UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER 30,~~MARCH 31, ~~2022~~2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number 001-13795

AMERICAN VANGUARD CORPORATION


Delaware	95-2588080
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification Number)

4695 MacArthur Court, Newport Beach, California	92660
(Address of principal executive offices)	(Zip Code)

(949) 260-1200

(Registrant’s telephone number, including area code)

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, ~~$.10~~$0.10 par value

AVD

New York Stock Exchange

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.


Large Accelerated Filer	☐	Accelerated Filer	☒
Non-Accelerated Filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Stock, ~~$.10~~$0.10 Par ~~Value —~~ Value—~~29,581,627~~29,415,136 shares as of ~~November 2, 2022.~~April 27, 2023.

AMERICAN VANGUARD CORPORATION

INDEX

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	For the three months ended March 31
	2023			2022
Net sales	$	124,885		$	149,593
Cost of sales		(86,348	)		(98,198	)
Gross profit		38,537			51,395
Operating expenses		(35,272	)		(36,646	)
Operating income		3,265			14,749
Change in fair value of an equity investment		(22	)		83
Interest expense, net		(1,686	)		(398	)
Income before provision for income taxes		1,557			14,434
Income tax benefit (expense)		361			(4,499	)
Net income	$	1,918		$	9,935
Earnings per common share—basic	$	0.07		$	0.33
Earnings per common share—assuming dilution	$	0.07		$	0.33
Weighted average shares outstanding—basic		28,367			29,677
Weighted average shares outstanding—assuming dilution		29,073			30,349

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2022

2021

2022

2021

Net sales

$
152,117

$
147,298

$
449,636

$
398,063

Cost of sales

(90,733
)

(90,234
)

(267,280
)

(243,729
)
Gross profit

61,384

57,064

182,356

154,334

Operating expenses

(50,140
)

(48,410
)

(145,550
)

(132,934
)
Adjustment to bargain purchase gain on business acquisition

—

292

—

171

Operating income

11,244

8,946

36,806

��
21,571

Change in fair value of equity investments

(454
)

(668
)

(857
)

103

Other income

—

—

—

672

Interest expense, net

(1,086
)

(962
)

(2,256
)

(2,921
)
Income before provision for income taxes and loss on equity
method investment

9,704

7,316

33,693

19,425

Income tax expense

(2,963
)

(1,517
)

(10,187
)

(5,324
)
Income before loss on equity method investment

6,741

5,799

23,506

14,101

Loss on equity method investment

—

(301
)

—

(388
)
Net income

$
6,741

$
5,498

$
23,506

$
13,713

Earnings per common share—basic

$
.23

$
.18

$
.80

$
.46

Earnings per common share—assuming dilution

$
.23

$
.18

$
.78

$
.45

Weighted average shares outstanding—basic

29,214

29,892

29,496

29,854

Weighted average shares outstanding—assuming dilution

29,805

30,390

30,128

30,470

See notes to the ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

For the Three Months
Ended September 30,

For the Nine Months
Ended September 30,

2022

2021

2022

2021

Net income

$
6,741

$
5,498

$
23,506

$
13,713

Other comprehensive loss:

Foreign currency translation adjustment, net of tax effects

(2,764
)

(3,459
)

(1,748
)

(3,048
)
Comprehensive income

$
3,977

$
2,039

$
21,758

$
10,665


	For the three months ended March 31
	2023		2022
Net income	$	1,918	$	9,935
Other comprehensive income:
Foreign currency translation adjustment, net of tax effects		2,546		7,080
Comprehensive income	$	4,464	$	17,015

See notes to the ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

ASSETS

September 30,
2022

December 31,
2021

Current assets:

Cash and cash equivalents

$
20,808

$
16,285

Receivables:

Trade, net of allowance for doubtful accounts of $4,535 and $3,938, respectively

194,515

149,326

Other

10,022

9,595

Total receivables, net

204,537

158,921

Inventories

192,309

154,306

Prepaid expenses

16,967

12,488

Income taxes receivable

2,180

—

Total current assets

436,801

342,000

Property, plant and equipment, net

68,598

66,111

Operating lease right-of-use assets

25,402

25,386

Intangible assets, net

187,207

197,841

Goodwill

46,215

46,260

Other assets

11,936

16,292

Deferred income tax assets, net

16

270

Total assets

$
776,175

$
694,160

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current installments of other liabilities

$
—

$
802

Accounts payable

81,919

67,140

Customer prepayments

222

63,064

Accrued program costs

108,016

63,245

Accrued expenses and other payables

24,390

20,745

Income taxes payable

—

3,006

Current operating lease liabilities

5,329

5,059

Total current liabilities

219,876

223,061

Long-term debt, net

148,414

52,240

Long-term operating lease liabilities

20,536

20,780

Other liabilities, net of current installments

5,457

5,335

Deferred income tax liabilities, net

19,324

20,006

Total liabilities

413,607

321,422

Commitments and contingent liabilities

Stockholders' equity:

Preferred stock, $.10 par value per share; authorized 400,000 shares; none issued

—

—

Common stock, $.10 par value per share; authorized 40,000,000 shares; issued
34,463,947 shares at September 30, 2022 and 34,248,218 shares at December 31, 2021

3,446

3,426

Additional paid-in capital

101,426

101,450

Accumulated other comprehensive loss

(15,532
)

(13,784
)
Retained earnings

325,698

304,385

Less treasury stock at cost, 4,884,200 shares at September 30, 2022 and 3,361,040 shares at December 31, 2021

(52,470
)

(22,739
)
Total stockholders’ equity

362,568

372,738

Total liabilities and stockholders' equity

$
776,175

$
694,160


	March 31, 2023			December 31, 2022
Current assets:
Cash and cash equivalents	$	19,568		$	20,328
Receivables:
Trade, net of allowance for doubtful accounts of $5,692 and $5,136, respectively		166,120			156,492
Other		9,999			9,816
Total receivables, net		176,119			166,308
Inventories		219,080			184,190
Prepaid expenses		15,324			15,850
Income taxes receivable		4,879			1,891
Total current assets		434,970			388,567
Property, plant and equipment, net		71,538			70,912
Operating lease right-of-use assets		24,460			24,250
Intangible assets, net		181,909			184,664
Goodwill		47,366			47,010
Other assets		10,610			10,769
Deferred income tax assets, net		220			141
Total assets	$	771,073		$	726,313

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	74,887		$	69,000
Customer prepayments		70,338			110,597
Accrued program costs		71,379			60,743
Accrued expenses and other payables		38,038			20,982
Operating lease liabilities, current		5,367			5,279
Total current liabilities		260,009			266,601
Long-term debt, net		97,000			51,477
Operating lease liabilities, long term		19,614			19,492
Other liabilities, net of current installments		4,648			4,167
Deferred income tax liabilities, net		14,808			14,597
Total liabilities		396,079			356,334
Commitments and contingent liabilities (Notes 15 and 17)
Stockholders' equity:
Preferred stock, $0.10 par value per share; authorized 400,000 shares; none issued		—			—
Common stock, $0.10 par value per share; authorized 40,000,000 shares; issued 34,463,829 shares at March 31, 2023 and 34,446,194 shares at December 31, 2022		3,446			3,444
Additional paid-in capital		107,591			105,634
Accumulated other comprehensive loss		(9,636	)		(12,182	)
Retained earnings		329,812			328,745
Less treasury stock at cost, 5,057,727 shares at March 31, 2023 and 5,029,892 shares at December 31, 2022		(56,219	)		(55,662	)
Total stockholders’ equity		374,994			369,979
Total liabilities and stockholders’ equity	$	771,073		$	726,313

See notes to the ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For The Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and March 31, 2022

(In thousands, except share data)

(Unaudited)


	Common Stock						Additional			Accumulated Other						Treasury Stock								Common Stock						Additional			Accumulated Other						Treasury Stock
	Shares			Amount			Paid-in Capital			Comprehensive Loss			Retained Earnings			Shares		Amount			Total			Shares			Amount			Paid-in Capital			Comprehensive Loss			Retained Earnings			Shares		Amount			Total
Balance, December 31, 2022																									34,446,194		$	3,444		$	105,634		$	(12,182	)	$	328,745			5,029,892	$	(55,662	)	$	369,979
Stocks issued under ESPP																									22,101			2			478			—			—			—		—			480
Cash dividends on common stock ($0.030 per share)																									—			—			—			—			(851	)		—		—			(851	)
Foreign currency translation adjustment, net																									—			—			—			2,546			—			—		—			2,546
Stock-based compensation																									—			—			1,474			—			—			—		—			1,474
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes)																									(4,466	)		—			5			—			—			—		—			5
Shares repurchased																									—			—			—			—			—			27,835		(557	)		(557	)
Net income																									—			—			—			—			1,918			—		—			1,918
Balance, March 31, 2023																									34,463,829		$	3,446		$	107,591		$	(9,636	)	$	329,812			5,057,727	$	(56,219	)	$	374,994

Balance, December 31, 2021		34,248,218		$	3,426		$	101,450		$	(13,784	)	$	304,385			3,361,040	$	(22,739	)	$	372,738			34,248,218		$	3,426		$	101,450		$	(13,784	)	$	304,385			3,361,040	$	(22,739	)	$	372,738
Common stock issued under ESPP		26,751			2			434			—			—			—		—			436
Stocks issued under ESPP																									26,751			2			434			—			—			—		—			436
Cash dividends on common stock ($0.025 per share)		—			—			—			—			(736	)		—		—			(736	)		—			—			—			—			(736	)		—		—			(736	)
Foreign currency translation adjustment, net		—			—			—			7,080			—			—		—			7,080			—			—			—			7,080			—			—		—			7,080
Stock-based compensation		—			—			1,563			—			—			—		—			1,563			—			—			1,563						—			—		—			1,563
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes)		(183,093	)		(18	)		(2,156	)		—			—			—		—			(2,174	)		(183,093	)		(18	)		(2,156	)		—			—			—		—			(2,174	)
Shares repurchased																	332,404		(6,219	)		(6,219	)		—			—			—			—			—			332,404		(6,219	)		(6,219	)
Net income		—			—			—			—			9,935			—		—			9,935			—			—			—			—			9,935			—		—			9,935
Balance, March 31, 2022		34,091,876			3,410			101,291			(6,704	)		313,584			3,693,444		(28,958	)		382,623			34,091,876		$	3,410		$	101,291		$	(6,704	)	$	313,584			3,693,444	$	(28,958	)	$	382,623
Cash dividends on common stock ($0.025 per share)		—			—			—			—			(742	)		—		—			(742	)
Foreign currency translation adjustment, net		—			—			—			(6,064	)		—			—		—			(6,064	)
Stock-based compensation		—			—			1,273			—			—			—		—			1,273
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes)		351,358			35			892			—			—			—		—			927
Shares repurchased		—			—			—			—			—			606		(13	)		(13	)
Net income		—			—			—			—			6,830			—		—			6,830
Balance, June 30, 2022		34,443,234			3,445			103,456			(12,768	)		319,672			3,694,050		(28,971	)		384,834
Common stock issued under ESPP		24,489			2			399			—			—			—		—			401
Cash dividends on common stock ($0.025 per share)		—			—			—			—			(715	)		—		—			(715	)
Foreign currency translation adjustment, net		—			—			—			(2,764	)		—			—		—			(2,764	)
Stock-based compensation		—			—			1,560			—			—			—		—			1,560
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes)		(3,776	)		(1	)		11			—			—			—		—			10
Shares repurchased		—			—			—			—			—			387,340		(7,499	)		(7,499	)
Accelerated share repurchase pending final settlement		—			—			(4,000	)		—			—			802,810		(16,000	)		(20,000	)
Net income		—			—			—			—			6,741			—		—			6,741
Balance, September 30, 2022		34,463,947		$	3,446		$	101,426		$	(15,532	)	$	325,698			4,884,200	$	(52,470	)	$	362,568

See notes to the ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.

~~AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~For The Three and Nine Months Ended September 30, 2021~~

~~(In thousands, except share data)~~

~~(Unaudited)~~

Common Stock

Additional

Accumulated
Other

Treasury Stock

Shares

Amount

Paid-in
  Capital

Comprehensive
Loss

Retained
Earnings

Shares

Amount

AVD
Total

Balance, December 31, 2020

33,922,433

$
3,394

$
96,642

$
(9,322
)

$
288,182

3,061,040

$
(18,160
)

$
360,736

Common stock issued under ESPP

25,120

2

338

—

—

—

—

340

Cash dividends on common stock ($0.02 per share)

—

—

—

—

(596
)

—

—

(596
)
Foreign currency translation adjustment, net

—

—

—

(2,503
)

—

—

—

(2,503
)
Stock-based compensation

—

—

1,792

—

—

—

—

1,792

Stock options exercised; grants, termination
   and vesting of restricted stock units
   (net of shares in lieu of taxes)

(73,231
)

(7
)

(2,787
)

—

—

—

—

(2,794
)
Net income

—

—

—

—

3,071

—

—

3,071

Balance, March 31, 2021

33,874,322

3,389

95,985

(11,825
)

290,657

3,061,040

(18,160
)

360,046

Cash dividends on common stock ($0.02 per share)

—

—

—

—

(600
)

—

—

(600
)
Foreign currency translation adjustment, net

—

—

—

2,914

—

—

—

2,914

Stock-based compensation

—

—

1,806

—

—

—

—

1,806

Stock options exercised; grants, termination
   and vesting of restricted stock units
   (net of shares in lieu of taxes)

387,329

39

22

—

—

—

—

61

Net income

—

—

—

—

5,144

—

—

5,144

Balance, June 30, 2021

34,261,651

3,428

97,813

(8,911
)

295,201

3,061,040

(18,160
)

369,371

Common stock issued under ESPP

25,662

2

401

403

Cash dividends on common stock ($0.02 per share)

—

—

—

—

(594
)

—

—

(594
)
Foreign currency translation adjustment, net

—

—

—

(3,459
)

—

—

—

(3,459
)
Stock-based compensation

—

—

1,711

—

—

—

—

1,711

Stock options exercised; grants, termination
   and vesting of restricted stock units
   (net of shares in lieu of taxes)

(14,648
)

(2
)

(8
)

—

—

—

—

(10
)
Shares repurchased

—

—

—

—

—

300,000

(4,579
)

(4,579
)
Net income

—

—

—

—

5,498

—

—

5,498

Balance, September 30, 2021

34,272,665

$
3,428

$
99,917

$
(12,370
)

$
300,105

3,361,040

$
(22,739
)

$
368,341

~~See notes to the Condensed Consolidated Financial Statements.~~

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

For the Nine Months Ended September 30,

2022

2021

Cash flows from operating activities:

Net income

$
23,506

$
13,713

Adjustments to reconcile net income to net cash used in operating
activities:

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

16,649

17,045

Amortization of other long-term assets

2,656

2,981

Loss on disposal of property, plant and equipment

265

—

Accretion of discounted liabilities

28

(10
)
Amortization of deferred loan fees

174

294

Provision for bad debts

597

1,202

Loan principal and interest forgiveness

—

(672
)
Fair value adjustment to contingent consideration

621

520

Stock-based compensation

4,396

5,309

Change in deferred income taxes

(64
)

(560
)
Change in fair value of equity investments

857

(103
)
Loss on equity method investment

—

388

Adjustment to bargain purchase gain on business acquisition

—

(171
)
Net foreign currency adjustments

218

(330
)
Changes in assets and liabilities associated with operations:

Increase in net receivables

(46,289
)

(42,979
)
Increase in inventories

(38,987
)

(4,325
)
Increase in prepaid expenses and other assets

(4,272
)

(2,194
)
(Increase) decrease in income tax receivable/payable, net

(5,201
)

2,031

Increase in net operating lease liability

10

183

Increase in accounts payable

14,418

7,769

Decrease in customer prepayments

(62,831
)

