<PAGE> 1
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 SEPTEMBER 30, 1995
[ ] 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)
4100 East Washington Boulevard, Los Angeles, California 90023
- - ------------------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
(213) 264-391
- - -------------------------------------------------------------------------------
(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 -- 2,309,371 shares as of September 30, 1995.
<PAGE> 2
AMERICAN VANGUARD CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements:
Consolidated Statements of Operations
for the three and nine months ended
September 30, 1995 and 1994 1
Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994 2
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1995 and 1994 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
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30 ended September 30
----------------------------- -----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $11,138,200 $10,005,800 $34,815,000 $29,517,700
Cost of sales 6,971,300 6,081,100 21,650,700 16,959,500
----------- ----------- ----------- -----------
Gross profit 4,166,900 3,924,700 13,164,300 12,558,200
Operating expenses 3,663,100 3,907,800 11,784,000 11,152,100
----------- ----------- ----------- -----------
Operating income 503,800 16,900 1,380,300 1,406,100
Interest expense (218,500) (277,100) (750,000) (694,900)
Interest income 1,600 2,100 5,600 4,700
Other settlement expenses - - - (910,000)
----------- ----------- ----------- -----------
Income (loss) before income taxes 286,900 (258,100) 635,900 (194,100)
Income taxes (expense) benefit (114,700) 100,900 (256,900) 21,300
----------- ----------- ----------- -----------
Net income (loss) $ 172,200 $ (157,200) $ 379,000 $ (172,800)
=========== =========== =========== ===========
Per share information:
Net income (loss) per share $ .07 $ (.07) $ .16 $ (.07)
=========== =========== =========== ===========
Weighted average number of shares 2,319,154 2,331,371 2,320,713 2,328,807
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 319,200 $ 317,700
Receivables:
Trade 6,229,100 12,722,400
Legal settlement 207,500 2,270,000
Other 383,500 488,200
----------- -----------
6,820,100 15,480,600
----------- -----------
Inventories 9,104,300 7,217,900
Prepaid expenses 497,300 929,700
----------- -----------
Total current assets 16,740,900 23,945,900
Property, plant and equipment, net 13,884,900 15,024,100
Land held for development 210,800 210,800
Cost in excess of assets acquired, net 450,400 475,500
Deferred charges, net 194,000 1,001,100
Other assets 301,800 271,300
----------- -----------
$31,782,800 $40,928,700
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Note payable to bank $ - $ 8,000,000
Current installments of long-term debt 1,144,700 1,205,300
Accounts payable 2,521,600 2,891,600
Accrued expenses 2,570,600 3,092,200
Income taxes payable 84,600 672,500
Legal settlements payable 125,000 3,411,600
----------- -----------
Total current liabilities 6,446,500 19,273,200
Note payable to bank 5,000,000 -
Long-term debt, excluding current installments 2,153,100 3,695,300
Deferred income taxes 2,817,300 2,817,300
----------- -----------
Total liabilities 16,416,900 25,785,800
----------- -----------
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 2,331,371 shares 233,100 233,100
Additional paid-in capital 1,688,200 1,688,200
Retained earnings 13,600,600 13,221,600
----------- -----------
15,521,900 15,142,900
Less treasury stock, 22,000 shares at cost (156,000) -
----------- -----------
Total stockholders' equity 15,365,900 15,142,900
----------- -----------
$31,782,800 $40,928,700
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $ 379,000 $ (172,800)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 2,711,300 2,622,300
Changes in assets and liabilities
associated with operations:
Decrease in receivables 8,660,500 2,292,700
Increase in inventories (1,886,400) (2,602,600)
Decrease (increase) in prepaid expenses 432,400 (536,900)
Increase (decrease) in accounts payable (370,000) 368,100
Decrease in other payables and accrued expenses (4,396,100) (685,300)
Increase in deferred income taxes - 25,500
----------- -----------
Net cash provided by operating activities 5,530,700 1,311,000
----------- -----------
Cash flows from investing activities:
Capital expenditures (429,400) (604,000)
Increase in deferred charges (226,400) (415,000)
Net increase in other noncurrent assets (114,600) (20,700)
----------- -----------
Net cash used in investing activities (770,400) (1,039,700)
----------- -----------
</TABLE>
(Continued)
4
<PAGE> 7
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Increase (decrease) in cash
Cash flows from financing activities:
Net repayments under line of credit agreement $(3,000,000) $ (50,000)
Increase in long-term debt - 592,000
Principal payments on long-term debt (1,602,800) (928,700)
Acquisition of treasury stock (156,000) -
----------- -----------
Net cash used in financing activities (4,758,800) (386,700)
----------- -----------
Net increase (decrease) in cash 1,500 (115,400)
Cash at beginning of year 317,700 290,800
----------- -----------
Cash as of September 30 $ 319,200 $ 175,400
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 8
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 nine months ended September 30,
1995, are not necessarily indicative of the results that may be expected
for the year ending December 31, 1995. 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, 1994.
