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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 JUNE 30, 1996
[ ] 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
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
4695 MacArthur Court, Newport Beach, California 92660
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(Address of principal executive offices) (Zip Code)
(714) 260-1200
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(Registrant's telephone number, including area code)
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(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
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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
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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 -- 2,522,079 shares as of June 30, 1996.
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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 and six months ended
June 30, 1996 and 1995 1
Consolidated Balance Sheets
as of June 30, 1996 and
December 31, 1995 2
Consolidated Statements of Cash Flows
for the six months ended
June 30, 1996 and 1995 4
Notes to Consolidated Financial
Statements 6
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations. 8
PART II - OTHER INFORMATION 13
SIGNATURE PAGE 14
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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 For the six months
ended June 30 ended June 30
----------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
Net sales $9,892,000 $13,542,500 $20,313,100 $23,676,800
Cost of sales 6,645,900 8,376,900 12,893,900 14,679,400
---------- ----------- ----------- -----------
Gross profit 3,246,100 5,165,600 7,419,200 8,997,400
Operating expenses 3,020,600 4,402,800 6,377,500 8,120,900
---------- ----------- ----------- -----------
Operating income 225,500 762,800 1,041,700 876,500
Interest expense (196,000) (287,200) (456,900) (531,500)
Interest income 2,200 2,300 4,400 4,000
---------- ----------- ----------- -----------
Income before
income taxes 31,700 477,900 589,200 349,000
Income taxes expense (16,200) (193,600) (239,200) (142,200)
---------- ----------- ----------- -----------
Net income $ 15,500 $ 284,300 $ 350,000 $ 206,800
========== =========== =========== ===========
Per share information:
Net income
per share $ .01 $ .11 $ .14 $ .08
========== =========== =========== ===========
Weighted average number
of shares outstanding 2,522,079 2,551,308 2,522,079 2,553,657
========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
June 30, Dec. 31,
1996 1995
-------- --------
(Unaudited) (Note)
Current assets:
Cash $ 294,000 $ 331,600
Receivables:
Trade 10,334,400 15,228,300
Legal settlement - 195,000
Other 40,000 62,700
----------- -----------
10,374,400 15,486,000
----------- -----------
Inventories 10,427,600 8,269,600
Prepaid expenses 574,700 581,000
----------- -----------
Total current assets 21,670,700 24,668,200
Property, plant and
equipment, net 13,031,800 13,680,400
Land held for development 210,800 210,800
Cost in excess of assets
acquired, net 425,400 442,100
Deferred charges, net 51,600 57,900
Other assets 244,800 281,600
----------- -----------
$35,635,100 $39,341,000
=========== ===========
See accompanying notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, Dec. 31,
1996 1995
-------- --------
(Unaudited) (Note)
Current liabilities:
Current installments of
long-term debt $ 1,267,600 $ 1,265,600
Accounts payable 1,616,000 2,810,800
Accrued expenses 1,858,000 3,433,700
Income taxes payable - 1,366,300
Legal settlements payable 52,500 97,200
----------- -----------
Total current liabilities 4,794,100 8,973,600
Note payable to bank 4,700,000 3,900,000
Long-term debt, excluding
current installments 5,001,100 5,539,500
Deferred income taxes 2,922,500 2,922,500
----------- -----------
Total liabilities 17,417,700 21,335,600
----------- -----------
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; 2,564,429
shares issued 256,400 233,100
Additional paid-in
capital 3,879,000 1,688,200
Retained earnings 14,343,500 16,345,600
----------- -----------
18,478,900 18,266,900
Treasury stock at cost
(42,350 shares) (261,500) (261,500)
----------- -----------
Total stockholders' equity 18,217,400 18,005,400
----------- -----------
$35,635,100 $39,341,000
=========== ==========
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date (Note 1).