(38,272
)
Increase in accrued program costs

45,016

33,982

Increase in other payables and accrued expenses

2,555

4,025

Net cash used in operating activities

(45,678
)

(174
)
Cash flows from investing activities:

Capital expenditures

(8,946
)

(7,963
)
Proceeds from disposal of property, plant and equipment

46

—

Acquisition of product line

—

(10,000
)
Intangible assets

(1,078
)

(285
)
Investments

—

(183
)
Net cash used in investing activities

(9,978
)

(18,431
)
Cash flows from financing activities:

Payments under line of credit agreement

(64,000
)

(57,408
)
Borrowings under line of credit agreement

160,000

86,000

Payment of contingent consideration

—

(250
)
Net receipt from the issuance of common stock under ESPP

837

743

Net receipt from the exercise of stock options

783

172

Payment for tax withholding on stock-based compensation awards

(2,020
)

(2,915
)
Repurchase of common stock

(33,731
)

(4,579
)
Payment of cash dividends

(2,072
)

(1,789
)
Net cash provided by financing activities

59,797

19,974

Net increase in cash and cash equivalents

4,141

1,369

Effect of exchange rate changes on cash and cash equivalents

382

(574
)
Cash and cash equivalents at beginning of period

16,285

15,923

Cash and cash equivalents at end of period

$
20,808

$
16,718


	For the three months ended March 31
	2023			2022
Cash flows from operating activities:
Net income	$	1,918		$	9,935
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property, plant and equipment and intangible assets		5,539			5,230
Amortization of other long-term assets		714			1,173
Provision for bad debts		581			494
Fair value adjustment of contingent consideration		—			599
Stock-based compensation		1,474			1,563
Change in deferred income taxes		122			207
Change in liabilities for uncertain tax positions or unrecognized tax benefits		371			—
Other		94			2
Foreign currency transaction gains		(446	)		(261	)
Changes in assets and liabilities associated with operations:
Increase in net receivables		(8,779	)		(33,660	)
Increase in inventories		(33,731	)		(11,738	)
Decrease (increase) in prepaid expenses and other assets		600			(800	)
Change in income tax receivable/payable, net		(2,965	)		3,046
Increase in accounts payable		5,655			9,677
Decrease in customer prepayments		(22,759	)		(44,528	)
Increase in accrued program costs		10,660			24,601
(Decrease) increase in other payables and accrued expenses		(500	)		2,145
Net cash used in operating activities		(41,452	)		(32,315	)
Cash flows from investing activities:
Capital expenditures		(2,590	)		(3,294	)
Proceeds from disposal of property, plant and equipment		—			54
Acquisition of a product line		(703	)		—
Intangible assets		(15	)		(1,010	)
Net cash used in investing activities		(3,308	)		(4,250	)
Cash flows from financing activities:
Payments under line of credit agreement		(27,300	)		(12,000	)
Borrowings under line of credit agreement		72,000			58,000
Net receipt from the issuance of common stock under ESPP		480			436
Net receipt from the exercise of stock options		18			—
Receipt payment for tax withholding on stock-based compensation awards		(13	)		(2,174	)
Repurchase of common stock		(557	)		(6,219	)
Payment of cash dividends		(851	)		(594	)
Net cash provided by financing activities		43,777			37,449
Net (decrease) increase in cash and cash equivalents		(983	)		884
Effect of exchange rate changes on cash and cash equivalents		223			672
Cash and cash equivalents at beginning of period		20,328			16,285
Cash and cash equivalents at end of period	$	19,568		$	17,841

See notes to the ~~Condensed Consolidated Financial Statements.~~condensed consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

(In thousands, except share data)

(Unaudited)

1. Summary of Significant Accounting Policies — The accompanying unaudited condensed consolidated financial statements of American Vanguard Corporation and Subsidiaries (“AVD” or “the Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of consolidating adjustments, eliminations and normal recurring accruals) considered necessary for a fair ~~statement~~presentation have been included. Operating results for the ~~three- and nine-month periods~~three months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2022.~~2023. The financial statements and related notes do not include all information and footnotes required by US GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2021.~~

The Company continues to closely monitor the impact of the novel coronavirus (COVID-19) pandemic on all aspects of its business, including how the pandemic will impact its customers, business partners, and employees. The Company is considered an essential business by most governments2022. Certain operating cash flow items have been reclassified in the ~~jurisdictions and territories in which~~prior period condensed consolidated financial statements to conform with the Company operates and, as a result, did not incur significant disruptions from the COVID-19 pandemic during the three- and nine-month periods ended September 30, 2022 and 2021. During the three- and nine-month periods ended September 30, 2022, the Company experienced strong demand for its domestic crop and international products, and generally more normal business activities including face-to-face meetings with customers and suppliers etc. The Company established a pandemic working group at the start of the COVID-19 pandemic.

Looking forward, the Company is unable to predict the impact that the pandemic may have on its future financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its customers in the near term will depend on future developments, which are highly uncertain and, beyond extrapolating our experience since the start of the pandemic, cannot be predicted with confidence. The Company continues to monitor its business for adverse impacts of the pandemic, including some continuing volatility in foreign exchange markets, supply-chain disruptions in certain markets, and increased costs of employee safety and retention, among others.March 31, 2023 presentation.

2. Leases — The Company has operating leases for warehouses, manufacturing facilities, offices, cars, railcars and certain equipment. The lease term includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not terminate) that the Company is reasonably certain to exercise. The Company has leases with a lease term ranging from 1one year ~~year~~ to 20years.

Finance leases are immaterial to the accompanying condensed consolidated financial statements. There were no lease transactions with related parties as of and for the ~~three- and nine-month~~three-month periods presented in the table below.

The operating lease expense for the ~~three-month periods~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021,~~ was $~~1,653~~1,637 and $~~1,568~~1,604, ~~respectively, and $4,876~~ ~~and $4,464~~ ~~for the nine-month periods ended September 30, 2022 and 2021,~~ respectively. Lease expenses related to variable lease payments and short-term leases were immaterial. ~~Additional~~Other information related to operating leases ~~are as~~ follows:

Three months
ended
September 30, 2022

Three months
ended
September 30, 2021

Nine months
ended
September 30, 2022

Nine months
ended
September 30, 2021

Cash paid for amounts included in the
measurement of lease liabilities

$
1,613

$
1,260

$
4,846

$
4,271

ROU assets obtained in exchange for new
liabilities

$
2,378

$
5,805

$
4,202

$
17,872


	Three months ended March 31, 2023		Three months ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities	$	1,644	$	1,674
Right-of-use assets obtained in exchange for new liabilities	$	1,884	$	926

The weighted-average remaining lease term and discount rate related to the operating leases as of ~~September 30, 2022~~March 31, 2023 were as follows:


Weighted-average remaining lease term (in years)		~~6.08~~5.68
Weighted-average discount rate	~~4.00~~	4.12	%

Future minimum lease payments under non-cancellable operating leases as of ~~September 30, 2022~~March 31, 2023 were as follows:


2022 (excluding nine-months ended September 30, 2022)	$	1,603
2023		5,977
2023 (excluding three months ended March 31, 2023)				$	4,625
2024		5,132			5,657
2025		4,610			5,143
2026		3,439			3,926
2027					2,662
Thereafter		8,580			6,200
Total lease payments		29,341		$	28,213
Less: imputed interest		(3,476	)		(3,232	)
Total	$	25,865		$	24,981
Amounts recognized in the condensed consolidated balance sheets:

Amounts recognized in the condensed consolidated balance sheet:
Operating lease liabilities, current	$	5,329		$	5,367
Operating lease liabilities, long-term	$	20,536
Operating lease liabilities, long term				$	19,614

3. Revenue Recognition —The Company recognizes revenue from the sale of its products, which include crop and non-crop products. The Company sells its products to customers, which include distributors, retailers, and growers. In addition, the Company recognizes royalty income from licensing agreements. ~~Based on similar economic and operational characteristics, the Company’s business is aggregated into~~ The Company has one reportable segment. Selective enterprise information of sales disaggregated by category and geographic region is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
Net sales:
U.S. crop	$	69,115	$	66,722	$	220,503	$	184,052	$	61,876	$	88,193
U.S. non-crop		18,936		21,622		53,648		60,563		13,899		13,396
Total U.S.		88,051		88,344		274,151		244,615		75,775		101,589
International		64,066		58,954		175,485		153,448		49,110		48,004
Total net sales:	$	152,117	$	147,298	$	449,636	$	398,063	$	124,885	$	149,593
Timing of revenue recognition:
Goods and services transferred at a point in time	$	152,117	$	147,298	$	449,493	$	397,762	$	124,842	$	149,487
Goods and services transferred over time		—		—		143		301		43		106
Total net sales:	$	152,117	$	147,298	$	449,636	$	398,063	$	124,885	$	149,593

Contract assets relate to royalties earned on certain functional licenses granted for the use of the Company’s intellectual property and amounted to $~~3,000~~ ~~and $3,900~~3,100 at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022. The short-term and long-term contract assets of $~~1,525~~2,295 and $~~1,475~~805 are included in other receivables and other assets, respectively, on the condensed consolidated balance sheets as of ~~September 30, 2022. The~~March 31, 2023. As of December 31, 2022, the short-term and long-term assets ofamounted to $~~1,825~~2,098 and $~~2,075~~1,002 ~~are included in other receivables and other assets, respectively, on the condensed consolidated balance sheets as of December 31, 2021.~~, respectively.

The Company sometimes receives payments from its customers in advance of goods and services being provided in return for early cash incentive programs. These payments are included in customer prepayments on the condensed consolidated balance sheets. Revenue recognized for the ~~three- and nine-month periods~~three months ended ~~September 30, 2022,~~March 31, 2023, that was included in customer prepayments at the beginning of ~~2022,~~2023, was $~~272~~22,759 and $~~63,064~~17,500~~, respectively.~~ was reclassified to accrued expenses and other payables. The Company expects to recognize all its remaining customer prepayments as revenue in fiscal ~~2022.~~2023.

4. Property, Plant and Equipment — Property, plant and equipment at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consists of the following:


	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Land	$	2,755		$	2,756		$	2,761		$	2,757
Buildings and improvements		19,909			19,844			20,918			20,794
Machinery and equipment		140,309			132,159			146,047			142,980
Office furniture, fixtures and equipment		10,419			10,094			11,266			13,231
Automotive equipment		1,595			1,832			1,490			1,584
Construction in progress		7,898			8,199			4,622			5,897
Total gross value		182,885			174,884
Total								187,104			187,243
Less accumulated depreciation		(114,287	)		(108,773	)		(115,566	)		(116,331	)
Total net value	$	68,598		$	66,111
Property, plant and equipment, net							$	71,538		$	70,912

The Company recognized depreciation expense related to property and equipment of $~~2,091~~2,179 and $~~2,496~~2,103 for the ~~three-month periods~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. The Company recognized depreciation expense related to property and equipment of $6,207~~ ~~and $6,341~~ ~~for the nine-month periods ended September 30, 2022 and 2021,~~ respectively.

Substantially all of the Company’s assets are pledged as collateral towith its lender banks.

5. Inventories — Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (“FIFO”) or average cost ~~methods.~~method. The components of inventories consist of the following:

September 30,
2022

December 31, 2021

Finished products

$
163,359

$
138,159

Raw materials

28,950

16,147

$
192,309

$
154,306


	March 31, 2023		December 31, 2022
Finished products	$	185,992	$	155,128
Raw materials		33,088		29,062
Inventories	$	219,080	$	184,190

6. Segment Reporting — Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable segment. Selective enterprise information is as follows:

For the three months
ended September 30,

2022

2021

Change

% Change

Net sales:

U.S. crop

$
69,115

$
66,722

$
2,393

4
%
U.S. non-crop

18,936

21,622

(2,686
)

-12
%
U.S. total

88,051

88,344

(293
)

0
%
International

64,066

58,954

5,112

9
%
Net sales:

$
152,117

$
147,298

$
4,819

3
%
Gross profit:

U.S. crop

$
34,502

$
30,237

$
4,265

14
%
U.S. non-crop

8,811

8,882

(71
)

-1
%
U.S. total

43,313

39,119

4,194

11
%
International

18,071

17,945

126

1
%
Total gross profit:

$
61,384

$
57,064

$
4,320

8
%


	For the nine months ended September 30,										For the three months ended March 31,
	2022		2021		Change			% Change			2023			2022			Change			% Change
Net sales:
U.S. crop	$	220,503	$	184,052	$	36,451			20	%	$	61,876		$	88,193		$	(26,317	)		-30	%
U.S. non-crop		53,648		60,563		(6,915	)		-11	%		13,899			13,396			503			4	%
U.S. total		274,151		244,615		29,536			12	%
Total U.S.												75,775			101,589			(25,814	)		-25	%
International		175,485		153,448		22,037			14	%		49,110			48,004			1,106			2	%
Net sales:	$	449,636	$	398,063	$	51,573			13	%
Total net sales:											$	124,885		$	149,593		$	(24,708	)		-17	%
Cost of sales:
U.S. crop											$	41,254		$	54,200		$	(12,946	)		-24	%
U.S. non-crop												8,453			7,629			824			11	%
Total U.S.												49,707			61,829			(12,122	)		-20	%
International												36,641			36,369			272			1	%
Total cost of sales:											$	86,348		$	98,198		$	(11,850	)		-12	%
Gross profit:
U.S. crop	$	104,599	$	78,313	$	26,286			34	%	$	20,622		$	33,993		$	(13,371	)		-39	%
U.S. non-crop		24,826		28,047		(3,221	)		-11	%		5,446			5,767			(321	)		-6	%
U.S. total		129,425		106,360		23,065			22	%
Total U.S.												26,068			39,760			(13,692	)		-34	%
International		52,931		47,974		4,957			10	%		12,469			11,635			834			7	%
Total gross profit:	$	182,356	$	154,334	$	28,022			18	%	$	38,537		$	51,395		$	(12,858	)		-25	%
Gross margin:
U.S. crop												33	%		39	%
U.S. non-crop												39	%		43	%
Total U.S.												34	%		39	%
International												25	%		24	%
Gross margin:												31	%		34	%

7. Accrued Program Costs — The Company offers various discounts to customers based on the volume purchased within a defined time period, other pricing adjustments, ~~some grower~~ volume incentives or other key performance ~~indicator~~ driven payments, which are usually made at the end of a growing season, to distributors, retailers or growers. The Company describes these payments as ~~“Programs”.~~“Programs.” Programs are a critical part of doing business in both the U.S. crop and non-crop chemicals marketplaces. These discount Programs represent variable consideration. Revenues from sales are recorded at the net sales price, which is the transaction price net of the impact of Programs and includes estimates of variable consideration. Variable consideration includes amounts that are expected to be paid to its customers estimated using the expected value method. Each quarter management ~~reviews~~compares individual sale transactions with Programs to determine what, if any, estimated program liabilities have been incurred. Once this initial calculation is made for the specific quarter, sales and marketing management, along with ~~support from~~executive and financial ~~analysts, reviews~~management, review the accumulated Program balance and, for ~~volume driven~~volume-driven payments, make assessments of whether or not customers are tracking in a manner that indicates that they will meet the requirements set out in agreed upon terms and conditions attached to each Program. Following this assessment, management makes adjustments to the accumulated accrual to properly reflect the Company’s best estimate of the liability at the balance sheet date. Programs are ~~then reviewed with executive management for final approval. Programs are~~ paid out predominantly on an annual basis, usually in the final quarter of the financial year or the first quarter of the following year. No significant changes in estimates were made during the ~~three-~~three months ended March 31, 2023 and ~~nine-month periods ended September 30,~~ 2022 ~~and 2021.~~ .

