1
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 JUNE 30, 2000
[ ] 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 -- 2,692,939 shares as of August 11, 1999.
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AMERICAN VANGUARD CORPORATION
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Statements of Operations
for the three and six months ended
June 30, 2000 and 1999 1
Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999 2
Consolidated Statements of Cash Flows for the
six months ended June 30, 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 12
SIGNATURE PAGE 13
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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
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net sales $ 17,803,800 $ 17,660,100 $ 29,589,600 $ 27,846,300
Cost of sales 9,017,100 9,496,600 15,300,600 15,461,300
------------ ------------ ------------ ------------
Gross profit 8,786,700 8,163,500 14,289,000 12,385,000
Operating expenses 7,166,200 6,738,600 12,131,300 11,355,800
------------ ------------ ------------ ------------
Operating income 1,620,500 1,424,900 2,157,700 1,029,200
Interest expense (473,200) (398,900) (881,900) (880,400)
Interest income 1,200 1,000 2,300 2,600
------------ ------------ ------------ ------------
Income before income
tax expense 1,148,500 1,027,000 1,278,100 151,400
Income tax expense 459,300 407,700 511,200 57,500
------------ ------------ ------------ ------------
Net income $ 689,200 $ 619,300 $ 766,900 $ 93,900
============ ============ ============ ============
Basic and diluted net income
per common share $ .26 $ .23 $ .28 $ .03
============ ============ ============ ============
Weighted average number
of shares 2,698,536 2,728,425 2,699,587 2,735,096
============ ============ ============ ============
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, Dec. 31,
2000 1999
----------- -----------
(Unaudited) (Note)
ASSETS (NOTE 8)
Current assets:
Cash $ 953,500 $ 550,200
Receivables:
Trade 12,786,000 15,119,800
Other 612,200 833,200
----------- -----------
13,398,200 15,953,000
----------- -----------
Inventories (note 2) 21,135,100 16,749,900
Prepaid expenses 847,200 819,600
----------- -----------
Total current assets 36,334,000 34,072,700
Property, plant and
equipment, net (note 3) 9,617,400 10,514,200
Land held for development 210,800 210,800
Intangible assets 11,139,700 10,086,400
Other assets 640,000 695,200
----------- -----------
$57,941,900 $55,579,300
=========== ===========
(Continued)
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, Dec. 31,
2000 1999
----------- -----------
(Unaudited) (Note)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 3,460,400 $ 3,022,200
Accounts payable 4,478,900 2,946,300
Accrued expenses and other payables 5,087,000 5,653,700
Income taxes payable -- 1,064,200
----------- -----------
Total current liabilities 13,026,300 12,686,400
Note payable to bank (note 6) 11,800,000 10,100,000
Long-term debt, excluding
current installments 5,035,600 5,145,600
Other long-term liabilities 127,300 101,700
Deferred income taxes 1,576,700 1,576,700
----------- -----------
Total liabilities 31,565,900 29,610,400
----------- -----------
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 2,827,039 shares
(2,564,182 at December 31, 1999 (note 4) 282,700 256,400
Additional paid-in capital (note 4) 5,906,600 3,879,000
Retained earnings (note 4) 20,944,900 22,520,200
----------- -----------
27,134,200 26,655,600
Treasury stock at cost (134,100 shares
at June 30, 2000 and 114,000 shares
at December 31, 1999) 758,200 686,700
----------- -----------
Total stockholders' equity 26,376,000 25,968,900
----------- -----------
$57,941,900 $55,579,300
=========== ===========
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 SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Increase (decrease) in cash
Cash flows from operating activities:
Net income $ 766,900 $ 93,900
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 1,578,400 1,635,400
Changes in assets and liabilities
associated with operations:
Decrease in receivables 2,554,800 170,200
Increase in inventories (4,385,200) (2,644,100)
Increase in prepaid expenses (27,600) (92,200)
Increase (decrease) in accounts
payable 1,532,600 (1,297,300)
Decrease in other payables
and accrued expenses (1,605,300) (2,646,800)
----------- -----------
Net cash provided by (used in)
operating activities 414,600 (4,780,900)
----------- -----------
Cash flows from investing activities:
Capital expenditures (250,900) (236,200)
Net decrease (increase) in other
noncurrent assets 21,200 (41,800)
----------- -----------
Net cash used in investing
activities (229,700) (278,000)
----------- -----------
(Continued)
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
----------- -----------
Increase (decrease) in cash
Cash flows from financing activities:
Net additions under lines of credit agreement $ 1,700,000 $ 6,000,000
Reductions in long-term debt (1,121,800) (833,400)
Exercise of Stock Options 31,400 --
Payment of cash dividends (319,700) (149,500)
Purchase of treasury stock (71,500) (101,800)
----------- -----------
Net cash provided by financing
activities 218,400 4,915,300
----------- -----------
Increase (decrease) in cash 403,300 (143,600)
Cash at beginning of year 550,200 767,000
----------- -----------
Cash as of June 30 $ 953,500 $ 623,400
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES:
On April 14, 2000, the Company distributed 256,857 shares of Common Stock in
connection with a 10% Common Stock dividend to stockholders of record as of
March 31, 2000. As a result of the stock dividend, Common Stock was increased by
$25,700, additional paid-in capital was increased by $1,997,000, and retained
earnings was decreased by $2,022,700.
