hi
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 JUNE 30, 20212022
☐ | 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 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 Par Value—30,878,20130,869,520 shares as of August 2, 2021.2022.
AMERICAN VANGUARD CORPORATION
INDEX
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| Page Number |
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| 3 | |
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| Condensed Consolidated Statements of Comprehensive Income |
| 4 |
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| 5 | |
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| Condensed Consolidated |
| 6 |
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| 8 | |
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| 9 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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30 | |||
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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 June 30, |
|
| For the Six Months Ended June 30, |
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Net sales |
| $ | 134,610 |
|
| $ | 104,555 |
|
| $ | 250,765 |
|
| $ | 200,517 |
|
| $ | 148,084 |
|
| $ | 134,610 |
|
| $ | 297,519 |
|
| $ | 250,765 |
|
Cost of sales |
|
| (82,471 | ) |
|
| (64,249 | ) |
|
| (153,495 | ) |
|
| (121,830 | ) |
|
| (88,305 | ) |
|
| (82,471 | ) |
|
| (176,547 | ) |
|
| (153,495 | ) |
Gross profit |
|
| 52,139 |
|
|
| 40,306 |
|
|
| 97,270 |
|
|
| 78,687 |
|
|
| 59,779 |
|
|
| 52,139 |
|
|
| 120,972 |
|
|
| 97,270 |
|
Operating expenses |
|
| (43,080 | ) |
|
| (33,579 | ) |
|
| (84,524 | ) |
|
| (70,124 | ) |
|
| (48,966 | ) |
|
| (43,080 | ) |
|
| (95,410 | ) |
|
| (84,524 | ) |
Adjustment to bargain purchase gain on business acquisition |
|
| (88 | ) |
|
| — |
|
|
| (121 | ) |
|
| — |
|
|
| — |
|
|
| (88 | ) |
|
| — |
|
|
| (121 | ) |
Operating income |
|
| 8,971 |
|
|
| 6,727 |
|
|
| 12,625 |
|
|
| 8,563 |
|
|
| 10,813 |
|
|
| 8,971 |
|
|
| 25,562 |
|
|
| 12,625 |
|
Change in fair value of an equity investment |
|
| (295 | ) |
|
| 24 |
|
|
| 771 |
|
|
| 24 |
|
|
| (486 | ) |
|
| (295 | ) |
|
| (403 | ) |
|
| 771 |
|
Other income |
|
| — |
|
|
| — |
|
|
| 672 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 672 |
|
Interest expense, net |
|
| (1,013 | ) |
|
| (1,274 | ) |
|
| (1,959 | ) |
|
| (2,782 | ) |
|
| (772 | ) |
|
| (1,013 | ) |
|
| (1,170 | ) |
|
| (1,959 | ) |
Income before provision for income taxes and loss on equity method investment |
|
| 7,663 |
|
|
| 5,477 |
|
|
| 12,109 |
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|
| 5,805 |
|
|
| 9,555 |
|
|
| 7,663 |
|
|
| 23,989 |
|
|
| 12,109 |
|
Income tax expense |
|
| (2,445 | ) |
|
| (1,565 | ) |
|
| (3,807 | ) |
|
| (1,360 | ) |
|
| (2,725 | ) |
|
| (2,445 | ) |
|
| (7,224 | ) |
|
| (3,807 | ) |
Income before loss on equity method investment |
|
| 5,218 |
|
|
| 3,912 |
|
|
| 8,302 |
|
|
| 4,445 |
|
|
| 6,830 |
|
|
| 5,218 |
|
|
| 16,765 |
|
|
| 8,302 |
|
Loss from equity method investment |
|
| (74 | ) |
|
| (25 | ) |
|
| (87 | ) |
|
| (38 | ) | ||||||||||||||||
Net income attributable to American Vanguard |
| $ | 5,144 |
|
| $ | 3,887 |
|
| $ | 8,215 |
|
| $ | 4,407 |
| ||||||||||||||||
Loss on equity method investment |
|
| — |
|
|
| (74 | ) |
|
| — |
|
|
| (87 | ) | ||||||||||||||||
Net income |
| $ | 6,830 |
|
| $ | 5,144 |
|
| $ | 16,765 |
|
| $ | 8,215 |
| ||||||||||||||||
Earnings per common share—basic |
| $ | .17 |
|
| $ | .13 |
|
| $ | .28 |
|
| $ | .15 |
|
| $ | .23 |
|
| $ | .17 |
|
| $ | .57 |
|
| $ | .28 |
|
Earnings per common share—assuming dilution |
| $ | .17 |
|
| $ | .13 |
|
| $ | .27 |
|
| $ | .15 |
|
| $ | .23 |
|
| $ | .17 |
|
| $ | .55 |
|
| $ | .27 |
|
Weighted average shares outstanding—basic |
|
| 29,930 |
|
|
| 29,413 |
|
|
| 29,834 |
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|
| 29,350 |
|
|
| 29,602 |
|
|
| 29,930 |
|
|
| 29,639 |
|
|
| 29,834 |
|
Weighted average shares outstanding—assuming dilution |
|
| 30,499 |
|
|
| 29,854 |
|
|
| 30,511 |
|
|
| 29,904 |
|
|
| 30,225 |
|
|
| 30,499 |
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|
| 30,289 |
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|
| 30,511 |
|
See notes to the Condensed Consolidated Financial Statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
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| 2021 |
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| 2020 |
| ||||
Net income |
| $ | 5,144 |
|
| $ | 3,887 |
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| $ | 8,215 |
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| $ | 4,407 |
|
Comprehensive income: |
|
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|
|
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Foreign currency translation adjustment |
|
| 2,914 |
|
|
| 324 |
|
|
| 411 |
|
|
| (8,739 | ) |
Comprehensive income (loss) |
| $ | 8,058 |
|
| $ | 4,211 |
|
| $ | 8,626 |
|
| $ | (4,332 | ) |
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income |
| $ | 6,830 |
|
| $ | 5,144 |
|
| $ | 16,765 |
|
| $ | 8,215 |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment, net of tax effects |
|
| (6,064 | ) |
|
| 2,914 |
|
|
| 1,016 |
|
|
| 411 |
|
Comprehensive income |
| $ | 766 |
|
| $ | 8,058 |
|
| $ | 17,781 |
|
| $ | 8,626 |
|
See notes to the Condensed Consolidated Financial Statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS
|
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Current assets: |
|
|
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Cash and cash equivalents |
| $ | 19,559 |
|
| $ | 15,923 |
|
| $ | 22,057 |
|
| $ | 16,285 |
|
Receivables: |
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|
|
|
|
|
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Trade, net of allowance for doubtful accounts of $4,138 and $3,297, respectively |
|
| 152,031 |
|
|
| 130,029 |
| ||||||||
Trade, net of allowance for doubtful accounts of $4,411 and $3,938, respectively |
|
| 165,711 |
|
|
| 149,326 |
| ||||||||
Other |
|
| 10,766 |
|
|
| 8,444 |
|
|
| 13,208 |
|
|
| 9,595 |
|
Total receivables, net |
|
| 162,797 |
|
|
| 138,473 |
|
|
| 178,919 |
|
|
| 158,921 |
|
Inventories, net |
|
| 175,151 |
|
|
| 163,784 |
| ||||||||
Inventories |
|
| 182,203 |
|
|
| 154,306 |
| ||||||||
Prepaid expenses |
|
| 13,896 |
|
|
| 10,499 |
|
|
| 16,368 |
|
|
| 12,488 |
|
Income taxes receivable |
|
| 1,679 |
|
|
| 3,046 |
|
|
| 523 |
|
|
| — |
|
Total current assets |
|
| 373,082 |
|
|
| 331,725 |
|
|
| 400,070 |
|
|
| 342,000 |
|
Property, plant and equipment, net |
|
| 66,533 |
|
|
| 65,382 |
|
|
| 67,453 |
|
|
| 66,111 |
|
Operating lease right-of-use assets |
|
| 21,601 |
|
|
| 12,198 |
|
|
| 24,449 |
|
|
| 25,386 |
|
Intangible assets, net of amortization |
|
| 195,655 |
|
|
| 197,514 |
| ||||||||
Intangible assets, net |
|
| 191,560 |
|
|
| 197,841 |
| ||||||||
Goodwill |
|
| 48,154 |
|
|
| 52,108 |
|
|
| 46,997 |
|
|
| 46,260 |
|
Other assets |
|
| 27,678 |
|
|
| 18,602 |
|
|
| 13,099 |
|
|
| 16,292 |
|
Deferred income tax assets, net |
|
| 2,739 |
|
|
| 2,764 |
|
|
| 16 |
|
|
| 270 |
|
Total assets |
| $ | 735,442 |
|
| $ | 680,293 |
|
| $ | 743,644 |
|
| $ | 694,160 |
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY | LIABILITIES AND STOCKHOLDERS’ EQUITY |
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
| ||||||||||||
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current installments of other liabilities |
| $ | 1,629 |
|
| $ | 2,647 |
|
| $ | 1,367 |
|
| $ | 802 |
|
Accounts payable |
|
| 65,073 |
|
|
| 59,253 |
|
|
| 86,944 |
|
|
| 67,140 |
|
Deferred revenue |
|
| 13,205 |
|
|
| 43,611 |
| ||||||||
Customer prepayments |
|
| 272 |
|
|
| 63,064 |
| ||||||||
Accrued program costs |
|
| 64,534 |
|
|
| 45,441 |
|
|
| 99,152 |
|
|
| 63,245 |
|
Accrued expenses and other payables |
|
| 17,441 |
|
|
| 16,184 |
|
|
| 20,180 |
|
|
| 20,745 |
|
Operating lease liabilities, current |
|
| 3,993 |
|
|
| 4,188 |
| ||||||||
Income taxes payable |
|
| — |
|
|
| 3,006 |
| ||||||||
Current operating lease liabilities |
|
| 5,029 |
|
|
| 5,059 |
| ||||||||
Total current liabilities |
|
| 165,875 |
|
|
| 171,324 |
|
|
| 212,944 |
|
|
| 223,061 |
|
Long-term debt, net of deferred loan fees |
|
| 149,378 |
|
|
| 107,442 |
| ||||||||
Operating lease liabilities, long-term |
|
| 17,655 |
|
|
| 8,177 |
| ||||||||
Other liabilities, excluding current installments |
|
| 8,209 |
|
|
| 9,054 |
| ||||||||
Deferred income tax liabilities |
|
| 24,954 |
|
|
| 23,560 |
| ||||||||
Long-term debt, net |
|
| 100,779 |
|
|
| 52,240 |
| ||||||||
Long-term operating lease liabilities |
|
| 19,852 |
|
|
| 20,780 |
| ||||||||
Other liabilities, net of current installments |
|
| 5,584 |
|
|
| 5,335 |
| ||||||||
Deferred income tax liabilities, net |
|
| 19,651 |
|
|
| 20,006 |
| ||||||||
Total liabilities |
|
| 366,071 |
|
|
| 319,557 |
|
|
| 358,810 |
|
|
| 321,422 |
|
Commitments and contingent liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.10 par value per share; authorized 400,000 shares; NaN issued |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock, $.10 par value per share; authorized 40,000,000 shares; issued 34,261,651 shares at June 30, 2021 and 33,922,433 shares at December 31, 2020 |
|
| 3,428 |
|
|
| 3,394 |
| ||||||||
Common stock, $.10 par value per share; authorized 40,000,000 shares; issued 34,443,234 shares at June 30, 2022 and 34,248,218 shares at December 31, 2021 |
|
| 3,445 |
|
|
| 3,426 |
| ||||||||
Additional paid-in capital |
|
| 97,813 |
|
|
| 96,642 |
|
|
| 103,456 |
|
|
| 101,450 |
|
Accumulated other comprehensive loss |
|
| (8,911 | ) |
|
| (9,322 | ) |
|
| (12,768 | ) |
|
| (13,784 | ) |
Retained earnings |
|
| 295,201 |
|
|
| 288,182 |
|
|
| 319,672 |
|
|
| 304,385 |
|
|
|
| 387,531 |
|
|
| 378,896 |
| ||||||||
Less treasury stock at cost, 3,061,040 shares at June 30, 2021 and December 31, 2020 |
|
| (18,160 | ) |
|
| (18,160 | ) | ||||||||
Less treasury stock at cost, 3,694,050 shares at June 30, 2022 and 3,361,040 shares at December 31, 2021 |
|
| (28,971 | ) |
|
| (22,739 | ) | ||||||||
Total stockholders’ equity |
|
| 369,371 |
|
|
| 360,736 |
|
|
| 384,834 |
|
|
| 372,738 |
|
Total liabilities and stockholders' equity |
| $ | 735,442 |
|
| $ | 680,293 |
|
| $ | 743,644 |
|
| $ | 694,160 |
|
See notes to the Condensed Consolidated Financial Statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
For The Three-Three and Six-MonthsSix Months Ended June 30, 20212022
(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, 2020 |
|
| 33,922,433 |
|
| $ | 3,394 |
|
| $ | 96,642 |
|
| $ | (9,322 | ) |
| $ | 288,182 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 360,736 |
| ||||||||||||||||||||||||||||||||
Balance, December 31, 2021 |
|
| 34,248,218 |
|
| $ | 3,426 |
|
| $ | 101,450 |
|
| $ | (13,784 | ) |
| $ | 304,385 |
|
|
| 3,361,040 |
|
| $ | (22,739 | ) |
| $ | 372,738 |
| ||||||||||||||||||||||||||||||||
Common stock issued under ESPP |
|
| 25,120 |
|
|
| 2 |
|
|
| 338 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 340 |
|
|
| 26,751 |
|
|
| 2 |
|
|
| 434 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 436 |
|
Cash dividends on common stock ($0.02 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (596 | ) |
|
| — |
|
|
| — |
|
|
| (596 | ) | ||||||||||||||||||||||||||||||||
Cash dividends on common stock ($0.025 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (736 | ) |
|
| — |
|
|
| — |
|
|
| (736 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,503 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,503 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,080 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,080 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,792 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,792 |
|
|
| — |
|
|
| — |
|
|
| 1,563 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,563 |
|
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 | ) |
|
| (183,093 | ) |
|
| (18 | ) |
|
| (2,156 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,174 | ) |
Shares repurchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 332,404 |
|
|
| (6,219 | ) |
|
| (6,219 | ) | ||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,071 |
|
|
| — |
|
|
| — |
|
|
| 3,071 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,935 |
|
|
| — |
|
|
| — |
|
|
| 9,935 |
|
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 | ) | ||||||||||||||||||||||||||||||||
Balance, March 31, 2022 |
|
| 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 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,914 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,914 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,064 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,064 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,806 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,806 |
|
|
| — |
|
|
| — |
|
|
| 1,273 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,273 |
|
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| 387,329 |
|
|
| 39 |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61 |
|
|
| 351,358 |
|
|
| 35 |
|
|
| 892 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 927 |
|
Shares repurchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 606 |
|
|
| (13 | ) |
|
| (13 | ) | ||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,144 |
|
|
| — |
|
|
| — |
|
|
| 5,144 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,830 |
|
|
| — |
|
|
| — |
|
|
| 6,830 |
|
Balance, June 30, 2021 |
|
| 34,261,651 |
|
| $ | 3,428 |
|
| $ | 97,813 |
|
| $ | (8,911 | ) |
| $ | 295,201 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 369,371 |
| ||||||||||||||||||||||||||||||||
Balance, June 30, 2022 |
|
| 34,443,234 |
|
| $ | 3,445 |
|
| $ | 103,456 |
|
| $ | (12,768 | ) |
| $ | 319,672 |
|
|
| 3,694,050 |
|
| $ | (28,971 | ) |
| $ | 384,834 |
|
See notes to the Condensed Consolidated Financial Statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
For The Three-Three and Six-MonthsSix Months Ended June 30, 20202021
(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 |
|
| AVD Total |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Comprehensive Loss |
|
| Retained Earnings |
|
| Shares |
|
| Amount |
|
| AVD Total |
| ||||||||||||||||
Balance, December 31, 2019 |
|
| 33,233,614 |
|
| $ | 3,324 |
|
| $ | 90,572 |
|
| $ | (5,698 | ) |
| $ | 274,118 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 344,156 |
| ||||||||||||||||||||||||||||||||
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 |
|
| 22,776 |
|
|
| 2 |
|
|
| 350 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 352 |
|
|
| 25,120 |
|
|
| 2 |
|
|
| 338 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 340 |
|
Cash dividends on common stock ($0.02 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (586 | ) |
|
| — |
|
|
| — |
|
|
| (586 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (596 | ) |
|
| — |
|
|
| — |
|
|
| (596 | ) |
Foreign currency translation adjustment, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,063 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,063 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,503 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,503 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,357 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,357 |
|
|
| — |
|
|
| — |
|
|
| 1,792 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,792 |
|
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| (67,969 | ) |
|
| (7 | ) |
|
| (2,522 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,529 | ) |
|
| (73,231 | ) |
|