8. Cash Dividends on Common Stock —The Company has declared and paid the following cash dividends in the periods covered by this Form 10-Q:


Declaration Date	Record Date	Distribution Date	Dividend Per Share		Total Paid
March 13, 2023	March 24, 2023	April 14, 2023	$	0.030	$	851
December 12, 2022	December 28, 2022	January 11, 2023	$	0.030	$	851
March 14, 2022	March 25, 2022	April 15, 2022	$	0.025	$	736
December 13,2021	December 27, 2021	January 10, 2022	$	0.020	$	594

Declaration Date

Record Date

Distribution Date

Dividend
Per Share

Total
Paid

September 12, 2022

September 23, 2022

October 7, 2022

$
0.025

$
715

June 6, 2022

June 24, 2022

July 8, 2022

$
0.025

$
742

March 14, 2022

March 25, 2022

April 15, 2022

$
0.025

$
736

December 13, 2021

December 27, 2021

January 10, 2022

$
0.020

$
594

September 13, 2021

October 1, 2021

October 15, 2021

$
0.020

$
594

June 8, 2021

June 24, 2021

July 8, 2021

$
0.020

$
600

March 10, 2021

March 15, 2021

April 15, 2021

$
0.020

$
596

December 7, 2020

December 23, 2022

January 6, 2021

$
0.020

$
592

9. Earnings Per Share — The components of basic and diluted earnings per share were as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2022

2021

2022

2021

Numerator:

Net income attributable to AVD

$
6,741

$
5,498

$
23,506

$
13,713

Denominator: (in thousands)

Weighted average shares outstanding-basic

29,214

29,892

29,496

29,854

Dilutive effect of stock options and grants

591

498

632

616

Weighted average shares outstanding-diluted

29,805

30,390

30,128

30,470


	Three Months Ended March 31,
	2023		2022
Numerator:
Net income	$	1,918	$	9,935
Denominator:
Weighted average shares outstanding-basic		28,367		29,677
Dilutive effect of stock options and grants		706		672
Weighted average shares outstanding-diluted		29,073		30,349

For the ~~three-~~three months ended March 31, 2023 and ~~nine-month periods ended September 30,~~ 2022, ~~and 2021, respectively,~~ no stock options or restricted stock awards were excluded from the computation of diluted earnings per share.

10. Debt — The Company has a revolving line of credit that is shown as long-term debt in the condensed consolidated balance sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The Company has no short-term debt as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The debt is summarized in the following table:


Long-term indebtedness ($000's)	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Revolving line of credit	$	149,300		$	53,300		$	97,000		$	52,300
Deferred loan fees		(886	)		(1,060	)		(761	)		(823	)
Net long-term debt	$	148,414		$	52,240
Total indebtedness, net of deferred loan fees							$	96,239		$	51,477

The ~~Company’s main bank is Bank~~deferred loan fees as of March 31, 2023 are included in other assets on the ~~West, a wholly-owned subsidiary of the French bank, BNP Paribas. Bank of the West has been the Company’s bank for more than 40 years and is the syndication manager for the Company’s loans.~~condensed consolidated balance sheets.

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 Agent ~~and~~ (including the Company and AMVAC BV), as Borrowers, on the one hand, and a group of commercial lenders led by Bank of the West as administrative agent, documentation agent, syndication agent, collateral agent and sole lead arranger, ~~and book runner,~~ on the other hand. The Credit Agreement consists of a line of credit of up to $275,000, an accordion feature of up to $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~~amended and ~~restates~~restated the previous credit facility, which had a maturity date of June 30, 2022. With respect to key financial covenants, the Credit Agreement contains ~~two;~~two: namely, borrowers are required to maintain a Total 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 Fixed Charge Coverage Ratio ("FCCR") 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. Distributions to the Company’s shareholders are limited to net income for the four fiscal quarter period ending on the fiscal quarter immediately prior to the fiscal quarter in which the current distribution was declared.

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 Margin” which is based upon the Total Leverage (“TL”) Ratio (“LIBOR 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 Margin (“Adjusted Base Rate Revolver Loan”). The Company and the Lenders entered into an amendment to the Credit Agreement, effective March 9, 2023, whereby LIBOR was replaced by SOFR with a credit spread adjustment of 10.0 bps for all SOFR periods. The revolving loans now bear interest at a variable rate based at our election with proper notice, on either (i) SOFR plus 0.1% per annum and the “Applicable Margin” or (ii) the greater of (x) the Prime Rate, (y) the Federal Funds Rate plus 0.5%, and (z) the Daily One-Month SOFR Rate plus 1.10%, plus, in the case of (x), (y) or (z) the Applicable Margin (“Adjusted Base Rate Revolver Loan”). Interest payments for ~~LIBOR~~SOFR Revolver Loans are payable on the last day of each interest period (either ~~one, two, three~~one-, three- or ~~six~~six- months, as selected by the ~~borrower)~~Company) and the maturity date, while interest payments for Adjusted Base Rate Revolver Loans are payable on the last business day of each ~~calendar quarter~~month and the maturity date. The interest rate ~~as of September 30, 2022~~on March 31, 2023, was ~~4.46~~6.53%.

~~At September 30, 2022,~~As of March 31, 2023, the Company was ~~compliant~~in compliance with ~~all covenants~~the TL Ratio but noncompliant with respect to ~~its current credit agreement. Also, at September 30, 2022,~~ the ~~Company’s total Funded Debt amounted~~FCCR. The noncompliance was driven to $~~149,300. At that date~~ the ~~Company’s rolling four quarter~~lesser extent by a reduction in the Consolidated EBITDA ~~(as defined~~(in the numerator of the FCCR calculation) during the twelve months ended March 31, 2023, and to a greater extent by higher-than-normal distributions (in the denominator of the FCCR calculation) arising from share repurchases made by the Company during the same period. On May 8, 2023, the Company obtained a waiver of the FCCR for the twelve months ended March 31, 2023, and an adjustment to the FCCR terms for the period ending June 30, 2023. The impact of most of the share repurchases will disappear from the denominator in the ~~Credit Agreement) amounted~~FCCR calculation in the third quarter of 2023.

At March 31, 2023, according to $~~77,167, which results in a leverage ratio~~the terms of~~1.93, as compared to a maximum leverage ratio permitted under~~ the Credit Agreement, of ~~3.5. At September 30, 2022,~~as amended, and based on our performance against the most restrictive covenant listed above, the Company ~~has~~had the capacity to increase its borrowings by up to $~~120,783~~111,922~~, according to the terms thereof.~~. This compares to an available borrowing capacity of $~~94,973~~200,372 as of ~~September 30, 2021. At~~ December 31, ~~2021,~~2022.

11. Classification Corrections — A correction to the condensed consolidated statements of operations for the three months ended March 31, 2022 was made in connection with the Company’s operations in Australia, where the Company ~~had borrowing capacity~~sells its products to distribution companies as well as directly to growers via third-party agents. The Company identified errors related to the classification of $~~178,705~~.third-party agent’s commission amounts. The ~~level~~Company evaluated these errors and the impact to previously issued financial statements and concluded that the impact of ~~borrowing capacity~~this classification error is ~~driven by three factors: (1) our~~not material to any previously issued quarterly or annual financial ~~performance, as measured in EBITDA for both the trailing twelve-month period~~statements. However, management has recorded a correction adjustment to previously reported financial statement line items and ~~proforma basis arising from acquisitions, (2) net borrowings, and (3) the leverage covenant (the TL Ratio).~~

~~Agrinos had an existing Paycheck Protection Program (PPP) loan~~related disclosures. The third-party agents’ commission in the amount of $~~705~~158 aswas reclassified from net sales to operating expenses. The impact was an increase in net sales and gross profit in the amount of $158 and an offsetting increase in operating expenses in the ~~date it was acquired by~~same amount. This correction did not have any impact on operating income, net income, and earnings per common share.

12. Change in Accounting Principle — Historically, the Company included warehousing, handling and outbound freight costs in ~~October 2020. This PPP loan was granted~~operating expenses on its Consolidated Statements of Operations. Effective January 1, 2023, the Company elected to ~~Agrinos~~include these costs in cost of sales instead of operating expenses on ~~April 27, 2020. On January 7, 2021, the Small Business Administration forgave $667~~ ~~in principal and $~~5 ~~in interest of this PPP loan. As a result, the PPP loan was extinguished on January 7, 2021 and the total amount forgiven of $672~~ ~~was recorded as other income in the Company’s~~its condensed consolidated statements of ~~operations~~operations. The effects of the change in accounting have been retrospectively applied to all periods presented. The Company believes that the change in accounting is preferable as it aligns the Company’s classification of this warehousing, handling and ~~represents~~outbound freight costs in such a ~~non-cash financing activity on~~way as to present operational management with a clearer vision of the ~~condensed consolidated statement~~operational performance by business unit. This accounting change also increases the comparability of ~~cash flows~~the Company’s financial performance with its peer companies as most peer companies include warehousing, handling and outbound freight costs in cost of sales rather than operating expenses. As a result, this change is intended to help interested parties better understand the Company’s performance and facilitate comparisons with most of the Company’s peer companies. The following table compares the Company’s historical classification with the classification after the adoption of the change in accounting for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2023 and 2022:

~~11.~~ ~~Reclassifications —~~ ~~Certain items may have been reclassified in the prior period condensed consolidated financial statements to conform with the September 30, 2022, presentation.~~


	Classification after adoption of accounting change						Historical classification
	For the three months ended March 31						For the three months ended March 31
	2023			2022			2023			2022
Net sales	$	124,885		$	149,593		$	124,885			149,593
Cost of sales		(86,348	)		(98,198	)		(77,093	)		(88,242	)
Gross profit		38,537			51,395			47,792			61,351
Operating expenses		(35,272	)		(36,646	)		(44,527	)		(46,602	)
Operating income	$	3,265		$	14,749		$	3,265		$	14,749

1312

The change in accounting principle did not have any impact on operating income, net income and earnings per share.

~~12.~~13. Comprehensive Income — Total comprehensive income includes, in addition to net income, changes in equity that are excluded from the condensed consolidated ~~statement~~statements of operations and are recorded directly into a separate section of stockholders’ equity on the condensed consolidated balance sheets. For the ~~three- and nine-month~~three-month periods ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ total comprehensive income consisted of net income attributable to American Vanguard and foreign currency translation adjustments.

~~13.~~14. Stock-Based Compensation — The following tables illustrate the Company’s stock-based compensation, unamortized stock-based compensation, and remaining weighted average amortization period.


	Stock-Based Compensation for the Three months ended		Stock-Based Compensation for the Nine months ended		Unamortized Stock-Based Compensation		Remaining Weighted Average Period (years)		Stock-Based Compensation for the Three months Period		Unamortized Stock-Based Compensation as of March 31		Remaining Weighted Average Period (years)
September 30, 2022
Restricted Stock	$	1,184	$	3,257	$	8,010		2.0
March 31, 2023
Time-Based Restricted Stock									$	1,198	$	5,304		1.7
Unrestricted Stock		130		369		347		0.7		130		87		0.2
Performance-Based Restricted Stock		246		770		3,093		1.9		146		1,978		1.7
Total	$	1,560	$	4,396	$	11,450			$	1,474	$	7,369

September 30, 2021
Restricted Stock	$	1,246	$	3,469	$	8,277		2.0
March 31, 2022
Time-Based Restricted Stock									$	993	$	5,411		1.7
Unrestricted Stock		100		317		267		0.7		117		78		0.2
Performance-Based Restricted Stock		365		1,523		3,522		2.0		453		2,319		1.7
Total	$	1,711	$	5,309	$	12,066			$	1,563	$	7,808

The Company also granted stock options in past periods. All outstanding stock options are fully vested and exercisable and no expense was recorded during the ~~three-~~three months ended March 31, 2023 and ~~nine-month periods ended September 30, 2022, and 2021.~~2022.

~~Time-Based~~Time-based Restricted and Unrestricted Stock — A summary of ~~non-vested shares as of,~~nonvested time based restricted and ~~for, the three- and nine-month periods ended September 30, 2022, and 2021~~unrestricted stock is presented below:


	Three and Nine Months Ended September 30, 2022					Three and Nine Months Ended September 30, 2021					Three Months Ended March 31, 2023					Three Months Ended March 31, 2022
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at December 31st		817,290		$	17.04		820,624		$	16.64		742,050		$	18.86		817,290		$	17.04
Vested		(230,080	)		17.31		(197,615	)		19.91		(2,017	)		15.71		(230,080	)		17.31
Forfeited		(24,109	)		17.10		(11,580	)		16.95		(5,479	)		19.87		(24,109	)		17.10
Nonvested shares at March 31st		563,101			16.93		611,429			15.57		734,554		$	18.86		563,101		$	16.93
Granted		242,067			23.79		289,757			20.10
Vested		(27,482	)		22.35		(30,112	)		16.72
Forfeited		(14,070	)		18.53		(11,231	)		16.60
Nonvested shares at June 30th		763,616			18.88		859,843			17.04
Granted		13,600		$	18.94		3,400			15.17
Vested		(1,262	)		19.39		(5,962	)		15.36
Forfeited		(15,945	)		20.09		(13,841	)		17.21
Nonvested shares at September 30th		760,009		$	18.86		843,440		$	17.04

Performance-Based Restricted Stock — A summary of ~~non-vested~~nonvested performance-based ~~shares as of, and for, the three- and nine-month periods ended September 30, 2022, and 2021, respectively~~stock is presented below:


	Three and Nine Months Ended September 30, 2022					Three and Nine Months Ended September 30, 2021					Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at December 31st		379,061		$	16.43		391,771		$	16.26		318,699	$	18.05		379,061		$	16.43
Additional granted (forfeited) based on performance achievement		(41,088	)		16.56		71,180			20.53		—		—		(41,088	)		16.56
Vested		(78,704	)		17.18		(175,087	)		19.78		—		—		(78,704	)		17.18
Forfeited		(7,074	)		16.77		(505	)		19.26		—		—		(7,074	)		16.77
Nonvested shares at March 31st		252,195			16.17		287,359			15.16		318,699	$	18.05		252,195		$	16.17
Granted		83,190			23.63		102,043			20.03
Forfeited		(7,829	)		17.50		—			—
Nonvested shares at June 30th		327,556			16.58		389,402			16.44
Forfeited		(2,577	)		17.80		(3,733	)		17.04
Nonvested shares at September 30th		324,979		$	16.57		385,669		$	16.43

Stock Options — ~~The Company has~~A summary of stock options outstanding under its incentive stock option plans and performance incentive stock option plan. All outstanding stock options are vested and exercisable. The following tables present details for each type of plan:is presented below:

Time-based Incentive Stock Option Plans

Activity of the incentive stock option plans for the ~~three- and nine-month periods~~three months ended ~~September 30, 2022:~~March 31, 2023:


	Number of Shares			Weighted Average Exercise Price Per Share
Balance outstanding, December 31, 2022		68,896		$	11.49
Options exercised		(1,537	)		11.49
Balance outstanding, March 31, 2023		67,359		$	11.49

Number of
Shares

Weighted
Average Price
Per Share

Balance outstanding, December 31, 2021 and March 31, 2022

108,036

$
11.49

Options exercised

(33,745
)

11.49

Balance outstanding, June 30, 2022

74,291

$
11.49

Options exercised

(1,541
)

11.49

Balance outstanding, September 30, 2022

72,750

$
11.49

All outstanding stock options as of March 31, 2023 have an exercise price of $11.49 and a remaining life of 21 months.

There was no activity during the three months ended March 31, 2022. There were 108,036 incentive stock options outstanding as of ~~September 30,~~March 31, 2022 ~~have~~with an exercise price per share of $11.49~~, total intrinsic value of $525~~, and a remaining life of 2733 months.

