<PAGE> 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 MARCH 31, 1997
[ ] 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 -- 2,507,829 shares as of March 31, 1997
<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, 1997 and 1996 1
Consolidated Balance Sheets
as of March 31, 1997, and
December 31, 1996 2
Consolidated Statements of Cash Flows
for the three months ended
March 31, 1997 and 1996 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
----------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales $10,583,600 $10,421,100
Cost of sales 6,431,800 6,248,000
----------- -----------
Gross profit 4,151,800 4,173,100
Operating expenses 3,881,000 3,356,900
----------- -----------
Operating income 270,800 816,200
Interest expense (355,700) (260,900)
Interest income 4,700 2,200
----------- -----------
Income (loss) before income tax (80,200) 557,500
Income tax (expense) benefit 24,100 (223,000)
----------- -----------
Net income (loss) $ (56,100) $ 334,500
=========== ===========
Net income (loss) per common share $ (.02) $ .13
=========== ===========
Weighted average number
of shares outstanding 2,507,829 2,522,079
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash $ 342,000 $ 632,400
Receivables:
Trade 18,328,400 16,529,900
Other 110,300 198,800
----------- -----------
18,438,700 16,728,700
----------- -----------
Inventories 14,758,400 11,350,300
Prepaid expenses 1,156,200 653,600
----------- -----------
Total current assets 34,695,300 29,365,000
Property, plant and
equipment, net 12,713,900 12,927,500
Land held for development 210,800 210,800
Cost in excess of assets
acquired, net 3,471,800 3,532,200
Deferred charges, net 1,630,800 1,660,100
Other assets 301,800 332,700
----------- -----------
$53,024,400 $48,028,300
=========== ===========
</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, December 31,
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
Current liabilities:
Current installments of
long-term debt $ 1,253,600 $ 1,160,500
Accounts payable 4,200,600 3,002,300
Accrued expenses 2,236,100 4,750,600
Accrued royalty obligation-
current portion 1,600,000 1,600,000
Income taxes payable 119,000 946,200
Legal settlements payable 52,500 52,500
----------- -----------
Total current liabilities 9,461,800 11,512,100
Notes payable to bank 14,564,000 7,000,000
Long-term debt, excluding
current installments 4,062,000 4,373,100
Accrued royalty obligation-
excluding current portion 3,062,000 3,062,000
Deferred income taxes 2,695,600 2,695,600
----------- -----------
Total liabilities 33,845,400 28,642,800
----------- -----------
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 2,564,429
shares 256,400 256,400
Additional paid-in capital 3,879,000 3,879,000
Retained earnings 15,402,500 15,609,000
----------- -----------
19,537,900 19,744,400
Treasury stock at cost
(56,600 shares) 358,900 358,900
----------- -----------
Total stockholders' equity 19,179,000 19,385,500
----------- -----------
$53,024,400 $48,028,300
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1996, 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, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income (loss) $ (56,100) $ 334,500
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 678,500 586,900
Changes in assets and liabilities
associated with operations:
Decrease (increase) in
receivables (1,710,000) 3,066,700
Increase in inventories (3,408,100) (865,200)
Decrease (increase) in
prepaid expenses (502,600) 89,600
Increase (decrease) in
accounts payable 1,198,300 (795,400)
Decrease in other payables
and accrued expenses (3,341,700) (2,036,300)
------------ ------------
Net cash provided by
(used in) operating
activities (7,141,700) 380,800
------------ ------------
Cash flows from investing activities:
Capital expenditures (340,000) (86,500)
Increase in deferred charges (1,600) -
Net increase in other noncurrent
assets (2,700) (13,700)
------------ ------------
Net cash used in
investing activities (344,300) (100,200)
------------ ------------
</TABLE>
(Continued)
4
<PAGE> 7
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net additions under lines of credit
agreements $ 7,564,000 $ 300,000
Principal payments on long-term debt (218,000) (303,700)
Payment of cash dividends (150,400) (138,000)
----------- -----------
Net cash provided by
(used in) financing
activities 7,195,600 (141,700)
----------- -----------
Net increase (decrease)
in cash (290,400) 138,900
Cash at beginning of year 632,400 331,600
----------- -----------
Cash at end of period $ 342,000 $ 470,500
=========== ===========
</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,
1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996.
2. Inventories - The components of inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- ------------
<S> <C> <C>
Finished products $11,441,000 $ 8,108,800
Raw materials 3,317,400 3,241,500
----------- -----------
$14,758,400 $11,350,300
=========== ===========
</TABLE>
3. Property, plant and equipment at March 31, 1997 and December 31, 1996,
consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
<S> <C> <C>
Land $ 2,382,600 $ 2,382,600
Buildings and improvements 3,816,400 3,812,300
Machinery and equipment 20,710,700 20,677,000
Office furniture and fixtures 1,062,600 1,031,400
Automotive equipment 105,000 105,000
Construction in progress 1,474,500 1,203,500
----------- -----------
29,551,800 29,211,800
Less accumulated depreciation 16,837,900 16,284,300
----------- -----------
$12,713,900 $12,927,500
=========== ===========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. On March 12, 1997, the Company announced that the Board of Directors
declared a cash dividend of $.06 per share. The dividend was paid on
March 31, 1997 to stockholders of record as of March 20, 1997.
In February 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.
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,
1997, 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 $162,500 or 1.5% to $10,583,600 for the quarter ended March
31, 1997 from $10,421,100 for the same period in 1996.