See accompanying notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
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Increase (decrease) in cash
Cash flows from operating activities:
Net income $ 350,000 $ 206,800
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,171,300 1,807,400
Changes in assets and liabilities
associated with operations:
Decrease in receivables 5,111,600 5,128,400
Increase in inventories (2,158,000) (643,800)
Decrease in prepaid expenses 6,300 404,400
Decrease in accounts payable (1,194,800) (34,600)
Decrease in other payables
and accrued expenses (2,986,700) (4,585,400)
----------- -----------
Net cash provided by
operating activities 299,700 2,283,200
----------- -----------
Cash flows from investing activities:
Capital expenditures (449,200) (282,800)
Increase in deferred charges - (221,600)
Net increase in other noncurrent assets (13,700) (70,500)
----------- -----------
Net cash used in
investing activities (462,900) (574,900)
----------- -----------
(Continued)
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
----------- ------------
Increase (decrease) in cash
Cash flows from financing activities:
Net borrowings (repayments) under
line of credit agreement $ 800,000 $ (400,000)
Increase in long-term debt 96,600 -
Principal payments on long-term debt (633,000) (1,298,200)
Acquisition of treasury stock - (91,000)
Payment of cash dividends (138,000) -
----------- -----------
Net cash provided by
(used in) financing
activities 125,600 (1,789,200)
----------- -----------
Net decrease in cash (37,600) (80,900)
Cash at beginning of year 331,600 317,700
----------- -----------
Cash as of June 30 $ 294,000 $ 236,800
=========== ===========
On March 15, 1996, the Company distributed 233,058 shares of Common Stock in
connection with a 10% Common Stock dividend to stockholders of record as of
February 29, 1996. As a result of the stock dividend, Common Stock was
increased by $23,300, additional paid-in capital was increased by $2,190,800,
and retained earnings was decreased by $2,214,100 (Note 4).
See accompanying 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.
Operating results for the three and six-month periods ended June 30,
1996 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1996. 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, 1995.
2. Inventories - The components of inventories consist of the following:
June 30, 1996 December 31, 1995
------------- -----------------
Finished products $ 7,439,500 $6,001,600
Raw materials 2,988,100 2,268,000
----------- ----------
$10,427,600 $8,269,600
=========== ==========
3. Property, plant and equipment at June 30, 1996 and December 31, 1995,
consists of the following:
June 30, December 31,
1996 1995
------------ ------------
Land $ 2,382,600 $ 2,319,800
Buildings and improvements 3,719,400 3,539,900
Machinery and equipment 20,496,600 19,998,800
Office furniture and fixtures 1,006,500 971,800
Automotive equipment 105,000 105,000
Construction in progress 499,400 825,000
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28,209,500 27,760,300
Less accumulated depreciation 15,177,700 14,079,900
----------- -----------
$13,031,800 $13,680,400
=========== ===========
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. On February 5, 1996, the Company announced that the Board of Directors
declared a cash dividend of $.06 per share as well as a 10% stock
dividend. Both dividends were distributed on March 15, 1996 to
stockholders of record at the close of business on February 29, 1996.
The cash dividend was paid on the number of shares outstanding prior to
the 10% stock dividend. Stockholders entitled to fractional shares
resulting from the 10% stock dividend received cash in lieu of such
fractional share based on $9.50 per share, the closing price of the
Company's stock on February 29, 1996. Weighted average number of shares
for all periods presented have been restated to reflect the 10% stock
dividend.
5. Earnings Per Share - Earnings per share is computed by dividing net
income by the weighted average number of shares outstanding after giving
effect to the stock dividend described in note 4 during the respective
period.
