, due to the seasonality of its business, AVD uses temporary contract personnel to perform certain duties primarily related to packaging of its products. None of the Company’s employees are subject to a collective bargaining agreement. The Company believes it maintains positive relations with its employees.

Domestic operations

AMVAC is a California corporation that was incorporated under the name of Durham Chemical in August 1945. The name of the corporation was subsequently changed to AMVAC in January 1971. As the Company’s main operating subsidiary, AMVAC owns and/or operates the Company’s domestic manufacturing facilities. AMVAC manufactures, formulates, packages and sells its products in the U.S. and is a wholly owned subsidiary of AVD.

GemChem is a California corporation that was incorporated in 1991 and was subsequently purchased by the Company in 1994. GemChem sells into the pharmaceutical, cosmetic and nutritional markets and, in addition, purchases key raw materials for the Company. GemChem is a wholly owned subsidiary of AVD.

6

DAVIE owns real estate for corporate use only. The site is the home to the Company’s research center and also provides accommodation for the Company’s production control team. See also Part I, Item 2 of this Annual Report on Form 10-K. DAVIE is a wholly owned subsidiary of AVD.

On October 2, 2017, AMVAC purchased substantially all of the assets of OHP, a domestic distribution company specializing in products for the turf and ornamental market. OHP markets and sells end use products for third-parties,third parties, either under third-party brands or else as its own label products.

Envance is a Delaware Limited Liability Company and is a wholly owned subsidiary of the Company. Itthat was formed in 2012 withby AMVAC and joint venture partner TyraTech. AMVAC’s initial shareholding was 60% which increased to 87% in 2015. Prior to November 8, 2018 the Company also owned 34.38% of TyraTech. On November 8, the Company acquired the remaining 65.62% of the shares of TyraTech Inc.Envance and as a result, TyraTech became a wholly owned subsidiarysubsidiaries of the Company on November 9, 2018. Also, as a result of acquiring 100% of TyraTech, Envance became a wholly owned subsidiary of the Company. Envance has the rights to develop and commercialize pesticide products and technologies based on TyraTech’s intellectual property. Products are made from natural oils in global consumer, commercial, professional, crop protection and seed treatment markets and has begun bringingmarkets. Envance is taking products to market and licenseprimarily by licensing its intellectual property to third-parties.third parties.

International operations

In July 2012, the Company formed AMVAC CV, which is incorporated in the Netherlands, for the purpose of managing foreign sales on behalf of the Company. AMVAC CV is owned jointly by AMVAC as the general partner, and AVD International, LLC (also formed in July 2012 as a wholly owned subsidiary of AMVAC), as the limited partner, and is therefore a wholly owned subsidiary of AMVAC.

AVD. In November 2019, AMVAC Hong Kong was formed in November 2019 and is wholly owned bysubsidiary of AMVAC. AMVAC Hong Kong took over the role of AMVAC CV as of January 1, 2020.

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AMVAC BV is a registered Dutch private limited liability company that was formed in July 2012. AMVAC BV is located in the Netherlands and is wholly owned by AMVAC CV. During 2020,2021, the international business sold the Company’s products in 5554 countries, as compared to 55 countries in 2019.2020.

AMVAC M is a wholly owned subsidiary of AMVAC BV and was originally formed in 1998 (as Quimica Amvac de Mexico S.A. de C.V and subsequently changed to AMVAC Mexico Sociedad de Responsabilidad Limitada “AMVAC M”) to conduct the Company’s business in Mexico.  

AMVAC Sgpr is a wholly owned subsidiary of AMVAC BV and was formed on April 12, 2016. This new entity was formed to conduct the Company’s business in the Asia Pacific and China region.

Hong Kong JV is a 50% owned joint venture with Huifeng (Hong Kong) Limited, a wholly owned subsidiary of Huifeng Agrochemical Company, Ltd, (“Huifeng”) a China based, basic chemical manufacturer. The Hong Kong JV was formed on August 2, 2016. The purpose of the joint venture is to be a technology transfer platform between the co-owners, including the development of proprietary agrochemical formulations and precision application systems for crop protection. Furthermore, it is intended to be used to develop both partners’ business in the region. This included, in 2017, the acquisition of 100% of the shares of Profeng.

On October 27, 2017, AMVAC BV purchased 100% of the stock of AgriCenter, which owned shares in subsidiaries located in Costa Rica, Panama, Nicaragua, Honduras, the Dominican Republic, Mexico, Guatemala, and El Salvador. These affiliated entities, collectively known as AgriCenter, market, sell and distribute end-use chemicalchemicals, including the Company’s own products, and biological products throughout Central America primarily for crop applications.

On January 10, 2019, AMVAC BV acquired 100% of the stock of DefensiveAgrovant and Agrovant,Defensive, two distribution companies based in Brazil. DefensiveAgrovant and AgrovantDefensive market and distribute crop protection products and micronutrients with focus on the fruit and vegetable market segments throughout Brazil. On December 31, 2020, Agrovant and Defensive merged and renamed the resulting entity, AMVAC 3p.

On October 8, 2020, American Vanguard Australia Pty Ltd acquired 100% of the stock of AgNova, an Australian company that sources, develops, and distributes specialty crop protection and production solutions for agricultural and horticultural producers, and for selected non-crop users.

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On October 2, 2020, the Company’s principal operating subsidiary, AMVAC, completed the purchase of all outstanding shares of Agrinos and certain intellectual property rights. Agrinos is a fully integrated biological input supplier with proprietary technology, internal manufacturing, and global distribution capabilities and has operating entities in the U.S., Mexico, India, Brazil, China, Ukraine, and Spain.

The Company classifies as international sales all products bearing foreign labeling shipped to a foreign destination.

The Company’s Operations in a Pandemic

Having been categorized as aSince the start of the coronavirus pandemic early in March 2020, by the World Health Organization, the novel coronavirus (COVID-19)Company has since spread, at the time of this document, to infect over 100 million people and caused over 2 million fatalities worldwide. Like many other companies, we have had to adapt quickly and frequentlymade sustained efforts to ensure the health and safety of the workplaceworkforce while maintaining operations without disruption. Our mission was driven in part by our legal status. Underensuring continuity of the business, which, under applicable federal guidelines (at (https://www.cisa.govww.cisa.gov), the Company is part of the nation’s “critical infrastructure” and falls within threecritical infrastructure (as part of the 16 sectors that are specially permitted to operate:  “Food and Agriculture” sector (engaged in “the production of chemicalsAgriculture,” “Chemical” and other substances used by the food and agriculture industry, including pesticides, herbicides etc.”), the “Chemical” sector (supporting the operation . . . of facilities (particularly those with high risk chemicals . . . whose work cannot be done remotely and requires the presence of highly trained personnel to ensure safe operations”) and the “Public Works and Infrastructure Support Services” sector (in supportsectors). Our network of public health including pest control and exterminators, landscapers and others who provide services to residences and businesses). In issuing guidance on Coronavirus, then President Donald J. Trump said, “If you workinternational subsidiaries is accorded similar status by governments in a critical infrastructure industry, as defined by the Department of Homeland Security, such as healthcare services and pharmaceutical and food supply, you have a special responsibility to maintain your normal work schedule[emphasis added].” We have found that state COVID-19 orders and, indeed, even those of countriesterritories in which they operate. In the outbreak has been most pronounced, have consistently excepted food supply as an area essential to the survival of its populations and, as such, had given special permission to companies, such as ours, to continue to operate during the pandemic.

In light of our status within the critical infrastructure, at the outset of the pandemic,workplace, the Company took swift action to understand, containhas designed and mitigate the risks posed by this pandemic. Specifically, we formed a Pandemic Work Group to design and implementimplemented protocols for social distancing, makemade provisions for the workforce to work remotely where possible, establishand established quarantine tracing and leave-of-absence policies for those who present COVID-like symptomsymptoms or may have been in touchcontact with those who have. Further, the group has keptCompany keeps current with local, state, federal and international laws and restrictions that could affect the business; providedbusiness and provide real-time information to the workforce including with respect to testing and vaccinations; and drawn from political commentary and news statements concrete directions on how best to continue operations. We haveworkforce. The Company has also prepared contingency plans to permit the continued operation of ourits factories, in the event that there are critical staffing issues due to attrition. Further, we havethe Company continuously monitoredmonitors supply chain, transport, logistics and border closures and havehas reached out to third-partiesthird parties to make clear that we arethe Company is continuing to operate, and that we have ourit has its own policies relating to health and safety (e.g., all staff who can work remotely were instructed so to do and were provided with the necessary IT equipment, no third-party visitors, no face-to-face meetings) and areis committed to compliance with COVID-19 policies of ourits business partners. Our CEO and

As has been the Pandemic Work Group have held regular “statecase with many other employers, since the start of 2021, the Company has encouraged its workforce to receive vaccinations against COVID-19 through various means, including incentive programs. The surge of the company” callsDelta variant in early 2021 had a comparatively low impact on the Company’s workforce. However, the Omicron variant, which began to spread throughout the world in late 2021, proved to be transmissible to people who were vaccinated or unvaccinated. As a result, like many employers, the Company experienced a surge in COVID-19 infections at the end of the fourth quarter in 2021 carrying over into the first quarter of 2022. Based upon tracking and tracing, we believe that most of these cases came from community (as opposed to workplace) transmission. Further, compared to the Delta surge and earlier variants, these cases typically presented with mild symptoms. All told, the functional heads of our businesses across the globe to ensure that our information is shared in a timely manner and that our direction is clear.