~~Activity for the three- and nine-month periods ended September 30, 2021:~~

Number of
Shares

Weighted
Average Price
Per Share

Balance outstanding, December 31, 2020

123,087

$
11.48

Options exercised

(5,838
)

11.49

Balance outstanding, March 31, 2021

117,249

11.48

Options exercised

(8,826
)

11.35

Balance outstanding, June 30, 2021

108,423

11.49

Options exercised

(387
)

11.49

Balance outstanding, September 30, 2021

108,036

$
11.49

~~Performance~~Performance-based Incentive Stock Option Plan

~~Activity~~There was no activity for the ~~three-~~three months ended March 31, 2023 and ~~nine-month periods ended September 30, 2022:~~2022. There were

81,808

Number of
Shares

Weighted
Average Price
Per Share

Balance outstanding, December 31, 2021 and March 31, 2022

114,658

$
11.49

Options exercised

(32,850
)

11.49

Balance outstanding, June 30 and September 30, 2022

81,808

$
11.49

~~Activity for the three-~~ and ~~nine-month periods ended September 30, 2021:~~

114,658

Number of
Shares

Weighted
Average Price
Per Share

Balance outstanding, December 31, 2020

114,658

$
11.49

Options exercised

—

—

Balance outstanding, September 30, 2021

114,658

$
11.49

~~All the~~ of performance incentive stock options outstanding as of ~~September 30,~~March 31, 2023 and 2022, ~~have~~with an exercise price per share of $11.49~~, total intrinsic value of $590~~, and a remaining life of 2721 ~~months.~~and 33 months, respectively.

~~14.~~15. Legal Proceedings — — During the reporting period, there have been no material developments in legal proceedings that were reported in the Company’s Form 10-K for the year ended December 31, ~~2021,~~2022, except as described below.

~~EPA FIFRA/RCRA Matter.~~Department of Justice and Environmental Protection Agency Investigation. On November 10, 2016, ~~the Company~~AMVAC was served with a grand jury subpoena from the United States Attorney’s Office for the Southern District of Alabama, seeking documents regarding the importation, transportation, and management of a specific pesticide. The Company retained defense counsel to assist in responding to the subpoena and otherwise in defending the Company’s interests. AMVAC is cooperating in the investigation.

~~Since April 2018,~~ After interviewing multiple witnesses (including three employees before a grand jury in February 2022) and making multiple document requests, the Department of Justice (“~~DOJ”~~DoJ”) has conducted several interviews of AMVAC employees and issued supplemental document requests in connection with the investigation. In November 2020, DOJ issued a second grand jury subpoena seeking records and related communications with regard to a submission made by the Company to the Environmental Protection Agency (“EPA”) in connection with a request to amend a pesticide’s registration. Soon thereafter, DOJ also identified the Company and ~~one of its non-executive employees~~a manager-level employee as targets of the government’s investigation. ~~In January 2021, DOJ and EPA informed the Company that it is investigating~~DoJ’s investigation focused on potential violations of two environmental statutes, the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”) and the Resource Conservation and Recovery Act (“RCRA”), as well as obstruction of an agency proceeding and false statement statutes. DOJ also identified evidence that it contends supports alleged violations with respect to both the Company and the individual target. As part of discussions regarding possible resolution, in October 2021, the Company presented its evaluation of the legal and factual issues raised by the government (which do not include any allegations of harm to human health or the environment) to both DOJ and USEPA. Further, three corporate witnesses were interviewed by the grand jury in Mobile, Alabama in February 2022. Following that interview,In March 2022, the individual target entered into a plea agreement ~~which was entered by the court having jurisdiction~~relating to provision of false information in ~~this matter in May 2022.~~a government proceeding. In July 2022, the ~~DOJ outlined its current view~~DoJ sent correspondence to the Company’s counsel to the effect that it was focusing on potential RCRA violations relating to the reimportation of Australian containers in 2015. Our defense counsel spoke with DoJ on the ~~investigation and indicated~~subject in early October 2022, at which time DoJ expressed an interest in ~~reaching resolution of~~resolving the ~~matter. Further discussions on~~matter and stated that ~~subject are imminent. The~~it would get back to the Company ~~expects that talks regarding potential resolution will resume in the near future.~~with its position.

The governmental agencies involved in this investigation have a range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of FIFRA, RCRA and other federal statutes including, but not limited to, injunctive relief, fines, penalties and modifications to business practices and compliance programs, including the appointment of a monitor. If violations are established, the amount of any fines or monetary penalties which could be assessed and the scope of possible non-monetary relief would depend on, among other factors, findings regarding the amount, timing, nature and scope of the violations, and the level of cooperation provided to the governmental authorities during the investigation. As a result, the Company cannot yet anticipate the timing or predict the ultimate resolution of this investigation, financial or otherwise, which could have a material adverse effect on our business prospects, operations, financial condition and cash ~~flow.~~flows. Accordingly, wethe Company has not recorded a loss contingency for this matter.

Pitre etc. v. Agrocentre Ladauniere et al. On February 11, 2022, a strawberry grower named Les Enterprises Pitre, Inc. filed a complaint in the Superior Court, District of Labelle, Province of Quebec, Canada, entitled Pitre, etc. v. Agrocentre Ladauniere, Inc. etal, including Amvac Chemical Corporation, seeking damages in the amount of approximately $5 million arising from stunted growth of, and reduced yield from, its strawberry crop allegedly from the application of AMVAC’s soil fumigant, Vapam, in spring of

2021. Examinations of plaintiff were held in mid-August 2022, during which plaintiff in effect confirmed that he had planted his seedlings before expiration of the full-time interval following product application (as per the product label), that he had failed to follow the practice of planting a few test seedlings before planting an entire farm, and that he had placed his blind trust in his application adviser on all manner of timing and rate. An examination of the Company’s most knowledgeable witness is scheduled to take place in June 2023. The Company believes that the claims have no merit and intends to defend the matter. At this stage in the proceedings, there is not sufficient information to form a judgment as to either the probability or amount of loss; thus, the Company has not recorded a loss contingency for this matter.

Catalano v. AMVAC Chemical Corp. On June 6, 2022, AMVAC was served with a summons and complaint for a matter entitled Andrew Catalano and Ruth Catalano v. AMVAC in the Superior Court of the State of California, County of Orange (30-2022-01263987-CU-PL-CXC) in which plaintiff, who worked as a professional applicator of pesticides, including Orthene (for which AMVAC is registrant) seeks damages for an injury (specifically, cardiomyopathy) allegedly arising from his exposure to this product. AMVAC is unaware of any link between cardiovascular disease and Orthene (which has been commercially available for over 30 years) and believes that this case has no merit and intends to defend it vigorously. The Company filed an answer in early July, including multiple affirmative defenses. Further, the parties continue to engage in discovery, and plaintiffs have been unable to supply any data establishing a causal link between use of this product and the heart condition that plaintiff alleges. At this stage, there is not sufficient information to form a judgment as to either the probability or amount of any loss; thus, the Company has not recorded a loss contingency for this matter.

~~Harold Reed v. AMVAC et al. During January 2017, the Company was served with two Statements~~Notice of Claim that had been filed on March 29, 2016 with the Court of Queen’s Bench of Alberta, Canada (as case numbers 160600211 and 160600237) in which plaintiffs, Harold Reed (an applicator) and 819596 Alberta Ltd. dba Jem Holdings (an application equipment rental company), allege physical injury and damageIntention to equipment, respectively, arising from a fire that occurred during an application of the Company’s potato sprout inhibitor, SmartBlock, at a potato storage facility in Coaldale, Alberta on April 2, 2014. Four other related matters were subsequently consolidated into this case (alleging loss of potatoes, damage to equipment, damage to Quonset huts and loss of business income). The parties have exchanged written discovery, and depositions of persons most knowledgeable took place during the first quarter of 2019. Citing the length of the cases’ pendency and the expense, in December 2019, plaintiff Reed voluntarily dismissed two actions (160600211 and 160600237) for no consideration. Over the course of 2020, discovery was completed, and the parties held a mediation on March 11, 2021; however, no settlement was reached. The parties participated in a second mediation in August 2022, during which plaintiffs significantly lowered their collective demands, and all parties were able to reach a settlement under the terms of which three co-defendants (including the Company) are equally sharing in a cash contribution. The Company’s contribution toward settlement was largely covered by pre-existing reserves and, in any event, is not material to its financial performance or operations. The court has entered an order of dismissal with prejudice pursuant to the settlement agreement; thus, this matter is resolved.

Suspend DCPA ~~Suspension Proceedings~~. ~~In May~~On April 28, 2022, the USEPA ~~issued~~published a notice of ~~intention~~intent to suspend (“NOITS”) DCPA, the active ingredient of an ~~herbicidal product~~herbicide marketed by the Company under the name ~~Dacthal, on~~Dacthal. The agency cited as the basis for the suspension that the Company ~~acted allegedly inappropriately in providing~~did not take appropriate steps to provide data studies ~~that had been~~ requested byin support of the ~~agency.~~registration review. In fact, ~~the agency had requested 89 data studies and,~~ over the course of several years, the Company ~~had supplied 69 such~~cooperated in performing the vast majority of the nearly 90 studies requested by USEPA and had been working ~~constructively on mutually acceptable timetables either~~in good faith to ~~complete, or to obtain waivers for,~~meet the ~~balance of the studies. The Company petitioned~~agency’s schedule. After an administrative law judge (“ALJ”) to appeal the notice of intention to suspend ("NOITS"). In response to USEPA’s motion, the ALJ granted an accelerated decision to uphold the NOITS. The Company, in turn, has appealed the ALJ’s decision to theappeals court (the Environmental Appeals Board (“EAB”), on the ground that the basis was erroneous, both with respect to statutory construction and factual inferences being improperly made in the agency’s favor. In October 2022, the EAB reversed the ALJ’s order, finding that that court had used a statutorily improper standard (namely, whether the Company had submitted all requested data as opposed toBoard) clarified the proper standard offor use at the hearing (namely, whether ~~the Company acted appropriately in responding~~registrant took appropriate steps to respond to the data ~~call-ins)~~call-in), a hearing was held in January 2023 before the ALJ, by which time USEPA had narrowed the scope of its claim to nine outstanding studies, all of which have been started by the Company and none of which are necessary for USEPA to commence its risk assessment. The parties have filed their post-hearing briefs, and the Company expects that the ALJ will render a decision in the near future. During the course of these proceedings, AMVAC has been free to make, sell and distribute both the technical grade material and end-use product and may continue to do so unless and until there is an adverse ruling at both the trial and appellate level (if any). The ~~matter has been remanded to the ALJ, which has set~~Company believes that a ~~hearing date of January 24, 2023. At the same time, USEPA has expressed an interest in settlement of the matter; thus, the Company, USEPA~~loss is neither probable nor estimable and, the Office of General Counsel are engaged in settlement discussions in parallel with the proceedings at the ALJ. At this stage, the Company is unable to predict the probable outcome of the matter and, accordingly,consequently, has not recorded a loss contingency ~~with respect thereto.~~ for this matter.

~~15.~~16. Recent Issued Accounting Guidance —

~~Accounting Standards Adopted~~

In November 2021, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2021-10, “Disclosures by Business Entities about Government Assistance.” This ASU codifies new requirements to disclose information about the nature of certain government assistance received, the accounting policy used to account for the transactions, the location in the financial statements where such transactions were recorded, and significant terms and conditions associated with such transactions. The guidance is effective for annual periods beginning after December 15, 2021. Effective January 1, 2022, the Company adopted ASU No. 2021-10 on a prospective basis. ~~The adoption of this standard was not material to the Company’s condensed consolidated financial statements.~~

~~Accounting Standards Not Yet Adopted~~

~~In October 2021,~~March 2020, the FASB issued ASU ~~2021-08, “Business Combinations~~2020-04 Reference Rate Reform (Topic ~~805)~~848): ~~Accounting~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting,as amended and supplemented by subsequent ASUs (collectively, “ASU 2020-04” and “ASU 2022-06”), which provides practical expedients for ~~Contract Assets~~contract modifications and ~~Liabilities~~certain hedging relationships associated with the transition from ~~Contracts with Customers.”~~reference rates that are expected to be discontinued. This ~~ASU requires an acquiring entity to recognize~~guidance is applicable for borrowing instruments, which use LIBOR as a reference rate, and ~~measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. The ASU~~ is ~~effective for fiscal years and interim periods beginning after~~available through December ~~15, 2022, with early adoption permitted.~~31, 2024. The Company ~~is evaluating the impact of adopting~~has evaluated this ASU and does not expect its adoption to have a material impact on its condensed consolidated financial statements.

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to its condensed consolidated financial statements.

~~16.~~17. Fair Value of Financial Instruments — — The accounting standard for fair value measurements provides a framework for measuring fair value and requires ~~certain~~expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard established a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:

•

Level 1 – Quoted prices in active markets for identical assets or liabilities.

•

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, short-term investments, accounts receivable, ~~long-term investments,~~ accounts payable and accrued expenses, approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s ~~short-term and long-term~~ borrowings, which are considered Level 2 liabilities, approximates fair value ~~based upon~~as they bear interest at a variable rate at current ~~rates and terms available to the Company for similar debt.~~market rates.

The Company measures its contingent earn-out liabilities in connection with business acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. The Company did

not have any contingent earn-out liabilities at March 31, 2023 and December 31, 2022. The following table illustrates the Company’s contingent consideration movements related to its business ~~acquisitions:~~

Three months ended
September 30, 2022

Three months ended
September 30, 2021

Balance, June 30

$
1,367

$
2,116

Fair value adjustment

—

(493
)
Payments on existing obligations

(1,292
)

—

Accretion of discounted liabilities

10

(1
)
Foreign exchange effect

(85
)

(57
)
Balance, September 30

$
—

$
1,565

Nine months ended
September 30, 2022

Nine months ended
September 30, 2021

Balance, December 31

$
786

$
2,468

Purchase price adjustment

—

(955
)
Fair value adjustment

635

520

Payments on existing obligations

(1,292
)

(250
)
Accretion of discounted liabilities

28

(10
)
Foreign exchange effect

(157
)

(208
)
Balance, September 30

$
—

$
1,565

~~The contingent consideration in the amount of $786~~ ~~is included in current installments of other liabilities on the condensed consolidated balance sheets~~acquisitions as of ~~December~~and for the three months ended March 31, ~~2021.~~2022:

~~17.~~


	Three months ended March 31, 2022
Balance, December 31, 2021	$	786
Fair value adjustment		599
Accretion of discounted liabilities		6
Foreign exchange effect		46
Balance, March 31, 2022	$	1,437

18. Accumulated Other Comprehensive Loss ~~(“AOCL”)~~—The following table lists the beginning balance, ~~annual~~quarterly activity and ending balance of accumulated other comprehensive loss, which consists of foreign currency ~~(FX)~~ translation adjustments:


	Total
Balance, December 31, 2022	$	(12,182	)
Foreign currency translation adjustment, net of tax effects of ($89)		2,546
Balance, March 31, 2023	$	(9,636	)

Balance, December 31, 2021	$	(13,784	)
Foreign currency translation adjustment, net of tax effects of ($48)		7,080
Balance, March 31, 2022	$	(6,704	)
~~Foreign currency translation adjustment, net of tax effects of $109~~		(~~6,064~~	)
~~Balance, June 30, 2022~~		(~~12,768~~	)
~~Foreign currency translation adjustment, net of tax effects of $~~81		(~~2,764~~	)
~~Balance, September 30, 2022~~	$	(~~15,532~~	)

~~Balance, December 31, 2020~~	$	(~~9,322~~	)
~~Foreign currency translation adjustment, net of tax effects of $1,179~~		(~~2,503~~	)
~~Balance, March 31, 2021~~		(~~11,825~~	)
~~Foreign currency translation adjustment, net of tax effects of ($1,731~~)		~~2,914~~
~~Balance, June 30, 2021~~		(~~8,911~~	)
~~Foreign currency translation adjustment, net of tax effects of $1,359~~		(~~3,459~~	)
~~Balance, September 30, 2021~~	$	(~~12,370~~	)

~~18.~~ 19. Equity Investments — In February 2016, AMVAC Netherlands BV made an investment in Biological Products for Agriculture (“Bi-PA”). Bi-PA develops biological plant protection products that can be used for the control of pests and disease of agricultural crops. As of ~~September 30,~~March 31, 2023 and 2022, ~~and December 31, 2021,~~ the Company’s ownership position in Bi-PA was 15%. Since this investment does not have a readily determinable fair value, the Company has elected to measure the investment at cost less impairment, if any, and also records 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 periodically reviews the investment for possible impairment. There was no impairment or observable price changes on the investment during the ~~three-~~three months ended March 31, 2023 and ~~nine-month periods ended September 30,~~ 2022. The ~~Company recorded an impairment in the amount of $399~~ ~~during the three- and nine-month periods ended September 30, 2021.The~~ investment is recorded within other assets on the condensed consolidated balance sheets and amounted to $~~2,884~~2,869 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

On April 1, 2020, AMVAC purchased 6.25 million shares, an ownership of approximately 8%, of common stock of Clean Seed Capital Group Ltd. (TSX Venture Exchange: “CSX”) for $1,190. The shares are publicly traded, have a readily determinable fair value, and are considered a Level 1 investment. The fair value of the stock amounted to $~~659~~762 and $~~1,516~~784 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The Company recorded a loss of $~~454~~ ~~and $269~~ ~~for the three-month periods ended September 30, 2022 and 2021, respectively. The Company recorded a loss of $857~~22 and a gain of $~~502~~83 for the ~~nine-month periods~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.The investment is recorded within other assets on the condensed consolidated balance sheets.