During the six months ended June 30, 2000, the Company completed the acquisition
of two established product lines from two large chemical manufacturers. In
connection with these acquisitions, the Company recorded intangible assets in
the amount of $1,450,000 in consideration of its debt obligation in the same
amount.
See notes to consolidated financial statements.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
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, 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 consist of the
following:
June 30, 2000 December 31, 1999
------------- -----------------
Finished products $18,027,300 $14,258,700
Raw materials 3,107,800 2,491,200
----------- -----------
$21,135,100 $16,749,900
=========== ===========
3. Property, plant and equipment at June 30, 2000 and December 31,
1999 consists of the following:
June 30, December 31,
2000 1999
----------- ------------
Land $ 2,382,600 $ 2,382,600
Buildings and improvements 4,751,800 4,727,300
Machinery and equipment 23,947,900 23,825,700
Office furniture and fixtures 2,565,800 2,467,900
Automotive equipment 136,900 136,900
Construction in progress 520,600 519,400
----------- -----------
34,305,600 34,059,800
Less accumulated depreciation 24,688,200 23,545,600
----------- -----------
$ 9,617,400 $10,514,200
=========== ===========
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
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 were distributed on April 14, 2000 to
stockholders of record at the close of business on March 31, 2000. The
cash dividend was paid on the number of shares outstanding prior to the
stock dividend. Stockholders entitled to fractional shares resulting
from the stock dividend received cash in lieu of such fractional share
based on $7.875 per share, the closing price of the Company's stock on
March 31, 2000. The Company distributed 256,857 shares of Common Stock
in connection with the Common Stock dividend. As a result Common Stock
was increased by $25,700, additional paid-in capital was increased by
$1,997,000, and retained earnings was decreased by $2,022,700. 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 June 30, 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.
This fully-secured line of credit was renewed in June 2000 and now
expires on June 1, 2002. The Company had $12,200,000 available under
this credit agreement as of June 30, 2000. (See note 9.)
7. During the six months ended June 30, 2000, the Company completed the
acquisition of two product lines from two large chemical manufacturers.
In connection with these acquisitions, the Company recorded intangible
assets in the amount of $1,450,000 in consideration of its debt
obligation in the same amount.
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, 1999.
9. Reclassification - Certain items have been reclassified in the prior
period consolidated financial statements to conform with the June 30,
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 JUNE 30:
The Company reported net income of $689,200 or $.26 per share for the second
quarter ended June 30, 2000 as compared to $619,300 or $.23 per share for the
same period in 1999.
Net sales increased slightly by $143,700 to $17,803,800 for the quarter ended
June 30, 2000 from $17,660,100 for the same period in 1999.
Gross profits increased $623,200 to $8,786,700 for the three months ended June
30, 2000 from $8,163,500 for the same period in 1999. The gross profit margin
for the quarter ended June 30, 2000 improved to 49% from 46% in 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, increased by $427,600 to
$7,166,200 for the three months ended June 30, 2000 as compared to $6,738,600
for the same period in 1999. The differences in operating expenses by specific
departmental costs are as follows:
o Selling expenses increased by $1,197,400 to $3,233,500 for the second
quarter ended June 30, 2000 as compared to $2,036,100 for the same
period in 1999. Increased expenses related to the Company's recently
acquired soil insecticide business were the reasons for the increase.
o General and administrative expenses declined by $1,003,800 to $1,388,900
for the second quarter ended June 30, 2000 as compared to $2,392,700 for
the same period in 1999. The decline was due primarily to a reduction
in legal expenses, which accounted for approximately 90% of the
decrease. The balance of the decrease was due to a reduction of
certain other outside professional expenses.
o Research and product development costs and regulatory/registration
expenses increased by $76,700 to $1,265,700 for the quarter ended June
30, 2000 from $1,189,000 for the same period in 1999. The increase was
primarily due to increases in costs incurred to generate scientific data
related to the registration and possible new uses of the Company's
products.
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o Freight, delivery, storage and warehousing costs increased $157,300 to
$1,278,100 for the quarter ended June 30, 2000 as compared to $1,120,800
for the same period in 1999. The increased costs were due primarily to
the changes in the sales mix of the Company's products.