In keeping with our charge to operate as an essential business and by virtue of our efforts to contain and mitigate the risks posed by the pandemic, we haveCompany has been able to manage ourits business with minimal disruptionimpact during the reporting period. years ended December 31, 2021 and 2020.

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As referredof this writing, the Omicron surge is dropping dramatically in many regions, including the U.S. Barring the advent of another variant, between natural immunity from infection and vaccine immunity, populations in many countries will be increasingly less vulnerable to coronavirus. However, the efficacy of boosters, variability in this Form 10-K (see Note 1social restrictions and evolution of the virus are not yet known. Consequently, the Company is unable to predict the Consolidated Financial Statements),ultimate impact that the coronavirus has affected our overall performancepandemic may have on its future financial condition, results of operations and cash flows in the near- to a degree. Lost opportunitiesmid-term. The Company continues to monitor its business for certain new product launches, inability to meet both existing and potential new customers face-to-face, reduced demand for commodity crops sold to restaurants, andadverse impacts of the pandemic, including volatility in the foreign exchange effectsmarkets, demand, supply-chain disruptions in Brazil, Mexicocertain markets, and Australia, have likely limited the Company’s top-line growth by up to several million dollars and the associated profitability, to an indeterminate degree, since the inceptionincreased costs of the pandemic.  employee safety, among others.

Risk Management

The Company regularly monitors matters, whether insurable or not, that could pose material risk to its operations, the safety of its employees and neighbors, and its financial performance. The Risk Committee of the Board of Directors (“Board”) was formed in 2010, consists of four members of the Board and meets regularly. However, all members of the Board are invited to and regularly attend Risk Committee meetings. Working with senior management, the committee continuously evaluates the Company’s risk profile, identifies mitigation measures and ensures that the Company is prudently managing these risks.

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Further, in support of the Risk Committee, senior management has appointed a risk manager who is focused on addressing each of the most material risks facing the Company. The top risks identified by management (in no particular order) include: adverse political and regulatory climate; managing inventory and optimizing manufacturing efficiency; succession planning and bench strength; maintaining a competitive edge in the marketplace; the possibility of an environmental event; undervaluation of the Company; availability of acquisition and licensing targets and cyber-terrorism. In addition, the Company continually evaluates insurance levels for product liability, property damage and other potential areas of risk. Management believes its facilities and equipment are adequately insured against loss from usual business risks including cyber-terrorism.

Environmental, Social and Corporate Governance (“ESG”)

At the center of strategy is fully described on our ESG commitment is the principle of website (Sustainable Agriculturewww.american-vanguard.com. While this concept has been used by many to mean many different things, we have given it a very clear meaning. In our parlance, Sustainable Agriculture is broad enough to encompass a comprehensive ESG program, but clear enough to give us direction in our outlook and purpose in our activities. Please); just click on the “ESG” tab at www.american-vanguard.com to accesstab. The reader will also find the documents mentioned below.

Access to food is a basic human right and is atCompany’s updated Corporate Sustainability Report (dated February 2022) under the core of our commitment to sustainable agriculture. All people should be able to rely on a stable, affordable food supply both now and into the future. We are committed to meeting that need upon a foundation of social responsibility and equity. In that vein, we believe that sustainable agriculture must include these three principles:

Climate Equity – as outlined in our Climate Change Commitment, we are committed to making enterprise-wide, progressive and measurable efforts to do our part to help to arrest the trend of global warming. In making decisions, taking actions and conducting our operations we are mindful of climate equity, which holds that climate change has three primary effects – generational, regional and individual. To that end, we believe that reducing our carbon footprint and, through our products and services, enabling others to do so will advance climate equity consistent with the goal of a 2-degree warmer world, as outlined in the Paris Agreement. Whether in terms of eco-friendly products – such as natural oils from Envance (used in Proctor & Gamble’s Zevo product line), microbial High Yield solutions from Agrinos (that enhance soil health and promote carbon sequestration) or tailored bionutritional products from Greenplants – or delivery systems, such as our SIMPAS precision application system that maximizes yield while minimizing the environmental footprint – we are endeavoring to making the planet a better place than we found it.

Environmental Equity – we recognize that our planet has limited resources and that what we do with them has an effect on the habitat for both humans and other species, both for today and tomorrow. We also recognize that our activities can affect the environment generationally, regionally and individually. We are, therefore, committed to environmental equity in our operations. Specifically, and as more fully outlined in our sustainability reports, we seek to conserve finite resources such as water, land and energy while protecting the environment and enhancing biodiversity, so that these resources are available in amounts and quality to support our neighbors and future generations. In addition, we have committed significant resources toward supporting growers with precision application technology – like SIMPAS and Ultimus – that enable growers to manage, optimize and trace the use of crop and soil inputs, and to use only what is needed, precisely where it is needed. Furthermore, we are mindful of those who might be disproportionately affected by what we do, such as loaders and applicators of our products. To that end, we have been at the forefront of user-friendly, closed delivery systems (from Lock ‘n Load to SMARTBox to SIMPAS/SmartCartridges) to minimize exposure and maximize safety for those on-the-ground.

Food Equity – we are committed to the proposition that access to food is a basic human right. Implicit in that commitment is the principle of food equity, which has three aspects, once again, generational, regional and individual. First, food security – we believe it is essential to ensure the long-term sustainability and competitiveness of the global agricultural industry. We contribute toward food security by investing in eco-friendly solutions and in new technology, like SIMPAS, that give growers the best tools possible to ensure that their operations are viable, both today and tomorrow. Second, food availability – ensuring that food gets from field to table. As we saw in the pandemic, the supply chain for food can be broken, and those who suffer most are often those farthest from the fields. To that end, we support farm-to-field efforts and programs to reduce food waste. Third, food affordability – ensuring that food prices can be maintained for all, including the impoverished. We do this by giving farmers effective tools, including precision application equipment, that optimize their costs, boost their yield, and enable them to produce and market food at reasonable prices.

Social Responsibility – our discussion of Sustainable Agriculture would not be complete without specific mention of our commitment to social responsibility. This concept is inherent in all forms of equity, be they climate, environmental or food related. However, social responsibility gives us pause to consider factors of a more fundamental nature, such as human rights. Our Human Rights Policy details our essential belief that we respect and support human rights, both within and without our operations. We believe that it is fundamental to our corporate responsibility and, indeed, to our humanity, that we recognize, respect and nurture the freedom and dignity of all persons. To that end, we support the tenets of the International Bill of Human Rights, including the United Nations Universal Declaration of Human Rights, the UN framework on Corporate Responsibility to Respect Human Rights (which is one section of the UN Guiding Principles on Business and Human Rights) and the UN International Labor Organization on Fundamental Principles and Rights at Work.  

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Under the umbrella of Sustainable Agriculture, we are committed to operating our business with a sense of mindfulness – toward the climate, toward the environment and toward the good of humans and other species. We consider ourselves to be part of a broader mission – one of ensuring that people can rely upon a stable, affordable food supply both now and in the future. It is a privilege to be part of that mission. With that privilege comes responsibility, and we take that responsibility seriously.  same tab.

Available Information

The Company makes available free of charge (through its website, www.american-vanguard.com), its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). All reports filed with the SEC are available free of charge on the SEC website, www.sec.gov. Also available free of charge on the Company’s website are the Company’s Audit Committee, Compensation Committee, Finance Committee and Nominating and Corporate Governance Committee Charters, the Company’s Corporate Governance Guidelines, the Company’s Code of Conduct and Ethics, and the Company’s Employee Complaint Procedures for Accounting and Auditing Matters. Beneath the “ESG”ESG tab at that site, you will also find links to the Company’s Corporate Sustainability Reports, Climate Change Commitment and Human Rights Policy. The Company’s Internet website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K.

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Regulatory/Legislative/Litigation Risks

The regulatory climate remains challenging to the Company’s interests both domestically and internationally—Various agencies within the U.S. (both federal and state) and foreign governments continue to exercise increased scrutiny in permitting continued uses (or the expansion of such uses) of many chemistries, including several of the Company’s products and, in some cases, have initiated or entertained challenges to these uses. The challenge of the regulatory climate is more pronounced in certain geographical regions (outside the U.S.) where the Company faces resistance to the continued use of certain of its products. For example, the European Union (“EU”) employs a hazard-based analysis when considering whether product registrations can be maintained; under this approach, EU regulatory authorities typically do not weigh benefit against risk in their assessments and routinely cancel products for which a safer alternative is available, notwithstanding the benefit of the cancelled product. There is no guarantee that this regulatory climate will change in the near term or that the Company will be able to maintain or expand the uses of many of its products in the face of such regulatory challenges.