~~19.~~ ~~Product and Business Acquisitions~~ ~~— The Company did not complete any acquisitions during the three- and nine-month periods ended September 30, 2022. The Company completed~~ ~~one~~ ~~product acquisition during the three- and nine-months ended September 30, 2021. The acquisition was completed on July 1, 2021, for $10,000~~ ~~in cash consideration. The acquisition was accounted for as an asset acquisition and the $10,000 in consideration was allocated as follows: product registrations and product rights $8,225, trade names and trademarks $1,650, and prepaid asset $125~~.

20. Income Taxes —— Income tax ~~expense~~benefit was $~~2,963~~ ~~and $1,517~~361 for the ~~three-month period~~three months ended ~~September 30, 2022, and 2021, respectively. The effective tax rate was~~ ~~30.5% and~~ ~~20.7% for the three-month periods ended September 30, 2022 and 2021, respectively. Income~~March 31, 2023, as compared to income tax expense ~~was~~of $~~10,187~~ ~~and $5,324~~4,499 for the ~~nine~~three-months ended March 31, 2022. The effective income tax rate for the three months ended ~~September 30, 2022, and 2021, respectively. The~~March 31, 2023 was computed based on the estimated effective tax rate for the ~~nine-month periods ended September 30, 2022~~full year, adjusted for a benefit from the remeasurement of certain U.S. federal and ~~2021, was~~ ~~30.2% and~~ ~~27.4%, respectively. For the three- and nine-month periods ended September 30, 2022, the rate increased compared~~state deferred taxes, partially offset by an expense attributed to ~~the same periods of 2021 reflecting the mix of income in different jurisdictions. For~~establishing liabilities for uncertain tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act (“TCJA”) of 2017 amends Internal Revenue Code Section 174 Costs wherein research and development expenditures will no longer be deductedpositions in the ~~tax year that such costs are incurred but must now be capitalized~~U.S. and ~~amortized over either a five- or fifteen-year period, depending on the location of the activities performed. The~~India. This calculation resulted in an effective tax rate ~~is based on the projected income~~of minus 23.2% for the ~~full year and~~three months ended March 31, 2023, as compared to 31.2% for the three months ended March 31, 2022.

It is ~~subject~~expected that $1,550 of unrecognized tax benefits will be released within the next twelve months due to ~~ongoing review and adjustment by management.~~expiration of the statute of limitations.

21. Stock Re-purchase ~~Programs~~Program — The Company periodically repurchases shares of its common stock under a board-authorized repurchase program through a combination of open market transactions and accelerated share repurchase (ASR) arrangements.

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 under a 10b5-1 plan, par value $0.10 per share, in the open market over the succeeding one year, subject to limitations and restrictions under applicable securities laws. During 2022 and 2023, the Company purchased 761,985 shares of its common stock for a total of $14,558 at an average price of $19.11 per share. The 10b5-1 plan terminated on March 8, 2023.

The table below summarizes the number of shares of the Company’s common stock that were repurchased during the ~~three-~~three months ended March 31, 2023 and ~~nine-month periods ended September 30,~~ 2022. ~~There were no such purchases during the three- and nine-month periods ended September 30, 2021.~~

Month ended

Total number of
shares purchased

Average price
paid per share

Total amount paid

Maximum number
of shares that may
yet be purchased
under the plan

March 31, 2022

332,404

$
18.71

$
6,219

667,596

Balance at March 31, 2022

332,404

$
6,219

667,596

April 30, 2022

100

$
19.99

$
2

667,496

May 31, 2022

506

$
19.99

$
11

666,990

Balance at June 30, 2022

606

$
19.99

$
13

666,990

August 31, 2022

165,039

$
19.59

$
3,234

501,951

September 30, 2022

222,301

$
19.19

$
4,265

279,650

Balance at September 30, 2022

387,340

$
19.36

$
7,499

279,650

Total number of shares repurchased

720,350

$
19.06

$
13,731

279,650


Three months ended	Total number of shares purchased		Average price paid per share		Total amount paid		Maximum number of shares that may yet be purchased under the plan
March 31, 2023		27,835	$	19.96	$	557		—
March 31, 2022		332,404	$	18.71	$	6,219		667,596

~~On August 22, 2022, pursuant to a Board of Directors resolution, the Company entered into an accelerated share repurchase arrangement to repurchase $20,000~~ ~~of its common stock. Under the agreement, the Company paid $20,000~~ ~~and immediately received an initial delivery of~~ ~~802,810~~ ~~shares in the amount of $16,000, which the Company recorded as treasury shares. The Company recorded the remaining $4,000~~ as a reduction to additional paid-in capital pending final settlement in the fourth quarter of 2022. The final number of shares that the Company ultimately receives under the agreement will be determined based on the average of the Rule 10b-18 volume-weighted average prices of the Company’s common stock during the term of the agreement, less and agreed discount, and subject to adjustments pursuant to the terms of the agreement.

The table below summarizes the number of shares of the Company’s common stock that were received under the accelerated share repurchase arrangement during the three- and nine-month periods ended September 30, 2022. ~~There were no such transactions during the three- and nine-month periods ended September 30, 2021.~~

Month ended

Total number of
shares received

Average price
paid per share

Total amount paid

August 31, 2022

802,810

$
19.93

$
16,000

~~In summary, the Company added a total of~~ ~~1,190,150~~ ~~and~~ ~~1,523,160~~ ~~of treasury shares of the Company’s common stock during the three- and nine-month periods ended September 30, 2022.~~

22. Supplemental Cash Flow Information


	For the Nine Months Ended September 30,				For the three months ended March 31
	2022		2021
Supplemental cash flow information:
Cash paid during the period for:
Cash paid during the period:					2023		2022
Interest	$	2,073	$	2,839	$	1,316	$	387
Income taxes, net	$	15,530	$	3,836	$	2,104	$	1,454
Non-cash transactions:
ROU assets exchanged for lease liabilities	$	4,202	$	17,872
Deferred consideration in connection with business acquisitions:						—	$	599
Cash dividends declared and included in accrued expenses	$	715	$	594	$	851	$	736

2117

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Numbers in thousands)

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. These forward-looking statements are based on current expectations and are subject to a number of risks, uncertainties and other factors. In connection with the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important factors which, among other things, could cause the 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 Annual 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. Securities and Exchange Commission (the “SEC”). It is not possible to foresee or identify all such factors. For more detailed information, refer to Item 3., Quantitative and Qualitative Disclosures about Market Risk, and Part II, Item 1A., Risk Factors, in this Quarterly Report on Form 10-Q.

~~MANAGEMENT OVERVIEW~~Effective January 11, 2023, the Company includes warehousing, handling and outbound freight costs in cost of sales instead of operating expenses on its condensed consolidated statements of operations. The effects of the change in accounting have been retrospectively applied to all periods presented. The Company believes that the change in accounting is preferable as it aligns the Company’s classification of this warehousing, handling and outbound freight costs in such a way as to present operational management with a clearer vision of the operational performance by business unit. This accounting change also increases the comparability of the Company’s financial performance with its peer companies as most peer companies include warehousing, handling and outbound freight costs in cost of sales rather than operating expenses. As a result, this change is intended to help interested parties better understand the Company’s performance and facilitate comparisons with most of the Company’s peer companies. The change in accounting principle did not have any impact on operating income, net income and earnings per share. Please refer to note 12 to the condensed consolidated financial statements for further details.

Overview of the Company’s Performance

~~During~~Domestic crop sales, and therefore, the ~~third~~Company’s financial performance for the first quarter of ~~2022,~~2023 declined in most material respects as compared to the ~~agriculture industry continued~~comparable period in 2022. While the domestic farm economy remains strong, supply disruptions and delays in raws and intermediates compounds used to ~~demonstrate resiliency. Driven by geopolitical conditions,~~manufacture the Company’s leading corn soil insecticide, coupled with shifts in procurement timing for its herbicides, yielded significantly lower sales in its domestic crop business, as compared to this time last year. By contrast, both the domestic non-crop and ~~soybean commodity prices for row crops remained high. Further, supply chain conditions continued to improve across many industries. Further, thus far, the industry has been able to compensate~~international businesses recorded slightly higher sales for the ~~effects~~period. With lower sales of ~~inflation through price increases. The Company responded to these conditions by increasing prices, where possible, and deployed its factory assets to continue meeting demand. Consequently,~~the higher margin domestic crop business, the Company’s overall sales and profit performance were adversely affected. While operating ~~results~~expenses declined, factory costs rose primarily as a result of not having the raw materials available to manufacture the corn soil insecticides products and as a result gross profit declined. Further, higher interest expenses (partially offset by lower tax expenses) yielded lower net income for the ~~third~~ quarter, of 2022 improved modestly in terms of net sales and more significantly in terms of profitability, as compared with those of the same period of 2021. Led by increased sales within our international business, consolidated net sales increased by 3% (to end at $152,117 as compared to ~~$147,298) and net income increased by 23% (to $6,741 from $5,498).~~last year.

On a consolidated basis, domestic sales ~~were flat, and~~declined 25% while international ~~sales increased 9%~~rose by 2%, resulting in an overall net sales ~~improvement~~decline of 3%17%. ~~By contrast,~~Further, overall cost of sales, ~~was virtually flat, quarter-over-quarter. This lower comparative increase~~which has been subject to a change in definition to now incorporate the cost of ~~sales was a result of higher selling prices~~outbound logistics and ~~a favorable mix of higher-margin products in the third quarter of 2022, as compared to the same period of the prior year.~~freight expenses, decreased by 12%. Cost of sales were ~~60%~~69% of sales in ~~the third quarter of 2022,~~2023, as compared to ~~61%~~66% for the same period of ~~2021.~~2022. These factors, taken together with higher manufacturing costs (both labor and service-related), yielded a ~~8% increase~~25% decrease in gross profit (to $38,537 in 2023 from $51,395 in the comparable quarter of 2022), while overall gross margin percent ~~improved~~declined to ~~40%~~31% from ~~39% quarter-over-quarter, as a result of selling more higher margin products, increased prices, and better factory performance.~~34% quarter-over-quarter.

Operating expenses ~~remained flat at 33%~~declined to $35,272 in Q1 2023 from $36,646; however, operating expenses as a percent of net sales ~~notwithstanding significant inflationary pressure.~~ rose to 28% in the first quarter of 2023 from 24% in the comparable period of 2022.

Operating income for the period ~~increased by 26% (to $11,244~~decreased to $3,265 from ~~$8,946),~~$14,749, driven by the ~~overall~~reduced sales, ~~increase,~~decreased gross margin percentage and proportionately higher ~~selling prices and improved factory utilization. Interest~~operating expenses. The Company recorded higher interest expense ~~was flat as compared with the same period of 2021, while tax expense rose by 95% (from $1,517 in the third quarter of 2021 to $2,963 in the same period of 2022)~~ due to ~~an increase in taxable income and higher effective tax rate.~~federal interest rate increases during the intervening year. These factors yielded net income for the period of ~~$6,741, a 23% increase over~~$1,918, as compared to ~~$5,498~~$9,935 in the ~~third~~first quarter of ~~2021.~~2022. Details on our financial performance are set forth below.

2218

RESULTS OF OPERATIONS

Quarter Ended ~~September 30, 2022 and 2021:~~March 31:


	For the three months ended March 31,
	2023			2022			Change			% Change
Net sales:
U.S. crop	$	61,876		$	88,193		$	(26,317	)		-30	%
U.S. non-crop		13,899			13,396			503			4	%
Total U.S.		75,775			101,589			(25,814	)		-25	%
International		49,110			48,004			1,106			2	%
Total net sales:	$	124,885		$	149,593		$	(24,708	)		-17	%
Cost of sales:
U.S. crop	$	41,254		$	54,200		$	(12,946	)		-24	%
U.S. non-crop		8,453			7,629			824			11	%
Total U.S.		49,707			61,829			(12,122	)		-20	%
International		36,641			36,369			272			1	%
Total cost of sales:	$	86,348		$	98,198		$	(11,850	)		-12	%
Gross profit:
U.S. crop	$	20,622		$	33,993		$	(13,371	)		-39	%
U.S. non-crop		5,446			5,767			(321	)		-6	%
Total U.S.		26,068			39,760			(13,692	)		-34	%
International		12,469			11,635			834			7	%
Total gross profit:	$	38,537		$	51,395		$	(12,858	)		-25	%
Gross margin:
U.S. crop		33	%		39	%
U.S. non-crop		39	%		43	%
Total U.S.		34	%		39	%
International		25	%		24	%
Gross margin:		31	%		34	%

2022

2021

Change

% Change

Net sales:

U.S. crop

$
69,115

$
66,722

$
2,393

4
%
U.S. non-crop

18,936

21,622

(2,686
)

-12
%
Total U.S.

88,051

88,344

(293
)

0
%
International

64,066

58,954

5,112

9
%
Total net sales:

$
152,117

$
147,298

$
4,819

3
%
Cost of sales:

U.S. crop

$
34,613

$
36,485

$
(1,872
)

-5
%
U.S. non-crop

10,125

12,740

(2,615
)

-21
%
Total U.S.

44,738

49,225

(4,487
)

-9
%
International

45,995

41,009

4,986

12
%
Total cost of sales:

$
90,733

$
90,234

$
499

1
%
Gross profit:

U.S. crop

$
34,502

$
30,237

$
4,265

14
%
U.S. non-crop

8,811

8,882

(71
)

-1
%
Total U.S.

43,313

39,119

4,194

11
%
International

18,071

17,945

126

1
%
Total gross profit

$
61,384

$
57,064

$
4,320

8
%
Gross margin:

U.S. crop

50
%

45
%

U.S. non-crop

47
%

41
%

Total U.S.