| (7 | ) |
|
| (2,787 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,794 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 520 |
|
|
| — |
|
|
| — |
|
|
| 520 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,071 |
|
|
| — |
|
|
| — |
|
|
| 3,071 |
|
Balance, March 31, 2020 |
|
| 33,188,421 |
|
|
| 3,319 |
|
|
| 89,757 |
|
|
| (14,761 | ) |
|
| 274,052 |
|
|
| 3,061,040 |
|
|
| (18,160 | ) |
|
| 334,207 |
| ||||||||||||||||||||||||||||||||
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 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 324 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 324 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,914 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,914 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,188 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,188 |
|
|
| — |
|
|
| — |
|
|
| 1,806 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,806 |
|
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| 40,657 |
|
|
| 5 |
|
|
| 49 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 54 |
|
|
| 387,329 |
|
|
| 39 |
|
|
| 22 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,887 |
|
|
| — |
|
|
| — |
|
|
| 3,887 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,144 |
|
|
| — |
|
|
| — |
|
|
| 5,144 |
|
Balance, June 30, 2020 |
|
| 33,229,078 |
|
| $ | 3,324 |
|
| $ | 90,994 |
|
| $ | (14,437 | ) |
| $ | 277,939 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 339,660 |
| ||||||||||||||||||||||||||||||||
Balance, June 30, 2021 |
|
| 34,261,651 |
|
| $ | 3,428 |
|
| $ | 97,813 |
|
| $ | (8,911 | ) |
| $ | 295,201 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 369,371 |
|
See notes to the Condensed Consolidated Financial Statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| For the Six Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 8,215 |
|
| $ | 4,407 |
|
| $ | 16,765 |
|
| $ | 8,215 |
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization of property, plant and equipment and intangible assets |
|
| 10,697 |
|
|
| 9,665 |
|
|
| 11,004 |
|
|
| 10,697 |
|
Amortization of other long-term assets |
|
| 2,044 |
|
|
| 1,965 |
|
|
| 1,739 |
|
|
| 2,044 |
|
Loss on disposal of property, plant and equipment |
|
| 256 |
|
|
| — |
| ||||||||
Accretion of discounted liabilities |
|
| (9 | ) |
|
| 7 |
|
|
| 17 |
|
|
| (11 | ) |
Amortization of deferred loan fees |
|
| 162 |
|
|
| 139 |
|
|
| 139 |
|
|
| 162 |
|
Provision for bad debts |
|
| 945 |
|
|
| 392 |
|
|
| 470 |
|
|
| 945 |
|
Loan principal and interest forgiveness |
|
| (672 | ) |
|
| — |
|
|
| — |
|
|
| (672 | ) |
Adjustment to contingent consideration |
|
| 1,014 |
|
|
| — |
| ||||||||
Fair value adjustment to contingent consideration |
|
| 635 |
|
|
| 1,013 |
| ||||||||
Stock-based compensation |
|
| 3,598 |
|
|
| 2,545 |
|
|
| 2,836 |
|
|
| 3,598 |
|
Change in deferred income taxes |
|
| (353 | ) |
|
| (1,562 | ) |
|
| 109 |
|
|
| (353 | ) |
Change in fair value of an equity investment |
|
| (771 | ) |
|
| — |
|
|
| 403 |
|
|
| (771 | ) |
Loss on equity method investment |
|
| — |
|
|
| 87 |
| ||||||||
Adjustment to bargain purchase gain on business acquisition |
|
| — |
|
|
| 121 |
| ||||||||
Net foreign currency adjustments |
|
| (147 | ) |
|
| 594 |
|
|
| (20 | ) |
|
| (145 | ) |
Loss from equity method investment |
|
| 87 |
|
|
| 38 |
| ||||||||
Adjustment to bargain purchase gain on business acquisition |
|
| 121 |
|
|
| — |
| ||||||||
Changes in assets and liabilities associated with operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in net receivables |
|
| (25,317 | ) |
|
| 16,421 |
| ||||||||
Increase in net receivables |
|
| (18,645 | ) |
|
| (25,317 | ) | ||||||||
Increase in inventories |
|
| (11,464 | ) |
|
| (21,706 | ) |
|
| (27,774 | ) |
|
| (11,464 | ) |
Increase in prepaid expenses and other assets |
|
| (3,696 | ) |
|
| (2,297 | ) |
|
| (3,652 | ) |
|
| (3,696 | ) |
Decrease in income tax receivable |
|
| 1,374 |
|
|
| 899 |
| ||||||||
(Decrease) increase in net operating lease liability |
|
| (120 | ) |
|
| 7 |
| ||||||||
Increase (decrease) in accounts payable |
|
| 6,190 |
|
|
| (12,351 | ) | ||||||||
Decrease in deferred revenue |
|
| (30,407 | ) |
|
| (2,431 | ) | ||||||||
(Increase) decrease in income tax receivable/payable, net |
|
| (3,526 | ) |
|
| 1,374 |
| ||||||||
(Decrease) in net operating lease liability |
|
| (21 | ) |
|
| (120 | ) | ||||||||
Increase in accounts payable |
|
| 19,439 |
|
|
| 6,190 |
| ||||||||
Decrease in customer prepayments |
|
| (62,789 | ) |
|
| (30,407 | ) | ||||||||
Increase in accrued program costs |
|
| 19,098 |
|
|
| 12,577 |
|
|
| 35,987 |
|
|
| 19,098 |
|
Increase (decrease) in other payables and accrued expenses |
|
| 507 |
|
|
| (2,394 | ) | ||||||||
Net cash (used in) provided by operating activities |
|
| (18,904 | ) |
|
| 6,915 |
| ||||||||
(Decrease) increase in other payables and accrued expenses |
|
| (602 | ) |
|
| 507 |
| ||||||||
Net cash used in operating activities |
|
| (27,230 | ) |
|
| (18,905 | ) | ||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (5,075 | ) |
|
| (6,386 | ) |
|
| (5,654 | ) |
|
| (5,075 | ) |
Proceeds from disposal of property, plant and equipment |
|
| 27 |
|
|
| — |
| ||||||||
Acquisition of product line |
|
| (10,000 | ) |
|
| — |
|
|
| — |
|
|
| (10,000 | ) |
Intangible assets |
|
| (241 | ) |
|
| (3,889 | ) |
|
| (1,044 | ) |
|
| (241 | ) |
Investments |
|
| (184 | ) |
|
| (1,190 | ) |
|
| — |
|
|
| (184 | ) |
Net cash used in investing activities |
|
| (15,500 | ) |
|
| (11,465 | ) |
|
| (6,671 | ) |
|
| (15,500 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under line of credit agreement |
|
| 41,774 |
|
|
| 10,502 |
| ||||||||
Payments under line of credit agreement |
|
| (56,600 | ) |
|
| (24,226 | ) | ||||||||
Borrowings under line of credit agreement |
|
| 105,000 |
|
|
| 66,000 |
| ||||||||
Payment of contingent consideration |
|
| (250 | ) |
|
| (1,227 | ) |
|
| — |
|
|
| (250 | ) |
Net payments from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding) |
|
| (2,393 | ) |
|
| (2,123 | ) | ||||||||
Net receipt from the issuance of common stock under ESPP |
|
| 436 |
|
|
| 340 |
| ||||||||
Net receipt from the exercise of stock options |
|
| 765 |
|
|
| 167 |
| ||||||||
Payment for tax withholding on stock-based compensation awards |
|
| (2,012 | ) |
|
| (2,900 | ) | ||||||||
Repurchase of common stock |
|
| (6,232 | ) |
|
| — |
| ||||||||
Payment of cash dividends |
|
| (1,189 | ) |
|
| (1,168 | ) |
|
| (1,330 | ) |
|
| (1,188 | ) |
Net cash provided by financing activities |
|
| 37,942 |
|
|
| 5,984 |
|
|
| 40,027 |
|
|
| 37,943 |
|
Net increase in cash and cash equivalents |
|
| 3,538 |
|
|
| 1,434 |
|
|
| 6,126 |
|
|
| 3,538 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
| 98 |
|
|
| 585 |
|
|
| (354 | ) |
|
| 98 |
|
Cash and cash equivalents at beginning of period |
|
| 15,923 |
|
|
| 6,581 |
|
|
| 16,285 |
|
|
| 15,923 |
|
Cash and cash equivalents at end of period |
| $ | 19,559 |
|
| $ | 8,600 |
|
| $ | 22,057 |
|
| $ | 19,559 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
| ||||||||
Cash paid during the period for: |
|
|
|
|
|
|
|
| ||||||||
Interest |
| $ | 1,873 |
|
| $ | 2,902 |
| ||||||||
Income taxes, net |
| $ | 2,757 |
|
| $ | 1,901 |
| ||||||||
Non-cash transactions: |
|
|
|
|
|
|
|
| ||||||||
ROU assets exchanged for lease liabilities |
| $ | 12,067 |
|
| $ | 1,502 |
|
See notes to the Condensed Consolidated Financial Statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except share data)
(Unaudited)
1. Summary of Significant Accounting Policies — The accompanying unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements of American Vanguard Corporation and Subsidiaries (“AVD” or “the Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of consolidating adjustments, eliminations and normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three- and six-monthssix-month periods ended June 30, 20212022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.2022. The financial statements and related notes do not include all information and footnotes required by US GAAP for annual reports. This quarterly report should be read in conjunction with the Condensed Consolidated Financial Statementsconsolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2020.2021.
SinceThe Company is closely monitoring the startimpact of the novel coronavirus (COVID-19) pandemic early in 2020, the Company has made sustained efforts to ensure the health and safety of the workforce while ensuring continuity of the business, which, under applicable federal guidelines (https://ww.cisa.gov) is part of the nation’s critical infrastructure (as part of the “Food and Agriculture,” “Chemical” and “Public Works and Infrastructure Support Services” sectors). In the workplace, the Company has designed and implemented protocols for social distancing, made provisions for the workforce to work remotely where possible, and established quarantine policies for those who present COVID-like symptoms or may have been in contact with those who have. Further, the Company keeps current with local, state, federal and international laws and restrictions that could affect the business and provide real-time information to the workforce. The Company has also prepared contingency plans to permit the continued operation of its factories, in the event that there are critical staffing issues due to attrition. Further, the Company continuously monitors supply chain, transport, logistics and border closures and has reached out to third parties to make clear that the Company is continuing to operate, and that it has its own policies relating to health and is committed to compliance with COVID-19 policieson all aspects of its business, partners.
As has beenincluding how the case with many other employers, sincepandemic will impact its customers, business partners, and employees. The Company is considered an essential business by most governments in the start of 2021,jurisdictions and territories in which the Company has encouraged its workforce to receive vaccinations againstoperates and, as a result, did not incur significant disruptions from the COVID-19 through various means, including incentive programs. However, new variants, particularly the Delta variant, have engendered a resurgence of the virus in many regions particularly among the unvaccinated. In the midst of changing conditions, the Company has nevertheless been able to manage its business with minimal impactpandemic during the three- and six-month periods ended June 30, 2021,2022 and 2020.2021. During the three- and six-month periods ended June 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 ultimate 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 the foreign exchange markets, demand, supply-chain disruptions in certain markets, and increased costs of employee safety, among others.
2. Leases — The Company has operating leases for warehouses, manufacturing facilities, offices, cars, railcars and certain equipment. The lease term includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not terminate) that the Company is reasonably certain to exercise. The Company has leases with a lease term ranging from 1 year to 20 years.
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 six-month periods presented in the table below.
The operating lease expense for the three monthsthree-month period ended June 30, 2022, and 2021, was $1,619 and 2020, was $1,442, and $1,396, respectively, and $2,896$3,223 and $2,791$2,896 for the six monthssix-month period ended June 30, 20212022 and 2020,2021, respectively. Lease expenses related to variable lease payments and short-term leases were immaterial. Additional information related to operating leases are as follows:
|
| Three months ended June 30, 2021 |
|
| Three months ended June 30, 2020 |
|
| Six months ended June 30, 2021 |
|
| Six months ended June 30, 2020 |
|
| Three months ended June 30, 2022 |
|
| Three months ended June 30, 2021 |
|
| Six months ended June 30, 2022 |
|
| Six months ended June 30, 2021 |
| ||||||||
Cash paid for amounts included in the measurement of lease liabilities |
| $ | 1,546 |
|
| $ | 1,382 |
|
| $ | 3,011 |
|
| $ | 2,778 |
|
| $ | 1,559 |
|
| $ | 1,546 |
|
| $ | 3,233 |
|
| $ | 3,011 |
|
ROU assets obtained in exchange for new liabilities |
| $ | 11,691 |
|
| $ | 677 |
|
| $ | 12,067 |
|
| $ | 1,502 |
|
| $ | 898 |
|
| $ | 11,691 |
|
| $ | 1,825 |
|
| $ | 12,067 |
|
The weighted-average remaining lease term and discount rate related to the operating leases as of June 30, 20212022 were as follows:
Weighted-average remaining lease term (in years) |
|
|
|
|
Weighted-average discount rate |
|
|
| % |
Future minimum lease payments under non-cancellable operating leases as of June 30, 20212022 were as follows:
2021 (excluding six months ended June 30, 2021) |
| $ | 2,345 |
| ||||
2022 |
|
| 4,374 |
| ||||
2022 (excluding six months ended June 30, 2022) |
| $ | 3,041 |
| ||||
2023 |
|
| 3,421 |
|
|
| 5,378 |
|
2024 |
|
| 2,627 |
|
|
| 4,578 |
|
2025 |
|
| 2,332 |
|
|
| 4,067 |
|
2026 |
|
| 3,050 |
| ||||
Thereafter |
|
| 10,350 |
|
|
| 8,290 |
|
Total lease payments |
|
| 25,449 |
|
|
| 28,404 |
|
Less: imputed interest |
|
| 3,801 |
|
|
| 3,523 |
|
Total |
| $ | 21,648 |
|
| $ | 24,881 |
|
Amounts recognized in the Condensed Consolidated Balance Sheets: |
|
|
|
|
|
|
|
|
Operating lease liabilities, current |
| $ | 3,993 |
|
| $ | 5,029 |
|
Operating lease liabilities, long-term |
| $ | 17,655 |
|
| $ | 19,852 |
|
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 1 reportable segment. Selective enterprise information of sales disaggregated by category and geographic region is as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 62,575 |
|
| $ | 44,670 |
|
| $ | 117,330 |
|
| $ | 95,032 |
|
| $ | 63,195 |
|
| $ | 62,575 |
|
| $ | 151,388 |
|
| $ | 117,330 |
|
U.S. non-crop |
|
| 21,488 |
|
|
| 13,872 |
|
|
| 38,941 |
|
|
| 24,865 |
|
|
| 21,316 |
|
|
| 21,488 |
|
|
| 34,712 |
|
|
| 38,941 |
|
Total U.S. |
|
| 84,063 |
|
|
| 58,542 |
|
|
| 156,271 |
|
|
| 119,897 |
|
|
| 84,511 |
|
|
| 84,063 |
|
|
| 186,100 |
|
|
| 156,271 |
|
International |
|
| 50,547 |
|
|
| 46,013 |
|
|
| 94,494 |
|
|
| 80,620 |
|
|
| 63,573 |
|
|
| 50,547 |
|
|
| 111,419 |
|
|
| 94,494 |
|
Total net sales: |
| $ | 134,610 |
|
| $ | 104,555 |
|
| $ | 250,765 |
|
| $ | 200,517 |
|
| $ | 148,084 |
|
| $ | 134,610 |
|
| $ | 297,519 |
|
| $ | 250,765 |
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods and services transferred at a point in time |
| $ | 134,493 |
|
| $ | 103,846 |
|
| $ | 250,464 |
|
| $ | 199,622 |
|
| $ | 148,047 |
|
| $ | 134,493 |
|
| $ | 297,376 |
|
| $ | 250,464 |
|
Goods and services transferred over time |
|
| 117 |
|
|
| 709 |
|
|
| 301 |
|
|
| 895 |
|
|
| 37 |
|
|
| 117 |
|
|
| 143 |
|
|
| 301 |
|
Total net sales: |
| $ | 134,610 |
|
| $ | 104,555 |
|
| $ | 250,765 |
|
| $ | 200,517 |
|
| $ | 148,084 |
|
| $ | 134,610 |
|
| $ | 297,519 |
|
| $ | 250,765 |
|
Performance Obligations — A performance obligation is a promise in a contract or sales order to transfer a distinct good or service to the customer. A transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s sales orders have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the sales orders. For sales orders with multiple performance obligations, the Company allocates the sales order’s transaction price to each performance obligation based on its relative stand-alone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. The Company’s performance obligations are satisfied either at a point in time or over time as work progresses.