The Russian invasion of the Ukraine may expand into a broader international conflict that could adversely affect multiple channels of commerce and markets. While business operations relating to the Ukraine constitute an immaterial part of the Company’s overall business, there is no guarantee that the current conflict will not draw military intervention from other countries or retaliation from Russia, which, in turn, could lead to a much larger conflict. If such escalation should occur, supply chain, trade routes and markets currently served by the Company could be adversely affected, which, in turn, could materially, adversely affect the Company’s business operations and financial performance.

Product liability judgments on glyphosate and cases involving other pesticides by domestic courts present a litigation risk to companies in this industry—Multiple judgments have been rendered by domestic courts in product liability cases against Bayer/Monsanto in connection with injuries allegedly arising from exposure to the herbicide product, glyphosate. The basis was purported carcinogenicity based largely upon the findings of a certain international organization, in spite ofdespite significant scientific evidence to the contrary. While the Company does not sell glyphosate, the theory of these results could put one or more of the Company’s products at risk. ThereFurther, a number of product liability cases involving paraquat have been filed in domestic courts. While the Company is not a party to these cases and discontinued its limited sales of this herbicide shortly after acquiring an end-use registration as part of a larger acquisition, there is no guarantee that one or more product liability actions would not be brought against the Company on a similar basis, and it is possible that adverse rulings in any such actions could have a material adverse effect upon the Company’s financial performance in future reporting periods.

The trend of passing pesticide “ban-bills” in various states could put one or more of the Company’s products at risk—In certain states, including Maryland and New York, state and/or local legislatures have passed legislation banning the use of specific pesticides, such as chlorpyrifos, or pesticide in general, in spite of valid registrations at USEPA and/or the equivalent state agency. While the Company does not sell chlorpyrifos products, there is no guarantee that one or more of its registered products would not be targeted in state or local legislation of this nature. Further, such legislation could have a material adverse effect upon the Company’s financial performance in future reporting periods.

Use of the Company’s products is subject to continuing challenges from activist groups—Use of agrochemical products, including the Company’s products, is regularly challenged by activist groups in many jurisdictions under a multitude of federal, state and foreign statutes, including FIFRA, the Food Quality Protection Act, Endangered Species Act (“ESA”) and the Clean Water Act, to name a few. These challenges typically take the form of lawsuits or administrative proceedings against the USEPA and/or other federal, state or foreign agencies, the filing of amicus briefs in pending actions, the introduction of legislation that is inimical to the Company’s interests, and/or adverse comments made in response to public comment invited by regulatory agencies in the course of registration, re-registration or label expansion. The most prominent of these actions include a line of cases under which environmental groups have sought to suspend, cancel or otherwise restrict the use of pesticides that have been approved by USEPA on the ground that that agency failed to confer with the National Marine Fishery Service and/or the Fish and Wildlife Service under the ESA with respect to biological opinions relating to the use of such products. While industry has been active in defending registrations and proposing administrative and legislative approaches to address serious resource issues at the affected agencies, these cases continue to be brought. It is possible that one or more of these challenges could succeed, resulting in a material adverse effect upon one or more of the Company’s products.products and consolidated financial statements.

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USEPA has proposed further limitations and taken action on the continued registration of organophosphates— In September 2015, the USEPA published in the Federal Register a memorandum entitled, “Literature Review on Neurodevelopmental Effects & FQPA Safety Factor Determination for the Organophosphate Pesticides,” in which it adopted a position recommending the application of a 10X safety factor under the FQPA (Food Quality Protection Act) in light of the alleged possibility of neurodevelopmental harm to women and children based on epidemiological data. Since that time, in the face of objection from industry, the agency has applied this safety factor to all registered Organophosphate Pesticides (“Ops” or “OP”), including those owned by the Company, as they have come up for review or renewal. The Company, like many in our industry, believes that applying this safety factor is not based upon sound science and that the limited studies upon which the agency is relying (for which raw data is not available even to the agency) do not establish a causal link between the perceived harm and the use of its products. In addition, finding that the tolerances for chlorpyrifos (an organophosphate not sold by the Company) that had been established under FFDCA could not be deemed with reasonable certainty to cause no harm, USEPA revoked those tolerance factors and consequently cancelled the registrations for chlorpyrifos. There is no guarantee that USEPA will not employ a similar standard of review against one or more of the Company’s organophosphates. Accordingly, the Company intends to take all action necessary to defend its registrations. We have been joined in this effort by other companies that are similarly concerned about the potential impact of USEPA’s action. Nevertheless, there is no guarantee that the Company’s actions will alter the course that USEPA has proposed; if the agency’s position becomes final, some uses of the Company’s OP products could be limited or cancelled. Such action could have a material adverse effect upon the Company’s financial performance in future reporting periods.

The distribution and sale of the Company’s products are subject to prior governmental approvals and thereafter ongoing governmental regulation—The Company’s products are subject to laws administered by federal, state and foreign governments, including regulations requiring registration, approval and labeling of its products. The labeling requirements restrict the use of, and type of, application for our products. More stringent restrictions could make our products less available, which would adversely affect our revenues and profitability.profitability and cash flows. Substantially all of the Company’s products are subject to the USEPA (and/or similar agencies in the various territories or jurisdictions in which we do business) registration and re-registration requirements and are registered in accordance with FIFRA or similar laws. Such registration requirements are based, among other things, on data demonstrating that the product will not cause unreasonable adverse effects on human health or the environment when used according to approved label directions. All states, where any of the Company’s products are used, also require registration before products, such as the Company sells, can be marketed or used in that state. Governmental regulatory authorities have required, and may require in the future, that certain scientific data requirements be fulfilled on the Company’s products. The Company, on its behalf and also in joint efforts with other registrants, has furnished, and is currently furnishing certain required data relative to its products. There can be no assurance, however, that the USEPA or similar agencies will not request that certain tests or studies be repeated, or that more stringent legislation or requirements will not be imposed in the future. The Company can provide no assurance that any testing approvals or registrations will be granted on a timely basis, if at all, or that its resources will be adequate to meet the costs of regulatory compliance.

The manufacturing of the Company’s products is subject to governmental regulations— The Company currently owns and operates five manufacturing facilities which are located in Los Angeles, California; Axis, Alabama; Hannibal, Missouri; Marsing, Idaho,Idaho; Clackamas, Oregon,Oregon; and Ethojoa,Etchojoa, Mexico and owns and has manufacturing services provided at an additional facility in Hannibal, Missouri, (the “Facilities”). The Facilities operate under the laws and regulations imposed by relevant country, state and local authorities. The manufacturing of key ingredients for certain of the Company’s products occurs at the Facilities. An inability to renew or maintain a license or permit, or a significant increase in the fees for such licenses or permits, could impede the Company’s manufacture of one or more of its products and/or increase the cost of production; this, in turn, would materially and adversely affect the Company’s ability to provide customers with its products in a timely and affordable manner.

Pandemic/Climate Risks

The COVID-19 pandemic may interfere withis creating risk, uncertainties and adverse conditions in many industries both here and abroad.  The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic will impact its customers, business partners, and employees. While the Company did not incur significant disruptions from the COVID-19 pandemic during the years ended December 31, 2021 and 2020, the Company is unable to predict the impact that the pandemic will 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 business—Overoperations and those of its customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the past year,scope, severity and duration of the novelpandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. There is no guarantee that the Company will be able to operate without material disruption for the duration of the pandemic or that its financial conditions and results of operations and cash flows will not be materially adversely affected by the pandemic in future periods.

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Disruption in the global supply chain is creating delays, unavailability and adverse conditions for our industry, including significant price increases especially with regard to ocean bound shipments. With the prolongation of the coronavirus pandemic, the global supply chain has spread aroundbeen under increased stress stemming from container shortages, a lack of domestic truck drivers and a shift in consumer buying habits. Consequently, ocean cargo both inbound to, and, in some cases, outbound from, the globe, infecting over 100 million personsU.S. has experienced significant delays, while domestic ports and resultingregional warehouses have been filled beyond capacity. To date, while experiencing disruptions in over 2 million fatalities. While the companysupply of raw materials, intermediates, finished goods and packaging, the Company has been able to operatecarry on business without interruption, during the reporting period, and has seen comparative minimal impact on the markets that it serves,a material adverse effect upon its overall operations or financial performance. Further, there is no guarantee that the pandemic, as it continues, will not disrupt our supply chain customerscondition will materially improve any time soon or end-users of our products.that the company will continue to avoid material disruption. Such disruption could have a material adverse effect on the company’s operations, financial condition or cash flows.

Climate Change may adversely affect the Company’s business—Over the course of the past several years, global climate conditions have become increasingly inconsistent, volatile and unpredictable. Many of the regions in which the Company does business have experienced excessive moisture, cold, drought and/or heat of an unprecedented nature at various times of the year. In some cases, these conditions have either reduced or obviated the need for the Company’s products, whether pre-plant, at-plant, post-emergent or at harvest. Due to the unpredictable nature of these conditions, growers and distributors appear to have become increasingly conservative in procurement practices and the accumulation of inventory. Further, the random nature of climactic change has made it increasingly difficult to forecast market demand and, consequently, financial performance, from year-to-year. There is no guarantee that climate change will abate in the near future, and it is possible that such change will continue to hinder the Company’s ability to forecast its sales performance with accuracy and otherwise adversely affect the Company’s financial performance.