49
%

44
%

International

28
%

30
%

Total gross margin

40
%

39
%

Our domestic crop business recorded net sales during the first quarter of 2023 that were ~~4% higher~~30% lower than those of the ~~third~~first quarter of ~~2021~~2022 ($~~69,115~~61,876 as compared to ~~$66,722)~~$88,193). ~~Year-over-year gains~~Despite having taken extraordinary measures in the prior year to position suppliers in both the US and China, the Company experienced significant delays in obtaining critical intermediate compounds necessary to formulate our leading granular soil insecticide Aztec®. Ultimately, the Company was able to manufacture and sell only about one-third of the volume of Aztec as it had forecasted. Having already recorded strong sales of Counter® in fourth quarter of 2022, we worked with customers to place other alternative products during the first quarter of 2023 (i.e., Smartchoice®, Index® and Force®) and sold out of those products. Nevertheless, overall net sales of our corn soil insecticides were ~~posted by~~down about 45% compared to the first quarter of the prior year. In addition, sales of our Impact post-emergent corn herbicides, which (as they related to the wholesale distribution channel) were strong in the prior quarter, decreased in the first quarter due largely to higher-than-normal inventory levels of glyphosate and glufosinate (neither of which the Company sells) in the distribution channel. Further, procurement activity for Dacthal, ~~(a leading weed control solution for~~ a ~~variety~~specialty crop herbicide, had shifted earlier (into the fourth quarter of ~~high value vegetable crops including onions), Folex (which benefited from favorable harvest weather conditions and~~2022) than had been the case in the first quarter of 2022. This resulted in a nearly 40% decline in quarterly sales of our portfolio of herbicide products. By contrast, partially offsetting these declines, we saw a 30% increase in ~~2022 cotton acres in the Mississippi Delta region), and Bidrin (our cotton foliar insecticide which benefitted from increased early-season pest pressure). These gains were partially offset by lower~~ sales of corn soil insecticide Aztec, due to a shift in customer purchasing patterns, and temporarily delayed sales of Thimet for sugarcane applications which were curtailed at the end of the quarter due to the impact of Hurricane Ian on logistics in Florida. Further, while drought conditions in our Western and Southwestern markets adversely impacted the physical volume of our soil fumigants ~~products, we achieved improved net sales through appropriate price adjustments.~~versus the prior year due in part to the gradual elimination of agricultural water allocation restrictions in California following abundant rainfall and record snowpack accumulation.

Cost of sales within the domestic crop business decreased by 5%24% (from ~~$36,485~~$54,200 in ~~2021~~2022 to ~~$34,613~~$41,254 in ~~2022) primarily~~2023) as a result of ~~selling more higher-margin products, and improved~~decreased volumes, as compared to the first quarter of 2022. In-bound freight costs rose due, in part, to our efforts to expedite shipment of intermediate compounds for Aztec production. Less favorable factory ~~performance. As a result of these factors~~performance (arising from increased labor costs, higher service charges (at our Axis plant) and increased ~~pricing, domestic crop generated an 14% increase~~waste disposal charges (at our Los Angeles facility), coupled with lower factory absorption rates due to raw material supply delays that resulted in lower than expected output, led to a 35% decrease in gross profit for domestic crop (from ~~$30,237~~$33,993 in ~~the third quarter of 2021~~2022 to ~~$34,502 this year) on a 4% increase~~$20,622 in ~~sales.~~2023).

Our domestic non-crop businessposted a ~~decline~~4% increase in net sales in the ~~third~~first quarter ~~of 2022,~~2023, as compared to the same period in the prior year ~~(down 12% to $18,936 from $21,622~~($13,899 in ~~2021)~~2023 v. $13,396 in 2022). In this category, our Dibrom® mosquito adulticide generated steady sales compared to the same quarter of the prior year, as hurricane and tropical storm activity season were consistent with the prior year. Further, royalty and license fees for our Envance proprietary solutions were higher than the first quarter of last year. By contrast, we experienced lighter than normal demand for our commercial pest control products, including pest strips. In addition, we recorded slightly lower net sales from our OHP nursery and ornamental ~~products declined, as consumer spending paused on concerns over a possible economic recession. Conversely, we saw an uptick in demand for goods that we supply to professional pest control applicators~~business and ~~landscapers. Mosquito control product sales were below~~ the ~~prior year third quarter, but in the aftermath of Hurricane Ian channel inventories~~pharmaceutical products of our ~~Dibrom adulticide are being depleted and is expected to be replenished in the next two quarters.~~GemChem business.

Cost of sales within the domestic non-crop business ~~declined~~rose by ~~21%~~about 11% in the ~~third~~first quarter ~~of 2022,~~2023, as compared to the same period in the prior year (from ~~$12,740~~$7,629 to $8,453). This was driven by a different mix of products including some lower margin products. With higher costs of sales on a concomitantly lower increase in ~~2021 to $10,125 in 2022), primarily resulting from lower~~net sales, ~~offset by price increases and improved factory performance and associated overhead cost recovery. Gross~~gross profit for domestic non-crop decreased by 1%6% (from ~~$8,882~~$5,767 in ~~2021~~2022 to ~~$8,811~~$5,446 in ~~2022)~~2023).

Net sales of our international businesses rose by 9%about 2% during the period ($~~64,066~~49,110 in ~~2022~~2023 vs. ~~$58,954~~$48,004 in ~~2021)~~2022). This group of businesses experienced increases in herbicides, fungicides, and ~~constituted 42% of our consolidated quarterly sales. These results were achieved despite the challenges posed~~plant growth regulators, partially offset by ~~the strong US Dollar~~minor sales decreases in soil fumigants, foliar insecticides, and ~~various production, supply, and transportation difficulties. The business benefited from~~soil insecticides. We posted sales increases in ~~soil fumigants, Mocap~~the Central American market through our AgriCenter group (up 11%) and ~~Nemacur soil insecticides~~enjoyed improved demand for our Assure II herbicide in Canada. Our Australian business delivered higher sales and ~~an especially strong~~gross profits versus the prior year, as they focused on a more profitable product mix. Our performance in Mexico remained solid, despite temporary product importation impediments. By contrast, net sales of our business in Brazil ~~where~~declined due to general market inventories. Further, the international business of Agrinos, a key part of our ~~Counter nematicide sales are accelerating. Our Central American business experienced increased demand~~Green Solutions platform, declined slightly in the ~~pineapple, banana, and citrus markets, along~~quarter with continuing expansion of our Greenplants micronutrient solutions. In Mexico, despite drought conditions, our business experienced good performance by penetrating previously untapped regions of the country with at-plant fumigants and herbicides on high-value crops. Despite sufficient rainfall and heavy demand for molluscicides and other insecticide products for use on canola, winter wheat and pulse, our Australian operations posted lower sales asin India and China, partially offset by a ~~result of supply constraints and transportation-related difficulties.~~modest increase in Ukraine.

Cost of sales in our international business increased by ~~12%~~1% (from ~~$41,009~~$36,369 in ~~2021~~2022 to ~~$45,995~~$36,641 in ~~2022)~~2023), ~~on sales that increased by 9% and was impacted by cost increases (including logistics and freight) of~~which is consistent with the ~~third-party products that we distribute.~~relative increase in net sales. Gross profit for the international businesses increased by 1%about 7% (to ~~$18,071~~$12,469 in ~~2022~~2023 from ~~$17,945~~$11,635 in ~~2021).~~2022), which was above the corresponding increase in net sales; the disparity was due largely to the shortage of high-value products produced by the Company domestically.

On a consolidated basis, gross profit for the ~~third~~first quarter of 2023 decreased by 25% (from $51,395 in 2022 ~~increased by 8% (from $57,064~~to $38,537 in ~~2021 to $61,384 in 2022)~~2023). Decreased sales volume, unavailability of high-margin crop products and higher factory costs all factored into yielding reduced profitability. Overall gross margin percentage ended at ~~40%~~31% in the ~~third~~first quarter of ~~2022,~~2023, as compared to ~~39%~~34% in the ~~third~~first quarter of the prior year. The primary driver for this increase was higher selling prices coupled with improved factory performance, partially offset by inflation on raw materials and logistics and, for our international businesses, higher purchases costs related to increases in the US Dollar.

Operating expenses ~~increased~~decreased by ~~$1,730~~$1,374 or 4% to ~~$50,140~~$35,272 for the ~~three-month period~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the same period in ~~2021.~~2022. The ~~changes~~differences in operating expenses by department are as follows:


	2022		2021		Change			% Change			2023		2022		Change			% Change
Selling	$	14,162	$	12,462	$	1,700			14	%	$	13,371	$	11,243	$	2,128			19	%
General and administrative		15,570		15,727		(157	)		-1	%
Other												9,130		14,994		(5,864	)		-39	%
Proxy activities												541		—		541			100	%
Amortization												3,360		3,439		(79	)		-2	%
Research, product development and regulatory		8,513		7,674		839			11	%		8,870		6,970		1,900			27	%
Freight, delivery and warehousing		11,895		12,547		(652	)		-5	%
Subtotal	$	50,140	$	48,410	$	1,730			4	%
											$	35,272	$	36,646	$	(1,374	)		-4	%

•

Selling expenses increased by ~~$1,700 to end at $14,162~~$2,128 for the ~~three-month period~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared with the same period of the prior year. This included increased costs associated with employees and travel expenses ~~(as~~as the business ~~resumed in-person interaction~~continues to grow and return to normal face to face contact with ~~customers), inflation related increased wages, increased spending on advertising~~customers, and ~~promoting~~other costs supporting long term growth offset to a degree by the ~~Company’s products, and the cost of commissions associated with sales growth~~beneficial movements in ~~Brazil. These increased costs were somewhat offset by~~some key exchange ~~movement in key currencies.~~rates.

•

General and administrative expenses decreased by ~~$157 to end at $15,570~~$5,864 for the ~~three-month period~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the same period of ~~2021.~~2022. The main drivers were reduced short-term and long-term incentive compensation accruals that reflect the ~~positive impacts on~~business performance for the ~~foreign~~first quarter of 2023, and benefits associated with favorable currency ~~exchange rates, offset by increased wages, travel expenses, legal and other administrative costs~~movements particularly in ~~support of our growing business.~~the Central America region.

•

The Company spent $541 in fees associated with its proxy activities.

•

Research, product development costs and regulatory expenses increased by ~~$839 to end at $8,513~~$1,900 for the ~~three-month period~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the same period of ~~2021.~~2022. The main drivers were increased ~~international regulatory~~costs associated with the commercialization of our SIMPAS delivery system and ~~registration~~ costs ~~as we invest in our strongly growing business.~~

•

~~Freight, delivery~~associated with product defense and warehousing costs for the three-month period ended September 30, 2022, were $11,895 or 7.8% of sales as compared to $12,547 or 8.5% of sales for the same period in 2021. The decrease can mainly be attributed to improved supply chain conditions and variations in delivery destinations.product development activities.

On April 1, 2020, the Company made a strategic investment in Clean Seed Inc., in the amount of $1,190. The Company recorded a negative fair value ~~adjustments~~adjustment in the amount of ~~$454 and $269 for~~$22 during the three months ended ~~September 30, 2022~~March 31, 2023, and ~~2021, respectively.~~a positive adjustment in the amount of $83 during the comparative three months of the prior year.

Interest costs net of capitalized interest were ~~$1,086~~$1,686 in the ~~three-month period ended September 30, 2022,~~first three months of 2023, as compared to ~~$962~~$398 in the same period of ~~2021.~~2022. Interest costs are summarized in the following table:

Average Indebtedness and Interest expense


	Three months ended September 30, 2022								Three months ended September 30, 2021								Q1 2023								Q1 2022
	Average Debt		Interest Expense			Interest Rate			Average Debt		Interest Expense			Interest Rate			Average Debt		Interest Expense			Interest Rate			Average Debt		Interest Expense			Interest Rate
Revolving line of credit (average)	$	125,441	$	1,104			3.5	%	$	147,171	$	889			2.4	%	$	90,486	$	1,542			6.8	%	$	85,756	$	401			1.9	%
Amortization of deferred loan fees		—		61			—			—		70			—			—		63			—			—		69			—
Amortization of other deferred liabilities		—		10			—			—		2			—			—		—			—			—		6			—
Other interest expense		—		(1	)		—			—		52			—			17,500		128			2.9	%		—		9			—
Subtotal		125,441		1,174			3.7	%		147,171		1,013			2.8	%	$	107,986	$	1,733			6.4	%	$	85,756	$	485			2.3	%
Capitalized interest		—		(88	)		—			—		(51	)		—			—		(47	)		—			—		(87	)		—
Total	$	125,441	$	1,086			3.5	%	$	147,171	$	962			2.6	%	$	107,986	$	1,686			6.2	%	$	85,756	$	398			1.9	%

The Company’s average overall debt for the ~~three-month period~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$125,441,~~$90,486, as compared to ~~$147,171~~$85,756 for the ~~three-month period~~three months ended ~~September 30, 2021.~~March 31, 2022. Our borrowings in the ~~three-month period~~three months ended ~~September 30, 2022,~~March 31, 2023 were lower mainly due to cash generated over the last 12 months used to pay down debt, partially offset by the acquisition activity over the same period and increases in working capital in support of business growth. As can be seen from the table above, the effective bank interest rate on our revolving line of credit was 3.5% and 2.4% at each of the three-month period ended September 30, 2022 and 2021, respectively.

~~Income tax expense increased by $1,446 to $2,963 for the three-month period ended September 30, 2022, as~~higher when compared to $1,517 for the comparable period in 2021. The effective tax rates for the three-month period ended September 30, 2022, and 2021, were 30.5% and 20.7%, respectively. The effective tax rate for all interim periods is based on the projected income for the full year and is subject to ongoing review and adjustment by management. The increase in effective tax rate was primarily driven by the mix of our domestic and international income.

Our net income for the three-month period ended September 30, 2022, was $6,741 or $0.23 per basic and diluted share, as compared to $5,498 or $0.18 per basic and diluted share in the same quarter of 2021.

~~Nine Months Ended September 30, 2022 and 2021:~~

~~Overview of the Company’s Performance~~

During the first nine months of 2022, the global agricultural industry maintained the upcycle that began in 2021. Commodity prices remained high, driven in part by the Russian invasion of Ukraine, which has served to reduce exports from both Russia and Ukraine, of corn, wheat, sunflower oil and fertilizer inputs into the global market, and a stronger farm economy in the U.S. Inflation in multiple countries has led to higher costs of goods and transportation; however, the strength of the farm economy was able to absorb these effects during the subject period. Following extraordinary activity in the first quarter, domestic distribution within our industry slowed procurement modestly during the second and third quarters. All told, the Company’s overall operating results for the first nine months of 2022 improved in most all respects over those of the same period of 2021.

On a consolidated basis, with domestic sales up 12% and international sales up by 14%, overall net sales increased by 13% (to $449,636 from $398,063). Cost of sales were up 10% on an absolute basis but decreased as a percent of net sales to 59% from 61%. Factory performance improved during the first nine months of 2022, as compared to that of 2021. These factors, taken together, yielded an increase in gross profit, which was up $28,022 or 18% period-over-period and improved to 41% of net sales, up from 39% during the first nine months of 2021. Operating expenses rose on an absolute basis by 10% but declined as a percent of net sales to 32% as compared to 33% of net sales for the same period of the prior ~~year.~~

~~Interest expense declined slightly, while income tax expense increased to $10,187 from $5,324 during the comparable period last~~ year, ~~primarily~~mainly as a result of ~~stronger financial performance and higher effective tax rate. Overall, the Company’s net income for the period~~ increased ~~by 71%, ending at $23,506,~~working capital as ~~compared to $13,713 during the first nine months of the prior year. Details on our financial performance are set forth below.~~

~~RESULTS OF OPERATIONS~~

~~Nine months ended September 30, 2022, and 2021~~

2022

2021

Change

% Change

Net sales:

U.S. crop

$
220,503

$
184,052

$
36,451

20
%
U.S. non-crop

53,648

60,563

(6,915
)

-11
%
Total U.S.

274,151

244,615

29,536

12
%
International

175,485

153,448

22,037

14
%
Total net sales:

$
449,636

$
398,063

$
51,573

13
%
Cost of sales:

U.S. crop

$
115,904

$
105,739

$
10,165

10
%
U.S. non-crop

28,822

32,516

(3,694
)

-11
%
Total U.S.

144,726

138,255

6,471

5
%
International

122,554

105,474

17,080

16
%
Total cost of sales:

$
267,280

$
243,729

$
23,551

10
%
Gross profit:

U.S. crop

$
104,599

$
78,313

$
26,286

34
%
U.S. non-crop

24,826

28,047

(3,221
)

-11
%
Total U.S.

