<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 MARCH 31, 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
- - ----------------------------------------------- ---------------------
(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)
(714) 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 -- 2,522,079 shares as of March 31, 1996
<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 months ended
March 31, 1996 and 1995 1
Consolidated Balance Sheets
as of March 31, 1996, and
December 31, 1995 2
Consolidated Statements of Cash Flows
for the three months ended
March 31, 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 11
SIGNATURE PAGE 12
</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
ended March 31
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net sales $10,421,100 $10,134,300
Cost of sales 6,248,000 6,302,500
----------- -----------
Gross profit 4,173,100 3,831,800
Operating expenses 3,356,900 3,718,100
----------- -----------
Operating income 816,200 113,700
Interest expense (260,900) (244,300)
Interest income 2,200 1,700
----------- -----------
Income (loss) before income tax 557,500 (128,900)
Income tax (expense) benefit (223,000) 51,400
----------- -----------
Net (income) loss $ 334,500 $ (77,500)
=========== ===========
Net income (loss) per common share $ .13 $ (.03)
=========== ===========
Weighted average number of shares
outstanding 2,522,079 2,556,032
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, Dec. 31,
1996 1995
----------- -----------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash $ 470,500 $ 331,600
Receivables:
Trade 12,395,000 15,228,300
Legal settlement - 195,000
Other 24,300 62,700
----------- -----------
12,419,300 15,486,000
----------- -----------
Inventories 9,134,800 8,269,600
Prepaid expenses 491,400 581,000
----------- -----------
Total current assets 22,516,000 24,668,200
Property, plant and
equipment, net 13,217,700 13,680,400
Land held for development 210,800 210,800
Cost in excess of assets
acquired, net 433,700 442,100
Deferred charges, net 54,700 57,900
Other assets 269,200 281,600
----------- -----------
$36,702,100 $39,341,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, Dec. 31,
1996 1995
----------- -----------
(Unaudited) (Note)
<S> <C> <C>
Current liabilities:
Current installments of
long-term debt $ 1,265,200 $ 1,265,600
Accounts payable 2,015,400 2,810,800
Accrued expenses 2,515,500 3,433,700
Income taxes payable 292,900 1,366,300
Legal settlements payable 52,500 97,200
----------- -----------
Total current liabilities 6,141,500 8,973,600
Note payable to bank 4,200,000 3,900,000
Long-term debt, excluding
current installments 5,236,200 5,539,500
Deferred income taxes 2,922,500 2,922,500
----------- -----------
Total liabilities 18,500,200 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; issued and
outstanding 2,564,429
shares 256,400 233,100
Additional paid-in capital 3,879,000 1,688,200
Retained earnings 14,328,000 16,345,600
----------- -----------
18,463,400 18,266,900
Treasury stock at cost
(42,350 shares) 261,500 261,500
----------- -----------
Total stockholders' equity 18,201,900 18,005,400
----------- -----------
$36,702,100 $39,341,000
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1995, has been derived from the audited
financial statements at that date (Note 1).
See notes to consolidated financial statements.
3
<PAGE> 6
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $ 334,500 $ (77,500)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 586,900 907,300
Changes in assets and liabilities
associated with operations:
Decrease in receivables 3,066,700 4,900
Decrease (increase) in
inventories (865,200) 511,000
Decrease in prepaid expenses 89,600 157,100
Decrease in accounts payable (795,400) (476,200)
Decrease in other payables
and accrued expenses (2,036,300) (1,164,400)
----------- -----------
Net cash provided by
(used in) operating
activities 380,800 (137,800)
----------- -----------
Cash flows from investing activities:
Capital expenditures (86,500) (81,600)
Increase in deferred charges - (200,500)
Net (increase) decrease in other
noncurrent assets (13,700) 4,500
----------- -----------
Net cash used in
investing activities (100,200) (277,600)
----------- -----------
</TABLE>
(Continued)
4
<PAGE> 7
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Net additions under line of credit
agreement $ 300,000 $ 1,600,000
Principal payments on long-term debt (303,700) (899,500)
Acquisition of treasury stock - (91,000)
Payment of cash dividends (138,000) -
----------- -----------
Net cash provided by
(used in) financing
activities (141,700) 609,500
----------- -----------
Net increase in cash 138,900 194,100
Cash at beginning of year 331,600 317,700
----------- -----------
Cash at end of period $ 470,500 $ 511,800
=========== ===========
</TABLE>
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 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 months ended March 31,
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:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- -----------
<S> <C> <C>
Finished Products $6,580,800 $6,001,600
Raw Materials 2,554,000 2,268,000
---------- ----------
$9,134,800 $8,269,600
========== ==========
</TABLE>
3. Property, plant and equipment at March 31, 1996 and December 31, 1995,
consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Land $ 2,319,800 $ 2,319,800
Buildings and improvements 3,643,800 3,539,900
Machinery and equipment 20,470,000 19,998,800
Office furniture and fixtures 996,600 971,800
Automotive equipment 105,000 105,000
Construction in progress 311,600 825,000
----------- -----------
27,846,800 27,760,300
Less accumulated depreciation 14,629,100 14,079,900
----------- -----------
$13,217,700 $13,680,400
=========== ===========
</TABLE>
6
<PAGE> 9
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 as of March 31, 1996 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 March 31,
1996, presentation.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31:
Net sales increased $286,800 or 3% to $10,421,100 for the quarter ended March
31, 1996 from $10,134,300 for the same period in 1995.