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The Company’s business may be adversely affected by weather effects and commodity prices—Demand for many of the Company’s products tends to vary with weather conditions and weather-related pressure from pests. Adverse weather conditions, then, may reduce the Company’s revenues and profitability. In light of the possibility of adverse seasonal effects, there can be no assurance that the Company will maintain sales performance at historical levels in any particular region. Similarly, demand for the Company’s products used in row crops tends to vary with the commodity prices of those crops in the U.S., particularly corn, soybeans and cotton. These prices may be driven in part by weather, pest pressure, the domestic farm economy and international markets (e.g., yield and pricing from similar crops grown in Brazil). There is no guarantee that the U.S. farm economy and row crop commodity prices will maintain sufficient strength and stability to support the Company’s products at or above historical levels.  

The Company may be subject to environmental liabilities—The Company is fully committed toward minimizing the risk of discharge of materials into the environment and to complying with governmental regulations relating to protection of the environment, its neighbors and its workforce. Nevertheless, federal and state authorities may seek fines and penalties for any violation of the various laws and governmental regulations. In addition, while the Company continually adapts its manufacturing processes to the environmental control standards of regulatory authorities, it cannot entirely eliminate the risk of accidental contamination or injury from hazardous or regulated materials. Further, these various governmental agencies could, among other things, impose potential criminal liability arising in connection with the Company’s importation (transportation, handling, and storage) of depleted Thimet containers (see, “Legal Proceedings”). In short, the Company may be held liable for significant damages or fines relating to any environmental contamination, injury, or compliance violation which could have a material adverse effect on the Company’s consolidated financial condition, statements of operations and cash flows.

Acquisition/Investment Risks

Newly acquired businesses or product lines may not generate forecasted results—While the Company conducts due diligence using a combination of internal and third-partythird party resources and applies what it believes to be appropriate criteria for each transaction before making acquisitions, there is no guarantee that a business or product line acquired by the Company will generate results that meet or exceed results that were forecasted by the Company when evaluating the acquisition. There are many factors that could affect the performance of a newly acquired business or product line. While the Company uses assumptions that are based upon due diligence and other market information in valuing a business or product line prior to concluding an acquisition, actual results generated post-closing could vary widely from the Company’s forecast and, as such, could have a material effect upon the Company’s overall financial performance.

The Company’s investment in foreign businesses may pose additional risks—With the expansion of its footprint internationally, the Company now carries on business at a material level in some jurisdictions that have a history of political, economic or currency-related instability and customers with a potentially higher risk profile regarding accounts receivable collectivity compared to the Company’s legacy business. While such instability may not be present at the current time, there is no guarantee that conditions will not change in one or more jurisdictions quickly and without notice, nor is there any guarantee that the Company would be able to recoup its investment in such territories in light of such changes and potential losses due to political factors, economic factors, devaluation of local currencies, or the collectability risk from customers. Adverse changes of this nature could have a material effect upon the Company’s overall financial performance.

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The Company’s investment in technology may not generate forecasted returns—The Company has had a history of investing in technological innovation, including with respect to product delivery systems, essentialnatural oil technology and biologicals, as one of its core strategies. These investments are based upon the premise that new technology will allow for safer handling or lower overall toxicity profile of the Company’s product portfolio, appeal to regulatory agencies and the market we serve, gain commercial acceptance, and command a return that is sufficiently in excess of the investment. However, there is no guarantee that a new technology will be successfully commercialized, generate a material return or maintain market appeal. Further, many types of development costs must be expensed in the period in which they are incurred. This, in turn, tends to put downward pressure on period profitability. There can be no assurance that these expenses will be recovered through successful long-term commercialization of a new technology.

The Company’s growth has been fueled in part by acquisitions—Over the past few decades, the Company’s growth has been driven by acquisitions and licensing of both established and developmental products from third-parties.third parties. There is no guarantee that acquisition targets or licensing opportunities meeting the Company’s investment criteria will remain available or will be affordable. If such opportunities do not present themselves, then the Company may be unable to duplicate historical growth rates in future years.

The Company is dependent upon sole source suppliers for certain of its raw materials and active ingredients—There are a limited number of suppliers of certain important raw materials used by the Company in a number of its products. Certain of these raw materials are available solely from single sources either domestically or overseas. ThereIn connection with supply chain disruptions in 2021, phosphorus and related compounds were increasingly difficult to source for our entire industry; ensuring a continuous supply required extraordinary efforts both with respect to sourcing and production planning. That said, there is no guarantee that any of our suppliers will be willing or able to supply these products to the Company reliably, continuously and at the levels anticipated by the Company or required by the market. If these sources prove to be unreliable and the Company is not able to supplant or otherwise second source these products, it is possible that the Company will not achieve its projected sales which, in turn, could adversely affect the Company's consolidated financial statements.

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The Company faces competition in certain markets from new technologies and demand for organically produced food— The Company faces competition from larger companies that market new chemistries and other similar technologies in certain of the crop protection sectors in which the Company competes. There is no guarantee that the Company will maintain its market share or pricing levels in sectors that are subject to competition from companies that market new technologies. Further, it is possible that increased demand for organic crops may, over time, reduce the demand for the Company’s products.

The Company faces competition from generic competitors that source product from countries having lower cost structures—The Company continues to face competition from competitors around the globe that may enter the market through either offers to pay data compensation, or similar means in foreign jurisdictions, and then subsequently source material from countries having lower cost structures (typically India and China). These competitors typically tend to operate at thinner gross margins and, with low costs of goods, tend to drive pricing and profitability of subject product lines downward. There is no guarantee that the Company will maintain market share and pricing when facing such generic competitors, or that such competitors will not offer generic versions of the Company’s products in the future.

The Company’s key customers typically carry competing product lines and may be influenced by the Company’s larger competitors—A significant portion of the Company’s products are sold to national distributors in the U.S., which also carry product lines of competitors that are much larger than the Company. Typically, revenues from the sales of these competing product lines and related program incentives constitute a greater part of our distributors’ income than do revenues from sales and program incentives arising from the Company’s product lines. With the recent consolidation among domestic distribution companies, these considerations have become more pronounced. In light of these facts, there is no assurance that such customers will continue to market our products aggressively or successfully, or that the Company will be able to influence such customers to continue to purchase our products instead of those of our competitors.

Industry consolidation may threaten the Company’s position in various markets—The global agricultural chemical industry continues to undergo significant consolidation. Many of the Company’s competitors have grown or are expected to grow through mergers and acquisitions. As a result, these competitors will tend to be in position to realize greater economies of scale, offer more diverse portfolios and thereby exert greater influence throughout the distribution channels. Consequently, the Company may find it more difficult to compete in various markets. While such merger activity may generate acquisition opportunities for the Company, there is no guarantee that the Company will benefit from such opportunities. Further, there is a risk that the Company’s future performance may be hindered by the growth of its competitors through consolidation.

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The Company is dependent on a limited number of customers, which makes it vulnerable to the continued relationship with and financial health of those customers—In 2020, 2019 and 2018, ourOur top three customers accounted for 39%, 39% and 29%, respectively, of the Company’s sales.sales in 2021, 2020 and 2019. The Company’s future prospects may depend on the continued business of such customers and on our continued status as a qualified supplier to such customers. The Company cannot guarantee that these key customers will continue to buy products from us at current levels. The loss of a key customer could have a material adverse effect on the Company’s consolidated financial statements.

General Risks

The carrying value of certain assets on the Company’s consolidated balance sheets may be subject to impairment depending upon market trends and other factors—The Company regularly reviews the carrying value of certain assets, including long-lived assets, inventory, fixed assets and intangibles. Depending upon the class of assets in question, the Company takes into account various factors including, among others, sales, trends, market conditions, cash flows, profit margins and the like. Based upon this analysis, where circumstances warrant, the Company may leave such carrying values unchanged or adjust them as appropriate. There is no guarantee that these carrying values can be maintained indefinitely, and it is possible that one or more such assets could be subject to impairment which, in turn, could have an adverse impact upon the Company’s consolidated financial statements.

The Company’s computing systems are subject to cyber security risks—In the course of its operations the Company relies on its computing systems, including access to the internet, the use of third-party applications and the storage and transmission of data through such systems. While the Company has implemented security measures to protect these systems, there is no guarantee that a third-party will not penetrate these defenses through hacking, phishing or otherwise and either compromise, corrupt or shut down these systems. Further, in the event of such incursion it is possible that confidential business information and private personal data could be taken. Such an event could adversely affect both the Company’s ability to operate, its reputation with key stakeholders and its overall financial performance.

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Reduced financial performance may limit the Company’s ability to borrow under its credit facility—The Company has historically grown net sales and net income through boththe expansion of current product lines, the acquisition of product lines from third-partiesthird parties and the acquisition of both domestic and international distributors with strong niche market positions. In order to finance such acquisitions, the Company has drawn upon its senior credit facility. However, the Company’s borrowing capacity under the senior credit facility depends, in part, upon its satisfaction of a negative covenant that sets a maximum ratio of borrowed debt to earnings (as measured over the trailing 12-month period). There is no guarantee that the Company will continue to generate earnings necessary to ensure that it has sufficient borrowing capacity to support future acquisitions or that, when necessary, the lender group will amend the senior credit facility to provide for such borrowing capacity.Further, despite the Company’s long-standing relationship with its lenders, in light of the uncertainties in global financial markets, there is no guarantee that the Company’s lenders will be either willing or able to continue lending to the Company at such rates and in such amounts as may be necessary to meet the Company’s working capital needs.