Gross profits of $4,151,800 for the three months ended March 31, 1997 remained
virtually unchanged as compared to $4,173,100 for the same period in 1996. The
gross profit percentage decreased by 1% from 40% for the quarter ended March 31,
1996 to 39% for the quarter ended September 30, 1997. Although several product
groups experienced minor declines during the quarter ended March 31, 1997, sales
of Metam Sodium products increased significantly thereby offsetting the declines
in other product groups and pushing first quarter sales to the record high level
of $10,583,600. The increase in sales of Metam Sodium products was primarily
attributable to the acquisition in December 1996 (from Zeneca, Inc.) of the
rights to manufacture and sell the Vapam(R) label of Metam Sodium products.
Despite the higher sales in the first quarter of 1997, the gross profit declined
slightly primarily as a result of competitive pricing pressures in the Metam
Sodium market.
Operating expenses, which are net of other income, increased by $524,100 to
$3,881,000 for the quarter ended March 31, 1997 as compared to $3,356,900 for
the same period in 1996.
The differences in operating expenses by specific departmental costs are as
follows:
o Selling and regulatory expenses remained relatively constant
with a minor increase of $10,300 to $1,118,300 from $1,108,000
for the prior year first quarter. The Company, to support and
grow the Vapam(R) product line, made investments in its
technical, sales and marketing infrastructure which included
the hiring of additional technical and sales individuals. The
costs of these investments were offset by a decline of certain
other variable selling costs in the quarter ended March 31,
1997 when compared to the same period in 1996.
o General and administrative expenses increased $177,100 to
$989,200 from $812,100 for the first quarter of 1996 primarily
due to the commencement of amortization of intangible assets
acquired in connection with the acquisition of Vapam(R) (from
Zeneca, Inc.) in the amount of $78,800 and the recognition of
$91,300 in expenses in connection with the hiring of an
executive officer of AMVAC during the fourth quarter of 1996.
o Research and development expenses increased by $217,400 to
$896,400 over the prior year first quarter level of $679,000
primarily due to an increase in costs incurred to generate
scientific data related to registration of the Company's
products.
8
<PAGE> 11
o Shipping and receiving costs increased by $119,300 to $877,100
from $757,800 for the first quarter of 1996 primarily due to
increased freight, storage and rail car fleet expenses
incurred in connection with the increased activity in the
Metam Sodium product group.
Interest costs were $355,700 during the three months ended March 31, 1997 as
compared to $260,900 for the same period in 1996. The average level of
borrowing under the Company's lines of credit was approximately $11,647,400 for
the first quarter of 1997 as compared to $5,350,500 for the same period in
1996. The average level of other long-term debt was $5,424,600 for the first
quarter of 1997 as compared to $6,653,300 for the same period in 1996. On a
combined basis the Company's average debt for the first quarter of 1997 was
$17,072,000 as compared to $12,003,800 for the first quarter of 1996. While
interest rates have remained fairly stable since the first quarter of 1996, the
increase in combined average debt of $5,068,200 is the reason for the increase
in interest expense in the first quarter of 1997.
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.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at March 31, 1997 was $25,233,500 reflecting an increase of
$7,380,600 over working capital of $17,852,900 at December 31, 1996. The
Company's cash used in operations was $7,141,700 for the first quarter of 1997
driven primarily by an increase in accounts receivable of $1,710,000 as a
result of sales with extended terms, an increase in inventories of $3,408,100
to meet forecasted sales and payments of accrued rebates, royalties income
taxes and other accruals of $3,341,700
9
<PAGE> 12
offset partially by depreciation and amortization of $678,500 and an increase
in accounts payable of $1,198,300. The remaining cash used in operations was
funded by an increase in debt under the Company's lines of credit in the amount
of $7,564,000. Additionally, the Company declared and paid cash dividends of
$150,400 during the first quarter of 1997 and made capital improvements of
$340,000.
The Company had $2,400,000 in availability under its fully-secured $15,500,000
revolving line of credit as of March 31, 1997, a decrease of $6,100,000 from
the amount available as of December 31, 1996. The Company had $3,536,000 in
availability under its fully-secured $5,000,000 long-term acquisition line of
credit as of March 31, 1997. No amounts had been borrowed under the
acquisition line of credit as of December 31, 1996. The Company made principal
payments on its other long-term debt and capital leases of $218,000 during the
quarter ended March 31, 1997.
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 judgment as of the
date of this report. The Company disclaims, however, any intent or obligation
to update forward-looking statements.
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 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
three months ended March 31, 1997.
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, 1997 By: /s/ ERIC G. WINTEMUTE
-----------------------------
Eric G. Wintemute
President, Chief Executive
Officer and Director
Dated: May 13, 1997 By: /s/ J. A. BARRY
-----------------------------
J. A. Barry
Vice President
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 342,000
<SECURITIES> 0
<RECEIVABLES> 18,438,700
<ALLOWANCES> 0
<INVENTORY> 14,758,400
<CURRENT-ASSETS> 34,695,300
<PP&E> 29,551,800
<DEPRECIATION> 16,837,900
<TOTAL-ASSETS> 53,024,400
<CURRENT-LIABILITIES> 9,461,800
<BONDS> 19,879,600
0
0
<COMMON> 256,400
<OTHER-SE> 18,922,600
<TOTAL-LIABILITY-AND-EQUITY> 53,024,400
<SALES> 10,583,600
<TOTAL-REVENUES> 10,583,600
<CGS> 6,431,800
<TOTAL-COSTS> 6,431,800
<OTHER-EXPENSES> 3,881,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 351,000
<INCOME-PRETAX> (80,200)
<INCOME-TAX> (24,100)
<INCOME-CONTINUING> (56,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56,100)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