2. Inventories - The components of inventories consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
Finished Products $ 6,991,400 $ 5,544,100
Raw Materials 2,112,900 1,673,800
----------- -----------
$ 9,104,300 $ 7,217,900
=========== ===========
</TABLE>
3. Property, plant and equipment at September 30, 1995 and December 31,
1994, consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
Land $ 2,319,800 $ 2,319,800
Buildings and improvements 3,526,400 3,487,500
Machinery and equipment 19,944,400 19,873,600
Office furniture and fixtures 936,300 819,800
Automotive equipment 105,000 103,600
Construction in progress 574,300 388,700
----------- -----------
27,406,200 26,993,000
Less accumulated depreciation 13,521,300 11,968,900
----------- -----------
$13,884,900 $15,024,100
=========== ===========
</TABLE>
6
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. Note Payable to Bank - In August 1995 the Company entered into an
amended fully-secured line of credit agreement, under the terms of which
a bank has committed a maximum of $10,500,000. 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
credit agreement. The unused credit available under this facility at
September 30, 1995 was $5,500,000. The commitment made under the credit
agreement expires on July 31, 1997. The Company is required, under this
agreement, to maintain certain financial ratios and meet certain net
worth and indebtedness tests for which the Company was in compliance as
of September 30, 1995.
5. Repurchase of Common Stock - During the nine months ended September 30,
1995, the Company repurchased 22,000 shares of common stock for an
aggregate price of $156,000. All of the repurchased shares are held in
treasury for use in conjunction with the Company's 1994 Stock Option
Plan and other general corporate purposes.
6. Earnings Per Share - Earnings per share is computed by dividing net
income by the weighted average number of shares outstanding during the
respective period.
7. Reclassification - Certain items have been reclassified in the prior
period consolidated financial statements to conform with the September
30, 1995, presentation.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- - ---------------------
QUARTER ENDED SEPTEMBER 30:
- - --------------------------
The Company reported net income of $172,200 or $.07 per share for the quarter
ended September 30, 1995 as compared to a net loss of $157,200 or $.07 per
share for the same period in 1994.
Net sales increased $1,132,400 or 11% to $11,138,200 for the quarter ended
September 30, 1995 from $10,005,800 for the same period in 1994. The sales
growth reflects the strong performance of Amvac Chemical's product line.
Gross profits increased slightly to $4,166,900 for the three months ended
September 30, 1995 from $3,924,700 for the same period in 1994. The gross
profit margin, however, declined from 39% for the quarter ended September 30,
1994 to 37% for the quarter ended September 30, 1995. The reduction in the
gross profit percentage in the third quarter of 1995 was primarily attributable
to the sales mix of products.
Operating expenses, which are net of other income, decreased by $244,700 to
$3,663,100 for the quarter ended September 30, 1995 as compared to $3,907,800
for the same period in 1994.
The differences in operating expenses by specific departmental costs are as
follows:
o Selling and regulatory expenses increased by approximately
$70,200 primarily as a result of increased variable selling
expenses related to increased sales levels.
o General, administrative and corporate expenses increased
approximately $152,200 primarily due to an increase in outside
professional fees of approximately $146,500.
o Research and development expenses decreased by approximately
$560,700 primarily due to a decrease in costs incurred to
generate scientific data related to registration of the
Company's products.
o Freight, delivery and warehousing costs increased by
approximately $93,600 primarily attributable to higher
shipping costs as a result of increased sales. Increased
payroll and payroll related items also contributed to the
increase in costs.