Gross profits increased to $4,173,100 for the three months ended March 31, 1996
from $3,831,800 for the same period in 1995. The gross profit percentage
increased by 2% from 38% for the quarter ended March 31, 1995 to 40% for the
quarter ended March 31, 1996. The increase in the gross profit percentage is
primarily attributable to changes in the sales product mix in the first quarter
of 1996 as compared to the first quarter of 1995. The primary components of
the change in the gross profit percentage were increased sales of higher profit
Pentachloronitrobenzene ("PCNB") products offset by decreased sales of lower
profit Bidrin(R). Although not having a significant impact on the change in
gross profit percentage, sales of Metam Sodium products and Pest Strip products
were up significantly in the first quarter of 1996 but were offset by lower
sales of Naled products, Napthalene Acetic Acid ("NAA") products and
Phosdrin(R).
Operating expenses, which are net of other income, decreased by $361,200 to
$3,356,900 for the quarter ended March 31, 1996 as compared to $3,718,100 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 approximately
$88,600 primarily as a result of decreased royalties and
rebates in connection with reduced sales of Bidrin(R) as
mentioned above.
o General and administrative expenses increased approximately
$164,700 primarily due to an increase in outside professional
fees.
o Research and development expenses decreased by approximately
$666,300 primarily due to a decrease in costs incurred to
generate scientific data related to registration of several of
the Company's products.
o Shipping and receiving costs increased by approximately
$229,000, the most significant portion of which was due to
increased trucking and rail freight costs in
8
<PAGE> 11
connection with the increased sales activity of Metam Sodium
products.
Interest costs were $260,900 during the three months ended March 31, 1996 as
compared to $244,300 for the same period in 1995. The average level of
borrowing under the Company's line of credit agreement was approximately
$5,350,500 for the first quarter of 1996 as compared to $8,517,800 for the same
period in 1995. The average level of other long-term debt was $6,653,300 for
the first quarter of 1996 as compared to $4,154,800 for the same period in
1995. On a combined basis, the Company's average debt for the first quarter of
1996 was $12,003,800 as compared to $12,672,600 for the first quarter of 1995.
While interest rates have slightly decreased since the first quarter of 1995,
the change in debt composition to higher levels of longer-term debt with its
slightly higher rates has tended to offset any decline in interest expense.
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 (as previously mentioned), crop growing cycles,
changes in product mix of sales and ordering patterns that may vary in timing,
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.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $16,374,500 reflecting an increase of $679,900 over working
capital of $15,694,600 at December 31, 1995. With net income of $334,500,
depreciation and amortization of $586,900 and a reduction in receivables of
$3,066,700, the Company generated cash flow of $3,988,100 the substantial
portion of which was used to increase inventories by $865,200, reduce trade
accounts payable by $795,400 and reduce accrued expenses and other payables by
$2,036,300. Inventories were increased to meet expected sales forecasts. The
decrease in accrued expenses and other payables related primarily to payments
of product
9
<PAGE> 12
rebates to customers and payment of 1995 income tax liabilities. Additionally,
the Company declared and paid cash dividends of approximately $138,000 during
the first quarter of 1996 and made capital improvements of $86,500.
The Company had $6,300,000 in availability under its fully-secured $10,500,000
long-term line of credit as of March 31, 1996, a decrease of $300,000 from the
amount available as of December 31, 1995. The Company made principal payments
on its long-term debt and capital leases of $303,700 during the quarter ended
March 31, 1996.
Management believes current financial resources (working capital and 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.
10
<PAGE> 13
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 - FDS
(b) The Company did not file any reports on Form 8-K during the three
months ended March 31, 1996.
11
<PAGE> 14
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 13, 1996 By: /s/ ERIC G. WINTEMUTE
------------------------------
Eric G. Wintemute
President, Chief Executive
Officer and Director
Dated: May 13, 1996 By: /s/ J. A. BARRY
-----------------------------
J. A. Barry
Vice President
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 470,500
<SECURITIES> 0
<RECEIVABLES> 12,419,300
<ALLOWANCES> 0
<INVENTORY> 9,134,800
<CURRENT-ASSETS> 22,516,000
<PP&E> 27,846,800
<DEPRECIATION> 14,629,100
<TOTAL-ASSETS> 36,702,100
<CURRENT-LIABILITIES> 6,141,500
<BONDS> 10,701,400
0
0
<COMMON> 256,400
<OTHER-SE> 17,945,500
<TOTAL-LIABILITY-AND-EQUITY> 36,702,100
<SALES> 10,421,100
<TOTAL-REVENUES> 10,421,100
<CGS> 6,248,000
<TOTAL-COSTS> 6,248,000
<OTHER-EXPENSES> 3,356,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258,700
<INCOME-PRETAX> 557,500
<INCOME-TAX> 223,000
<INCOME-CONTINUING> 334,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 334,500
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