The Company is subject to taxation related risks in multiple jurisdictions—The Company is a U.S. based multinational company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be contested or overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. In 2017, the U.S. enacted significant tax reform, and in the long-term certain provisions of the new law may adversely affect us. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the EU, as well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, (“OECD”), are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business. If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial condition, or results of operations, or cash flows may be adversely impacted. In response to the economic situation of the COVID-19 pandemic, President Donald Trump signed into law The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, on March 27, 2020.  The Company has considered both the income tax and non-income tax provisions of the CARES Act and has determined it has no significant impact.

To the extent that capacity utilization is not fully realized at its manufacturing facilities, the Company may experience lower profitability—While the Company endeavors continuously to maximize utilization of it manufacturing facilities, our success in these endeavors is dependent upon many factors, including fluctuating market conditions, product life cycles, weather conditions in our key markets, availability of raw materials, manufacturing equipment failures,performance, retention of the workforce and regulatory constraints, among other things. There can be no assurance that the Company will be able to maximize the utilization of capacity at its manufacturing facilities. Underutilization of such manufacturing resources could have a material adverse effect upon the Company’s financial performance.  

The Company’s continued success depends, in part, upon a limited number of key employees—Within certain functions, the Company relies heavily on a small number of key employees to manage ongoing operations and to perform strategic planning. In some cases, there are no internal candidates who are qualified to succeed these key personnel in the short term. In the event that the Company were to lose one or more key employees, there is no guarantee that Company could replace them with people having comparable skills. Further, the loss of key personnel could adversely affect the operation of our business.

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None

AMVAC owns in fee the Facility constituting approximately 152,000 square feet of improved land in Commerce, California (“Commerce”) on which its West Coast manufacturing, some of its warehouse facilities and some of its manufacturing administrative offices are located.

DAVIE owns in fee approximately 72,000 square feet of warehouse, office and laboratory space on approximately 118,000 square feet of land in Commerce, California, which is leased to AMVAC. In 2013, the Company made a significant investment in the Glenn A. Wintemute Research Center, which houses the Company’s primary research laboratory supporting synthesis, formulation and other new product endeavors.

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In 2001, AMVAC completed the acquisition of a manufacturing facility (the “Axis Facility”) from E.I. DuPont de Nemours and Company (“DuPont”). The Axis Facility was one of three such units located on DuPont’s 510-acre complex in Axis, Alabama. The acquisition consisted of a long-term ground lease of 25 acres and the purchase of all improvements thereon. The facility is a multi-purpose plant designed for synthesis of active ingredients and formulation and packaging of finished products. In 2018, FMC Corporation acquired from DuPont a business unit, which held, among other things, the Axis Facility. Prior to expiration of the lease, AMVAC and FMC negotiated the terms of a new lease, which has a term of 15 years and the option to renew for two, 5-year periods.

On December 28, 2007, AMVAC purchased certain manufacturing assets relating to the production of Thimet and Counter and located at BASF’s multi-plant facility situated in Hannibal, Missouri (the “Hannibal Site”). Subject to the terms and conditions of the Agreement, AMVAC purchased certain buildings, manufacturing equipment, office equipment, fixtures, supplies, records, raw materials, intermediates and packaging constituting the “T/C Unit” of the Hannibal Site. The parties entered into a ground lease and a manufacturing and shared services agreement, under which BASF continues to supply various shared services to AMVAC for the Hannibal Site.

On March 7, 2008, AMVAC acquired from Bayer CropScience Limited Partnership, (“BCS LP”), a U.S. business of Bayer CropScience GmbH, a facility (the “Marsing Facility”) located in Marsing, ID,Idaho, which consists of approximately 17 acres of improved real property. The Marsing Facility is engaged in the blending of liquid and powder raw materials and the packaging of some of the Company’s finished goods inventory in liquid, powder and pelletized formulations which are sold both in the U.S. and internationally. In addition, during 2019, the Company purchased approximately three acres of unimproved real estate immediately adjacent to the Marsing Facility for potential storage and operational use in the future.  

On October 2, 2020, AMVAC completed the purchase of all outstanding shares of Agrinos which is a fully integrated biological input supplier with proprietary technology, internal manufacturing, and global distribution capabilities. Its High Yield Technology® product platform works in conjunction with other nutritional crop inputs to increase crop yield, improve soil health and reduce the environmental footprint of traditional agricultural practices. Agrinos has two primary biological production facilities, a state-of-the-art microbial fermentation facility based in Clackamas, Oregon, and a facility in Sonora, Mexico. The Clackamas and Sonora facilities are used as both manufacturing sites, and operational centers for global supply chain and logistics. 

AVD regularly adds chemical processing equipment to enhance or expand its production capabilities. The Company believes its facilities are in good operating condition, are suitable and adequate for current needs and have flexibility to change products, and can produce at greater rates as required.products. Facilities and equipment are insured against losses from fire as well as other usual business risks. The Company knows of no material defects in title to, or encumbrances on, any of its properties except that substantially all of the Company’s assets are pledged as collateral under the Company’s credit facility agreements with its primary lender group. For further information, refer to note 2Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

AVD owns approximately 42 acres of unimproved land in Texas for possible future expansion.

The Company leases approximately 19,953 square feet of office space located at 4695 MacArthur Court in Newport Beach, California. In September 2015,2020, the lease was amended and was extended to expire on June 30, 2021.2026. The premises have served as the Company’s corporate headquarters since 1994.1995.

The facilities occupied by GemChem, OHP, Envance and TyraTech (Envance and TyraTech are co-located), AMVAC BV’s,BV, AMVAC M’s,M, AMVAC CR Srl’s,Srl, AMVAC Sgpr’s,Sgpr, AgNova, Agrinos, AMVAC 3p and AgriCenter’s facilitiesAgriCenter, consist of administration, development centers (in the case of Envance and TyraTech) and/or sales offices which are leased. In addition, Defensive and Agrovant (the Company’s indirect, wholly owned subsidiaries in Brazil) own and/or lease administration and sales offices andAMVAC 3p leases warehouse space in Jaboticabal, Brazil.

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Please refer to Note 45 of the Notes to the Consolidated Financial Statements in Part II, item 8 of this Annual Report on Form 10-K.  

Not Applicable

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PART II

Market Information

Effective March 7, 2006, the Company listed its $0.10 par value common stock (“Common Stock”) on the New York Stock Exchange under the ticker symbol AVD. From January 1998 through March 6, 2006, the Common Stock was listed on the American Stock Exchange under the ticker symbol AVD. The Company’s Common Stock traded on The NASDAQ Stock Market under the symbol AMGD from March 1987 through January 1998. 

Holders

As of February 12, 2021,March 3, 2022, the number of stockholders of the Company’s Common Stock was approximately 5,048,6,296, which includes beneficial owners with shares held in brokerage accounts under street name and nominees.

Dividends

The Company has issued a cash dividend in each of the last twenty-four years dating back to 1996. Cash dividends declared during the past three years are summarized in the table below.

Share Repurchase ProgramPrograms

On March 8, 2022, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an aggregate number of up to 1,000,000 shares of its common stock, par value $0.10 per share, in the open market, over the succeeding one year at a price not to exceed $20 per share, subject to limitations and restrictions under applicable securities laws.

On August 30, 2021, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an aggregate number of 300,000 shares of its common stock, par value $0.10 per share, in the open market over the succeeding six months. During 2021, the Company purchased 300,000 shares of its common stock for a total of $4,579 at an average price of $15.26 per share.

On November 5, 2018, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an aggregate amountnumber of shares with a total purchase price not to exceed $20,000 of its common stock, par value $0.10 per share, in the open market, depending upon market conditions over the shortat a price not to mid-term.exceed $17 per share, subject to limitations and restrictions under applicable securities laws. The Shares Repurchase Program expired on March 8, 2019. During 2019, and 2018, the Company purchased a total of 610,406158,048 shares for a total of $9,891 at an average price of $16.20$16.48 per share.  share, for a total of $2,604. During 2018, the Company purchased 452,358 shares at an average price of $16.11 per share, for a total of $7,287.

Securities Authorized for Issuance under Equity Compensation Plans

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Stock Performance Graph

The following graph presents a comparison of the cumulative, five-year total return for the Company, the S&P 500 Stock Index, and a peer group (Specialty Chemical Industry). The graph assumes that the beginning values of the investments in the Company, the S&P 500 Stock Index, and the peer group of companies each was $100 on December 31, 2015.2016. All calculations assume reinvestment of dividends. Returns over the indicated period should not be considered indicative of future returns.

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The following table set forth the Company’s selected consolidated financial data as of and for each of the five years ended December 31, 2020 and should be read in conjunction with our audited consolidated financial statements and notes thereto included under Part II, Item 8 of this annual report.