Interest costs were $473,200 during the three months ended June 30, 2000 as
compared to $398,900 for the same period in 1999. The average level of borrowing
under the Company's line of credit was approximately $16,392,000 for the second
quarter of 2000 as compared to $15,902,000 for the same period in 1999. The
average level of other long-term debt was $7,857,000 for the second quarter of
2000 as compared to $8,818,000 for the same period in 1999. Higher effective
interest rates (coupled with slightly higher overall average debt levels)
accounted for the increase in 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. The primary reason is that the use cycles do not necessarily
coincide with financial reporting cycles. Because most of the Company's cost
structure is fixed, at least in the short-term, the combination of variable
revenue streams, and changing product mixes, results in varying quarterly levels
of profitability.
SIX MONTHS ENDED JUNE 30:
The Company reported net income of $766,900 or $.28 per share for the six months
ended June 30, 2000 as compared to $93,900 or $.03 per share for the same period
in 1999.
Net sales increased by $1,743,300 to $29,589,600 for the six months ended June
30, 2000 from $27,846,300 for the same period in 1999.
Gross profits increased $1,904,000 to $14,289,000 for the six months ended June
30, 2000 from $12,385,000 for the same period in 1999. The gross profit margin
for the six months ended June 30, 2000 improved to 48% from
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44% in the same period in 1999. The improved margin was due to the changes
in the sales mix of the Company's products.
Operating expenses are net of other income, increased by $775,500 to $12,131,300
for the six months ended June 30, 2000 as compared to $11,355,800 for the same
period in 1999. The differences in operating expenses by specific departmental
costs are as follows:
o Selling expenses increased by $1,650,400 to $4,813,600 for the six
months ended June 30, 2000 as compared to $3,163,200 for the same period
in 1999. Increased expenses related to the Company's recently acquired
soil insecticide business coupled with increased variable selling
expenses that relate to the product mix of sales were the reasons for
the increase.
o General and administrative expenses declined by $1,101,900 to $2,752,800
for the six months ended June 30, 2000 as compared to $3,854,700 for the
same period in 1999. The decline was due primarily to a reduction in
legal expenses.
o Research and product development costs and regulatory/registration
expenses increased by $164,200 to $2,328,100 for the six months ended
June 30, 2000 from $2,163,900 for the same period in 1999. The increase
was primarily due to increases in costs incurred to generate scientific
data related to the registration and possible new uses of the Company's
products.
o Freight, delivery, storage and warehousing costs increased $62,800 to
$2,236,800 for the six months ended June 30, 2000 as compared to
$2,174,000 for the same period in 1999. The increased costs were due
primarily to the changes in the sales mix of the Company's products.
Interest costs were $881,900 during the six months ended June 30, 2000 as
compared to $880,400 for the same period in 1999. The average, level of
borrowing under the Company's line of credit was $14,418,000 for the first six
months of 2000 as compared to $14,718,000 for the same period in 1999. The
average level of other long-term debt was $7,961,000 for the six months ended
June 30, 2000 as compared to $9,160,000 for the same period in 1999. On a
combined basis, the Company's average debt for the six months ended June 30,
2000 was $22,379,000 as compared to $23,878,000 for the first six months of
1999. While the overall average debt was down in the six months ended June 30,
2000 when compared to the same period in 1999, interest costs remained virtually
unchanged because of higher effective interest rates in 2000.
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LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $414,600 of cash during the first six months of
2000 primarily from a decline in receivables of $2,554,800, non-cash
depreciation and amortization of $1,578,400 and net income of $766,900.
Inventories increased by $4,385,200 during the first six months of the year in
anticipation of product demand during the last half of 2000. Accrued expenses
and payables declined by $72,700 due to payments of trade payables, income
taxes, product rebates and royalties, and other related expenses.
The Company invested $250,900 in capital expenditures and increased its other
noncurrent assets by $21,200.
Financing activities provided the Company $218,400 in cash. The Company's net
borrowings under its fully-secured revolving line of credit increased by
$1,700,000. The Company reduced its long-term debt by $1,121,800, paid $319,700
in cash dividends, and purchased 8,700 shares of treasury stock for $71,500.
The Company's fully-secured $24,000,000 long-term line of credit was renewed in
June 2000 and now expires on June 1, 2002. As of June 30, 2000, the Company had
$12,200,000 in availability under its fully-secured long- term line of credit.
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.
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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 23, 2000.
(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) Reports on Form 8-K
Date of the Report: May 23, 2000
Description: On May 15, 2000, American Vanguard Corporation issued a
press release announcing that Amvac Chemical Corporation, a wholly-owned
subsidiary of American Vanguard Corporation, purchased from GBB
Biosciences Corporation, its worldwide Dacthal(R) (DCPA) herbicide
product line.
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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 11, 2000 By: /s/ Eric G. Wintemute
-------------------------------------
Eric G. Wintemute
President,
Chief Executive Officer
and Director
Dated: August 11, 2000 By: /s/ J. A. Barry
-------------------------------------
J. A. Barry
Senior Vice President,
Chief Financial Officer,
Secretary/Treasurer
and Director
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EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27 Financial Data Schedule