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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, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 0-6354
AMERICAN VANGUARD CORPORATION
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(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)
(949) 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 -- 2,700,639 shares as of April 12, 2000
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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, 2000 and 1999 1
Consolidated Balance Sheets
as of March 31, 2000, and December 31, 1999 2
Consolidated Statements of Cash Flows for the
three months ended March 31, 2000 and 1999 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 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
---------------------------------
2000 1999
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Net sales $ 11,785,800 $ 10,186,200
Cost of sales 6,283,500 5,964,700
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Gross profit 5,502,300 4,221,500
Operating expenses 4,965,100 4,617,200
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Operating income/(loss) 537,200 (395,700)
Interest expense (408,700) (481,500)
Interest income 1,100 1,600
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Income/(loss) before income tax 129,600 (875,600)
Income tax (expense) benefit (51,900) 350,200
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Net income/(loss) $ 77,700 $ (525,400)
============ ============
Basic and diluted net income/(loss)
per common share $ .03 $ (.19)
============ =============
Weighted average number of shares
outstanding (Note 4) 2,700,639 2,741,840
============ ============
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS (NOTE 7)
March 31, December 31,
2000 1999
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(Unaudited) (Note)
Current assets:
Cash $ 959,700 $ 550,200
Receivables:
Trade 16,372,600 15,119,800
Other 604,700 833,200
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16,977,300 15,953,000
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Inventories (Note 2) 19,886,200 16,749,900
Prepaid expenses 742,400 819,600
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Total current assets 38,565,600 34,072,700
Property, plant and equipment,
net (Note 3) 10,035,300 10,514,200
Land held for development 210,800 210,800
Intangible assets 10,091,300 10,086,400
Other assets 665,100 695,200
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$59,568,100 $55,579,300
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See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2000 1999
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(Unaudited) (Note)
Current liabilities:
Current installments of long-term debt $ 2,791,000 $ 3,022,200
Accounts payable 5,389,100 2,946,300
Accrued expenses and other payables 3,891,300 5,653,700
Income taxes payable -- 1,064,200
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Total current liabilities 12,071,400 12,686,400
Notes payable to bank (Note 6) 15,400,000 10,100,000
Long-term debt, excluding current
installments 4,691,200 5,145,600
Other long-term liabilities 101,700 101,700
Deferred income taxes 1,576,700 1,576,700
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Total liabilities 33,841,000 29,610,400
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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 282,600 256,400
Additional paid-in capital 3,879,000 3,879,000
Retained earnings (Note 4) 22,252,200 22,520,200
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26,413,800 26,655,600
Treasury stock at cost (125,400 shares) 686,700 686,700
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Total stockholders' equity 25,727,100 25,968,900
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$59,568,100 $55,579,300
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NOTE: THE BALANCE SHEET AT DECEMBER 31, 1999 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, 2000 AND 1999
(UNAUDITED)
2000 1999
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Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $ 77,700 $ (525,400)
Adjustments to reconcile net income
loss to net cash used in operating activities:
Depreciation and amortization 779,100 821,100
Changes in assets and liabilities
associated with operations:
Decrease (increase) in receivables (1,024,300) 1,145,600
Increase in inventories (3,136,300) (4,189,600)
Decrease (increase) in prepaid expenses 77,200 (113,000)
Increase in accounts payable 2,442,800 850,500
Decrease in other payables and accrued
expenses (2,826,600) (3,808,200)
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Net cash used in operating activities (3,610,400) (5,819,000)
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Cash flows from investing activities:
Capital expenditures (95,400) (141,600)
Net decrease (increase) in other noncurrent assets (179,600) 1,700
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Net cash used in investing activities (275,000) (139,900)
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(Continued)
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
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Cash flows from financing activities:
Net additions under lines of credit
agreement $ 5,300,000 $ 6,400,000
Principal payments on long-term debt (685,600) (683,900)
Cash dividends (319,500) --
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Net cash provided by financing
activities 4,294,900 5,716,100
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Net increase (decrease) in cash 409,500 (242,800)
Cash at beginning of year 550,200 767,000
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Cash at end of period $ 959,700 $ 524,200
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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, 2000
are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000. 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, 1999.
2. Inventories - The components of inventories at March 31, 2000 and December
31, 1999 consists of the following:
March 31, 2000 December 31, 1999
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Finished Products $16,375,900 $14,258,700
Raw Materials 3,510,300 2,491,200
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$19,886,200 $16,749,900
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3. Property, plant and equipment at March 31, 2000 and December 31, 1999
consists of the following:
March 31, December 31,
2000 1999
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Land $ 2,382,600 $ 2,382,600
Buildings and improvements 4,731,700 4,727,300
Machinery and equipment 23,930,100 23,825,700
Office furniture and fixtures 2,529,600 2,467,900
Automotive equipment 136,900 136,900
Construction in progress 439,200 519,400
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34,150,100 34,059,800
Less accumulated depreciation 24,114,800 23,545,600
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$10,035,300 $10,514,200
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. 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 are payable on April 14, 2000 to shareholders of record at
the close of business on March 31, 2000. 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. These
options were anti-dilutive for the periods ended March 31, 2000 and 1999,
and as such, dilutive EPS amounts are the same as basic EPS for the periods
presented.