8
<PAGE> 11
Interest costs were $218,500 during the three months ended September 30, 1995
as compared to $277,100 for the same period in 1994. The average level of
borrowing under the Company's line of credit agreement was approximately
$5,484,000 for the third quarter of 1995 as compared to $7,171,000 for the same
period in 1994. The average level of long-term debt was $3,450,000 for the
third quarter of 1995 as compared to $5,316,000 for the same period in 1994.
Although interest rates were slightly higher on average for the third quarter
of 1995 as compared to the third quarter of 1994, the lower average debt for
the third quarter of 1995 resulted in lower interest costs in the third quarter
of 1995 as compared to the same period in 1994.
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 a good portion 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.
NINE MONTHS ENDED SEPTEMBER 30:
- - ------------------------------
The Company reported net income of $379,000 or $.16 per share for the nine
months ended September 30, 1995 as compared to a net loss of $172,800 or $.07
per share for the same period in 1994.
Net sales increased $5,297,300 or 18% to $34,815,000 for the nine months ended
September 30, 1995 from $29,517,700 for the same period in 1994. The sales
growth as discussed previously, reflects the strong performance of Amvac
Chemical's product line.
Gross profits improved to $13,164,300 for the first nine months of 1995 from
$12,558,200 for the same period in 1994. The gross profit margin, however,
declined from 43% for the first nine months of 1994 to 38% for the first nine
months of 1995. The decline in the gross profit margin is primarily
attributable to changes in the sales mix of the Company's products. The most
significant factor contributing to the decline in gross profit margins was the
phaseout of the sales of Phosdrin(R). The Company, in agreements reached with
the Environmental Protection Agency ("EPA"), agreed to phaseout the domestic
distribution, sale and use of Phosdrin(R). (Refer to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.) Sales of
Phosdrin(R) during the nine months ended September 30, 1995 decreased
approximately $6,613,000 to $568,000 from $7,181,000 during the same period in
1994. While sales of other products have enabled
9
<PAGE> 12
the Company to replace and surpass the sales lost due to the phaseout of
Phosdrin(R), the gross profit margins realized on certain of these other
products are less than the gross profits generated by sales of Phosdrin(R).
Operating expenses increased by $631,900 to $11,784,000 for the first nine
months of 1995 from $11,152,100 for the same period in 1994.
The differences in operating expenses by specific departmental costs are as
follows:
o Selling and regulatory expenses increased by approximately
$1,035,900 during the nine months ended September 30, 1995.
Approximately $608,800 of the increase was attributable to
increases in variable selling expenses, primarily royalties
and rebates. While rebates related to Phosdrin(R) decreased
approximately $634,600 due to the phaseout of domestic
Phosdrin(R) sales, rebates and royalties on other products
increased by approximately $1,243,400. The balance of the
increase in selling costs of approximately $258,300, was due
to increases in both fixed costs such as increases in payroll
and payroll related items and other variable costs due to
higher sales levels.
Regulatory expenses increased approximately $168,800 in the
first nine months of 1995. The increase in regulatory
expenses was attributable to operating costs incurred by the
Company's office in the United Kingdom, which was opened in
August 1994 in order to build the Company's presence in the
European chemical market, as well as the hiring of a director
to manage international regulatory affairs.
o General, administrative and corporate expenses increased
approximately $122,900 in the first nine months of 1995 which
was primarily attributable to an increase of approximately
$146,500 in outside professional fees which were slightly
offset by a decrease in legal fees.
o Research and development expenses decreased approximately
$593,300 in the first nine months of 1995 primarily as a
result of reduced costs incurred to generate scientific data
related to the registration of the Company's products.
Although data generation costs for Bidrin(R) and Napthalene
Acetic Acid products increased approximately $370,800 and
$110,600, respectively, these increases were more than offset
by a decrease of approximately $1,190,600 in
10
<PAGE> 13
research costs related to Phosdrin(R). Increased travel costs
to monitor ongoing research projects, smaller increases in data
generation costs of other products and new product development
accounted for the remaining increase of approximately $115,900.
o Freight, delivery and warehousing costs increased by approximately
$66,400 primarily attributable to higher shipping costs as a
result of increased sales as well as increases in payroll and
payroll related items.