The results for reporting periods beginning after January 1, 2018 are presented under Accounting Standards Codification (“ASC”) 606. Prior period results are not adjusted and continue to be reported in accordance with historic revenue recognition, ASC 605.

Effective January 1, 2019, the Company adopted ASC 842, Leases. See Description of Business, Basis of Consolidation, Basis of Presentation and Significant Accounting Policies in notes to the Consolidated Financial Statements. Prior period results are not adjusted and continue to be reported in accordance with ASC 840.

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FORWARD-LOOKING STATEMENTS/RISK FACTORS:

The Company, from time-to-time, may discuss forward-looking statements including assumptions concerning the Company’s operations, future results and prospects. Generally, “may,” “could,” “will,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue” and similar words identify forward-looking statements. Forward-looking statements appearing in this Report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on our current expectations and are subject to risks and uncertainties that can cause actual results and events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions contained in the entire Report. Such factors include, but are not limited to: product demand and market acceptance risks; the effect of economic conditions; weather conditions; changes in regulatory policy; the impact of competitive products and pricing; changes in foreign exchange rates; product development and commercialization difficulties; capacity and supply constraints or difficulties; availability of capital resources; general business regulations, including taxes and other risks as detailed from time-to-time in the Company’s reports and filings filed with the U.S. Security and Exchange Commission (“SEC”). It is not possible to foresee or identify all such factors. We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Report.

The discussion and analysis of our financial condition and results of operations for 2020,2021, as compared to 20192020 appears below. As permitted by SEC rules, we have omitted the discussion and analysis of our financial condition and results of operations for 20192020 compared to 2018.2019. See Item 7, “Management’s Discussions and Analysis of Financial Condition and Results of Operations”, in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, for this discussion.  

MANAGEMENT OVERVIEW

Despite a prolonged pandemic which affected the general global business environment over most of the year, theThe Company’s performance in 2021 was stronger in most all respects as compared to the prior year. The domestic agricultural economy continued an upcycle that started at the end of 2020 was steady,following several years in a downcycle. With that trend, commodity prices for many crops, including corn, soybeans and cotton, rose and remained strong. Both growers and the distribution channel, which had previously worked down inventory to very low levels, began to replenish their stocks of crop inputs. At the same time, pandemic restrictions were relieved in many regions and were only partially reinstated with a slight decline in the top lineemergence at the end of 2021 of the Omicron variant of the coronavirus. Despite supply chain disruptions and an improvement in net income. While netsome associated cost escalation, particularly on in-bound freight, and the year-end pandemic surge, the markets for the Company’s products were more robust. Net sales were down 2%for 2021 rose 21%, as compared to 20192020 ($458,704,556,872, as compared to $468,186)$458,704), and net income was up about 12%22% ($15,242,18,587, as compared to $13,601) due$15,242). It is also interesting to note that operating income rose 35% (to $30,946 in 2021 from $22,908 in 2020) and that, but for the most part to the beneficial effectone-time benefit in 2020 of both a business combination (specifically,$4,657 arising from a bargain purchase gain relating to the Agrinos acquisition) andacquisition, the release of liabilities for uncertain tax positions (relating to acquisitions that were completedimprovement in 2017 and 2019). As the reader will note, many of the other factors (gross margin, factory performance and operating expenses) were in line with the prior year.income would have been 65% year-over-year.

In summary, our results for 20202021 were as follows. Net sales performance was mixedimproved across all our businesses. The top line of our U.S. Crop segment was up slightly, notwithstanding the restrictions placed on our activities by pandemic related protocols, which caused our customers25%, led by strong demand for soil insecticides and employees to operate on a virtual basis across the entire distribution channel. By contrast, salescotton products. Sales of our U.S. Non-Crop business declined primarilywas up 30% due largely to reducedstrong demand for our mosquito adulticide product, as customers worked downreplenished channel inventory. International sales rose with the addition of businesses that werehad been acquired late in the year2020 (Agrinos and AgNova) and improved, continued strong performance in Mexico partially offset by a restructuringand overall strong performance in the supply channel in Central America and market softness in Brazil. Factory performance was in line with 2019.other regions.  

As a result of the sales dynamics just described, absolute gross profit during 20202021 was approximately 3% below24% above that of 20192020 ($172,590213,243 vs. $177,354)$172,590). Despite the sales driven decline,Further, gross profit when expressed as a percentage of sales remained exactlywas 38%, which was in line with the prior year at 38%.year. Operating expenses increased by less than 2%18% ending at $154,339,$182,468, as compared to $151,133$154,339 in 2019. This performance included multiple offsetting puts-and-takes. Within this category, selling2020; however, operating expenses were down about 6%, while general and administrative increased by about 3%; however, that comparison is substantially impacted by the beneficial impact on 2019 expenses that did not recur in 2020, including: the fair value adjustments(which include outbound freight) as a percent of net sales decreased to contingent consideration associated with 2017 acquisitions ($3,866),33% from 34% compared to 2020.

With a lower average debt level and a break-up fee on an acquisition that did not complete ($500). On the other hand, in 2020, we did benefit from the release of environmental reserves established at the time of the 2019 acquisition of our Brazilian entity ($1,227), incurred a charge related to the change in fair value of certain liabilities associated with an acquisition ($250), offset by a profit on sale of some product registrations ($493). Expenses relating to Regulatory, R&D and Product Development rose by about 9%, primarily due to higher reregistration activity and continued work on our SIMPAS delivery system. Finally, freight rose by about 4% in light of increased sales of bulk products, such as soil fumigants. Overall, operating profit declined by about 13% (to $22,908 in 2020 from $26,221 in 2019).

During 2020, we benefitted from the recognition of a preliminary bargain purchase gaindecrease in the amount of $4,657 arising from the acquisition of Agrinos. Agrinos was acquired out of bankruptcy. This provided the Company with an opportunity to acquire Agrinos at an advantageous purchase price, which was below the preliminary fair value of the net assets acquired, resulting in the above-mentioned bargain purchase gain.

The Company also recorded a gain on change in fair value on a strategic equity investment in the amount of $717.

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In spite of having a slightly higher average debt level,effective interest rate, our interest expense dropped by about 28%29% (to $3,687 in 2021 from $5,178 in 2020 from $7,209 in 2019)2020) due both to timing of our borrowings, continued strong cash generated from increased sales, customer prepayment programs and a dropreduction in effective interest rates. This enabled us to reportFor 2021, we reported income before provision for income taxes and loss on equity method investment of $18,447,$27,141, as compared to $19,012$18,447 in 2019.

Our2020. Despite a higher effective tax rate for 2020 ended at 16.7%,and income taxes, our net income was $18,587 in 2021 as compared to 27.4% in 2019. This improvement is primarily due to two factors; the bargain purchase gain (which is not taxable) and the net benefit$15,242, which represents an increase of releasing liabilities (in the amount of $2,092) for uncertain tax positions related to current year positions and to acquisitions completed in 2017 and in 2019. All told, then, for the 2020 year we recorded net income up 12% at $15,242 (as compared to $13,601 in 2019) and earnings per diluted share of $0.51 (as compared to $0.46 in 2019)about 22%.

When considering the consolidated balance sheet, long-term debt decreased to $52,240 as of December 31, 2021, from $107,442 as of December 31, 2020, from $148,766 as of December 31, 2019.2020. The decreased level of debt was driven by the Company’s strong cash management during 2020,2021, including a continued strong response from the Company’s biggest customers to our early-pay programs. The Company’s liquidity position improved with a closing borrowing capacityavailability of $178,705 as of December 31, 2021, as compared to $86,736 as of December 31, 2020, as compared2020. Furthermore, inventories decreased to $26,977$154,306, as of December 31, 2019. Furthermore,2021, as compared to inventories remain flat atof $163,784, as of December 31, 2020, as compared to inventories of $163,313, this time last year. This included inventory associated with the two business acquisitions completed in the final three months of the year that amounted to approximately $8,340.2020.

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Results of Operations

20202021 Compared with 2019:2020:

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Our Net sales of our U.S. crop business recorded net sales that were about 1%25% higher than those of the prior year period ($223,167 versus $220,635)263,632 vs. $211,357). After a brief period of anticipatory buying during the first few monthsReopening of the economy, transportation needs fueling ethanol, and improving grower profitability due to higher crop commodity prices, all contributed to strong demand for AVD’s crop protection products. Despite the second year of challenging COVID-19 pandemic conditions characterized by the Delta variant and, at the end of the year, the Omicron variant and supply chain disruptions, overall demand in the U.S. crop segment continued the steady improvement that had started with the 2019-2020 crop season, and our customers in the distribution channel followed conservativegradually returned to more normal procurement practicespractices. We had very strong performance in corn, with sales of soil insecticides and post-emergent herbicides posting a 45% year-over-year increase.  Similarly in cotton, a strong commodity price stimulated demand for the secondour foliar insecticides and third quartersharvest defoliant which generated sales that were up 84%, as compared to those of 2020. Reduced ethanol demand, low crop commodity pricing,We also recorded stronger sales in our soybean products, Thimet for peanuts, and Dacthal for a strained farm economywide range of fruits and the COVID-19 pandemic all contributed to this approach. In the final quartervegetables. Partially offsetting these increases, sales of the year, however, corn and soybean commodity price began to escalate, and Midwest purchasing patterns began to normalize, which, in turn, benefitted our soil insecticide product lines. We saw a strong performance in our soil fumigant business driven by a rebound in usage by potato growers, as pandemic-impacted restaurants and schools began to reopen. Newly acquired products, primarily for soybean, rice and corn applications, contributed to a year-over-year increase in sales and bolstered U.S. Crop gross margins as a result. Partially offsetting these increases, we recorded lower net sales of our foliar insecticide Bidrindeclined slightly due to low cotton commodity prices (and a concomitant decline of 11%year-end logistics difficulties in planted cotton acres - down 1.5 million acres to 12.2 million), unfavorable weather conditions, (drought in West Texas and hurricanestransporting this large volume liquid product, particularly in the Southeast region) and reduced foliar pest pressure. Our cotton harvest defoliant Folex generated slightly lower sales following multiple hurricanes that struck the region destroying some harvestable acreage.Pacific Northwest region.