Contract Assets and Deferred Revenue —The contract assets are included in other receivables on the Condensed Consolidated Balance Sheets and relate to royalties earned on certain functional licenses granted for the use of the Company’s intellectual property. property and amounted to $3,000 and $3,900 at June 30, 2022 and December 31, 2021, respectively. The timingshort-term and long-term contract assets of revenue recognition, billings$1,850 and cash collections may result$1,150 are included in deferred revenue. other receivables and other assets, respectively, on the condensed consolidated balance sheets as of June 30, 2022. The short-term and long-term assets of $1,825 and $2,075 are included in other receivables and other assets, respectively, on the condensed consolidated balance sheets as of December 31, 2021.
The Company sometimes receives payments from its customers in advance of goods and services being provided in return for early cash incentive programs, resultingprograms. These payments are included in deferred revenues. Customer prepayments on the condensed consolidated balance sheets.
|
| June 30, 2021 |
|
| December 31, 2020 |
| ||
Contract assets |
|
| 4,600 |
|
|
| 3,200 |
|
Deferred revenue |
|
| 13,205 |
|
|
| 43,611 |
|
Revenue recognized for the three- and six-monthssix-month periods ended June 30, 2021,2022, that was included in deferred revenuecustomer prepayments at the beginning of 2021 were $19,1112022, was $18,264 and $30,406,$62,792, respectively.The Company expects to recognize all its remaining customer prepayments as revenue in fiscal 2022.
4. Property, Plant and Equipment — Property, plant and equipment at June 30, 20212022 and December 31, 20202021 consists of the following:
|
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Land |
| $ | 2,756 |
|
| $ | 2,756 |
|
| $ | 2,756 |
|
| $ | 2,756 |
|
Buildings and improvements |
|
| 20,057 |
|
|
| 19,786 |
|
|
| 19,814 |
|
|
| 19,844 |
|
Machinery and equipment |
|
| 127,605 |
|
|
| 124,199 |
|
|
| 138,689 |
|
|
| 132,159 |
|
Office furniture, fixtures and equipment |
|
| 10,002 |
|
|
| 7,403 |
|
|
| 10,444 |
|
|
| 10,094 |
|
Automotive equipment |
|
| 1,979 |
|
|
| 1,747 |
|
|
| 1,625 |
|
|
| 1,832 |
|
Construction in progress |
|
| 8,568 |
|
|
| 10,392 |
|
|
| 6,778 |
|
|
| 8,199 |
|
Total gross value |
|
| 170,967 |
|
|
| 166,283 |
|
|
| 180,106 |
|
|
| 174,884 |
|
Less accumulated depreciation |
|
| (104,434 | ) |
|
| (100,901 | ) |
|
| (112,653 | ) |
|
| (108,773 | ) |
Total net value |
| $ | 66,533 |
|
| $ | 65,382 |
|
| $ | 67,453 |
|
| $ | 66,111 |
|
The Company recognized depreciation expense related to property plant and equipment of $1,673$1,974 and $1,839$1,673 for the three monthsthree-month period ended June 30, 2022 and 2021, and 2020, respectively. During the three months ended June 30, 2021, the Company eliminated $249 from such assets and accumulated depreciation of fully depreciated assets. During the three months ended June 30, 2020, the Company eliminated $283 from such assets and accumulated depreciation of fully depreciated assets.
The Company recognized depreciation expense related to property plant and equipment of $3,844$4,077 and $3,356$3,844 for the six monthssix-month period ended June 30, 2022 and 2021, and 2020, respectively. During the six months ended June 30, 2021, and 2020, the Company eliminated from such assets and accumulated depreciation $311 and $396, respectively, of fully depreciated assets.
Substantially all of the Company’s assets are pledged as collateral to its 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 method. The components of inventories consist of the following:
|
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Finished products |
| $ | 156,170 |
|
| $ | 149,415 |
|
| $ | 154,742 |
|
| $ | 138,159 |
|
Raw materials |
|
| 18,981 |
|
|
| 14,369 |
|
|
| 27,461 |
|
|
| 16,147 |
|
|
| $ | 175,151 |
|
| $ | 163,784 |
|
| $ | 182,203 |
|
| $ | 154,306 |
|
6. Segment Reporting — Based on similar economic and operational characteristics, the Company’s business is aggregated into 1 reportable segment. Selective enterprise information is as follows:
|
| For the three months ended June 30, |
|
|
|
|
|
|
|
|
|
| For the three months ended June 30, |
|
|
|
|
|
|
| �� |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 62,575 |
|
| $ | 44,670 |
|
| $ | 17,905 |
|
|
| 40 | % |
| $ | 63,195 |
|
| $ | 62,575 |
|
| $ | 620 |
|
|
| 1 | % |
U.S. non-crop |
|
| 21,488 |
|
|
| 13,872 |
|
|
| 7,616 |
|
|
| 55 | % |
|
| 21,316 |
|
|
| 21,488 |
|
|
| (172 | ) |
|
| -1 | % |
U.S. total |
|
| 84,063 |
|
|
| 58,542 |
|
|
| 25,521 |
|
|
| 44 | % |
|
| 84,511 |
|
|
| 84,063 |
|
|
| 448 |
|
|
| 1 | % |
International |
|
| 50,547 |
|
|
| 46,013 |
|
|
| 4,534 |
|
|
| 10 | % |
|
| 63,573 |
|
|
| 50,547 |
|
|
| 13,026 |
|
|
| 26 | % |
Net sales: |
| $ | 134,610 |
|
| $ | 104,555 |
|
| $ | 30,055 |
|
|
| 29 | % |
| $ | 148,084 |
|
| $ | 134,610 |
|
| $ | 13,474 |
|
|
| 10 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 26,805 |
|
| $ | 21,758 |
|
| $ | 5,047 |
|
|
| 23 | % |
| $ | 29,753 |
|
| $ | 26,805 |
|
| $ | 2,948 |
|
|
| 11 | % |
U.S. non-crop |
|
| 9,782 |
|
|
| 7,029 |
|
|
| 2,753 |
|
|
| 39 | % |
|
| 10,049 |
|
|
| 9,782 |
|
|
| 267 |
|
|
| 3 | % |
U.S. total |
|
| 36,587 |
|
|
| 28,787 |
|
|
| 7,800 |
|
|
| 27 | % |
|
| 39,802 |
|
|
| 36,587 |
|
|
| 3,215 |
|
|
| 9 | % |
International |
|
| 15,552 |
|
|
| 11,519 |
|
|
| 4,033 |
|
|
| 35 | % |
|
| 19,977 |
|
|
| 15,552 |
|
|
| 4,425 |
|
|
| 28 | % |
Total gross profit: |
| $ | 52,139 |
|
| $ | 40,306 |
|
| $ | 11,833 |
|
|
| 29 | % |
| $ | 59,779 |
|
| $ | 52,139 |
|
| $ | 7,640 |
|
|
| 15 | % |
|
| For the six months ended June 30, |
|
|
|
|
|
|
|
|
| |||||
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 117,330 |
|
| $ | 95,032 |
|
| $ | 22,298 |
|
|
| 23 | % |
U.S. non-crop |
|
| 38,941 |
|
|
| 24,865 |
|
|
| 14,076 |
|
|
| 57 | % |
U.S. total |
|
| 156,271 |
|
|
| 119,897 |
|
|
| 36,374 |
|
|
| 30 | % |
International |
|
| 94,494 |
|
|
| 80,620 |
|
|
| 13,874 |
|
|
| 17 | % |
Net sales: |
| $ | 250,765 |
|
| $ | 200,517 |
|
| $ | 50,248 |
|
|
| 25 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 48,076 |
|
| $ | 46,003 |
|
| $ | 2,073 |
|
|
| 5 | % |
U.S. non-crop |
|
| 19,165 |
|
|
| 11,748 |
|
|
| 7,417 |
|
|
| 63 | % |
U.S. total |
|
| 67,241 |
|
|
| 57,751 |
|
|
| 9,490 |
|
|
| 16 | % |
International |
|
| 30,029 |
|
|
| 20,936 |
|
|
| 9,093 |
|
|
| 43 | % |
Total gross profit: |
| $ | 97,270 |
|
| $ | 78,687 |
|
| $ | 18,583 |
|
|
| 24 | % |
|
| For the six months ended June 30, |
|
|
|
|
|
|
|
|
| |||||
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 151,388 |
|
| $ | 117,330 |
|
| $ | 34,058 |
|
|
| 29 | % |
U.S. non-crop |
|
| 34,712 |
|
|
| 38,941 |
|
|
| (4,229 | ) |
|
| -11 | % |
U.S. total |
|
| 186,100 |
|
|
| 156,271 |
|
|
| 29,829 |
|
|
| 19 | % |
International |
|
| 111,419 |
|
|
| 94,494 |
|
|
| 16,925 |
|
|
| 18 | % |
Net sales: |
| $ | 297,519 |
|
| $ | 250,765 |
|
| $ | 46,754 |
|
|
| 19 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 70,098 |
|
| $ | 48,076 |
|
| $ | 22,022 |
|
|
| 46 | % |
U.S. non-crop |
|
| 16,014 |
|
|
| 19,165 |
|
|
| (3,151 | ) |
|
| -16 | % |
U.S. total |
|
| 86,112 |
|
|
| 67,241 |
|
|
| 18,871 |
|
|
| 28 | % |
International |
|
| 34,860 |
|
|
| 30,029 |
|
|
| 4,831 |
|
|
| 16 | % |
Total gross profit: |
| $ | 120,972 |
|
| $ | 97,270 |
|
| $ | 23,702 |
|
|
| 24 | % |
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 expected to be paid to its customers estimated using the expected value method. Each quarter management reviews 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 financial analysts, reviews the accumulated Program balance and, for 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- and six-monthssix-month periods ended June 30, 2021,2022, and 2020, respectively.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 |
|
| Record Date |
| Distribution Date |
| Dividend Per Share |
|
| Total Paid |
| ||||
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 |
| ||||||||||||
June 8, 2021 |
| June 24, 2021 |
| July 8, 2021 |
| $ | 0.020 |
|
| $ | 600 |
|
| June 24, 2021 |
| July 8, 2021 |
| $ | 0.020 |
|
| $ | 600 |
|
March 10, 2021 |
| March 15, 2021 |
| April 15, 2021 |
| $ | 0.020 |
|
| $ | 596 |
|
| March 15, 2021 |
| April 15, 2021 |
| $ | 0.020 |
|
| $ | 596 |
|
December 7, 2020 |
| December 23, 2020 |
| January 6, 2021 |
| $ | 0.020 |
|
| $ | 593 |
|
| December 23, 2022 |
| January 6, 2021 |
| $ | 0.020 |
|
| $ | 592 |
|
March 9, 2020 |
| March 26, 2020 |
| April 16, 2020 |
| $ | 0.020 |
|
| $ | 586 |
| ||||||||||||
December 9, 2019 |
| December 26, 2019 |
| January 9, 2020 |
| $ | 0.020 |
|
| $ | 582 |
|
9. Earnings Per Share — The components of basic and diluted earnings per share were as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AVD |
| $ | 5,144 |
|
| $ | 3,887 |
|
| $ | 8,215 |
|
| $ | 4,407 |
|
| $ | 6,830 |
|
| $ | 5,144 |
|
| $ | 16,765 |
|
| $ | 8,215 |
|
Denominator: (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding-basic |
|
| 29,930 |
|
|
| 29,413 |
|
|
| 29,834 |
|
|
| 29,350 |
|
|
| 29,602 |
|
|
| 29,930 |
|
|
| 29,639 |
|
|
| 29,834 |
|
Dilutive effect of stock options and grants |
|
| 569 |
|
|
| 441 |
|
|
| 677 |
|
|
| 554 |
|
|
| 623 |
|
|
| 569 |
|
|
| 650 |
|
|
| 677 |
|
|
|
| 30,499 |
|
|
| 29,854 |
|
|
| 30,511 |
|
|
| 29,904 |
|
|
| 30,225 |
|
|
| 30,499 |
|
|
| 30,289 |
|
|
| 30,511 |
|
For the three- and six-monthssix-month periods ended June 30, 2021,2022, and 2020,2021, respectively, 0 stock options 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 Sheetscondensed consolidated balance sheets at June 30, 20212022 and December 31, 2020.2021. The Company has 0 short-term debt as of June 30, 20212022 and December 31, 2020.2021. The debt is summarized in the following table:
Long-term indebtedness ($000's) |
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Revolving line of credit |
| $ | 149,700 |
|
| $ | 107,900 |
|
| $ | 101,700 |
|
| $ | 53,300 |
|
Deferred loan fees |
|
| (322 | ) |
|
| (458 | ) |
|
| (921 | ) |
|
| (1,060 | ) |
Net long-term debt |
| $ | 149,378 |
|
| $ | 107,442 |
|
| $ | 100,779 |
|
| $ | 52,240 |
|
The Company’s main bank is Bank of 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 3040 years and is the syndication manager for the Company’s loans.
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, 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 a maturity date of August 5, 2026. The Credit Agreement amends and restates the previous credit facility, which had a maturity date of June 30, 2022. With respect to key financial covenants, the Credit Agreement contains 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 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 no longerdo not require Agent consent. In light ofDistributions to the maturity date ofCompany’s shareholders are limited to net income for the Credit Agreement, the Company classifies its revolving line of credit as a non-current liabilityfour fiscal quarter period ending on the Condensed Consolidated Balance Sheets as of June 30, 2021.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”). Interest payments for LIBOR Revolver Loans are payable on the last day of each interest period (either one, two, three or six months, as selected by the borrower) and the maturity date, while interest payments for Adjusted Base Rate Revolver Loans are payable on the last business day of each calendar quarter and the maturity date. The interest rate onas of June 30, 20212022 was 2.50%2.99%.
At June 30, 2021,2022, the Company was compliant with all covenants to its then current credit agreement. Also, at June 30, 2021,2022, the Company’s total Funded Debt amounted to $149,700.$101,700. At that date the Company’s rolling four quarter Consolidated EBITDA (as defined in the Credit Agreement) amounted to $59,030,$75,512, which results in a leverage ratio of 2.54,1.35, as compared to a maximum leverage ratio permitted under the Credit Agreement of 3.5. At June 30, 2021,2022, the Company has the capacity to increase its borrowings by up to $56,906,$162,592, according to the terms thereof. This compares to an available borrowing capacity of $49,420$56,906 as of June 30, 2020.2021. At December 31, 2020,2021, the Company had borrowing capacity of $86,736.$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).
OneAs of our recent acquisitions, the date it was acquired by the Company in October 2020, Agrinos had an existing Paycheck Protection Program (PPP) loan in the amount of $705 as of$705. This PPP loan was granted on April 27, 2020. On January 7, 2021, the date it was acquired (October 2, 2020), of whichSmall Business Administration forgave $667 in principal and $5 in interest was forgiven by the Small Business Administration on January 7, 2021. Agrinos repaid the remaining outstanding balance on the same day.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 Condensed Consolidated Statementcondensed consolidated statements of Operationsoperations and represents a non-cash financing activity on the Condensed Consolidated Statementcondensed consolidated statement of Cash Flowscash flows for the six months ended June 30, 2021.
11. Reclassifications — Certain items may have been reclassified in the prior period Condensed Consolidated Financial Statementscondensed consolidated financial statements to conform with the June 30, 2021,2022, presentation.
12. Comprehensive Income (Loss) — Total comprehensive income (loss) includes, in addition to net income, changes in equity that are excluded from the cCondensed Consolidated Statementondensed consolidated statement of Operationsoperations and are recorded directly into a separate section of stockholders’ equity on the Condensed Consolidated Balance Sheets.condensed consolidated balance sheets. For the three- and six-month periods ended June 30, 2021,2022, and 2020,2021, total comprehensive income (loss) consisted of net income attributable to American Vanguard and foreign currency translation adjustments.