129,425

106,360

23,065

22
%
International

52,931

47,974

4,957

10
%
Total gross profit

$
182,356

$
154,334

$
28,022

18
%
Gross margin:

U.S. crop

47
%

43
%

U.S. non-crop

46
%

46
%

Total U.S.

47
%

43
%

International

30
%

31
%

Total gross margin

41
%

39
%

~~Our~~ ~~domestic crop business~~ recorded net sales that were 20% above those of first nine months of 2021. Assisted by consistently high crop commodity prices and a strong domestic farm economy, the Company experienced strong demand across all product categories and was able to implement appropriate pricing actions to cover escalating material and transportation costs. Our Midwest corn business was exceptional, with Aztec soil insecticide and Impact herbicide brands increasing 70% over the prior year nine-month period. Our domestic cotton business led by Bidrin foliar insecticide and Folex harvest defoliant grew by over 40% in the first three quarter of 2022, as compared to the same period of 2021. Domestic Crop also benefited from very strong sales increases in Dacthal for high valued vegetable crops, Assure II which is expanding sales significantly in the US and Envoke, a newly introduced herbicide used to address glyphosate resistant weeds. The only area of demand softness was in soil fumigants, which experienced lower unit volumes due to drought conditions in Western and Southwestern states where water allocation has been implemented. However, we were able to make pricing adjustment to cover inflationary material and transportation costs in order to retain our traditional profit margins. During the first nine months of 2022, customer procurement activity was exceptionally high in the first quarter and assumed more normalized levels in the second and third quarters.

Cost of sales within the domestic crop business increased 10%, as compared to the first nine months of 2021, driven by sales that increased by 20% including increased sales of higher margin products (many of which we manufacture in our domestic facilities) and benefitting from improved factory performance. Gross profit for domestic crop rose by 34% during the nine-month period to $104,599 from $78,313.

~~Our~~ ~~domestic non-crop business~~ recorded an 11% decrease in net sales for the first nine months of the year (to $53,648 from $60,563). Revenue for our Envance technologies decreased when compared to the same period in 2021, due primarily to a one-time license fee received in 2021, and the timing of recognizing revenue for recurring royalties. Additionally, we experienced a fall-off in consumer demand for our OHP nursery and ornamental products, which we attribute to a pause in consumer spending caused by concerns over possible economic recession. Sales of our Dibrom® mosquito adulticide remained nearly flat as did demand for commercial pest control products (pest strips and bifenthrin).

Cost of sales within the domestic non-crop business decreased by 11%, (to $28,822 in 2022 from $32,516 in 2021) on net sales that were down by 11%. Gross profit for domestic non-crop decreased by 11% (to $24,826 in 2022 from $28,047 in 2021), due largely to the non-recurrence of a one-time, upfront license fee as described above.

~~Net sales of our~~ ~~international businesses~~ increased by 14% during the first three quarters of 2022 (to $175,485 in 2022 from $153,448 in 2021). Central America and Mexico both delivered double-digit growth by satisfying continuing strong demand for soil fumigants (on high-value crops), herbicides and granular insecticides. Brazil continued an upward trend (grew over 35%) fueled by further market penetration of our Counter granular insecticide/nematicide. Australia matched prior year sales driven by our expanded market footprint following the integration of the acquired AgNova business, partially offset by supply and logistics challenges. Significant product sales improvements included Mocap and Nemacur insecticides (together growing over 40%) and Assure II herbicide growing approximately 250%.

Cost of sales in our international business increased by 16% (to $122,544 in 2022 from $105,474 in 2021) primarily driven by volume growth and impacted by increased prices from the strengthening US Dollar, and general inflation on materials and associated logistics costs. Gross profit for the international businesses increased by 10% to $52,931 during the first nine months of 2022 from $47,974 during the same period in 2021.

On a consolidated basis, net sales for the first nine months of 2022 increased 13%, and gross profit increased by 18%. Our gross profit in the first nine months of 2022 increased in part as a result of improved sales volumes and pricing, and improved factory performance. Gross margin performance, when expressed as a percentage of sales, rose to 41% from 39% year-over-year.

Operating expenses increased by $12,616 to $145,550 for the nine-month period ended September 30, 2022, as compared to the same period in 2021. The changes in operating expenses by department are as follows:

2022

2021

Change

% Change

Selling

$
37,844

$
35,184

$
2,660

8
%
General and administrative:

Other

50,262

46,859

3,403

7
%
Proxy contest activities

1,785

—

1,785

100
%
Research, product development and regulatory

23,241

21,221

2,020

10
%
Freight, delivery and warehousing

32,418

29,670

2,748

9
%

$
145,550

$
132,934

$
12,616

9
%

•

Selling expenses increased by $2,660 to end at $37,844 for the nine-month period ended September 30, 2022, as compared to the same period of 2021. The main drivers were increased costs associated with commissions in Brazil, travel expenses (as the business ~~resumed in-person interaction with customers), inflation related increased wages and product complaints as a result of sales growth in Mid-west offset by positive movements in some key exchange rates.~~

•

~~General and administrative expenses - other increased by $3,403 to end at $50,262 for~~worked through the nine-month period ended September 30, 2022, as compared to the same period of 2021. The main drivers were increased wages, travel expenses and other administrative costs in support of our growing business, increased legal costs, the settlement of deferred considerationlogistics challenges related to the Australian business acquired in the final quarter of 2020, and increased short- and long-term incentive compensation as a result of our improved business performance. These costs were partly offset by some positive moves of exchange rates.

•

~~The Company spent $1,785 in fees associated with our Proxy defense activities; there were no such fees in the comparative period of the prior year.~~

•

Research, product development costs and regulatory expenses increased by $2,020 to end at $23,241 for the nine-month period ended September 30, 2022, as compared to the same period of 2021. The main drivers were increased costs associated with in-field activities in support of our proprietary delivery systems, and international product defense and registration expenses supporting strong sales growth.

•

Freight, delivery and warehousing costs for the nine-month period ended September 30, 2022 were $32,418 or 7.2% of sales as compared to $29,670 or 7.5% of sales for the same period in 2021. This increased expense is primarily driven by strong sales growth and variations in final delivery destinations, partially offset by improved supply chain conditions.

During the nine-month period ended September 30, 2022, the Company recorded a decrease in the fair value of our equity investment in Clean Seed in the amount of $857 and recorded an increase in the amount of $103 during the nine months ended September 30, 2021. These changes in fair value of our investment directly reflect changes in the stock’s quoted market price.

During the nine-month period ended September 30, 2021, a Paycheck Protection Program loan assumed on the acquisition of Agrinos in the fourth quarter of 2020 was fully extinguished with the majority of the balance forgiven and recorded as other income in the Company’s condensed consolidated statements of operations in the amount of $672.

~~Interest costs net of capitalized interest were $2,256 in the first nine-month period of 2022, as compared to $2,921 in the same period of 2021. Interest costs are summarized in the following table:~~

~~Average Indebtedness and Interest expense~~

Nine months ended September 30, 2022

Nine months ended September 30, 2021

Average
Debt

Interest
Expense

Interest
Rate

Average
Debt

Interest
Expense

Interest
Rate

Revolving line of credit (average)

$
111,939

$
2,250

2.7
%

$
144,405

$
2,733

2.5
%
Amortization of deferred loan fees

—

199

—

—

230

—

Amortization of other deferred liabilities

—

27

—

—

(6
)

—

Other interest expense

—

20

—

—

140

—

Subtotal

111,939

2,496

3.0
%

144,405

3,097

2.9
%
Capitalized interest

—

(240
)

—

—

(176
)

—

Total

$
111,939

$
2,256

2.7
%

$
144,405

$
2,921

2.7
%

The Company’s average overall debt for the nine-month period ended September 30, 2022, was $111,939, as compared to $144,405 for the nine months ended September 30, 2021. During the period, we continued to focus on our use of revolving debt, while funding working capital for the growing business.Aztec. As can be seen from the table above, our effective bank interest rate on our revolving line of credit was ~~2.7%~~6.8% for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~2.5% for the same period of 2021.~~1.9% in 2022.

Income tax ~~expense increased by $4,863 to end at $10,187~~benefit was $361 for the ~~nine-month period~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to an income tax expense of ~~$5,324~~$4,499 for the ~~comparable period in 2021.~~three-months ended March 31, 2022. The effective income tax rate for the three months ended March 31, 2023 was computed based on the estimated effective tax rate for the ~~nine~~full year, adjusted for a benefit from the remeasurement of certain U.S. federal and state deferred taxes, partially offset by an expense attributed to establishing liabilities for uncertain tax positions in the U.S. and India. This calculation resulted in an effective tax rate of minus 23.2% for the three months ended ~~September 30, 2022, was 30.2%~~March 31, 2023, as compared to ~~27.4%~~31.2% for ~~same period last year. The rate has increased compared~~the three months ended March 31, 2022.

It is expected that $1,550 of unrecognized tax benefits will be released within the next twelve months due to prior year reflecting a mix of income in different jurisdictions. For tax years beginning after December 31, 2021, the Tax Cuts and Jobs Act (“TCJA”) of 2017 amends Internal Revenue Code Section 174 wherein research and development expenditures will no longer be deducted in the tax year that such costs are incurred but must now be capitalized and amortized over either a five- or fifteen-year period, depending on the locationexpiration of the ~~activities performed. The effective tax rate for all interim periods is based on the projected income for the full year and is subject to ongoing review and adjustment by management.~~statute of limitations.

Our overall net income for the ~~nine-month period ended September 30, 2022~~first three months of 2023 was ~~$23,506~~$1,918 or ~~$0.80~~$0.07 per basic and ~~$0.78 per~~ diluted share, as compared to ~~$13,713~~$9,935 or ~~$0.46~~$0.33 per basic and ~~$0.45 per~~ diluted share in the ~~same period~~first quarter of ~~2021.~~2022.

LIQUIDITY AND CAPITAL RESOURCES

The ~~Company’s~~Company used cash of $41,447 in operating activities ~~utilized net cash of $45,678~~ during the ~~nine-month period~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$174~~$32,315 during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Included in the ~~$45,678~~$41,447 are net income of ~~$23,506,~~$1,918, plus non-cash depreciation, amortization of intangibles and other assets and discounted future liabilities, in the amount of ~~$19,305, loss on disposal of property, plant and equipment of $265, amortization of deferred loan fees of $174 and~~$6,253, provision for bad debts in the amount of ~~$597.~~$581 and other in the amount of $94. Also included are stock-based compensation of ~~$4,396, adjustment to contingent consideration in the amount of $621, increase~~$1,474, decrease in deferred income taxes of ~~$64,~~$122, change in ~~fair value~~liabilities for uncertain tax positions or unrecognized tax benefits of ~~an equity investment of $857,~~$371, and net change in foreign currency ~~adjustments~~adjustment of ~~$218.~~$446. These together provided net cash inflows of ~~$49,903,~~$10,367, as compared to ~~$39,606~~$18,942 for the same period of ~~2021.~~2022.

During the ~~nine-month period~~first three months of ~~2022,~~2023, the Company increased net working capital by ~~$97,986,~~$52,995, as compared to ~~an increase of $37,611~~$55,031 during the same period of the prior year. Included in this change: inventories increased by ~~$38,987,~~$33,731, as compared to ~~$4,325~~$11,738 for the ~~same period~~first quarter of 2021. While increases in inventory are normal for the Company’s annual cycle, the Company decided this year to bring in raw materials earlier than in prior seasons in order to secure our needs of key materials for the balance of the year and the start of the next growing season.

2022. Customer prepayments decreased by ~~$62,831,~~$22,759, as compared to ~~$38,272~~$44,528 in the same period of ~~2021,~~2022, driven by customer decisions regarding demand, payment timing and our cash incentive programs. Our accounts payable balances increased by ~~$14,418,~~$5,655, as compared to ~~an increase of $7,769~~$9,677 in the same period of ~~2021, driven by increased factory activity levels.~~2022. Accounts ~~receivables~~receivable increased by ~~$46,289,~~$8,779, as compared to ~~an increase of $42,979~~$33,660 in the same period of ~~2021. This is primarily driven by increased group sales and strong international growth.~~2022. Prepaid expenses ~~increased~~decreased by ~~$4,272,~~$600, as compared to ~~$2,194~~$800 in the same period of ~~2021.~~2022. Income tax receivable increased by ~~$5,201,~~$2,965, as compared to a decrease of ~~$2,031~~$3,046 in the prior year. Accrued programs increased by ~~$45,016, (as~~$10,660, as compared to ~~$33,982~~$24,601 in the prior ~~year), which is normal at this point~~year, as a result of both higher sales and the mix of those sales including products with higher program elements incorporated in ~~the growing season.~~pricing. Finally, other payables and accrued expenses ~~increased~~decreased by ~~$2,555,~~$500, as compared to ~~$4,025~~an increase of $2,145 in the prior year.

With regard to our program accrual, the increase (as noted above) primarily reflects our ~~volume~~level and mix of sales ~~(certain products are marketed with higher levels of program accruals),~~ and ~~mix of~~ customers in the first ~~nine months~~quarter of ~~2022,~~2023, as compared to the prior year. The Company accrues programs in line with the growing season upon which specific products are targeted. Typically crop products have a growing season that ends on September 30th of each year. During the first ~~nine months~~quarter of 2022, the Company made accruals for programs in the amount of ~~$78,640~~$23,669 and made payments in the amount of ~~$33,869.~~$13,033. During the first ~~nine months~~quarter of the prior year, the Company made accruals in the amount of ~~$59,267~~$40,469 and made payments in the amount of ~~$25,353. The increase in accruals for programs in the first nine months of 2022, compared to the same period in 2021, is a direct result of an increase in sales of qualifying products.~~$15,752.

Cash used for investing activities was $3,308 for the ~~nine-month period~~three months ended ~~September 30, 2022 and 2021 was $9,978 and $18,431, respectively.~~March 31, 2023, as compared to $4,250 for the three months ended March 31, 2022. The ~~$18,431 in 2021 includes a product acquisition in the amount of $10,000. No such acquisition took place in the current year. In 2022, the~~ Company spent ~~$8,946~~$2,590 on ~~purchases of~~ fixed assets acquisitions primarily focused on continuing to invest in manufacturing infrastructure. In addition, the Company made a payment of ~~$1,000 to Clean Seed to amend~~$703 for a ~~license agreement under which royalty-bearing license rights were converted to fully paid-up, royalty-free, perpetual license rights,~~product acquisition and spent ~~$78~~$15 on patents for the Envance technology business.