Cost of sales within the domestic crop business was slightly lower than 2019 (downhigher in 2021 (up 30% to $124,827$154,064 from $125,206)$118,634 in 2020), on sales that increased 25%, gross profit improved by 3%18% ($98,340109,568 in 20202021 vs. $95,429$92,723 in 2019)2020), and gross margin increased to 44%was 42% of sales as compared to 43%44% last year.

SalesNet sales of our U.S. non-crop business were downup about 21%30% ($48,55778,605 in 20202021 vs. $61,590$60,367 in 2019). Our2020) largely due to our Dibrom® mosquito adulticide sales, which constitute a significant portion of overall non-crop sales, were downnearly doubled in 20202021, as demand from mosquito control distributors continuedwas driven by significant tropical storm and hurricane activity and the normal need to work downrefill channel inventory.inventory in readiness for the next season. Net sales of pest strips and other commercial pest control products were down significantlyincreased strongly in 20202021, as a result of widespread closure of restaurants, schools, malls, and many other commercial enterprises due toreopened with the lifting of pandemic restrictions. In addition, COVID protocols adversely impacted the activity of commercial pest control operators. Offsetting these factors, netNet sales from our OHP nursery and ornamental business were 9%19% higher than 2019,2020, as demand for homeowner garden and landscape products accelerated during the second half of 2020year at retail locations around the country. Finally, our TyraTech/Envance revenues grew steadily withover 71% driven by both direct product sales and royalty income exceeding thewhich exceeded prior year performance.

Cost of sales in our U.S. non-crop business declinedrose by 17%27% in comparison to the prior year ($26,33241,162 in 20202021 vs. $31,877$32,525 in 2019)2020), gross profit declinedincreased by 25% ($22,22534% (from $27,842 in 2020 vs. $29,713to $37,443 in 2019)2021), and gross margin percentage declined slightlyincreased to 48% in 2021, as compared to 46% in 2020, as compared to 48% in 2019.2020.

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Net sales of our international businesses were increased by 1%15% in 20202021 ($186,980214,635 vs. $185,961$186,980 in 2019)2020). During 2020,2021, our international group successfully balanced several positive and negative factors.integrated two important new businesses. Our AgNova acquisition more than doubled our existing business in Australia, while our Agrinos biological products expanded our footprint in more than a half dozen countries worldwide. We enjoyed strong demand for our soil fumigants our Counter nematicide and our bromacil herbicides, particularly in Mexico, while experiencing reducedand experienced steady sales of one of our traditional insecticides (Mocap) due to regulatory phase-out in the EU. We benefitted from the addition of an acquired biological products business (Agrinos) and an established Australian supplier/distributor (AgNova). However, these gains were offset in part by softer demandCounter nematicide in Central America primarily due to a restructuringand Brazil. Further, we experienced slightly higher sales in theour AgriCenter Central American distribution business, despite supply channel, and in Brazil, primarily due to the devaluation of the Brazilian Real in comparison to last year,chain challenges, limited customer access (in light of coronavirus protocols), and competitive market conditions.

Cost of sales in our international business increased slightly (about 1%) toby 10% (to $148,403 in 2021 from $134,955 in 20202020), on sales that increased 15%, gross profit rose 27% from $133,749 in 2019. Gross profit at approximately the same level as the prior year ($52,025(to $66,232 in 20202021 vs. $52,212$52,025 in 2019)2020), and gross margin held steady atimproved to 31%, as compared to 28% (as postedreported in both years).2020.

On a consolidated basis, gross profit for the year decreasedincreased by 3%24% (ending at $172,590$213,243 in 2020,2021, as compared to $177,354$172,590 in 2019)2020) on sales up 21%. GrossTotal gross margin percentage remained the same as prior year at 38%, exactly in line with the prior year..        

Operating expenses in 2020(which include outbound freight costs) increased by $3,206 28,129 in 2021, to $154,339$182,468 or 34%33% of sales, as compared to $151,133$154,339 or 32%34% in 2019.2020. The differences in operating expenses by department are as follows:

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In July 2020, the Company made a strategic investment in Clean Seed Inc., in the amount of $1,190. Subsequent to the initial investment, the Company recorded positivea loss to its fair value adjustments in the amount of $717.

At the end of 2020 the Company completed on the acquisition of Agrinos. In addition to a manufacturing plant$391 in California, Agrinos has operating entities in a number of foreign countries including a manufacturing site in Mexico. The Company acquired Agrinos out of bankruptcy2021 and secured an economically advantageous purchase. The Company engaged a third-party valuation specialist to assist in establishing the preliminary fair value of the assets acquired. The valuation is mainly driven by future projected cash flows. The preliminary fair value of the net assets acquired, established with the assistance of a third-party valuation specialist, indicates that this acquisition resulted in a bargain purchase gain as the fair value of the acquired net assets exceeds the purchase price consideration. Accordingly, the Company has recorded a preliminary gain in the amount of $4,657 included$717 in operating income2020, respectively.

In February 2016, AMVAC BV made an equity investment of $3,283 in Biological Products for Agriculture (“Bi-PA”). The Company has elected to measure the investment at cost less impairment, if any, and to record an increase or decrease for changes resulting from observable price changes in orderly transactions for the identical or a similar investment of Bi-PA. The Company recorded an impairment in the amount of $399 during the year ended December 31, 2021. No impairment was recorded for the year ended December 31, 2020.

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Net interest expense was $5,178$3,687 in 2020,2021, as compared to $7,209$5,178 in 2019.2020. Interest costs are summarized in the following table:

The Company’s average overall debt for the year ended December 31, 20202021, was $170,801,$142,238, as compared to $166,828$170,801 for the year ended December 31, 2019.2020. On a gross basis, our effective interest rate decreased on our working capital revolver to 3.0%, as compared to 4.1% in 2019. This decrease was driven by decreases in the LIBOR rate. Afterafter adjustments related to capitalized interest and expenses related to the amortization of deferred liabilities, the overallour effective interest rate on our working capital revolver decreased to 2.6%, as compared to 3.0% in 2020. This improvement was 3.0% for 2020driven by U.S. fiscal policy and 4.3% 2019.decreases in the LIBOR rate, and improved cash management.

Our provision for income taxes for 20202021 was $3,080,$8,166, as compared to $5,202$3,080 for 2019.2020. The effective tax rate for 20202021 was 16.7%30.0%, as compared to 27.4%16.7% in 2019.2020. The increase of the effective tax rate in 2021 was due to a non-cash charge related to a valuation allowance associated with a deferred tax asset in Brazil.

The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. Federal income tax returns of the Company are subject to Internal Revenue Service (“IRS”) examination for the 20172018 through 20192020 tax years. State income tax returns are subject to examination for the 20162017 through 20192020 tax years. The Company has other foreign income tax returns subject to examination.

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For the years ended December 31, 20202021 and 2019,2020, the Company recorded net losses on its equity investments of $388 and $125, and $209, respectively.

Net income attributablewas $18,587 or $0.62 per basic share and $0.61 per diluted share in 2021 as compared to American Vanguard was $15,242 or $0.52 per basic share and $0.51 per diluted share in 2020 as compared to $13,601 or $0.46 per diluted share in 2019.2020.

Liquidity and Capital Resources

The Company generated $89,198$86,361 of cash from operating activities during the year ended December 31, 2020,2021, as compared to $9,569$90,324 in the prior year. Included in the $89,198$86,361 are net income of $15,242,$18,587, plus non-cash depreciation, amortization of intangibles and other assets and discounted future liabilities, in the amount of $23,849,$26,164, loss on disposal of property, plant and equipment of $194, amortization of deferred loan fees of $300,$367, revision of contingent consideration of $250,$758, and provision for bad debts in the amount of $1,002.$649. In addition, stock-based compensation of $6,561,$6,880, loss from equity method investments of $125,$388, change in investment fair value of $717,investments of $790, change in value of deferred income taxes of $969,$2,090, change in reserves for uncertain tax positions of $2,092, a$1,783, adjustment to bargain purchase gain on business acquisition in the amount of $4,657$171, decrease in environmental liability of $167, and other items amounting to $128,net foreign currency adjustment of $225, resulted in net cash provided by operating activities of $40,960,$49,669, as compared to $43,686$39,931 for the same period of 2019.2020.