Interest costs were $750,000 during the nine months ended September 30, 1995 as
compared to $694,900 for the same period in 1994. The average level of
borrowing under the Company's line of credit agreement was approximately
$7,073,000 for the first nine months of 1995 as compared to $6,858,000 for the
same period in 1994. The average level of long-term debt was $3,803,000 for
the nine months ended September 30, 1995 as compared to $5,491,000 for the same
period in 1994. Although average long-term debt was down significantly in
1995, the slight increase in average line of credit borrowings coupled with
overall higher effective interest rates in 1995 has resulted in the increase in
interest costs of $55,100 for the nine month period ended September 30, 1995 as
compared to the same period in 1994.
As mentioned previously, in January 1995, the Company reached an agreement with
the EPA to extend the distribution, sale and use of Phosdrin(R) in the United
States through November 30, 1995. After November 30, 1995 the Company will
recall all Phosdrin(R) remaining in the domestic marketplace. This extension
is in keeping with the EPA's stated policy and desire to deplete the stocks of
cancelled products as much as possible prior to recall. The ultimate costs of
the recall cannot be measured at this time. The Company will continue to sell
Phosdrin(R) for export, a market which accounted for approximately 2% of the
Company's total consolidated sales in 1994.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
Working capital was $10,294,400 reflecting a significant increase of $5,621,700
over working capital of $4,672,700 at December 31, 1994. Receivables decreased
by $8,660,500 during the nine months ended September 30, 1995. The Company
used this cash inflow to reduce accounts payable, accrued expenses and other
payables by $4,766,100 during the nine months ended September 30, 1995.
Significant obligations that were paid included legal settlements of
$3,285,700, rebates on products sold of $647,400 and income taxes of $525,000.
Based on anticipated demand in the fourth quarter, traditionally the Company's
busiest, inventories were increased by $1,886,400. The significant working
capital position at September 30, 1995 also reflects the renewal and amendment
of the Company's credit facility with the Company's
11
<PAGE> 14
line of credit being renewed for a multiyear term. The Company had $5,500,000
in availability under its line of credit agreement as of September 30, 1995.
(Refer to Note 4 of the Notes to the Consolidated Financial Statements of this
Quarterly Report.) As previously disclosed in the prior Quarterly Report on
Form 10-Q, the Company's primary lender also approved, in August 1995, a
$5,250,000 term credit facility, approximately $1,900,000 of which (at the time
of approval) will be used to pay off an existing note payable leaving
approximately $3,350,000 available through December 31, 1995 for future capital
expenditures. The Company made principal payments on its long-term debt and
capital leases of $1,602,800 during the nine months ended September 30, 1995.
Management believes current financial resources (working capital and short-term
borrowing arrangements) and anticipated funds from operations will be adequate
to meet financial needs through early 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.
12
<PAGE> 15
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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - FDS
(b) The Company did not file any reports on Form 8-K during the three months
ended September 30, 1995.
13
<PAGE> 16
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: November 10, 1995 By: /s/ Eric G. Wintemute
------------------------------
Eric G. Wintemute
President, Chief Executive
Officer and Director
Dated: November 10, 1995 By: /s/ J. A. Barry
------------------------------
J. A. Barry
Vice President
Chief Financial Officer,
Treasurer and Director
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 319,200
<SECURITIES> 0
<RECEIVABLES> 6,820,100
<ALLOWANCES> 0
<INVENTORY> 9,104,300
<CURRENT-ASSETS> 16,740,900
<PP&E> 27,406,200
<DEPRECIATION> 13,521,300
<TOTAL-ASSETS> 31,782,800
<CURRENT-LIABILITIES> 6,446,500
<BONDS> 8,287,800
<COMMON> 233,100
0
0
<OTHER-SE> 15,132,800
<TOTAL-LIABILITY-AND-EQUITY> 31,782,800
<SALES> 34,815,000
<TOTAL-REVENUES> 34,815,000
<CGS> 21,650,700
<TOTAL-COSTS> 21,650,700
<OTHER-EXPENSES> 11,784,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 744,400
<INCOME-PRETAX> 635,900
<INCOME-TAX> 256,900
<INCOME-CONTINUING> 379,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 379,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