During the ~~nine-month period~~three months ended ~~September 30, 2022,~~March 31, 2023, financing activities provided ~~$59,797,~~$43,777, as compared to ~~$19,974~~$37,449 during the same period of the prior year. Net borrowings under the Credit Agreement amounted to ~~$96,000 during~~$44,700 in the ~~nine-month period ended September 30, 2022,~~first quarter of 2023, as compared to ~~$28,592~~$46,000 in the same period of the prior year. The Company paid dividends to stockholders amounting to ~~$2,072~~$851 during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~$1,789~~$594 in the same period of ~~2021.~~2022. The Company paid ~~$13,731~~$557 for the repurchase of ~~720,350~~27,835 shares of its common stock during the ~~nine-month~~three months ended March 31, 2023, as compared to $6,219 to purchase 332,404 shares in the same period ~~ended September 30, 2022 and $20,000 in connection with an accelerated share repurchase program. There were no such purchases during~~of the ~~nine-month period ended September 30, 2021.~~prior year. The Company received ~~$837 for the issuance of shares under ESPP during the nine-month period ended September 30, 2022, as compared to $743 for the same period last year. The Company also received $783~~$18 from the exercise of stock ~~options during the nine-month period ended September 30, 2022, as compared to $172 in the prior period.~~options. Lastly, in exchange for shares of common stock returned by employees, ~~the Company~~we paid ~~$2,020~~$13 and ~~$2,915~~$2,174 for tax withholding on stock-based compensation awards during the ~~nine-months~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

The ~~Company~~Company’s main bank is Bank of the West, a wholly owned subsidiary of BMO Financial Group. Bank of the West has abeen the Company’s bank for more than 30 years and is the syndication manager for the Company’s revolving line of credit ~~that is~~ shown as long-term debt in the condensed consolidated balance sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021. These are~~2022. The debt is summarized in the following table:


Long-term indebtedness ($000's)	September 30, 2022			December 31, 2021
Long-term indebtedness							March 31, 2023			December 31, 2022
Revolving line of credit	$	149,300		$	53,300		$	97,000		$	52,300
Deferred loan fees		(886	)		(1,060	)		(761	)		(823	)
Net long-term debt	$	148,414		$	52,240
Total indebtedness							$	96,239		$	51,477

~~At September 30, 2022,~~

As of March 31, 2023, the Company was ~~compliant~~in compliance with ~~all covenants to its credit agreement. Also, at September 30, 2022,~~ the ~~Company’s total~~Consolidated Funded Debt ~~amounted~~Ratio but noncompliant with respect to ~~$149,300. At that date~~ the ~~Company’s rolling four quarter~~Fixed Charge Covenant ratio (“FCCR”). The noncompliance was driven by a reduction in the Consolidated EBITDA ~~(as defined~~(in the numerator of the FCCR calculation) during the twelve months ended March 31, 2023, coupled with higher-than-normal distributions (in the denominator of the FCCR calculation) arising from share repurchases made by the Company during the same period. On May 8, 2023, the Company obtained a waiver of the FCCR for the twelve months ended March 31, 2023, and an adjustment to the FCCR terms for the period ending June 30, 2023. The impact of most of the share repurchases will be eliminated from the denominator in the FCCR calculation in the third quarter of 2023.

At March 31, 2023, according to the terms of the Credit Agreement, ~~see Note 10) amounted to $77,167, which results in a leverage ratio of 1.93,~~ as ~~compared to a maximum leverage ratio permitted under~~amended, and based on our performance against the ~~Credit Agreement of 3.5. At September 30, 2022,~~most restrictive covenant listed above, the Company ~~has~~had the capacity to increase its borrowings by up to ~~$120,783, according to the terms thereof.~~$111,922. This compares to an available borrowing capacity of ~~$94,973~~$200,372 as of ~~September 30, 2021. At~~ December 31, 2021, the Company had borrowing capacity of $178,705. The level of borrowing capacity is driven by three factors: (1) our financial performance, as measured in EBITDA for both the trailing twelve-month period and proforma basis arising from acquisitions, (2) net borrowings, and (3) the leverage covenant (the TL Ratio).2022.

We believe that anticipated cash flow from operations, existing cash balances and available borrowings under our amended senior credit facility will be sufficient to provide us with liquidity necessary to fund our working capital and cash requirements for the next twelve months.

2922

RECENTLY ISSUED ACCOUNTING GUIDANCE

Please refer to Note 1516 in the accompanying Notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for recently issued and adopted accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company continually re-assesses the critical accounting policies used in preparing its financial statements. In the Company’s Form 10-K filed with the SEC for the year ended December 31, ~~2021,~~2022, the Company provided a comprehensive statement of critical accounting policies. These policies have been reviewed in detail as part of the preparation work for this Form 10-Q. After our review of these matters, we have determined that, during the subject reporting period, there has been no material change to the critical accounting policies that are listed in the Company’s Form 10-K for the year ended December 31, ~~2021.~~2022.

Certain of the Company’s policies require the application of judgment by management in selecting the appropriate assumptions for calculating financial estimates. These judgments are based on historical experience, terms of existing contracts, commonly accepted industry practices and other assumptions that the Company believes are reasonable under the circumstances. These estimates and assumptions are reviewed periodically, and the effects of ~~updates to estimates and assumptions~~revisions are reflected in the condensed consolidated financial statements in the period that ~~these updates~~revisions are determined to be necessary. Actual results may differ from these estimates under different outcomes or conditions. ~~Our estimates did not change materially during the three- and nine-months ended September 30, 2022.~~

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk related to changes in interest rates, primarily from its borrowing activities. The Company’s indebtedness to its primary lender is evidenced by a line of credit with a variable rate of interest, which fluctuates with changes in the lender’s reference rate. For more information, please refer to the applicable disclosures in the Company’s Form 10-K filed with the SEC for the year ended December 31, ~~2021 and note 10 to the condensed consolidated financial statements.~~2022.

The Company faces market risk to the extent that changes in foreign currency exchange rates affect our non-U.S. dollar functional currency as to foreign subsidiaries’ revenues, expenses, assets and liabilities. The Company currently does not engage in hedging activities with respect to such exchange rate risks.

Assets and liabilities outside the U.S. are located in regions where the Company has subsidiaries or joint ventures: Central America, South America, North America, Europe, Asia, and Australia. The Company’s investments in foreign subsidiaries and joint ventures with a functional currency other than the U.S. dollar are generally considered long-term. Accordingly, the Company does not hedge these net investments.

Item 4. CONTROLS AND PROCEDURES

As of ~~September 30, 2022,~~March 31, 2023, the Company has a comprehensive set of disclosure controls and procedures designed to ensure that all information required to be disclosed in our filings under the Securities Exchange Act (1934) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of ~~September 30, 2022,~~March 31, 2023, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, ~~has~~had concluded, based on their evaluation, that the Company’s disclosure controls and procedures are effective to provide reasonable assurance of the achievement of the objectives described above.

There were no changes in the Company’s internal controls over financial reporting that occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

3023

PART II. OTHER INFORMATION

The Company was not required to report any matters or changes for any items of Part II except as disclosed below.

Item 1. Legal Proceedings

Please refer to Note 14 in the accompanying Notes to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for legal updates.

Item 1A. Risk Factors

The Company continually re-assesses the business risks, and as part of that process detailed a range of risk factors in the disclosures in American Vanguard’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2021,~~2022, filed on March ~~14, 2022. There~~16, 2023. The following disclosure amends and supplements those risk factors and, except to the extent restated below, there are no material changes to the risk factors as so stated.

~~Domestic~~Disruption in the global supply chain is creating delays, unavailability and ~~regional inflation trends, increased interest rates~~adverse conditions for our industry—Despite improvement in container availability and ~~other factors could lead~~freight costs, the global supply chain continues to present risk. Industry consolidation, coupled with longer-term production commitments, has materially affected the ~~erosion~~Company’s supply of ~~economies~~raws and ~~adversely impact~~intermediates in the ~~Company.~~ Both the US and many other countries are experiencing inflation, which, in turn, is leading to increase costs in multiple industry segments, including agriculture and related industries. The persistence of inflation has led central bankers to increase interest rates within their regions.past. There is no guarantee that ~~these measures~~the supply chain condition will ~~arrest~~materially improve any time soon or that the ~~inflationary trend. Further, these factors, taken together with reduced productivity and constraints~~Company will continue to avoid material disruption. Such disruption could have a material adverse effect on the ~~labor supply could lead to recessionary periods in the regions in which~~Company’s operations, financial condition or cash flows.

The Company is dependent upon sole source or a limited number of 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 ~~does business. While~~in a number of its products. Certain of these raw materials are available solely from single or very few sources either domestically or overseas. In connection with supply chain disruptions in 2022, 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 products to the Company ~~takes measures within~~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 control to manage the effects of inflation, higher interest rates and other factors, ultimately, they are outside of the Company’s control. Further, the persistence and/or severity of one or more of themprojected sales which, in turn, could adversely affect the Company's consolidated financial ~~performance and/or operations~~statements.

The Company benefits from customer early pay in meeting its working capital needs. As is the case with other companies in this industry, the Company receives cash from certain major customers at year-end in exchange for granting discounts on the Company’s products during the first half of the ~~Company.~~following year. The Company typically uses this cash to pay down secured debt and for other working capital needs. This flow of cash obviates the need for additional borrowing, which, in turn, preserves borrowing capacity used in part for paying customer programs in the middle of the calendar year and, consequently, reduces interest expense. There is no guarantee that the Company’s customers will continue to support the early pay program at current levels. Further a material change in this program could have an adverse effect upon the Company’s liquidity and its ability to meet working capital demands.

Item 2. Purchases of Equity Securities by the Issuer

The Company periodically repurchases shares of its common stock under a board-authorized repurchase program through a combination of open market transactions, and accelerated share repurchase (ASR) arrangements.

The table below summarizes the number of shares of our common stock that were repurchased during the ~~three-~~three months ended March 31, 2023 and ~~nine-month periods~~the three months ended ~~September 30,~~March 31, 2022. ~~There were no such purchases during the three- and nine-month periods ended September 30, 2021.~~ The shares and respective amount are recorded as treasury shares on the Company’s condensed consolidated balance ~~sheet.~~

On August 22, 2022, pursuant to a Board of Directors resolution, the Company entered into an accelerated share repurchase arrangement to repurchase $20,000 of its common stock. Under the agreement, the Company paid $20,000 and immediately received an initial delivery of 802,810 shares in the amount of $16,000, which the Company recorded as treasury shares. The Company recorded the remaining $4,000 as a reduction to additional paid-in capital pending final settlement in the fourth quarter of 2022. The final number of shares that the Company ultimately receives under the agreement will be determined based on the average of the Rule 10b-18 volume-weighted average prices of the Company’s common stock during the term of the agreement, less and agreed discount, and subject to adjustments pursuant to the terms of the agreement.sheets.


Three months ended	Total number of shares purchased		Average price paid per share		Total amount paid		Maximum number of shares that may yet be purchased under the plan
March 31, 2023		27,835	$	19.96	$	557		—
March 31, 2022		332,404	$	18.71	$	6,219		667,596

3124

The table below summarizes the number of shares of the Company’s common stock that were received under the accelerated share repurchase arrangement during the three- and nine-month periods ended September 30, 2022. There were no such transactions during the three- and nine-month periods ended September 30, 2021.

Month ended

Total number of
shares received

Average price
paid per share

Total amount paid

August 31, 2022

802,810

$
19.93

$
16,000

~~In summary, the Company added a total of 1,190,150 and 1,523,160 of treasury shares of the Company’s common stock during the three- and nine-month periods ended September 30, 2022.~~

Item 6. Exhibits

Exhibits required to be filed by Item 601 of Regulation S-K:


Exhibit No.		Description

10.1		Employment Agreement between American Vanguard Corporation and Eric G. Wintemute dated April 1, 2022 (filed with the Securities Exchange Commission on April 7, 2022, and incorporated herein by reference).

18.1		Preferability Letter from Independent Registered Public Accounting Firm Regarding Change in Accounting Principle.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

101		The following materials from American Vanguard Corp’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2022,~~March 31, 2023, formatted in ~~iXBRL (Inline Extensible~~XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statement of Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

~~104~~		~~The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, has been formatted in Inline XBRL.~~

3325

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	american vanguard corporation

Dated: ~~November 8, 2022~~May 9, 2023	By:	/s/ eric g. wintemute
		Eric G. Wintemute
		Chief Executive Officer and Chairman of the Board

Dated: ~~November 8, 2022~~May 9, 2023	By:	/s/ david t. johnson
		David T. Johnson
		Chief Financial Officer & Principal Accounting Officer

3426


		Page Number
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)


	Condensed Consolidated Statements of Operations	3

	Condensed Consolidated Statements of Comprehensive Income	4

	Condensed Consolidated Balance Sheets	5

	Condensed Consolidated Statements of Stockholders’ Equity	6

	Condensed Consolidated Statements of Cash Flows	87

	Notes to Condensed Consolidated Financial Statements	98

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2218

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3023

Item 4.	Controls and Procedures	3023

PART II—OTHER INFORMATION		31

Item 1.	Legal Proceedings	3124

Item 1A.	Risks Factors	3124

Item 2.	Purchases of Equity Securities by the Issuer	3124

Item 6.	Exhibits	3325

SIGNATURES		3426


	Three months ended September 30, 2022		Three months ended September 30, 2021		Nine months ended September 30, 2022		Nine months ended September 30, 2021
Cash paid for amounts included in the measurement of lease liabilities	$	1,613	$	1,260	$	4,846	$	4,271
ROU assets obtained in exchange for new liabilities	$	2,378	$	5,805	$	4,202	$	17,872


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net income attributable to AVD	$	6,741	$	5,498	$	23,506	$	13,713
Denominator: (in thousands)
Weighted average shares outstanding-basic		29,214		29,892		29,496		29,854
Dilutive effect of stock options and grants		591		498		632		616
Weighted average shares outstanding-diluted		29,805		30,390		30,128		30,470


	Number of Shares			Weighted Average Price Per Share
Balance outstanding, December 31, 2021 and March 31, 2022		108,036		$	11.49
Options exercised		(33,745	)		11.49
Balance outstanding, June 30, 2022		74,291		$	11.49
Options exercised		(1,541	)		11.49
Balance outstanding, September 30, 2022		72,750		$	11.49


	Number of Shares			Weighted Average Price Per Share
Balance outstanding, December 31, 2020		123,087		$	11.48
Options exercised		(5,838	)		11.49
Balance outstanding, March 31, 2021		117,249			11.48
Options exercised		(8,826	)		11.35
Balance outstanding, June 30, 2021		108,423			11.49
Options exercised		(387	)		11.49
Balance outstanding, September 30, 2021		108,036		$	11.49


	Three months ended September 30, 2022			Three months ended September 30, 2021
Balance, June 30	$	1,367		$	2,116
Fair value adjustment		—			(493	)
Payments on existing obligations		(1,292	)		—
Accretion of discounted liabilities		10			(1	)
Foreign exchange effect		(85	)		(57	)
Balance, September 30	$	—		$	1,565

	Nine months ended September 30, 2022			Nine months ended September 30, 2021
Balance, December 31	$	786		$	2,468
Purchase price adjustment		—			(955	)
Fair value adjustment		635			520
Payments on existing obligations		(1,292	)		(250	)
Accretion of discounted liabilities		28			(10	)
Foreign exchange effect		(157	)		(208	)
Balance, September 30	$	—		$	1,565


Month ended	Total number of shares purchased		Average price paid per share		Total amount paid		Maximum number of shares that may yet be purchased under the plan
March 31, 2022		332,404	$	18.71	$	6,219		667,596
Balance at March 31, 2022		332,404			$	6,219		667,596

April 30, 2022		100	$	19.99	$	2		667,496
May 31, 2022		506	$	19.99	$	11		666,990
Balance at June 30, 2022		606	$	19.99	$	13		666,990

August 31, 2022		165,039	$	19.59	$	3,234		501,951
September 30, 2022		222,301	$	19.19	$	4,265		279,650
Balance at September 30, 2022		387,340	$	19.36	$	7,499		279,650

Total number of shares repurchased		720,350	$	19.06	$	13,731		279,650


Month ended	Total number of shares received		Average price paid per share		Total amount paid
August 31, 2022		802,810	$	19.93	$	16,000


	Nine months ended September 30, 2022								Nine months ended September 30, 2021
	Average Debt		Interest Expense			Interest Rate			Average Debt		Interest Expense			Interest Rate
Revolving line of credit (average)	$	111,939	$	2,250			2.7	%	$	144,405	$	2,733			2.5	%
Amortization of deferred loan fees		—		199			—			—		230			—
Amortization of other deferred liabilities		—		27			—			—		(6	)		—
Other interest expense		—		20			—			—		140			—
Subtotal		111,939		2,496			3.0	%		144,405		3,097			2.9	%
Capitalized interest		—		(240	)		—			—		(176	)		—
Total	$	111,939	$	2,256			2.7	%	$	144,405	$	2,921			2.7	%