13. 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 Six months ended |
|
| Unamortized Stock-Based Compensation |
|
| Remaining Weighted Average Period (years) |
| ||||||||||||||||||||
June 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Restricted Stock |
| $ | 1,079 |
|
| $ | 2,072 |
|
| $ | 9,277 |
|
|
| 2.2 |
| ||||||||||||||||
Unrestricted Stock |
|
| 122 |
|
|
| 239 |
|
|
| 476 |
|
|
| 0.9 |
| ||||||||||||||||
Performance-Based Restricted Stock |
|
| 72 |
|
|
| 525 |
|
|
| 3,781 |
|
|
| 2.1 |
| ||||||||||||||||
Total |
| $ | 1,273 |
|
| $ | 2,836 |
|
| $ | 13,534 |
|
|
|
|
| ||||||||||||||||
|
| Stock-Based Compensation for the Three months ended |
|
| Stock-Based Compensation for the Six months ended |
|
| Unamortized Stock-Based Compensation |
|
| Remaining Weighted Average Period (years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
June 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock |
| $ | 1,167 |
|
| $ | 2,223 |
|
| $ | 9,734 |
|
|
| 2.2 |
|
| $ | 1,167 |
|
| $ | 2,223 |
|
| $ | 9,734 |
|
|
| 2.2 |
|
Unrestricted Stock |
|
| 107 |
|
|
| 217 |
|
|
| 367 |
|
|
| 0.9 |
|
|
| 107 |
|
|
| 217 |
|
|
| 367 |
|
|
| 0.9 |
|
Performance-Based Restricted Stock |
|
| 532 |
|
|
| 1,158 |
|
|
| 4,186 |
|
|
| 2.1 |
|
|
| 532 |
|
|
| 1,158 |
|
|
| 4,186 |
|
|
| 2.1 |
|
Total |
| $ | 1,806 |
|
| $ | 3,598 |
|
| $ | 14,287 |
|
|
|
|
|
| $ | 1,806 |
|
| $ | 3,598 |
|
| $ | 14,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Restricted Stock |
| $ | 702 |
|
| $ | 1,478 |
|
| $ | 3,861 |
|
|
| 1.5 |
| ||||||||||||||||
Unrestricted Stock |
|
| 118 |
|
|
| 241 |
|
|
| 403 |
|
|
| 0.9 |
| ||||||||||||||||
Performance-Based Restricted Stock |
|
| 368 |
|
|
| 826 |
|
|
| 1,873 |
|
|
| 1.5 |
| ||||||||||||||||
Total |
| $ | 1,188 |
|
| $ | 2,545 |
|
| $ | 6,137 |
|
|
|
|
|
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- and six-monthssix-month periods ended June 30, 2021,2022, and 2020.2021.
Restricted and Unrestricted Stock — A summary of non-vested shares as of, and for, the three- and six-monthssix-month periods ended June 30, 2021,2022, and 20202021 is presented below:
|
| Six Months Ended June 30, 2021 |
|
| Six Months Ended June 30, 2020 |
|
| Three and Six Months Ended June 30, 2022 |
|
| Three and Six Months Ended June 30, 2021 |
| ||||||||||||||||||||
|
| 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 |
|
| 820,624 |
|
| $ | 16.64 |
|
|
| 719,845 |
|
| $ | 17.67 |
|
|
| 817,290 |
|
| $ | 17.04 |
|
|
| 820,624 |
|
| $ | 16.64 |
|
Granted |
|
| — |
|
|
| — |
|
|
| 4,185 |
|
|
| 18.63 |
| ||||||||||||||||
Vested |
|
| (197,615 | ) |
|
| 19.91 |
|
|
| (213,781 | ) |
|
| 16.18 |
|
|
| (230,080 | ) |
|
| 17.31 |
|
|
| (197,615 | ) |
|
| 19.91 |
|
Forfeited |
|
| (11,580 | ) |
|
| 16.95 |
|
|
| (14,715 | ) |
|
| 18.08 |
|
|
| (24,109 | ) |
|
| 17.10 |
|
|
| (11,580 | ) |
|
| 16.95 |
|
Nonvested shares at March 31st |
|
| 611,429 |
|
|
| 15.57 |
|
|
| 495,534 |
|
|
| 18.31 |
|
|
| 563,101 |
|
|
| 16.93 |
|
|
| 611,429 |
|
|
| 15.57 |
|
Granted |
|
| 289,757 |
|
|
| 20.10 |
|
|
| 43,168 |
|
|
| 13.45 |
|
|
| 242,067 |
|
|
| 23.79 |
|
|
| 289,757 |
|
|
| 20.10 |
|
Vested |
|
| (30,112 | ) |
|
| 16.72 |
|
|
| (37,958 | ) |
|
| 13.88 |
|
|
| (27,482 | ) |
|
| 22.35 |
|
|
| (30,112 | ) |
|
| 16.72 |
|
Forfeited |
|
| (11,231 | ) |
|
| 16.60 |
|
|
| (8,221 | ) |
|
| 18.64 |
|
|
| (14,070 | ) |
|
| 18.53 |
|
|
| (11,231 | ) |
|
| 16.60 |
|
Nonvested shares at June 30th |
|
| 859,843 |
|
| $ | 17.04 |
|
|
| 492,523 |
|
| $ | 18.22 |
|
|
| 763,616 |
|
| $ | 18.88 |
|
|
| 859,843 |
|
| $ | 17.04 |
|
Performance-Based Restricted Stock — A summary of non-vested performance-based shares as of, and for, the three- and six-monthssix-month periods ended June 30, 2021,2022, and 2020,2021, respectively is presented below:
|
| Six Months Ended June 30, 2021 |
|
| Six Months Ended June 30, 2020 |
|
| Three and Six Months Ended June 30, 2022 |
|
| Three and Six Months Ended June 30, 2021 |
| ||||||||||||||||||||
|
| 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 |
|
| 391,771 |
|
| $ | 16.26 |
|
|
| 345,432 |
|
| $ | 16.92 |
|
|
| 379,061 |
|
| $ | 16.43 |
|
|
| 391,771 |
|
| $ | 16.26 |
|
Additional granted based on performance achievement |
|
| 71,180 |
|
|
| 20.53 |
|
|
| 76,445 |
|
|
| 16.56 |
| ||||||||||||||||
Additional granted (forfeited) based on performance achievement |
|
| (41,088 | ) |
|
| 16.56 |
|
|
| 71,180 |
|
|
| 20.53 |
| ||||||||||||||||
Vested |
|
| (175,087 | ) |
|
| 19.78 |
|
|
| (184,785 | ) |
|
| 15.87 |
|
|
| (78,704 | ) |
|
| 17.18 |
|
|
| (175,087 | ) |
|
| 19.78 |
|
Forfeited |
|
| (505 | ) |
|
| 19.26 |
|
|
| (3,759 | ) |
|
| 17.23 |
|
|
| (7,074 | ) |
|
| 16.77 |
|
|
| (505 | ) |
|
| 19.26 |
|
Nonvested shares at March 31st |
|
| 287,359 |
|
|
| 15.16 |
|
|
| 233,333 |
|
|
| 17.63 |
|
|
| 252,195 |
|
|
| 16.17 |
|
|
| 287,359 |
|
|
| 15.16 |
|
Granted |
|
| 102,043 |
|
|
| 20.03 |
|
|
| — |
|
|
| — |
|
|
| 83,190 |
|
|
| 23.63 |
|
|
| 102,043 |
|
|
| 20.03 |
|
Forfeited |
|
| — |
|
|
| — |
|
|
| (2,268 | ) |
|
| 18.00 |
|
|
| (7,829 | ) |
|
| 17.50 |
|
|
| — |
|
|
| — |
|
Nonvested shares at June 30th |
|
| 389,402 |
|
| $ | 16.44 |
|
|
| 231,065 |
|
| $ | 17.63 |
|
|
| 327,556 |
|
| $ | 16.58 |
|
|
| 389,402 |
|
| $ | 16.44 |
|
Stock Options — The Company has 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:
Incentive Stock Option Plans
Activity for the three- and six-monthssix-month periods ended June 30, 2021:2022:
|
| 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 |
|
|
| 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 |
|
All the incentive stock options outstanding as of June 30, 2021,2022, have an exercise price per share of $11.49 and a remaining life of 4230 months.
Activity for the three- and six-monthssix-month periods ended June 30, 2020:2021:
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2019 |
|
| 332,823 |
|
| $ | 9.14 |
|
Options exercised |
|
| (15,836 | ) |
|
| 8.83 |
|
Balance outstanding, March 31, 2020 |
|
| 316,987 |
|
|
| 9.16 |
|
Options exercised |
|
| (9,291 | ) |
|
| 8.27 |
|
Balance outstanding, June 30, 2020 |
|
| 307,696 |
|
| $ | 9.18 |
|
|
| 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 |
|
Performance Incentive Stock Option Plan
Activity for the three- and six-monthssix-month periods ended June 30, 2021:2022:
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2020 |
|
| 114,658 |
|
| $ | 11.49 |
|
Options exercised |
|
| — |
|
|
| — |
|
Balance outstanding, March 31, 2021 and June 30, 2021 |
|
| 114,658 |
|
| $ | 11.49 |
|
|
| 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, 2022 |
|
| 81,808 |
|
| $ | 11.49 |
|
Activity for the three- and six-monthssix-month periods ended June 30, 2020:2021:
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2019 |
|
| 120,782 |
|
| $ | 11.49 |
|
Options exercised |
|
| (3,035 | ) |
|
| 11.49 |
|
Balance outstanding, March 31, 2020 and June 30, 2020 |
|
| 117,747 |
|
| $ | 11.49 |
|
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2020 |
|
| 114,658 |
|
| $ | 11.49 |
|
Options exercised |
|
| — |
|
|
| — |
|
Balance outstanding, March 31, 2021 and June 30, 2021 |
|
| 114,658 |
|
| $ | 11.49 |
|
All the performance incentive stock options outstanding as of June 30, 2021,2022, have an exercise price per share of $11.49 and a remaining life of 4230 months.
14. 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, 2020,2021, except as described below.
EPA FIFRA/RCRA Matter. On November 10, 2016, the Company 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 in substantially empty, closed containers.pesticide. The Company retained defense counsel to assist in responding to the subpoena and otherwise defending the Company’s interests. AMVAC is cooperating in the investigation.
Since April 2018, the Department of Justice (“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 as targets of the government’s investigation. In January 2021, DOJ and EPA informed the Company that it is investigating 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 for the Company as well as for the individual target, evidence that it contends supports alleged violations with respect to both the Company and the individual target. TheAs part of discussions regarding possible resolution, in October 2021, the Company is evaluatingpresented 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 is engagedUSEPA. Further, three corporate witnesses were interviewed by the grand jury in discussions with DOJMobile, Alabama in February 2022. Following that interview, the individual target entered into a plea agreement which was entered by the court having jurisdiction in this matter in May 2022. The Company expects that talks regarding possible resolution.potential resolution will resume in the near future.
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. Accordingly, we have not recorded a loss contingency for this matter.
Harold Reed v. AMVAC et al. During January 2017, the Company was served with two Statements 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 damage 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 have set a second mediation to occur in August 2022. The Company continues to believe that it is not primarily at risk but that a loss is probable and reasonably estimable and, to that end, has recorded a loss contingency in an amount that is not material to its financial performance or operations cash flows.
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 retained counsel and filed an answer in early July 2022, including multiple affirmative defenses. 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 set aside a reserve in connection with this matter.
15.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 2019,15, 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, the FASB issued ASU no. 2019-12, “Income Taxes2021-08, “Business Combinations (Topic 740)805): Simplifying the Accounting for Income Taxes,Contract Assets and Liabilities from Contracts with Customers.” (“This ASU No. 2019-12”).requires an acquiring entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. The amendment removes certain exceptions to the general income tax accounting methodology including an exception for the recognition of a deferred tax liability when a foreign subsidiary becomes an equity method investment and an exception for interim periods showing operating losses in excess of anticipated operating losses for the year. The amendment also reduces the complexity surrounding franchise tax recognition; the step up in the tax basis of goodwill in conjunction with business combinations; and the accounting for the effect of changes in tax laws enacted during interim periods. The amendments in this update areASU is effective for the Company for fiscal years and interim periods beginning after December 15, 2020, including interim periods within those years2022, with early adoption permitted. The Company is evaluating the impact of adopting this ASU.
The Company adopted ASU No. 2019-12 effective January 1, 2021.The adoption of this standard didreviewed all other recently issued accounting pronouncements and concluded that they were either not result in any material adjustmentsapplicable or not expected to the Company’s Condensed Consolidated Financial Statements.have a significant impact to its condensed consolidated financial statements.
16. Fair Value of Financial Instruments — The accounting standard for fair value measurements provides a framework for measuring fair value and requires certain 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 current rates and terms available to the Company for similar debt.
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 following table illustrates the Company’s contingent consideration movements related to its business acquisitions:
|
| Three months ended June 30, 2022 |
|
| Three months ended June 30, 2021 |
| ||||||||||
Balance, March 31 |
| $ | 1,437 |
|
| $ | 2,205 |
| ||||||||
Purchase price adjustment |
|
| — |
|
|
| (955 | ) | ||||||||
Fair value adjustment |
|
| 36 |
|
|
| 1,013 |
| ||||||||
Accretion of discounted liabilities |
|
| 11 |
|
|
| (27 | ) | ||||||||
Foreign exchange effect |
|
| (117 | ) |
|
| (120 | ) | ||||||||
Balance, June 30 |
| $ | 1,367 |
|
| $ | 2,116 |
| ||||||||
|
|
|
|
|
|
|
|
| ||||||||
|
| Six months ended June 30, 2021 |
|
| Six months ended June 30, 2020 |
|
| Six months ended June 30, 2022 |
|
| Six months ended June 30, 2021 |
| ||||
Balance, December 31 |
| $ | 2,468 |
|
| $ | 1,243 |
|
| $ | 786 |
|
| $ | 2,468 |
|
Purchase price adjustment |
|
| (955 | ) |
|
| — |
|
|
| — |
|
|
| (955 | ) |
Fair value adjustment |
|
| 1,014 |
|
|
| — |
|
|
| 635 |
|
|
| 1,013 |
|
Payments on existing obligations |
|
| (250 | ) |
|
| (1,227 | ) |
|
| — |
|
|
| (250 | ) |
Accretion of discounted liabilities |
|
| (11 | ) |
|
| — |
|
|
| 17 |
|
|
| (11 | ) |
Foreign exchange effect |
|
| (150 | ) |
|
| (16 | ) |
|
| (71 | ) |
|
| (149 | ) |
Balance, June 30 |
| $ | 2,116 |
|
| $ | — |
|
| $ | 1,367 |
|
| $ | 2,116 |
|
|
|
|
|
|
|
|
|
| ||||||||
|
| Three months ended June 30, 2021 |
|
| Six months ended June 30, 2020 |
| ||||||||||
Balance, March 31 |
| $ | 2,205 |
|
| $ | — |
| ||||||||
Purchase price adjustment |
|
| (955 | ) |
|
| — |
| ||||||||
Fair value adjustment |
|
| 1,014 |
|
|
| — |
| ||||||||
Accretion of discounted liabilities |
|
| (27 | ) |
|
| — |
| ||||||||
Foreign exchange effect |
|
| (121 | ) |
|
| — |
| ||||||||
Balance, June 30 |
| $ | 2,116 |
|
| $ | — |
|
The purchase price adjustment iscurrent portion of the result of a measurement-period adjustment and represents a non-cash investing activitycontingent consideration in the Condensed Consolidated Statementsamount of Operations. The fair value adjustment$1,367 and $1,501 is included in operating expensescurrent installments of other liabilities and the accretionlong-term portion in the amount of discounted liabilities$0 and $615 is included in interest expense, net,other liabilities on the Condensed Consolidated Statementscondensed consolidated balance sheets as of Operations. The foreign exchange effect is included in foreign currency translation adjustment on the Condensed Consolidated Statements of Comprehensive Income (Loss).June 30, 2022 and 2021, respectively.
17. Accumulated Other Comprehensive Loss (“AOCL”)—The following table lists the beginning balance, annual activity and ending balance of accumulated other comprehensive loss, which consists of foreign currency (FX) translation adjustments:
|
| Total |
| |
Balance, December 31, 2020 |
| $ | (9,322 | ) |
FX translation |
|
| (2,503 | ) |
Balance, March 31, 2021 |
|
| (11,825 | ) |
FX translation |
|
| 2,914 |
|
Balance, June 30, 2021 |
| $ | (8,911 | ) |
|
|
|
|
|
Balance, December 31, 2019 |
| $ | (5,698 | ) |
FX translation |
|
| (9,063 | ) |
Balance, March 31, 2020 |
|
| (14,761 | ) |
FX translation |
|
| 324 |
|
Balance, June 30, 2020 |
| $ | (14,437 | ) |
|
| Total |
| |
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 | ) |
|
|
|
|
|
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 | ) |
18. Equity Method InvestmentInvestments —On August 2, 2016, AMVAC BV entered into a joint venture with Huifeng (Hong Kong) Ltd, which is a wholly owned subsidiary of the Huifeng Group. The resulting entity, Hong Kong JV, focused on activities such as market access and technology transfer between the two members. AMVAC BV is a 50% owner of the entity. No material contributions were made subsequent to the initial investment. On June 27, 2017, both AMVAC BV and Huifeng (Hong Kong) Ltd. made individual capital contributions of $950 to the Hong Kong JV. The Company utilizes the equity method of accounting with respect to this investment. On July 7, 2017, the Hong Kong JV purchased the shares of Profeng Australia, Pty Ltd. (“Profeng”), for a total consideration of $1,900. The purchase consists of Profeng Australia, Pty Ltd Trustee and Profeng Australia Unit Trust. Both Trust and Trustee were previously owned by Huifeng (via its wholly owned subsidiary Huifeng (Hong Kong) Ltd).
For the three- and six-months ended June 30, 2021, the Company recognized losses of $74 and $87, respectively, as a result of the Company’s ownership position in the Hong Kong Joint Venture. For the three- and six-months ended June 30, 2020, the Company recognized losses of $25 and $38, respectively. The Company’s investment in this joint venture amounted to $301 and $475, respectively at June 30, 2021, and 2020, and is included in other assets on the Condensed Consolidated Balance Sheets.
19. Equity Investments— In February 2016, AMVAC Netherlands BV made an investment in Biological Products for Agriculture (“Bi-PA”) in the amount of $3,283.. Bi-PA develops biological plant protection products that can be used for the control of pests and disease of agricultural crops. As of June 30, 2022 and 2021, the Company’s ownership position in Bi-PA was 15%. Since this investment does not have 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 0 impairment or observable price changes on the investment during the three- and six-monthssix-month periods ended June 30, 2021,2022 and 2020.2021. The investment is recorded within other assets on the condensed consolidated balance sheets and amounted to $2,884 as of June 30, 2022 and December 31, 2021.
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 $2,678$1,113 and $1,516 as of June 30, 2021.2022 and December 31, 2021, respectively. The Company recorded a loss in the amount of $486 and $295 for the three monthsthree-month period ended June 30, 2022 and 2021, respectively. The Company recorded a loss of $403 and recorded a gain of $771 for the six months ended June 30, 2021.2022 and 2021, respectively The Companyinvestment is recorded a gain inwithin other assets on the amount of $24 for the three- and six-months ended June 30, 2020.
20. Income Taxes —condensed consolidated balance sheets.Income tax expense was $2,445 and $1,565 for the three months ended June 30, 2021, and 2020, respectively. The effective tax rate for the quarter was 31.9% and 28.6% for the three months ended June 30, 2021 and 2020, respectively. Income tax expense was $3,807 and $1,360 for the six months ended June 30, 2021, and 2020, respectively. The effective tax rate for the six months ended June 30, 2021, and 2020 was 31.4% and 23.4%, respectively. The rate has increased compared to prior years reflecting mix of income in different jurisdictions. The effective tax rate is based on the projected income for the full year and is subject to ongoing review and adjustment by management.
For the three- and six-months ended June 30, 2021 and 2020, the Company benefited from the tax impact of the vesting of certain stock grants.Additionally, for the same period in 2020, the Company benefited from a discrete income tax benefit as the Company assessed its income tax positions to account for the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) which was signed into law on March 27, 2020. A provision of the act modified the amount of interest deduction allowed and therefore reduced the Company’s 2019 Global Intangible Low Tax Income (“GILTI”) inclusion.
The Florida Department of Revenue has completed its audit of the Company’s state income tax returns for the years ended December 31, 2012 through December 31, 2013 and December 31, 2015 through December 31, 2018. No adjustments have been proposed for these periods. The Company has also been notified by the Mississippi Department of Revenue of its intent to examine the Company’s state income tax returns for the years ended December 31, 2016 through December 31, 2018. The result of Mississippi’s audit is not determinable since the audit is at its preliminary stage.
21.19. Product and Business Acquisitions — The Company did 0tnot complete any acquisitions during the three- and six-monthssix-month periods ended June 30, 2021,2022, and 2020.2021. However, the Company made a payment in the amount of $10,000 in June 2021 for the acquisition of a product line. The Company obtained control over the product line on July 1, 2021 and the acquisition will bewas accounted for as an asset acquisition in Q3 2021.
20. Income Taxes —Income tax expense was $2,725 and $2,445 for the three-month period ended June 30, 2022, and 2021, respectively. The $10,000 is included in other assets oneffective tax rate for the Condensed Consolidated Balance Sheets.
Duringquarter was 28.5% and 31.9% for the yearthree-month period ended December 31, 2020, the Company completed 2 acquisitions in exchangeJune 30, 2022 and 2021, respectively. Income tax expense was $7,224 and $3,807 for a total cash consideration at closing of $19,342, which was net of cash acquired of $1,970, and contingent consideration of $1,052, and the settlement of a net asset adjustment of $623. In addition, the Company assumed liabilities of $11,616 and recognized a bargain purchase gain in the amount of $4,536. The total asset value of $37,169 was preliminarily allocated as follows: product rights $8,577, trade names $351, distribution agreements $3,584, customer relationships $386, goodwill $4,618, working capital and fixed assets $19,653. During the six months ended June 30, 2022, and 2021, respectively. The effective tax rate for the Company recorded an adjustment to reduce the bargain purchase gain by the amount of $121 with a corresponding adjustment to working capital. Further, the Company recorded the following adjustments included in the preliminary allocation during the six monthssix-month period ended June 30, 2021: decrease2022 and 2021, was 30.1% and 31.4%, respectively. For the three- and six-month periods ended June 30, 2022, the rate decreased compared to the same periods of 2021 reflecting the mix of income in contingent consideration $955, increase in product registrations and product rights $1,932, increase in distribution agreements $3,584, decrease in trade name and trademarks $843, decrease in customer relationships and customer lists $246, decrease in goodwill $4,054,different jurisdictions and an increase in tax benefit from the vesting of certain stock grants. For 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 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 location of the activities performed. The effective tax rate is based on the projected income tax liabilities $1,328.for the full year and is subject to ongoing review and adjustment by management.
21. Stock Re-purchase Program— On March 8, 2022, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an aggregate number of up to 1,000,000 shares of its common stock, par value $0.10 per share, in the open market over the succeeding one year at a price not to exceed $20 per share, subject to limitations and restrictions under applicable securities laws.
The purchase price allocation for both acquisitions is preliminary with respect totable below summarizes the valuationnumber of contingent consideration, intangibles, property, plant and equipment, income taxes and certain other working capital items, as the Company is still in the process of gathering additional information and the determinationshares of the respective fair values.
On October 2, 2020, the Company completed the acquisition of all outstandingCompany’s common stock of the Agrinos Group Companies (Agrinos), except for Agrinos AS. Agrinos has operating entities in the U.S., Mexico, India, Brazil, China, Ukraine, and Spain. Agrinos is a fully integrated biological input supplier with proprietary technology, internal manufacturing, and global distribution capabilities. At closing, the Company paid cash consideration of $3,125, which was net of cash acquired of $1,813, and liabilities assumed of $4,963, including liabilities of $595 related to income tax matters. The acquisition was accounted for as a business combination and resulted in a preliminary bargain purchase gain of $4,536 (including a reduction of $121 recordedthat were repurchased during the six monthsthree- and six-month periods ended June 30, 2021). The total asset value of $12,624 has been preliminarily allocated as follows: working capital $7,370 (including trade receivables of $2,262), property, plant and equipment of $5,004, and intangible assets of $250. Agrinos was acquired out of bankruptcy. This provided the Company with an opportunity to acquire Agrinos at an advantageous purchase price which was below the preliminary fair value of Agrinos’ net assets acquired resulting in the above-mentioned bargain purchase gain.
On October 8, 2020, the Company completed the acquisition of all outstanding stock of AgNova Technologies Pty Ltd (“AgNova”). AgNova is an Australian entity that sources, develops, and distributes specialty crop protection and production solutions for agricultural and horticultural producers, and for selected non-crop users. At closing, the Company paid cash consideration of $16,217, which was net of cash acquired of $157, contingent consideration dependent on certain financial results of $1,052, the settlement of a net asset adjustment of $623, and liabilities assumed of $6,653, including liabilities of $3,857 related to income tax matters. The fair value of the contingent consideration of $1,052 was estimated using a Monte Carlo Simulation. The acquisition was accounted for as a business combination and the total asset value of $24,545 has been preliminarily allocated as follows: product registrations and product rights $8,327, distribution agreements $3,584, trade names and trademarks $351, customer relationships and customer lists $386, goodwill $4,618, which is non-deductible for tax purposes, working capital $7,206, including trade receivables of $1,508, and equipment $73. The preliminary allocation includes the following adjustments recorded2022. There were no such purchases during the six monthsthree- and six-month periods ended June 30, 2021, that were made based on a preliminary valuation report: decrease in contingent consideration $955, increase in product registrations and product rights $1,932, increase in distribution agreements $3,584, decrease in trade name and trademarks $843, decrease in customer relationships and customer lists $246, decrease in goodwill $4,054, and an increase in income tax liabilities $1,328.2021.
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 |
|
April 30, 2022 |
|
| 100 |
|
| $ | 19.99 |
|
| $ | 2 |
|
|
| 667,496 |
|
May 31, 2022 |
|
| 506 |
|
| $ | 19.99 |
|
| $ | 11 |
|
|
| 666,990 |
|
Total number of shares repurchased |
|
| 333,010 |
|
| $ | 18.71 |
|
| $ | 6,232 |
|
|
| 666,990 |
|
22. Foreign CurrencySupplemental Cash Flow Information— The Company recorded net foreign currency transaction gains in the amount of $738 and losses of $291 during the three months ended June 30, 2021, and 2020, respectively, included in operating expenses on the Condensed Consolidated Financial Statements. The Company incurred net foreign currency transaction losses in the amount of $465 and $1,128 during the six months ended June 30, 2021, and 2020, respectively, included in operating expenses on the Condensed Consolidated Financial Statements.
23. Subsequent Events— The Company made a payment in the amount of $10,000 in June 2021 for the acquisition of a product line and obtained control over the related assets on July 1, 2021. Please refer to Note 21 for further details.
The Company executed an amendment related to its Credit Agreement on August 5, 2021. Please refer to Note 10 for the terms of the Credit Agreement.
|
| For the Six Months Ended June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
| $ | 1,100 |
|
| $ | 1,873 |
|
Income taxes, net |
| $ | 10,749 |
|
| $ | 2,757 |
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
ROU assets exchanged for lease liabilities |
| $ | 1,825 |
|
| $ | 12,067 |
|
Cash dividends declared and included in accrued expenses |
| $ | 742 |
|
| $ | 600 |
|
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 1A., Risk factors and Item 7A.3., Quantitative and Qualitative Disclosures about Market Risk, and Part II, Item 1A., Risk Factors, in the Company’s Annualthis Quarterly Report on Form 10-K for the year ended December 31, 2020.10-Q.
MANAGEMENT OVERVIEW
The Company’s Operations in the Context of the COVID-19 Pandemic
Since the start of the coronavirus pandemic early in 2020, the company has made sustained efforts to maintain the health and safety of the workforce while ensuring continuity of the business, which, under applicable federal guidelines (https://ww.cisa.gov) is part of the nation’s critical infrastructure (as part of the “Food and Agriculture,” “Chemical” and “Public Works and Infrastructure Support Services” sectors). In the workplace, we have designed and implemented protocols for social distancing, made provisions for the workforce to work remotely where possible, and established quarantine policies for those who present COVID-like symptoms or may have been in contact with those who have. Further, we keep current with local, state, federal and international laws and restrictions that could affect the business and provide real-time information to the workforce. We have also prepared contingency plans to permit the continued operation of our factories, in the event that there are critical staffing issues. Further, we continuously monitor supply chain, transportation, logistics and border closures and have reached out to third parties to make clear that we are continuing to operate, that we have our own policies relating to health and that we are committed to compliance with COVID-19 policies of our business partners.
As has been the case with many other employers, since the start of 2021, we have encouraged our workforce to receive vaccinations against COVID-19 through various means, including incentive programs. However, new variants, particularly the Delta variant, have engendered a resurgence of the virus in many regions particularly among the unvaccinated. In the midst of changing conditions, we have nevertheless been able to manage our business with minimal impact during the reporting period.
Looking forward, the Company is unable to predict the ultimate 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 certainty. The Company continues to monitor its business for adverse impacts of the pandemic, including volatility in the foreign exchange markets, demand, supply-chain disruptions in certain markets, and increased costs of employee safety, among others.
Three Months Ended June 30, 2021 and 2020:
Overview of the Company’s Performance
The second quarter of 2020 began with a degree of hesitation in our markets, as buyers and sellers monitored the durability of the critical infrastructure, including supply chain, transportation and manufacturing. Over the course of that quarter, companies such as ours adapted to social restrictions, gained greater confidence and resumed business activity in a more normalized way. Shifting our focus to 2021, our industry has seen significant improvements in commodity pricing that has been coincident with considerable progress in vaccination campaigns and reductions in social restrictions. In a sense, to date, 2021 has been commonly seen as a year of recovery from the pandemic. Following a comparatively strong first quarter of 2021, the Company has continued that trend intoDuring the second quarter of 2021, during2022, the agriculture industry proceeded further into the second year of an upcycle, following a multi-year downcycle. While subject to intra-day fluctuations, commodity prices for row crops, which are largely driven by global conditions, were consistently strong. Consequently, the domestic farm economy showed continued resiliency. Geopolitical conditions, particularly the prolonged invasion of Ukraine, provided further price support for corn (and, consequently, soybeans), wheat and sunflower oil, as well as fertilizers. With improved supply chain conditions and a stronger U.S. dollar, domestic companies experienced enhanced buying power. Despite the advent of the BA5 variant, in the face of higher vaccination rates, the COVID-19 pandemic has shifted into an endemic in most regions. Amidst these factors and following on the heels of an extremely strong first quarter, the Company’s overall operating results for the second quarter of 2022 improved in most respects, as compared with those of the same period of 2021. Led by the strong sales growth of our international business, consolidated net sales increased by 29 % ($134,61010% (to end at $148,084 as compared to $104,555 in second quarter of 2020)$134,610) and net income increased by 32% ($5,144 as compared to $3,887 in the comparable period of 2020)33% (to $6,830 from $5,144).
On a consolidated basis, domestic sales rose 44%1% and international sales increased 10%26%, resulting in an overall net sales improvement of about 29%10%. CostIn comparison, cost of sales increased by 28%, primarily due to the volume growth in sales, the variability in7% or $5,834. This lower comparative increase was a result of higher selling prices and a favorable mix of sales and changeshigher-margin products in overall factory performance including the new factories acquired as part of the acquisition of the Agrinos Group at the end of 2020. Cost of sales were 61% of sales in both 2021 and 2020. These factors, taken together, yielded a 28% increase in gross profit (to $52,139 from $40,306 in the comparable quarter of 2020). Net cost of our manufacturing activity was impacted by a slow down to accommodate required mechanical integrity inspection activity in Axis, the start-up of the PCNB unit in Los Angeles and the addition of biological fermentation facilities acquired with the Agrinos businesses. Average gross margin percent for the second quarter of 2021 remained level with that of the same period in 2020 at 39% of sales.
Operating expenses on an absolute basis increased by about 28%, as compared to the comparable quarter (to $43,080 from $33,579), and remained flat as a percent of net sales at 32% for the 3-month period ended June 30, 2021,2022, as compared to the same period of 2020. Operating profitthe prior year. Cost of sales were 60% of sales in the second quarter of 2022, as compared to 61% for the same period roseof 2021. These factors, taken together, yielded a 15% increase in gross profit (to $59,779 from $52,139 in the comparable quarter of 2021), while overall gross margin percent improved to 40% from 39% quarter-over-quarter.
Operating expenses increased to 33% (to $8,971 from $6,727)of net sales (or $48,966), driven by a slightly higher concurrent sales increase. During the quarter, interest expense decreased by 20%,as compared to 32% (or $43,080) in comparison to the same period of the prior year primarily due to legal and other expenses amounting to $1,785 relating to proxy defense activity in the reporting period. Absent those expenses, our operating expenses would have been at 32%, in line with the same period of the prior year.
Operating income for the period increased by 21% (to $10,813 from $8,971), driven by cash generated over the last yearoverall sales increase, higher selling prices and a slight improvement inimproved factory utilization. Interest expense was 24% lower than the effective interest rate. Income taxes increased by 48%, as a result of both higher pre-tax income and a slightly higher effective tax rate (32% as compared to 29% in the comparablesame period of 2020).2021, driven by lower average levels of debt, which was aided by a second consecutive year of strong customer participation in early pay programs. These factors yielded net income for the period of $6,830, a 33% increase over compared to $5,144 which was 32% higher than thatin the second quarter of the same quarter in 2020.2021. Details on our financial performance are set forth below.
RESULTS OF OPERATIONS
Quarter Ended June 30, 20212022 and 2020:2021:
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 62,575 |
|
| $ | 44,670 |
|
| $ | 17,905 |
|
|
| 40 | % |
| $ | 63,195 |
|
| $ | 62,575 |
|
| $ | 620 |
|
|
| 1 | % |
U.S. non-crop |
|
| 21,488 |
|
|
| 13,872 |
|
|
| 7,616 |
|
|
| 55 | % |
|
| 21,316 |
|
|
| 21,488 |
|
|
| (172 | ) |
|
| -1 | % |
Total U.S. |
|
| 84,063 |
|
|
| 58,542 |
|
|
| 25,521 |
|
|
| 44 | % |
|
| 84,511 |
|
|
| 84,063 |
|
|
| 448 |
|
|
| 1 | % |
International |
|
| 50,547 |
|
|
| 46,013 |
|
|
| 4,534 |
|
|
| 10 | % |
|
| 63,573 |
|
|
| 50,547 |
|
|
| 13,026 |
|
|
| 26 | % |
Total net sales: |
| $ | 134,610 |
|
| $ | 104,555 |
|
| $ | 30,055 |
|
|
| 29 | % |
| $ | 148,084 |
|
| $ | 134,610 |
|
| $ | 13,474 |
|
|
| 10 | % |
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 35,770 |
|
| $ | 22,912 |
|
| $ | 12,858 |
|
|
| 56 | % |
| $ | 33,442 |
|
| $ | 35,770 |
|
| $ | (2,328 | ) |
|
| -7 | % |
U.S. non-crop |
|
| 11,706 |
|
|
| 6,843 |
|
|
| 4,863 |
|
|
| 71 | % |
|
| 11,267 |
|
|
| 11,706 |
|
|
| (439 | ) |
|
| -4 | % |
Total U.S. |
|
| 47,476 |
|
|
| 29,755 |
|
|
| 17,721 |
|
|
| 60 | % |
|
| 44,709 |
|
|
| 47,476 |
|
|
| (2,767 | ) |
|
| -6 | % |
International |
|
| 34,995 |
|
|
| 34,494 |
|
|
| 501 |
|
|
| 1 | % |
|
| 43,596 |
|
|
| 34,995 |
|
|
| 8,601 |
|
|
| 25 | % |
Total cost of sales: |
| $ | 82,471 |
|
| $ | 64,249 |
|
| $ | 18,222 |
|
|
| 28 | % |
| $ | 88,305 |
|
| $ | 82,471 |
|
| $ | 5,834 |
|
|
| 7 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 26,805 |
|
| $ | 21,758 |
|
| $ | 5,047 |
|
|
| 23 | % |
| $ | 29,753 |
|
| $ | 26,805 |
|
| $ | 2,948 |
|
|
| 11 | % |
U.S. non-crop |
|
| 9,782 |
|
|
| 7,029 |
|
|
| 2,753 |
|
|
| 39 | % |
|
| 10,049 |
|
|
| 9,782 |
|
|
| 267 |
|
|
| 3 | % |
Total U.S. |
|
| 36,587 |
|
|
| 28,787 |
|
|
| 7,800 |
|
|
| 27 | % |
|
| 39,802 |
|
|
| 36,587 |
|
|
| 3,215 |
|
|
| 9 | % |
International |
|
| 15,552 |
|
|
| 11,519 |
|
|
| 4,033 |
|
|
| 35 | % |
|
| 19,977 |
|
|
| 15,552 |
|
|
| 4,425 |
|
|
| 28 | % |
Total gross profit |
| $ | 52,139 |
|
| $ | 40,306 |
|
| $ | 11,833 |
|
|
| 29 | % |
| $ | 59,779 |
|
| $ | 52,139 |
|
| $ | 7,640 |
|
|
| 15 | % |
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
|
| 43 | % |
|
| 49 | % |
|
|
|
|
|
|
|
|
|
| 47 | % |
|
| 43 | % |
|
|
|
|
|
|
|
|
U.S. non-crop |
|
| 46 | % |
|
| 51 | % |
|
|
|
|
|
|
|
|
|
| 47 | % |
|
| 46 | % |
|
|
|
|
|
|
|
|
Total U.S. |
|
| 44 | % |
|
| 49 | % |
|
|
|
|
|
|
|
|
|
| 47 | % |
|
| 44 | % |
|
|
|
|
|
|
|
|
International |
|
| 31 | % |
|
| 25 | % |
|
|
|
|
|
|
|
|
|
| 31 | % |
|
| 31 | % |
|
|
|
|
|
|
|
|
Total gross margin |
|
| 39 | % |
|
| 39 | % |
|
|
|
|
|
|
|
|
|
| 40 | % |
|
| 39 | % |
|
|
|
|
|
|
|
|
Our domestic crop business recorded net sales that were over 40%1% higher than those of the second quarter 2020of 2021 ($62,57563,195, as compared to $44,670)$62,575). Rising crop commodity prices prompted growersLed by Dacthal, Impact, Assure II and retailersEnvoke, offset to increase their purchases of crop protection inputs. In corn,a degree by lower sales of our leading soil insecticide Aztec®Classic and our Impact® post emergentPython brands. The herbicide brands drove a 39% year-over-year increaseshowed strong growth across all markets, as weed management planning has become instrumental in controlling resistant weeds in cotton, sugarcane, soybeans, corn and high value crops. Our lead brands in cotton generated positive growth during the quarter due, in the case of Bidrin, to increased early season pest pressure, and, in the case of Folex, to an anticipated early harvest season as hot dry weather pushes cotton maturity ahead of seasonal norms. Partially offsetting these key products. Among other granular soil insecticides, Thimet®, used in peanuts and sugar cane, increased by 8% as compared to the prior year. Sales of our soybean products were flat, as compared to the same quarter in 2020. Fueled by renewed potato demand as pandemic restrictions on restaurants and schools eased,gains, sales of Thimet, Aztec and Counter were down in the quarter following unusually high demand in the first quarter. Further, lingering drought conditions in our Western and Southwestern markets adversely impacted our soil fumigants grew significantly. With respect to cotton products,fumigant sales, as water allocations have limited annual crop production in those regions. Drier conditions also suppressed sales of our Bidrin® foliar insecticide doubledDibrom during the period with improved weather conditions and higher insect pressure. Similarly, we experienced increased demand for our Folex® harvest defoliant due largely to higher cotton prices and increased harvestable acreage in West Texas. In general, most of our products sold into the U.S. crop sector either equaled or exceeded their sales performance of the second quarter of 2020.period.
Cost of sales within the domestic crop business increased significantly bothdecreased by 7% (from $35,770 in 2021 to $33,442 in 2022) primarily as a result of selling more, higher-margin products. As the increased volumes just discussed, a different mixresult of salesbetter pricing and increased netfavorable factory costs. Thisperformance, domestic crop generated an 11% increase of 23% in gross profit (to(from $26,805 from $21,758 in the first quarter of 2020).2021 to $29,753 this year) on a 1% increase in sales.
Within ourOur domestic non-crop business, posted nearly flat net sales increased by 55% (to $21,488 from $13,872) quarter-over-quarter. Sales of our Dibrom® mosquito adulticide sales grew significantly in the second quarter influenced by timing shifts in customer procurement,of 2022, as the distribution channel prepared to respondcompared to the 2021 hurricanesame period in the prior year (down 1% to $21,316 from $21,488 in 2021). In the quarter, relief from pandemic restrictions – primarily return to in-person school and tropical storm season being forecast by National Oceanicwork – has had a two-pronged effect on our non-crop business. On the one hand, the demand for nursery, ornamental and Atmospheric Administration. Our pest strips business sales grew by more than 56%,consumer products for the home declined, as consumerpeople spent less time in their homes. On the other hand, we saw an uptick in demand for goods that we supply to professional applicators and commercial demand improved with the relaxation of pandemic restrictions.landscapers, as homeowners shifted from do-it-yourself to using professional services. In addition, royalty and license fees forwe enjoyed higher sales of our Envance proprietary solutions reflected a steady stream of paymentspharmaceutical products from Proctor & Gamble forGemChem, while seeing an offsetting softness in the formulations that are used in their Zevo® consumer pest spray brand. We recorded more than a 27% improvement in net sales from our OHP nursery and ornamental businessturf supply market, as demand for ornament and decorative plants stayed strong across the U.S.golfing activity declined.
Cost of sales within the domestic non-crop business grew to $11,706,declined by 4% in the second quarter of 2022, as compared to $6,843the same period in the prior quarter. This increase was due largelyyear (from $11,706 in 2021 to volume$11,267 in 2022), primarily resulting from improved factory performance and mix of sales and increased net factoryassociated overhead cost caused by a slower than expected start-up of our PCNB manufacturing cell at the Los Angeles facility and mechanical integrity inspection activity at the Axis site.recovery. Gross profit for domestic non-crop increased by 39% (to3% (from $9,782 from $7,029 in 2020)2021 to $10,049 in 2022).
Net sales of our international businesses rose by about 10%26% during the period (to($63,573 in 2022 vs. $50,547 in 2021 from $46,013 in 2020). Newly acquired businesses contributed to this result. With more favorable weather conditions2021) and the additionconstituted 43% of our recently acquired AgNova business, we experienced a 3-foldconsolidated sales. These businesses benefited from sales increase from our Australian business. The addition of the Agrinos biological products business also contributed incrementally to international salesincreases in China and India. Further, Mexico posted strongly improved sales with stable demand for granularsoil fumigants, foliar insecticides, soil insecticides and very strongfungicides across many regions. Our Central American business enjoyed increased demand for our bromacil herbicides,in the pineapple, banana and soil fumigants for use in a number of high-value vegetable crops. While we experienced a decline in Europeancitrus markets, including stronger sales of our MocapGreenplants micronutrient solutions. In Mexico, despite drought conditions in the north, our Mexico business experienced good performance from at-plant fumigants and Nemacur granular soil insecticides,herbicides on high-value crops. Our Brazilian business benefited from increased sales of Counter on corn, while our Australian operations posted stronger sales in light of increased rainfall, heavy demand for molluscicides as a result of regulatory action last year, in Brazil net sales increased sharply with the recovery of the agricultural sector following the height of the pandemic. Finally, our businesses in Central America reported increases in sales,well as AgriCenter successfully overcame supplyinsecticide products for use on canola, winter wheat and logistical difficulties arising from the pandemic.pulse.
The costCost of sales in our international business increased by 25% (from $34,995 in 2021 to $43,596 in 2022), on sales that increased by 26% and was flat, quarter-over-quarter, while grossimpacted by cost increases (including logistics and freight) of the third-party products that we distribute. Gross profit rosefor the international businesses increased by 35%28% (to $19,977 in 2022 from $15,552 from $11,519) due in part to a concerted effort to market higher margin products in Central America, greater supply availability of certain herbicide products in Mexico and the addition of biological products from newly acquired businesses.2021).
On a consolidated basis, gross profit for the second quarter of 20212022 increased by 29% (to15% (from $52,139 from $40,306 in 2020)2021 to $59,779 in 2022). As mentioned above, despite some increased net factory cost,Overall gross margins remained levelmargin percentage ended at 40% in the second quarter of 2022, as compared to 39% in the second quarter of 2021, as compared to the same period 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 by $9,501$5,886 to $43,080$48,966 for the three monthsthree-month period ended June 30, 2021,2022, as compared to the same period in 2020.2021. The differences in operating expenses by department are as follows:
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||
Selling |
| $ | 11,611 |
|
| $ | 10,031 |
|
| $ | 1,580 |
|
|
| 16 | % |
General and administrative |
|
| 15,264 |
|
|
| 10,515 |
|
|
| 4,749 |
|
|
| 45 | % |
Research, product development and regulatory |
|
| 6,929 |
|
|
| 6,104 |
|
|
| 825 |
|
|
| 14 | % |
Freight, delivery and warehousing |
|
| 9,276 |
|
|
| 6,929 |
|
|
| 2,347 |
|
|
| 34 | % |
|
| $ | 43,080 |
|
| $ | 33,579 |
|
| $ | 9,501 |
|
|
| 28 | % |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||
Selling |
| $ | 12,598 |
|
| $ | 11,611 |
|
| $ | 987 |
|
|
| 9 | % |
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
| 16,258 |
|
|
| 15,264 |
|
|
| 994 |
|
|
| 7 | % |
Proxy contest activities |
|
| 1,785 |
|
|
| — |
|
|
| 1,785 |
|
|
| 100 | % |
Research, product development and regulatory |
|
| 7,758 |
|
|
| 6,929 |
|
|
| 829 |
|
|
| 12 | % |
Freight, delivery and warehousing |
|
| 10,567 |
|
|
| 9,276 |
|
|
| 1,291 |
|
|
| 14 | % |
Subtotal |
|
| 48,966 |
|
|
| 43,080 |
|
|
| 5,886 |
|
|
| 14 | % |
• | Selling expenses increased by |
• | General and administrative, other expenses increased by |
• | 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 |
• | Freight, delivery and warehousing costs for the |
On April 1, 2020, the Company made a strategic investment in Clean Seed Inc., in the amount of $1,190. DuringThe Company recorded negative fair value adjustments in the amount of $486 and $296 for the three months ended June 30, 2022 and 2021, and 2020, the Company recorded a (decrease) increase in fair value in the amount of $(295) and $24, respectively. These changes in fair value of our investment directly reflect changes in the stock’s quoted market price.
Interest costs net of capitalized interest were $1,013$772 in the three monthsthree-month period ended June 30, 2021,2022, as compared to $1,274$1,013 in the same period of 2020.2021. Interest costs are summarized in the following table:
Average Indebtedness and Interest expense
|
| Three months ended June 30, 2021 |
|
| Three months ended June 30, 2020 |
|
| Three months ended June 30, 2022 |
|
| Three months ended June 30, 2021 |
| ||||||||||||||||||||||||||||||||||||
|
| 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) |
| $ | 163,140 |
|
| $ | 984 |
|
|
| 2.4 | % |
| $ | 185,989 |
|
| $ | 1,248 |
|
|
| 2.7 | % |
| $ | 124,184 |
|
| $ | 745 |
|
|
| 2.4 | % |
| $ | 163,140 |
|
| $ | 984 |
|
|
| 2.4 | % |
Amortization of deferred loan fees |
|
| — |
|
|
| 80 |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
|
| — |
|
Amortization of other deferred liabilities |
|
| — |
|
|
| (25 | ) |
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| (25 | ) |
|
| — |
|
Other interest (income) expense |
|
| — |
|
|
| 39 |
|
|
| — |
|
|
| — |
|
|
| 26 |
|
|
| — |
| ||||||||||||||||||||||||
Other interest expense |
|
| — |
|
|
| 12 |
|
|
| — |
|
|
| — |
|
|
| 39 |
|
|
| — |
| ||||||||||||||||||||||||
Subtotal |
|
| 163,140 |
|
|
| 1,078 |
|
|
| 2.6 | % |
|
| 185,989 |
|
|
| 1,357 |
|
|
| 2.9 | % |
|
| 124,184 |
|
|
| 837 |
|
|
| 2.7 | % |
|
| 163,140 |
|
|
| 1,078 |
|
|
| 2.6 | % |
Capitalized interest |
|
| — |
|
|
| (65 | ) |
|
| — |
|
|
| — |
|
|
| (83 | ) |
|
| — |
|
|
| — |
|
|
| (65 | ) |
|
| — |
|
|
| — |
|
|
| (65 | ) |
|
| — |
|
Total |
| $ | 163,140 |
|
| $ | 1,013 |
|
|
| 2.5 | % |
| $ | 185,989 |
|
| $ | 1,274 |
|
|
| 2.7 | % |
| $ | 124,184 |
|
| $ | 772 |
|
|
| 2.5 | % |
| $ | 163,140 |
|
| $ | 1,013 |
|
|
| 2.5 | % |
The Company’s average overall debt for the three monthsthree-month period ended June 30, 20212022 was $163,140,$124,184, as compared to $185,989$163,140 for the three monthsthree-month period ended June 30, 2020.2021. Our borrowings in the three monthsthree-month period ended June 30, 2021,2022, 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 the associated investmentgrowth in expanded working capital.capital in support of business growth. As can be seen from the table above, ourthe effective bank interest rate on our revolving line of credit was 2.4% forat each of the three monthsthree-month period ended June 30, 2021, as compared to 2.7% in 2020.2022 and 2021.
Income tax expense increased by $880$280 to $2,445$2,725 for the three monthsthree-month period ended June 30, 2021,2022, as compared to $1,565$2,445 for the comparable period in 2020.2021. The effective tax raterates for the three monthsthree-month period ended June 30, 2022, and 2021, were 28.5% and 2020, was 31.9% and 28.6%, 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 increasedecrease in effective tax rate iswas primarily driven by the mix of our domestic and international income.income and benefit from the tax impact of the vesting of certain stock grants.
Our net income for the three monthsthree-month period ended June 30, 2021,2022, was $5,144$6,830 or $0.17$0.23 per basic and diluted share, as compared to $3,887$5,144 or $0.13$0.17 per basic and diluted share in the same quarter of 2020.2021.
Six Months Ended June 30, 20212022 and 2020:2021:
Overview of the Company’s Performance
Within the global agricultural industry, the first six months of 20212022 were characterized by greater confidence (having just arisen from the worsta prolongation of the pandemic)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 commodity pricing for row crops. Domestic marketsfarm economy in the U.S. Following extraordinary activity in the first quarter, domestic distribution within our industry gained strengthslowed procurement modestly during the first quarter and continued that trend into the second.second quarter. Our international businesses, for the most part, enjoyed similarstrong market trends.conditions in nearly all regions during the first half of the year. All told, the Company’s overall operating results for the first six months of 20212022 improved considerably over those of the same period of 2020.2021.
On a consolidated basis, with domestic sales up 30%19% and international sales up by 17%18%, overall net sales increased by 25%19% (to $250,765$297,519 from $200,517)$250,765). Cost of sales were up 26%15% on an absolute basis but remained flatdecreased as a percent of net sales atto 59% from 61%. Factory performance declinedimproved during the first half of 2021,2022, as compared to that of 2020.2021. These factors, taken together, yielded an increase in gross profit, which was up $18,583$23,702 or 24% (to $97,270$120,972 from $78,687)$97,270) and remained level when comparedimproved to 41% of net sales, atup from 39%. during the first half of 2021. In the first half of 2021,2022, while operating expenses rose on an absolute basis by 21%13%, these costs declined as a percent of net sales to 34%32% from 35%34% for the same period of the prior year.
Interest expense declined by 30% as a result of cash generated over the last 12-months, use to pay down debt. Income40%, while income tax expense increased primarily as a result of stronger financial performance plus an increasepartially offset by a decrease in effective tax rate and decreased benefit from discrete items compared to the first half of the prior year (at 31% as compared to 23%30.1% in 2022 and 31.4% in the prior year). Overall, the Company generated increasedCompany’s net income for the period increased by a factor of two, ending at $16,765, as compared to $8,215 from $4,407 during the first half of the prior year, up 86%.year. Details on our financial performance are set forth below.
RESULTS OF OPERATIONS
Six months ended June 30, 2021,2022, and 20202021
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 117,330 |
|
| $ | 95,032 |
|
| $ | 22,298 |
|
|
| 23 | % |
| $ | 151,388 |
|
| $ | 117,330 |
|
| $ | 34,058 |
|
|
| 29 | % |
U.S. non-crop |
|
| 38,941 |
|
|
| 24,865 |
|
|
| 14,076 |
|
|
| 57 | % |
|
| 34,712 |
|
|
| 38,941 |
|
|
| (4,229 | ) |
|
| -11 | % |
Total U.S. |
|
| 156,271 |
|
|
| 119,897 |
|
|
| 36,374 |
|
|
| 30 | % |
|
| 186,100 |
|
|
| 156,271 |
|
|
| 29,829 |
|
|
| 19 | % |
International |
|
| 94,494 |
|
|
| 80,620 |
|
|
| 13,874 |
|
|
| 17 | % |
|
| 111,419 |
|
|
| 94,494 |
|
|
| 16,925 |
|
|
| 18 | % |
Total net sales: |
| $ | 250,765 |
|
| $ | 200,517 |
|
| $ | 50,248 |
|
|
| 25 | % |
| $ | 297,519 |
|
| $ | 250,765 |
|
| $ | 46,754 |
|
|
| 19 | % |
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 69,254 |
|
| $ | 49,029 |
|
| $ | 20,225 |
|
|
| 41 | % |
| $ | 81,290 |
|
| $ | 69,254 |
|
| $ | 12,036 |
|
|
| 17 | % |
U.S. non-crop |
|
| 19,776 |
|
|
| 13,117 |
|
|
| 6,659 |
|
|
| 51 | % |
|
| 18,698 |
|
|
| 19,776 |
|
|
| (1,078 | ) |
|
| -5 | % |
Total U.S. |
|
| 89,030 |
|
|
| 62,146 |
|
|
| 26,884 |
|
|
| 43 | % |
|
| 99,988 |
|
|
| 89,030 |
|
|
| 10,958 |
|
|
| 12 | % |
International |
|
| 64,465 |
|
|
| 59,684 |
|
|
| 4,781 |
|
|
| 8 | % |
|
| 76,559 |
|
|
| 64,465 |
|
|
| 12,094 |
|
|
| 19 | % |
Total cost of sales: |
| $ | 153,495 |
|
| $ | 121,830 |
|
| $ | 31,665 |
|
|
| 26 | % |
| $ | 176,547 |
|
| $ | 153,495 |
|
| $ | 23,052 |
|
|
| 15 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
| $ | 48,076 |
|
| $ | 46,003 |
|
| $ | 2,073 |
|
|
| 5 | % |
| $ | 70,098 |
|
| $ | 48,076 |
|
| $ | 22,022 |
|
|
| 46 | % |
U.S. non-crop |
|
| 19,165 |
|
|
| 11,748 |
|
|
| 7,417 |
|
|
| 63 | % |
|
| 16,014 |
|
|
| 19,165 |
|
|
| (3,151 | ) |
|
| -16 | % |
Total U.S. |
|
| 67,241 |
|
|
| 57,751 |
|
|
| 9,490 |
|
|
| 16 | % |
|
| 86,112 |
|
|
| 67,241 |
|
|
| 18,871 |
|
|
| 28 | % |
International |
|
| 30,029 |
|
|
| 20,936 |
|
|
| 9,093 |
|
|
| 43 | % |
|
| 34,860 |
|
|
| 30,029 |
|
|
| 4,831 |
|
|
| 16 | % |
Total gross profit |
| $ | 97,270 |
|
| $ | 78,687 |
|
| $ | 18,583 |
|
|
| 24 | % |
| $ | 120,972 |
|
| $ | 97,270 |
|
| $ | 23,702 |
|
|
| 24 | % |
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. crop |
|
| 41 | % |
|
| 48 | % |
|
|
|
|
|
|
|
|
|
| 46 | % |
|
| 41 | % |
|
|
|
|
|
|
|
|
U.S. non-crop |
|
| 49 | % |
|
| 47 | % |
|
|
|
|
|
|
|
|
|
| 46 | % |
|
| 49 | % |
|
|
|
|
|
|
|
|
Total U.S. |
|
| 43 | % |
|
| 48 | % |
|
|
|
|
|
|
|
|
|
| 46 | % |
|
| 43 | % |
|
|
|
|
|
|
|
|
International |
|
| 32 | % |
|
| 26 | % |
|
|
|
|
|
|
|
|
|
| 31 | % |
|
| 32 | % |
|
|
|
|
|
|
|
|
Total gross margin |
|
| 39 | % |
|
| 39 | % |
|
|
|
|
|
|
|
|
|
| 41 | % |
|
| 39 | % |
|
|
|
|
|
|
|
|
Our domestic crop business recorded net sales that were 24%29% above those of first half of 20202021 (to $117,330$151,388 from $95,032). Higher crop$117,330) Assisted by consistently high commodity prices and solid economic recovery alleviated prior concerns about near-terma strong domestic farm economy, the Company experienced strong demand across all product categories. Further, with our domestic production capacity, we were able to meet demand in spite of international supply constraints. Our herbicide portfolio for use on corn, soybeans, cotton and allowed procurement patternssugar cane, and our granular soil insecticides both grew by approximately 60%. Foliar insecticides grew by 20% in the domestic marketfirst half versus 2021. The only area of reduced demand was for soil fumigants, which experienced lower sales due to be elevated asdrought conditions in Western and Southwestern states where water allocation has been implemented. During the first half of 2022, customer consumption increased at everyprocurement activity was exceptionally high in the first quarter and then stepped down to a more normalized level preparing forin the 2021-2022 growing season. In Midwest corn, we posted much higher sales of our key soil insecticides and our post-emergent herbicide Impact,as customers invested to protect their crops from pests such as corn root worm or challenging weeds in order to maximize yield during this time of higher commodity prices. Sales of our cotton products increased significantly, due primarily to higher commodity prices and favorable weather which provided incremental demand for our Folex harvest defoliant in Texas. Soil fumigant sales also increased, fueled by renewed demand in potatoes and other vegetables resulting from the reopening of restaurants and schools. Among our many other products, we saw increased sales in virtually every category, including single digit gains for several of our soil insecticides and double-digit growth for some of our most profitable specialty herbicides and growth regulators. second quarter.
Cost of sales within the domestic crop business increased 41%17%, as compared to the first six months of 2020,2021, driven by mix changessales that increased by 29% including increased sales of higher margin products (many of which we manufacture in our domestic facilities) and a generally weakerbenefitting from improved factory performance, including the newly acquired Agrinos biological manufacturing facilities.performance. Gross profit rose by 5% (to $48,07646% to $70,212 from $46,003).$48,076.
Our domestic non-crop business recorded a 57% year-over-year increasean 11% decrease in net sales for the first half of the year (to $38,941$34,712 from $24,865)$38,941). InThis decrease was largely due to a one-time license fee from P&G relating to Envance technology that had been received in the first half of 2021 and was recorded as revenue. Under the terms of that license, depending upon the achievement of commercialization milestones by the licensee, the Company will receive royalties in future reporting periods. Furthermore, in this category, sales of our Dibrom® mosquito adulticide sales grew significantly, influenced by distribution channel inventory restocking and timing shifts in customer procurement. Demandremained flat as did demand for commercial pest control products (pest strips, bifenthrin) improved considerably from 2020 pandemic levels. Revenues for. Sales of our Envance technologies increased significantly when compared to the first half of last year, due primarily to additional license fees and royalties during the first quarter of 2021. Our OHP nursery and ornamental business continuedwere comparable to post increased sales, asthe same period of the prior year, with reduced demand for homeowner garden and landscape products remained strong throughout the first half of the year. Our GemChem pharmaceutical supply business also grew, benefittingresulting from the rebounding economy.continually reducing pandemic restrictions, offset by increased demand from professional landscape service providers.
Cost of sales within the domestic non-crop business decreased by 5%, (to $18,698 in 2022 from $19,776 in 2021). Gross profit for domestic non-crop decreased by 16% to $16,014 in 2022 from $19,165 in 2021, due largely to the non-recurrence of a one-time, upfront license fee as described above.
Net sales of our international businessesincreased by 51%, broadly in line with the growth in sales (to $19,776 from $13,117)18% during the first half of 2021 versus the comparable period2022 (to $111,419 in 2020. Gross profit for domestic non-crop increased by 63% (to $19,1652022 from $11,748 in 2020), consistent with sales growth.
Net sales of our international businesses increased by 17% during the first half of 2021 (to $94,494 in 2021 from $80,6202021). Central America experienced double-digit growth in 2020). Strongall but one of its six countries. Mexico generated strong results in Mexico and Australia contributed significantly to this success. Mexico posted improved sales with continuing demand for granular insecticides, bromacilsoil fumigants (on high-value crops), herbicides and soil fumigants for use on high-value vegetable crops. Ingranular insecticides. Similarly, Australia enjoyed improved sales driven by improved rainfall and the extended footprint arising from the integration of recently acquiredthe AgNova with our existing business in that territory drove sales to five-times previous levels. Sales performance was down slightly in Central America resulting from COVID-19 limitationsbusiness. Brazil is now on in-person sales and marketing efforts, and some instances of unfavorable weather in the region earlier this year. While in Europe, sales of our Mocap® insecticide continued to decline during the phase-out of that product following the cancellation of its registration in the EU. In Canada, we experienced a sharp decline in Assure II sales due to intense first half price competition, and in Brazil, net sales increased sharply in the first half,an upward trend, due to a rebound in the agricultural sector following the heightand further market penetration of the pandemic.our granular insecticides.
Cost of sales in our international business increased by 8%19% (to $76,559 in 2022 from $64,465 from $59,684 in 2020)2021) primarily driven by volume growth and miximpacted by increased prices from the strengthening US Dollar, and foreign currency changes.general inflation on materials and associated logistics costs. Gross profit for the international businesses increased by 43% (to16% to $34,860 in 2022 from $30,029 from $20,936) during the period.in 2021.
On a consolidated basis, gross profit for the six months of 20212022 increased by 24% (to $120,972 in 2022 from $97,270 from $78,687),in 2021). This is the same rate of growth that we had seen last year, when we compared the first half of 2021 with that of 2020. Our gross profit in the first six months of 2022 increased in part as a result of improved sales volumes detailed above. Factory performance, however, declined during the first six months of 2021, as comparedand pricing in part due to the same period of 2020.improved factory performance. Gross margin performance, when expressed as a percentage of sales, remained flat atrose to 41% from 39%. year-over-year.
Operating expenses increased by $14,400$10,886 to $84,524$95,410 for the six-monthssix-month period ended June 30, 2021,2022, as compared to the same period in 2020.2021. The differences in operating expenses by department are as follows:
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| % Change |
| ||||||||
Selling |
| $ | 22,765 |
|
| $ | 20,505 |
|
| $ | 2,260 |
|
|
| 11 | % |
| $ | 23,683 |
|
| $ | 22,765 |
|
| $ | 918 |
|
|
| 4 | % |
General and administrative |
|
| 31,091 |
|
|
| 23,020 |
|
|
| 8,071 |
|
|
| 35 | % | ||||||||||||||||
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Other |
|
| 34,691 |
|
|
| 31,091 |
|
|
| 3,600 |
|
|
| 12 | % | ||||||||||||||||
Proxy contest activities |
|
| 1,785 |
|
|
| — |
|
|
| 1,785 |
|
|
| 100 | % | ||||||||||||||||
Research, product development and regulatory |
|
| 13,545 |
|
|
| 12,257 |
|
|
| 1,288 |
|
|
| 11 | % |
|
| 14,728 |
|
|
| 13,545 |
|
|
| 1,183 |
|
|
| 9 | % |
Freight, delivery and warehousing |
|
| 17,123 |
|
|
| 14,342 |
|
|
| 2,781 |
|
|
| 19 | % |
|
| 20,523 |
|
|
| 17,123 |
|
|
| 3,400 |
|
|
| 20 | % |
|
| $ | 84,524 |
|
| $ | 70,124 |
|
| $ | 14,400 |
|
|
| 21 | % |
| $ | 95,410 |
|
| $ | 84,524 |
|
|
| 10,886 |
|
|
| 13 | % |
• | Selling expenses increased by |
|
• | General and administrative expenses increased by |
• | The Company spent $1,785 in fees associated with our Proxy defense activities; there were no such fees in the |
• | Research, product development costs and regulatory expenses increased by |
• | Freight, delivery and warehousing costs for the |
During the six monthssix-month period ended June 30, 2021, and 2020,2022, the Company recorded an increasea decrease in the fair value of our equity investment in Clean Seed in the amount of $403 and recorded an increase in the amount of $771 and $24, respectively.during the six months ended June 30, 2021. These changes in fair value of our investment directly reflect changes in the stock’s quoted market price.
During the six monthssix-month period ended June 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 Statementscondensed consolidated statements of Operationsoperations in the amount of $672.
Interest costs net of capitalized interest were $1,959$1,170 in the first six monthssix-month period of 2021,2022, as compared to $2,782$1,959 in the same period of 2020.2021. Interest costs are summarized in the following table:
Average Indebtedness and Interest expense
|
| Six months ended June 30, 2021 |
|
| Six months ended June 30, 2020 |
|
| Six months ended June 30, 2022 |
|
| Six months ended June 30, 2021 |
| ||||||||||||||||||||||||||||||||||||
�� |
| 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) |
| $ | 144,324 |
|
| $ | 1,843 |
|
|
| 2.6 | % |
| $ | 175,475 |
|
| $ | 2,744 |
|
|
| 3.1 | % |
| $ | 105,076 |
|
| $ | 1,146 |
|
|
| 2.2 | % |
| $ | 144,324 |
|
| $ | 1,843 |
|
|
| 2.6 | % |
Amortization of deferred loan fees |
|
| — |
|
|
| 161 |
|
|
| — |
|
|
| — |
|
|
| 139 |
|
|
| — |
|
|
| — |
|
|
| 138 |
|
|
| — |
|
|
| — |
|
|
| 161 |
|
|
| — |
|
Amortization of other deferred liabilities |
|
| — |
|
|
| (9 | ) |
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| (9 | ) |
|
| — |
|
Other interest (income) expense |
|
| — |
|
|
| 89 |
|
|
| — |
|
|
| — |
|
|
| 57 |
|
|
| — |
|
|
| — |
|
|
| 21 |
|
|
| — |
|
|
| — |
|
|
| 89 |
|
|
| — |
|
Subtotal |
|
| 144,324 |
|
|
| 2,084 |
|
|
| 2.9 | % |
|
| 175,475 |
|
|
| 2,946 |
|
|
| 3.4 | % |
|
| 105,076 |
|
|
| 1,322 |
|
|
| 2.5 | % |
|
| 144,324 |
|
|
| 2,084 |
|
|
| 2.9 | % |
Capitalized interest |
|
| — |
|
|
| (125 | ) |
|
| — |
|
|
| — |
|
|
| (164 | ) |
|
| — |
|
|
| — |
|
|
| (152 | ) |
|
| — |
|
|
| — |
|
|
| (125 | ) |
|
| — |
|
Total |
| $ | 144,324 |
|
| $ | 1,959 |
|
|
| 2.7 | % |
| $ | 175,475 |
|
| $ | 2,782 |
|
|
| 3.2 | % |
| $ | 105,076 |
|
| $ | 1,170 |
|
|
| 2.2 | % |
| $ | 144,324 |
|
| $ | 1,959 |
|
|
| 2.7 | % |
The Company’s average overall debt for the six monthssix-month period ended June 30, 2021,2022, was $144,324,$105,076, as compared to $175,475$144,324 for the six months ended June 30, 2020.2021. During the period, we continued to focus on our usageuse of revolving debt, while funding working capital for the newly acquired products and businesses.growing business. As can be seen from the table above, our effective bank interest rate on our revolving line of credit was 2.6%2.2% for the six months ended June 30, 2021,2022, as compared to 3.1%2.6% in 2020.
2021.
Income tax expense increased by $2,447$3,417 to end at $3,807$7,224 for the six monthssix-month period ended June 30, 2021,2022, as compared to income tax expense of $1,360$3,807 for the comparable period in 2020.2021. The effective tax rate for the six months ended June 30, 2021,2022, was 31.4%30.1% as compared to 23.4%31.4% for same period last year. The effective tax rate for the six months ended June 30, 2020, includedhas decreased compared to prior year reflecting a mix of income in different jurisdictions two discrete income tax benefits. First, the Company assessed its income tax positions to account for the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) which was signed into law on March 27, 2020. A provision of the act modified the amount of interest deduction allowed and therefore reduced the Company’s 2019 Global Intangible Low Tax Income (“GILTI”) inclusion. Second, the Company benefitedan increased benefit from the tax impact of the vesting of certain stock grants.For 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 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 location 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.
Our net income for the six monthssix-month period ended June 30, 20212022 was $16,765 or $0.57 per basic and $0.55 per diluted share, as compared to $8,215 or $0.28 per basic and $0.27 per diluted share as compared to $4,407 or $0.15 per basic and diluted share in the same period of 2020.2021.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s operating activities utilized net cash of $18,904$27,230 during the six-month period ended June 30, 2022, as compared to $18,905 during the six months ended June 30, 2021, as compared to providing net cash of $6,915 during the six months ended June 30, 2020.2021. Included in the $18,904$27,230 are net income of $8,215,$16,765, plus non-cash depreciation, amortization of intangibles and other assets and discounted future liabilities, in the amount of $12,732,$12,760, loss on disposal of property, plant and equipment of $256, amortization of deferred loan fees of $162$139 and provision for bad debts in the amount of $945.$470. Also included are stock-based compensation of $3,598,$2,836, adjustment to contingent consideration in the amount of $1,014, losses from equity method investment of $87, decrease$635, increase in deferred income taxes of $353,$109, change in fair value of an equity investment of $771, loan principal$403, and interest forgiveness of $672, net foreign currency adjustments of $147 and adjustment to bargain purchase gain on business acquisition of $121.$20. These together provided net cash inflows of $24,931,$34,353, as compared to $18,190$24,930 for the same period of 2020.2021.
During the six monthssix-month period of 2021,2022, the Company increased working capital by $43,715,$68,187, as compared to an increase of $11,282$43,715 during the same period of the prior year. Included in this change: inventories increased by $11,464 (normal at this point in the season),$27,774, as compared to $21,706$11,464 for the same period of 2020. Deferred revenue2021. While increases in inventory are normal for the Company’s annual cycle, this year, the Company has made decisions 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.
Customer prepayments decreased by $30,407,$62,789, as compared to $2,431$30,407 in the same period of 2020,2021, driven by customer decisions regarding demand, payment timing and our cash incentive programs. Our accounts payable balances increased by $6,190,$19,439, as compared to decreased by $12,351an increase of $6,190 in the same period of 2020.2021, driven by increased factory activity levels. Accounts receivables increased by $25,317,$18,645, as compared to decreased by $16,421an increase of $25,317 in the same period of 2020.2021. This is primarily driven by increased group sales and strong international growth. Prepaid expenses increased by $3,696,$3,652, as compared to $2,297$3,696 in the same period of 2020.2021. Income tax receivable decreasedincreased by $1,374,$3,526, as compared to $899a decrease of $1,374 in the prior year. Accrued programs increased by $19,098,$35,987, as compared to $12,577$19,098 in the prior year, which is normal at this point in the growing season. Finally, other payables and accrued expenses increaseddecreased by $507,$602, as compared to decreased by $2,394an increase of $507 in the prior year.
With regard to our program accrual, the increase (as noted above) primarily reflects our volume and mix of sales (certain products are marketed with higher levels of program accruals), and customers in the first six months of 2021,2022, 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 six months of 2021,2022, the Company made accruals for programs in the amount of $39,235$67,274 and payments in the amount of $20,142.$31,367. During the first six months of the prior year, the Company made accruals in the amount of $33,336$39,235 and made payments in the amount of $20,771.$20,142. The increase in accruals for programs in the first six months of 2022, compared to the same period in 2021, is a direct result of an increase in sales of qualifying products.
Cash used for investing activities for the six monthssix-month period ended June 30, 2022, and 2021 was $6,671 and 2020 was $15,500, and $11,465, respectively. The $15,500 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 $5,075$5,654 on purchases of fixed assets acquisitions primarily focused on continuing to invest in manufacturing infrastructure,infrastructure. In addition, the Company made a depositpayment of $1,000 to Clean Seed to amend a license agreement under which royalty-bearing license rights were converted to fully paid-up, royalty-free, perpetual license rights, and spent $44 on a product line acquisition of $10,000, intangible assets of $241 and further investment of $184.patents for the Envance technology business.
During the six monthssix-month period ended June 30, 2021, and 2020,2022, financing activities provided $37,942 and $5,984, respectively. This is principally from$40,027, as compared to $37,943 during the increasedsame period of the prior year. Net borrowings onunder the Company’s senior credit facility. InCredit Agreement amounted to $48,400 during the first halfsix-month period ended June 30, 2022, as compared to $41,774 in the same period of 2021, the prior year. The Company paid dividends to stockholders amounting to $1,189,$1,330 during the six months ended June 30, 2022, as compared to $1,168$1,188 in the same period of 2020. In addition,2021. The Company paid $6,232 for the repurchase of 333,010 shares of its common stock during the six-month period ended June 30, 2022. There were no such purchases during the six-month period ended June 30, 2021. Lastly, in exchange for shares of common stock returned by employees, the Company made paymentspaid $2,012 and $2,900 for tax withholding on contingent consideration instock-based compensation awards during the amount of $250, as compared to $1,227 in the same period of 2020. six months ended June 30, 2022 and 2021, respectively.
The Company has a revolving line of credit that is shown as long-term debt in the Condensed Consolidated Balance Sheetscondensed consolidated balance sheets at June 30, 20212022 and December 31, 2020.2021. These are summarized in the following table:
Long-term indebtedness ($000's) |
| June 30, 2021 |
|
| December 31, 2020 |
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||||
Revolving line of credit |
| $ | 149,700 |
|
| $ | 107,900 |
|
| $ | 101,700 |
|
| $ | 53,300 |
|
Deferred loan fees |
|
| (322 | ) |
|
| (458 | ) |
|
| (921 | ) |
|
| (1,060 | ) |
Net long-term debt |
| $ | 149,378 |
|
| $ | 107,442 |
|
| $ | 100,779 |
|
| $ | 52,240 |
|
At June 30, 2021,2022, the Company was compliant with all covenants to its then current credit agreement. Also, at June 30, 2021,2022, the Company’s total Funded Debt amounted to $149,700.$101,700. At that date the Company’s rolling four quarter Consolidated EBITDA (as defined in the Credit Agreement, see Note 10) amounted to $59,030,$75,512, which results in a leverage ratio of 2.54,1.35, as compared to a maximum leverage ratio permitted under the Credit Agreement of 3.5. At June 30, 2021,2022, the Company has the capacity to increase its borrowings by up to $56,906,$162,592, according to the terms thereof. This compares to an available borrowing capacity of $49,420$56,906 as of June 30, 2020.2021. At December 31, 2020,2021, the Company had borrowing capacity of $86,736.$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).
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.
RECENTLY ISSUED ACCOUNTING GUIDANCE
Please refer to Note 15 in the accompanying Notes to the Condensed Consolidated Financial Statementscondensed consolidated financial statements for recently issued 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, 2020,2021, 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, 2020.2021.
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 revisions are reflected in the Condensed Consolidated Financial Statementscondensed consolidated financial statements in the period that 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 six-months ended June 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, 20202021 and note 10 to the Condensed Consolidated Financial Statements.condensed consolidated financial statements.
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 June 30, 2021,2022, 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 June 30, 2021,2022, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has 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.
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 Statementscondensed 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, 2020,2021, filed on March 31, 2021. In preparing this document, we have reviewed all the14, 2022. The following disclosure amends and supplements those risk factors included in that document and, find thatexcept to the extent restated below, there are no material changes to thosethe risk factors except for the following:as so stated.
The COVID-19 pandemic is creating risk, uncertainty and adverse conditions in many industries both here and abroad. The Company is closely monitoring the impactAn NGO petition to revoke tolerances a family of chemistries (namely, organophosphate) could jeopardize several of the COVID-19 pandemicCompany’s products. On November 18, 2021, a group of non-governmental organizations led by Pesticide Action Network North America filed a petition with the USEPA to revoke the food tolerances for eight of the Company’s registered active ingredients, all of which are in the family of organophosphates. In July 2022, USEPA published in the Federal Register an invitation for public comment on all aspectsthe petition, giving commenters 30 days’ within which to submit their comments. In light of its business, including how the pandemic will impact its customers, business partners,large number of active ingredients implicated by the petition, the Company and employees.multiple other stakeholders (including grower groups and trade organizations) are seeking an extension of time for submitting such comments. While the Company diddoes not incur significant disruptions frombelieve that there is a valid basis for revoking tolerances under applicable law (as the COVID-19 pandemic duringpetition is largely based upon unsound studies solely involving chlorypyrifos), there is no guarantee that USEPA will grant an extension or, for that matter, will deny the six months ended June 30, 2021,remedy being sought by the petition. It is possible that USEPA could find a basis upon which to revoke tolerances and therefore cancel one or all active ingredients which, in turn, could have a material adverse effect upon the Company’s financial performance. Further, this matter is unprecedented insofar as it, in effect, targets an entire class of chemistry (as opposed to one active ingredient); thus, it is possible that, if granted, this petition will establish an adverse precedent by which NGOs can seek to cancel other families of chemistries within the broader industry.
USEPA’s notice of intention to suspend the DCPA registration could have a broader impact on the Company’s portfolio and the industry in general. In May 2022, the USEPA issued a notice of intention to suspend DCPA, the active ingredient of an herbicidal product marketed by the Company is unable to predictunder the impactname Dacthal on the basis that the pandemic will haveCompany acted allegedly inappropriately in providing data studies that had been requested by the agency. In fact, the agency had requested 89 data studies and, over the course of several years, the Company had supplied 69 such studies and had been working constructively on its financial condition, results of operations and cash flows duemutually acceptable timetables either to numerous uncertainties. The extentcomplete, or to whichobtain waivers for, the COVID-19 pandemic impacts the Company’s operations and those of its customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and durationbalance of the pandemic,studies. The Company petitioned an administrative law judge (“ALJ”) to appeal the actions takenNOITS. In response to containUSEPA’s motion, the pandemic or mitigate its impact,ALJ granted an accelerated decision to uphold the NOITS. The Company, in turn, has appealed the ALJ’s decision to the Environmental Appeals Board, on the ground that the basis was erroneous, both with respect to statutory construction and factual inferences being improperly made in the direct and indirect economic effects ofagency’s favor. While the pandemic and containment measures, among others. ThereCompany believes that there is no merit to the agency’s position, there is no guarantee that the Company will be ableprevail in defending against the attempted suspension. Further, if this suspension is granted, it is possible that the agency will seek to operate withoutinvalidate registrations summarily, including both the Company’s and those of its peers. This, in turn, could have a material disruptionadverse effect upon the Company’s financial performance.
The Catalano product liability case could set an adverse precedent for the durationactive ingredient acephate, as well as for organophosphates more generally. As more fully described in Part 14, Item II herein, plaintiffs in Catalano seek damages for cardiovascular injury allegedly arising from making applications of the pandemic or that its financial conditions and results of operations will not be materially adversely affectedOrthene, a systemic insecticide marketed by the pandemicCompany, having acephate as its active ingredient. While the Company believes that the claim has not merit and that there have been no data studies linking acephate to cardiovascular disease, it is possible that a court could reach a judgment that is adverse to the Company and, in future quarters.so doing, set an adverse precedent with respect not only to commercial acephate products, but also to consumer acephate products and organophosphate products more generally. Such adverse judgment and/or precedent could have a materially adverse effect upon the Company’s financial performance.
Item 2. Purchases of Equity Securities by the Issuer
On March 8, 2022, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an aggregate number of up to 1,000,000 shares of its common stock, par value $0.10 per share, in the open market over the succeeding one year at a price not to exceed $20 per share, subject to limitations and restrictions under applicable securities laws.
The table below summarizes the number of shares of our common stock that were repurchased during the three- and six-month periods ended June 30, 2022. There were no such purchases during the three- and six-month periods ended June 30, 2021. The shares and respective amount are recorded as treasury shares on the Company’s condensed consolidated balance sheet.
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 |
|
April 30, 2022 |
|
| 100 |
|
| $ | 19.99 |
|
| $ | 2 |
|
|
| 667,496 |
|
May 31, 2022 |
|
| 506 |
|
| $ | 19.99 |
|
| $ | 11 |
|
|
| 666,990 |
|
Total number of shares repurchased |
|
| 333,010 |
|
| $ | 18.71 |
|
| $ | 6,232 |
|
|
| 666,990 |
|
Item 6. | Exhibits |
Exhibits required to be filed by Item 601 of Regulation S-K:
Exhibit No. |
| Description |
|
|
|
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 June 30, 2021, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive |
|
|
|
104 |
| The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, |
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: August | By: | /s/ eric g. wintemute |
|
| Eric G. Wintemute |
|
| Chief Executive Officer and Chairman of the Board |
|
|
|
Dated: August | By: | /s/ david t. johnson |
|
| David T. Johnson |
|
| Chief Financial Officer & Principal Accounting Officer |
3332