6. Under a credit agreement with a bank, the Company may borrow up to
$24,000,000. The note payable was scheduled to expire July 31, 2000. The
Company has received a written commitment from its bank to extend the
expiration date of the credit agreement to June 1, 2002. The bank has
historically renewed the Company's credit facility for two-year terms. The
Company's policy is to classify its borrowings under revolving credit
facilities as long-term debt since the intent is to maintain these
obligations for longer than one year. (See note 8.)
7. 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, 1999.
8. Reclassification - Certain items have been reclassified in the prior period
consolidated financial statements to conform with the March 31, 2000
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 $77,700 or $.03 per share for the quarter
ended March 31, 2000 as compared to a net loss of $525,400 or $.19 per share for
the same period in 1999.
Net sales increased by 16% to $11,785,800 for the three months ended March 31,
2000 from $10,186,200 for the same period in 1999. Sales of Fortress7, a soil
insecticide which was acquired from DuPont during the first quarter of 2000,
accounted for the increase sales.
Gross profits increased $1,280,800 to $5,502,300 for the quarter ended March 31,
2000 from $4,221,500 for the same period in 1999. Gross profit margins improved
to 47% for the three months ended March 31, 2000 from 41% for the same period in
1999. The improved margin was due to the changes in the sales mix of the
Company's products.
Operating expenses, which are net of other income of $70,400 and $6,100 for the
three months ended March 31, 2000 and 1999 respectively, increased by $347,900
to $4,965,100 for the first quarter ended March 31, 2000 from $4,617,200 for the
same period in 1999. The differences in operating expenses by specific
departmental costs are as follows:
o Selling expenses increased by $452,500 to $1,580,000 for the first quarter
ended March 31, 2000 from $1,127,500 for the prior year first quarter. The
increase was due, in part, to investments made in technical, sales and
marketing infrastructure, which included the hiring of additional sales
individuals, as well as engaging individuals on a consulting basis, in order
to support and grow the Fortress7 product line, which as previously
disclosed, was acquired from DuPont in the first quarter of 2000. Increased
variable selling expenses that relate to the increased sales levels and
product mix of sales also contributed to the increase in selling expenses.
o General and administrative expenses declined by $33,500 to $1,434,400 for
the first quarter ended March 31, 2000 from $1,467,900 for the first quarter
of 1999. A reduction in legal expenses served to more than offset increases
in payroll and payroll related costs and other outside professional fees.
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o Research and product development costs and regulatory/registration expenses
increased by $87,500 to $1,062,400 for the quarter ended March 31, 2000 as
compared to $974,900 for the first quarter of 1999. Increased costs to
generate scientific data related to the registration of the Company's
products primarily accounted for the increase.
o Freight, delivery, storage and warehousing costs declined by $94,300 to
$958,700 for the three months ended March 31, 2000 from $1,053,000 for the
same period in 1999. Decreased storage and delivery costs of the Company's
fumigant product line accounted for the decline in these expenses.
Interest costs were $408,700 during the three months ended March 31, 2000 as
compared to $481,500 for the same period in 1999. The average level of borrowing
under the Company's fully-secured revolving line of credit declined by
$1,040,100 to $12,442,900 for the first quarter of 2000 as compared to
$13,483,000 for the same period in 1999. The average level of other long-term
debt declined by $1,385,000 to $7,825,000 for the first quarter ended March 31,
2000 from $9,210,000 for the same period in 1999. On a combined basis the
Company's average debt for the first quarter of 2000 was $20,267,900 as compared
to $22,693,000 for the first quarter of 1999. Lower overall debt primarily
accounted for the lower interest costs.
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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LIQUIDITY AND CAPITAL RESOURCES
The Company used cash of $3,610,400 in its operating activities during the three
months ended March 31, 2000 primarily to acquire inventory which increased by
$3,136,300 in anticipation of product demand during the late spring and summer
months of 2000. Accrued expenses declined by $2,826,600 during the first quarter
of 2000 due to payments of income taxes, product rebates and royalties, and
other sales related expenses. Prepaid expenses declined by $77,200 while
receivables and accounts payable increased by $1,024,300 and $2,442,800
respectively during the first three months of 2000.
The Company invested $95,400 in capital expenditures and incurred an increase of
$179,600 in other noncurrent assets, primarily related to the acquisition of the
Fortress(R) product line from DuPont, during the quarter ended March 31, 2000.
The Company procured cash from its financing activities of $4,294,900 through an
increase in borrowing of $5,300,000 under the Company's fully-secured revolving
line of credit, while it made principal payments of $683,600 related to its
long-term debt.
The Company has received a written commitment from its bank to extend the
expiration date of its fully-secured $24,000,000 revolving line of credit to
June 1, 2002 from July 31, 2000. The Company had $8,600,000 in availability
under this revolving line of credit as of March 31, 2000.
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 1999. 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
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.
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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
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the three
months ended March 31, 2000.
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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 12, 2000 By: /s/ Eric G. Wintemute
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Eric G. Wintemute
President, Chief Executive
Officer and Director
Dated: May 12, 2000 By: /s/ J. A. Barry
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J. A. Barry
Senior Vice President,
Chief Financial Officer,
Secretary/Treasurer
and Director
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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27 Financial Data Schedule