6. Reclassification - Certain items have been reclassified in the prior
period consolidated financial statements to conform with the June 30,
1996, presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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QUARTER ENDED JUNE 30:
- ----------------------
The Company reported net income of $15,500 or $.01 per share for the second
quarter ended June 30, 1996 as compared to net income of $284,300 or $.11 per
share for the same period in 1995. Net sales decreased $3,650,500 or 27% to
$9,892,000 for the quarter ended June 30, 1996 from $13,542,500 for the same
period in 1995. The reason for the decline is primarily due to unanticipated
weather conditions in the Southeastern United States during the quarter
affecting the pest populations resulting in the delay or decline in usage of
certain of the Company's products which are used primarily in the cotton
market. The most significant decrease was in sales of Bidrin(R) products.
There was a notable increase in the sales of Metam Sodium products during the
quarter ended June 30, 1996 that helped assuage the negative impact of the
reduced Bidrin(R) sales.
Gross profits decreased $1,919,500 to $3,246,100 for the three months ended
June 30, 1996 from $5,165,600 for the same period in 1995. The gross profit
percentage declined by 5% from 38% for the quarter ended June 30, 1995 to 33%
for the quarter ended June 30, 1996. The reduction in the gross profit
percentage was primarily attributable to the sales mix of the Company's
products.
Operating expenses, which are net of other income, decreased by $1,382,200 to
$3,020,600 for the quarter ended June 30, 1996 as compared to $4,402,800 for
the same period in 1995.
The differences in operating expenses by specific departmental costs are as
follows:
o Selling and regulatory expenses decreased by $1,126,500
primarily as a result of reduced royalties and rebates on
decreased sales of Bidrin(R) during the second quarter of
1996.
o General and administrative expenses increased $152,500
primarily due to an increase in environmental consulting and
other outside professional fees.
o Research and development expenses decreased by $602,200
primarily due to a decrease in costs incurred
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to generate scientific data related to registration of the
Company's products. This decrease is primarily attributable
to a decrease in research and development costs in connection
with PCNB, Bidrin(R), Metam Sodium and NAA products.
o Shipping and receiving costs increased by $194,000 which was
primarily due to increased trucking and rail freight costs as
a result of increased sales of Metam Sodium products.
Interest costs were $196,000 during the three months ended June 30, 1996 as
compared to $287,200 for the same period in 1995. The average level of
borrowing under the Company's line of credit agreement was approximately
$3,525,000 for the second quarter of 1996 as compared to $7,250,000 for the
same period in 1995. The average level of other long-term debt was $6,365,000
for the second quarter of 1996 as compared to $3,800,000 for the same period in
1995. On a combined basis, the Company's average debt for the second quarter
of 1996 was $9,890,000 as compared to $11,050,000 for the second quarter of
1995. The lower average debt levels accompanied by lower effective interest
rates in the second quarter of 1996 as compared to the second quarter of 1995
account for the decrease in interest costs in 1996.
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. Because most of the Company's cost structure is fixed, at least
in the short-term, the combination of variable revenue streams, changing
product mixes, and a fixed cost structure results in varying quarterly levels
of profitability.
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SIX MONTHS ENDED JUNE 30:
- -------------------------
The Company reported net income of $350,000 or $.14 per share for the six-month
period ended June 30, 1996 as compared to net income of $206,800 or $.08 per
share for the same period in 1995. Net sales decreased $3,363,700 or 14% to
$20,313,100 for the six months ended June 30, 1996 from $23,676,800 for the
same period in 1995. As there was actually an increase in sales of $286,800
during the first quarter of 1996, all of the decrease in sales occurred during
the second quarter of 1996. As described above, the decrease during the second
quarter of 1996 was primarily due to unanticipated weather conditions which had
an adverse impact on sales of certain of the Company's pesticide related
products.
Gross profits declined $1,578,200 to $7,419,200 for the first six months of
1996 from $8,997,400 for the same period in 1995. The gross profit margin,
however, only declined 1.5% from 38% for the first six months of 1995 to 36.5%
for the first six months of 1996. Although there was a decline in the gross
profit margin as described above during the second quarter of 1996, this
decrease was mitigated by a higher gross margin percentage in the first quarter
of 1996 that was also attributable to the sales mix of the Company's products.
Operating expenses decreased by $1,743,400 to $6,377,500 for the first six
months of 1996 from $8,120,900 for the same period in 1995.
The differences in operating expenses by specific departmental costs are as
follows:
o Selling and regulatory expenses decreased $1,215,100 during
the six months ended June 30, 1996 as a result of reduced
royalties and rebates on decreased sales of Bidrin(R) products.
o General and administrative expenses increased $317,200 in the
first six months of 1996 which was primarily attributable to
an increase in environmental consulting and other outside
professional fees.
o Research and development expenses decreased by $1,268,500
during the six months ended June 30, 1996 primarily due to a
decrease in costs incurred to generate scientific data related
to registration of the Company's products. This decrease is
primarily attributable to a decrease in research and
development costs in connection with PCNB, NAA, Bidrin(R),
Metam Sodium and DDVP products.
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o Shipping and receiving costs increased by approximately
$423,000 during the six months ended June 30, 1996 primarily
attributable to higher trucking and rail freight costs as a
result of the increased sales activity of the Company's Metam
Sodium products.
Interest costs were $456,900 during the six months ended June 30, 1996 as
compared to $531,500 for the same period in 1995. The average level of
borrowing under the Company's line of credit agreement was $4,457,000 for the
first half of 1996 as compared to $7,878,000 for the same period in 1995. The
average level of other long-term debt was $6,502,000 for the six months ended
June 30, 1996 as compared to $3,956,000 for the same period in 1995. On a
combined basis, the Company's average debt for the six months ended June 30,
1996 was $10,959,000 as compared to $11,834,000 for the first six months of
1995. The lower average debt levels accompanied by lower effective interest
rates during the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995 account for the significant decrease in interest costs in
1996.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital was $16,876,600 at June 30, 1996 reflecting an increase of
$1,182,000 over working capital of $15,694,600 at December 31, 1995. With net
income of $350,000, depreciation and amortization of $1,171,300 and a reduction
in receivables of $5,111,600 the Company generated cash of $6,632,900 the
substantial portion of which was used to increase inventories by $2,158,000,
reduce trade accounts payable by $1,194,800 and reduce accrued expenses and
other payables by $2,986,700. Inventories were increased to meet expected sales
forecasts, however, actual sales did not achieve forecasted sales due to the
weather's unanticipated impact on pest populations during the six months ended
June 30, 1996. It is anticipated that inventories will be liquidated in the
ordinary course of business. The decrease in accrued expenses and other
payables related primarily to payments of product rebates to customers and
payment of 1995 income tax liabilities. Additionally, the Company declared
and paid cash dividends of $138,000 during the six months ended June 30, 1996
and made capital improvements of $449,200.
The Company had $5,800,000 in availability under its fully-secured $10,500,000
long-term line of credit as of June 30, 1996, a decrease of $800,000 from the
amount available as of December 31, 1995. The Company made principal payments
on its long-term debt and capital leases of $633,000 during the six months
ended June 30, 1996.
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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 1996. Management also
believes, 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 information 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 judgment as of the
date of this report. The Company disclaims, however, any intent or obligation
to update forward-looking statements.
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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 except as disclosed below.
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on June 6, 1996.
(b) Elections of directors: Proxies for the meeting were solicited pursuant
to Regulation 14 under the Act. There was no solicitation in opposition
to management's nominees as listed on the proxy statement, and all such
nominees were elected. Therefore, the directors elected are not listed
herein.
(c) Not applicable.
(d) Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the three months
ended June 30, 1996.
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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: August 13, 1996 By: /s/ Eric G. Wintemute
--------------------------
Eric G. Wintemute
President,
Chief Executive Officer
and Director
Dated: August 13, 1996 By: /s/ J. A. Barry
--------------------------
J. A. Barry
Vice President,
Chief Financial Officer,
Treasurer and Director
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