During 2020,2021, the Company decreased working capital by $37,160,$39,987, as compared to the position at December 31, 2019.2020. Included in this change: accounts receivables decreasednet increased by $15,559,$24,347, inventories decreased by $7,421, income taxes$8,130, tax receivable, net increased by $287,$6,051, and prepaid expenses decreasedincreased by $140.$3,354. Deferred revenue increased by $36,803,$19,280, as compared to December 31, 2019,2020, driven by individual customer decisions to make early payments in return for early cash incentive programs. Our accounts payable balances decreasedincreased by $8,124,$8,783, program accruals decreasedincreased by $2,517$17,877 and other payables and accrued expenses decreasedincreased by $775.$3,986.  

With regard to our program accrual, the year-over-year change is primarily driven by the mix of sales and customers in 2020,2021, as compared to the prior year. The Company accrues programs in line with the growing season upon which specific products are targeted. Most of our programs relate to domestic sales. Typically, domestic crops have a growing season that ends on September 30^th of each year. During 2021, the Company made accruals in the amount of $99,482 and made payments in the amount of $81,678. During 2020, the Company made accruals in the amount of $66,622 and made payments in the amount of $68,880. During 2019, the Company made accruals in the amount of $63,579, acquired certain liabilities in the amount of $7,247 as part of an acquisition, and made payments in the amount of $60,476.

21

Because the estimate for the program accrual is a material component of the presentation of the Company’s overall financial performance, the Company believes that the process it uses is critical in setting the accrual at the appropriate level. The Company’s process for developing the estimate involves a detailed review of each related transaction and includes the input of a significant number of senior employees to enable the Company to set the accrual using consistently applied judgements, subject to the particular circumstances of any individual transaction.  

Cash used for investing activities amounted to $35,795$20,042 for the year ended December 31, 2020,2021, as compared to $54,837$35,795 in 2019. The2020. In 2021, the Company spent $10,524 in business and product acquisitions and on patents applications associated with its TyraTech and Envance technology solutions. In addition, in 2021, $9,518 was spent on capital expenditures primarily focused on continuing to invest in manufacturing infrastructure to expand production efficiency and capabilities. In 2020, the Company spent $23,356 in business and product acquisitions including intangible assets, goodwill, working capital and fixed assets as well as patent application costs. The Company spent $1,190 on an equity investment. In addition, in 2020, $11,249 was spent on capital expenditures primarily focused on continuing to invest in manufacturing infrastructure. In 2019, the Company spent $41,852 in business and product acquisitions including intangible assets, goodwill, working capital and fixed assets as well as patent application costs, and $12,985$11,249 on capital expenditures primarily focused on our manufacturing facilities. Furthermore in 2020, the Company spent $1,190 on an equity investment.

During the year ended December 31, 2020,2021, financing activities used $43,213, principally$65,871, as compared to $44,440 during the prior year. This included making repayments on the Company’s senior credit facility as compared to providing $46,406 forin the amount of $55,569 during the year ended December 31, 2019. This included net2021. During 2020, the Company made similar repayments in the amount of $41,624 on our credit facility in 2020, as compared to net borrowings of $51,900 in 2019.$41,624.  During 2021, the year, weCompany paid dividends to stockholders amounting to $1,168,$2,382, as compared to $2,323$1,168 in 2019.2020. Furthermore, the Company paid for contingent consideration in the amount of $1,301 and $1,227 for the years ended December 31, 2021 and 2020, respectively. Finally, the Company used $4,579 to repurchase common stock in 2021. The Company did not repurchase common stock at market in 2020, as compared to repurchases of $2,604 in prior year.  2020.

The Company has various loans in place that together constitute the long-term loan balances shown in the consolidated balance sheets as atof December 31, 20202021 and 2019.2020. These are summarized in the following table:

The Company’s main bank is Bank of the West, a wholly-ownedwholly owned subsidiary of the French bank, BNP Paribas. Bank of the West has been the Company’s bank for more than 30 years and is the syndication manager for the Company’s loans.

23

The Company and certain of its affiliates are parties to a revolving line of credit agreement entitled the “Third Amended and Restated Loan and Security Agreement” dated as of August 5, 2021 (the “Credit Agreement”), which is a senior secured lending facility among AMVAC, the Company’s principal operating subsidiary, as borrower, and affiliatesBorrower Agent (including the Company AMVAC CV and AMVAC BV), as  guarantors and/or borrowers,Borrowers, on the one hand, and a group of commercial lenders led by Bank of the West as administrative agent, swing line lenderdocumentation agent, syndication agent, collateral agent, sole lead arranger and Letter of Credit issuerbook runner, on the other hand, consistinghand. The Credit Agreement consists of a line of credit of up to $250,000,$275,000, an accordion feature of up to $100,000$150,000, a letter of credit and swingline sub-facility (each having limits of $25,000) and has a maturity date of August 5, 2026. The Credit Agreement amends and restates the previous credit facility, which had a maturity date of June 30, 2022. TheWith respect to key financial covenants, the Credit Agreement contains two key financial covenants;two: namely, borrowers are required to maintain a Consolidated Funded DebtTotal Leverage (“TL”) Ratio of no more than 3.5-to-1, during the first three years, stepping down to 3.25-to-1 as of September 30, 2024, and a Consolidated Fixed Charge CovenantCoverage Ratio of at least 1.25-to-1. In addition, to the extent that it completes acquisitions totaling $15 million or more in any 90-day period, AMVAC may step-up the TL Ratio by 0.5-to-1, not to exceed 4.00-to-1, for the next three full consecutive quarters. Acquisitions below $50 million do not require Agent consent.

The Company’s borrowing capacity varies with its financial performance, measured in terms of Consolidated EBITDA as defined in the Credit Agreement, for the trailing twelve-month period. Under the Credit Agreement, revolving loans bear interest at a variable rate based, at borrower’s election with proper notice, on either (i) LIBOR plus the “Applicable Rate”Margin” which is based upon the Consolidated Funded DebtTotal Leverage (“TL”) Ratio (“Eurocurrency RateLIBOR Revolver Loan”) or (ii) the greater of (x) the Prime Rate, (y) the Federal Funds Rate plus 0.5%, and (z) the Daily One-Month LIBOR Rate plus 1.00%, plus, in the case of (x), (y) or (z) the Applicable RateMargin (“AlternateAdjusted Base Rate Revolver Loan”). Interest payments for Eurocurrency RateLIBOR Revolver Loans are payable on the last day of each interest period (either one, two, threeone-, three- or sixsix- months, as selected by the borrower) and the maturity date, while interest payments for AlternateAdjusted Base Rate Revolver Loans are payable on the last business day of each month and the maturity date. The interest rate on December 31, 20202021, was 2.75%1.98%.  

As of April 22 2020, AMVAC, as borrower, and certain affiliates amended the Credit Agreement., The Credit Agreement, as amended, has the same term and loan commitments, however the maximum permitted consolidated funded debt ratio (the “CFD Ratio”) has been increased from 3.25-to-1 to the following schedule: 4.00-to-1 through September 30, 2020, stepping down to 3.75-to-1 through December 31, 2020, 3.5-to-1 through March 31, 2021 and 3.25-to-1 thereafter. In addition, to the extent that it completes acquisitions totaling $15 million or more in any 90-day period, AMVAC may step-up the CFD Ratio by 0.5-to-1, not to exceed 4.25-to-1, for the next three full consecutive quarters. Finally, to the extent that a proposed acquisition is at least $30 million but less than $50 million, the consent of the Lead Agent is required. Larger acquisitions continue to require the consent of a majority of the Lenders.

At December 31, 2020,2021, according to the terms of the Credit Agreement, as amended, and based on our performance against the most restrictive covenant listed above, the Company had the capacity to increase its borrowings by up to $86,736.$178,705. This compares to an available borrowing capacity of $26,977$86,736 as of December 31, 2019.2020. The level of borrowing capacity is driven by three factors: (1) our financial performance, as measured in EBITDA for trailing twelve-month period, (2) the inclusion of proforma EBITDA related to acquisitions completed during the preceding twelve months and (3) the leverage covenant (being the number of times EBITDA the Company may borrow under its credit facility agreement). The Company was in compliance with all theits debt covenants as of December 31, 2020.2021.

We believe that the combination of our cash flows from future operations, current cash on hand and the availability under the Company’s credit facility will be sufficient to meet our working capital and capital expenditure requirements and will provide us with adequate liquidity to meet our anticipated operating needs for at least the next 12 months from the issuance of the Annual Report. Although operating activities are expected to provide cash, to the extent of growth in the future, our operating and investing activities will use cash and, consequently, this growth may require us to access some or all of the availability under the credit facility. It is also possible that additional sources of finance may be necessary to support additional growth.

Substantially all of the Company’s assets are pledged as collateral under the Credit Agreement, as amended.  

Contractual Obligations and Off-Balance Sheet Arrangements

The following summarizes our contractual obligations at December 31, 2020, and the effects such obligations are expected to have on cash flows in future periods: