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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
[ ] 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 0-6354
AMERICAN VANGUARD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2588080
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) 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)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
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 -- 2,866,524 shares as of May 11, 2001
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AMERICAN VANGUARD CORPORATION
INDEX
Page
Number
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PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements:
Consolidated Statements of Operations for the three
months ended March 31, 2001 and 2000 1
Consolidated Balance Sheets as of March 31, 2001,
and December 31, 2000 2
Consolidated Statements of Cash Flows for the three
months ended March 31, 2001 and 2000 4
Notes to Consolidated Financial Statements 6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3.
Quantitative and Qualitative Disclosures about
Market Risk 10
PART II - OTHER INFORMATION 11
SIGNATURE PAGE 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months
ended March 31,
-----------------------------
2001 2000
------------ ------------
Net sales $ 14,863,300 $ 11,785,800
Cost of sales 9,062,400 6,283,500
------------ ------------
Gross profit 5,800,900 5,502,300
Settlement income 208,300 --
Gain on sale of emission credits 465,500 --
Operating expenses 5,011,300 4,965,100
------------ ------------
Operating income 1,463,400 537,200
Interest expense 469,500 408,700
Interest income (2,300) (1,100)
------------ ------------
Income/before income tax 996,200 129,600
Income tax expense 398,500 51,900
------------ ------------
Net income $ 597,700 $ 77,700
============ ============
Earnings per common share $ .21 $ .03
============ ============
Earnings per common share - assuming dilution $ .20 $ .03
============ ============
Weighted average shares outstanding (note 4) 2,869,927 2,970,703
============ ============
Weighted average shares outstanding - assuming
dilution (notes 4 & 5) 2,951,870 3,011,024
============ ============
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS (note 8)
March 31, Dec. 31,
2001 2000
----------- -----------
(Unaudited) (Note)
Current assets:
Cash $ 751,100 $ 361,000
Receivables:
Trade 22,372,500 21,323,400
Other 1,965,500 1,526,300
----------- -----------
24,338,000 22,849,700
----------- -----------
Inventories (note 2) 22,350,900 21,202,800
Prepaid expenses 960,600 764,200
Deferred tax asset 568,800 568,800
----------- -----------
Total current assets 48,969,400 45,746,500
Property, plant and equipment,
net (note 3) 8,907,600 9,012,800
Land held for development 210,800 210,800
Intangible assets 10,438,100 10,657,100
Other assets 442,500 463,700
----------- -----------
$68,968,400 $66,090,900
=========== ===========
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, Dec. 31,
2001 2000
----------- -----------
(Unaudited) (Note)
Current liabilities:
Current installments of long-term debt $ 3,441,700 $ 3,575,400
Accounts payable 5,324,500 6,913,600
Accrued expenses and other payables 4,783,900 4,985,300
Income taxes payable 109,800 1,149,500
----------- -----------
Total current liabilities 13,659,900 16,623,800
Notes payable to bank (note 6) 22,300,000 15,800,000
Long-term debt, excluding
current installments 2,326,000 2,847,300
Other long-term liabilities 101,300 117,700
Deferred income taxes 1,414,500 1,414,500
----------- -----------
Total liabilities 39,801,700 36,803,300
----------- -----------
Stockholders' Equity:
Preferred stock, $.10 par value per
share. Authorized 400,000 shares;
none issued -- --
Common stock, $.10 par value per share
Authorized 10,000,000 shares; issued
and outstanding 2,826,039 shares 282,900 282,700
Additional paid-in capital 5,919,900 5,906,600
Retained earnings 24,664,900 24,354,600
----------- -----------
30,867,700 30,543,900
Less treasury stock at cost, 222,257
shares at March 31, 2001 and, 183,285
shares at December 31, 2000 1,701,000 1,256,300
----------- -----------
Total stockholders' equity 29,166,700 29,287,600
----------- -----------
$68,968,400 $66,090,900
=========== ===========
Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date.
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
----------- -----------
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $ 597,700 $ 77,700
Adjustments to reconcile net income loss
to net cash used in operating activities:
Depreciation and amortization 518,600 779,100
Changes in assets and liabilities
associated with operations:
Increase in receivables (1,488,300) (1,024,300)
Increase in inventories (1,148,100) (3,136,300)
Decrease (increase) in prepaid expenses (196,400) 77,200
Increase (decrease) in accounts payable (1,589,100) 2,442,800
Decrease in other payables and accrued
expenses (1,544,900) (3,146,100)
----------- -----------
Net cash used in operating activities (4,850,500) (3,929,900)
----------- -----------
Cash flows from investing activities:
Capital expenditures (179,800) (95,400)
Net decrease (increase) in other
noncurrent assets 6,600 (179,600)
----------- -----------
Net cash used in investing activities (173,200) (275,000)
----------- -----------
(Continued)
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
2001 2000
----------- -----------
Cash flows from financing activities:
Net additions under lines of credit
agreement $ 6,500,000 $ 5,300,000
Principal payments on long-term debt (655,000) (685,600)
Exercise of stock options 13,500 --
Purchase of treasury stock (note 7) (444,700) --
----------- -----------
Net cash provided by financing
activities 5,413,800 4,614,400
----------- -----------
Net increase (decrease) in cash 390,100 409,500
Cash at beginning of year 361,000 550,200
----------- -----------
Cash at end of period $ 751,100 $ 959,700
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES:
On March 20, 2001, the Company announced that the Board of Directors declared a
cash dividend of $.11 per share as well as a 10% stock dividend. Both dividends
will be distributed on April 13, 2001 to shareholders of record at the close of
business on March 30, 2001. The cash dividend will be paid on the number of
shares outstanding prior to the 10% stock dividend. Shareholders entitled to
fractional shares resulting from the 10% stock dividend will receive cash in
lieu of such fractional share based on the closing price of the Company's stock
on March 30, 2001. Cash dividends to be paid April 13, 2001 will total $287,400.
On March 16, 2000 the Company announced that the Board of Directors declared a
cash dividend of $.13 per share as well as a 10% stock dividend. Both dividends
were distributed on April 14, 2000. The cash dividends totaled $319,500.
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation, have been included. As of January 1,
1999, the Company changed its method of computing the overhead rate to be
included in inventory costs for interim financial reporting purposes. The
Company's inventory overhead rate is now based on the expected amount of
overhead to be incurred for the year, rather than the actual amount
incurred each quarter. Operating results for the three months ended March
31, 2001 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2001. For further information, refer to
the consolidated financial statements and footnotes thereto, included in
the Company's Annual Report on Form 10-K for the year ended December 31,
2000.
2. Inventories - The components of inventories at March 31, 2001 and December
31, 2000 consists of the following:
March 31, 2001 December 31, 2000
-------------- -----------------
Finished Products $19,312,400 $17,358,300
Raw Materials 3,038,500 3,844,500
----------- -----------
$22,350,900 $21,202,800
=========== ===========
3. Property, plant and equipment at March 31, 2001 and December 31, 2000
consists of the following:
March 31, December 31,
2001 2000
----------- -----------
Land $ 2,441,400 $ 2,441,400
Buildings and improvements 4,952,000 4,952,000
Machinery and equipment 23,992,600 23,938,100
Office furniture and fixtures 2,617,600 2,599,800
Automotive equipment 136,900 136,900
Construction in progress 391,600 284,100
----------- -----------
34,532,100 34,352,300
Less accumulated depreciation 25,624,500 25,339,500
----------- -----------
$ 8,907,600 $ 9,012,800
=========== ===========
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. On March 20, 2001, the Company announced that the Board of Directors
declared a cash dividend of $.11 per share as well as a 10% stock dividend.
Both dividends are payable on April 13, 2001 to shareholders of record at
the close of business on March 30, 2001. All stock related data in the
consolidated financial statements reflect the stock dividend for all
periods presented.
5. Earnings Per Share ("EPS") - Basic EPS is computed as net income divided by
the weighted average number of shares of common stock outstanding during
the period. Diluted EPS reflects potential dilution that could occur if
securities or other contracts, which, for the Company, consists of options
to purchase shares of the Company's common stock are exercised.
6. On April 4, 2001, the Company's bank amended its fully- secured long-term
line of credit agreement. The credit availability was temporarily increased
from $24,000,000 to $30,000,000 for the period April 4, 2001 through August
1, 2001. On August 1, 2001 the credit availability will automatically
reduce to $24,000,000 (credit availability as of March 31, 2001). The
expiration date of the credit agreement was also extended to July 1, 2002.
(See note 8.)
7. During the three months ended March 31, 2001, the Company purchased 38,972
shares of its Common Stock at an average sales price of $11.41 per share
for a total of $444,700. These purchases were in accordance with the
Company's buyback program which was announced on November 2, 2000.
8. Substantially all of the Company's assets not otherwise specifically
pledged as collateral on existing loans and capital leases, are pledged as
collateral under the Company's credit agreement with a bank. As referenced
in note 1, for further information, refer to the consolidated financial
statements and footnotes thereto (specifically note 3) included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
9. Reclassification - Certain items have been reclassified in the prior period
consolidated financial statements to conform with the March 31, 2001
presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31:
The Company reported net income of $597,700 or $.21 per share ($.20 per share -
assuming dilution) in the first quarter ended March 31, 2001 as compared to
$77,700 or $.03 per share for the same period in 2000. The $597,700 of net
income for 2001 includes after tax income of $404,300 or $.14 per diluted share,
related to the gain on the sale of emission credits and settlement income.
(Refer to disclosure below.)
Net sales increased by 26% or $3,077,500 to $14,863,300 for the quarter ended
March 31, 2001 from $11,785,800 for the same period in 2000. The increase in
sales levels was as a result of increased sales of the Company's herbicide and
insecticides, reflecting the successful product launches of Dacthal(R) and
Aztec(R).
The gross profit margin for the quarter ended March 31, 2001 declined to 39%
from 47% in the same period in 2000. The lower margin was due to the changes in
the sales mix of the Company's products.
Operating expenses, which are net of other income, increased modestly to
$5,011,300 for the quarter ended March 31, 2001 as compared to $4,965,100 for
the same period in 2000. The differences in operating expenses by specific
departmental costs are as follows:
o Selling expenses increased by $58,400 to $1,638,500 for the quarter ended
March 31, 2001 from $1,580,100 for the same period in 2000. This increase
was due primarily to increases in variable selling expenses that relate to
the sales mix of the Company's products and an increase in payroll and
payroll related costs.
o General and administrative expenses remained virtually unchanged with a
decrease of $16,600 to $1,417,800 for the quarter ended March 31, 2001 from
$1,434,400 for the same period in 2000.
o Research and product development costs and regulatory registration expenses
declined by $178,000 to $884,400 for the quarter ended March 31, 2001 as
compared to $1,062,400 for the same period in 2000. The decrease was due to
a decline in costs incurred to generate scientific data related to the
registration and possible new uses of the Company's products as well as a
decrease in payroll and payroll related items.
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o Freight, delivery, storage and warehousing costs increased $66,400 to
$1,025,000 for the three months ended March 31, 2001 as compared to
$958,600 for the same period in 2000 due to the increased sales levels.
o Other income/expense - During the first quarter ended March 31, 2000, the
Company recognized $70,500 in other income versus other expenses of $45,500
for the same period in 2001.
Interest costs were $469,500 during the three months ended March 31, 2001 as
compared to $408,500 for the same period in 2000 due to higher overall debt
levels in 2001.
In 1986, the Company constructed an incinerator to destroy a waste gas that had
been previously discharged to the atmosphere pursuant to an air permit. By
reducing this emission, the Company was entitled to transfer a portion of its
emission credits to others. The Company recognized in the quarter ended March
31, 2001, a net gain before taxes of $465,500 as a result of the sale of a
portion of its credits.
The Company settled negotiations with an insurance carrier related to the
recovery of certain costs pertaining to the completed remediation work of a
railroad siding which resulted in a net gain before taxes of $208,300 for the
quarter ended March 31, 2001.
Weather patterns can have an impact on the Company's operations. Weather
conditions influence pest population by impacting gestation cycles for
particular pests and the effectiveness of some of the Company's products, among
other factors. The end user of some of the Company's products may, because of
weather patterns, delay or intermittently disrupt field work during the planting
season which may result in a reduction of the use of some of the Company's
products.
Because of elements inherent to the Company's business, such as differing and
unpredictable weather patterns, crop growing cycles, changes in product mix of
sales, ordering patterns that may vary in timing, and promotional/early order
programs, measuring the Company's performance on a quarterly basis, (gross
profit margins on a quarterly basis may vary significantly) even when such
comparisons are favorable, is not as meaningful an indicator as full-year
comparisons. The primary reason is that the use cycles do not necessarily
coincide with financial reporting cycles.
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LIQUIDITY AND CAPITAL RESOURCES
The Company used $4,850,500 in operating activities for the three months ended
March 31, 2001. Net income of $597,700 and non-cash depreciation and
amortization of $518,600 provided $1,116,300 of cash for operations. This was
more than offset by increases of $1,488,300 in receivables, $1,148,100 in
inventories and $196,400 in prepaid expenses and a decrease of $3,134,000 in
payables and accrued expenses.
The Company used $173,200 in investing activities during the three months ended
March 31, 2001. It invested $179,800 in capital expenditures while other
noncurrent assets declined by $6,600.
Financing activities provided $5,413,800 for the first quarter ended March 31,
2001. The Company's net borrowings under its fully-secured revolving line of
credit increased by $6,500,000. The Company made payments on its long-term debt
of $655,000, purchased 38,792 shares of treasury stock for $444,700 and received
$13,500 in payment for the exercise of stock options.
On April 4, 2001, the Company's bank amended its fully-secured long-term line of
credit agreement. The credit availability was temporarily increased from
$24,000,000 to $30,000,000 for the period April 4, 2001 through August 1, 2001.
On August 1, 2001 the credit availability will automatically reduce to
$24,000,000 (credit availability as of March 31, 2001). The expiration date of
the credit agreement was also extended to July 1, 2002. (See note 8.)
Management believes current financial resources (working capital and short-term
borrowing arrangements) and anticipated funds from operations will be adequate
to meet financial needs during the remainder of 2001.
Management continues to believe, to continue to improve its working capital
position and maintain flexibility in financing interim needs, it is prudent to
explore alternate sources of financing.
***
The Company, from time-to-time, may discuss forward-looking information. Except
for the historical information contained in this report, all forward-looking
statements are estimates by the Company's management and are subject to various
risks and uncertainties that may cause results to differ from management's
current expectations. Such factors include weather conditions, changes in
regulatory policy and other risks as detailed from time-to-time in the Company's
SEC reports and filings. All forward-looking statements, if any, in this report
represent the Company's judgement as of the date of this report. The Company
disclaims, however, any intent or obligation to update forward- looking
statements.
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 fully-secured line of credit with a variable
rate of interest, which fluctuates with changes in the lender's referenced rate.
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PART II. OTHER INFORMATION
The Company was not required to report any matters or changes for any items of
Part II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) The Company did not file any reports on Form 8-K during the three
months ended March 31, 2001.
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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: May 11, 2001 By: /s/ Eric G. Wintemute
----------------------------------
Eric G. Wintemute
President, Chief Executive
Officer and Director
Dated: May 11, 2001 By: /s/ J. A. Barry
----------------------------------
J. A. Barry
Senior Vice President,
Chief Financial Officer,
Secretary/Treasurer
and Director
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