<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE YEAR ENDED DECEMBER 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Common Stock, $.10 par value
Securities registered pursuant to Section 12(g) of the Act: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The number of shares of $.10 par value Common Stock outstanding as of March 23,
1998, was 2,507,582. The aggregate market value of the voting stock of the
registrant held by non-affiliates at March 23, 1998, was $9,601,700. For
purposes of this calculation, shares owned by executive officers, directors, and
5% stockholders known to the registrant have been deemed to be owned by
affiliates.
<PAGE> 2
AMERICAN VANGUARD CORPORATION
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PART I PAGE NO.
<S> <C>
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of
Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 11
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operation 15
Item 8. Financial Statements and Supplementary
Data 22
Item 9. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure 22
PART III
Item 10. Directors and Executive Officers of the
Registrant 23
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain
Beneficial Owners and Management 29
Item 13. Certain Relationships and Related
Transactions 31
PART IV
Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K 32
SIGNATURES 33
</TABLE>
<PAGE> 3
PART I
This Report contains forward-looking statements and includes
assumptions concerning the Company's operations, future results and prospects.
These forward-looking statements are based on current expectations and are
subject to a number of risks, uncertainties and other factors. In connection
with the Private Securities Litigation Reform Act of 1995, the Company provides
the following cautionary statements identifying important factors which, among
other things, could cause the actual results and events to differ materially
from those set forth in or implied by the forward- looking statements and
related assumptions contained in the entire Report. Such factors include, but
are not limited to: product demand and market acceptance risks; the effect of
economic conditions; weather conditions; the impact of competitive products and
pricing; changes in foreign exchange rates; product development and
commercialization difficulties; capacity and supply constraints or difficulties;
availability of capital resources; general business and economic conditions; and
changes in government laws and regulations, including taxes.
ITEM 1 BUSINESS
American Vanguard Corporation was incorporated under the laws of
the State of Delaware in January 1969 and operates as a holding company. Unless
the context otherwise requires, references to the "Company", or the "Registrant"
in this Annual Report refer to American Vanguard Corporation and its
consolidated subsidiaries. The Company conducts its business through its
wholly-owned subsidiaries, Amvac Chemical Corporation ("AMVAC"), GemChem, Inc.
("GemChem"), 2110 Davie Corporation ("DAVIE"), and AMVAC Chemical UK Ltd.,
(Refer to Export Operations).
GEMCHEM, INC.
GemChem is a California corporation incorporated in 1991 and
purchased by the Company in 1994. GemChem is a national chemical distributor.
GemChem, in addition to representing AMVAC as its domestic sales force, also
sells into the pharmaceutical, cosmetic and nutritional markets. Prior to the
acquisition, GemChem acted in the capacity as the domestic sales force for the
Company (from September 1991).
1
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2110 DAVIE CORPORATION
Effective September 30, 1989, the Company sold substantially all
operating assets of DAVIE.
DAVIE currently invests in real estate for corporate use only.
See also PART I, Item 2 of this Annual Report.
AMVAC
AMVAC is a California corporation that traces its history from
1945. AMVAC is a specialty chemical manufacturer that develops and markets
products for agricultural and commercial uses. It manufactures and formulates
chemicals for crops, human and animal health protection. These chemicals which
include insecticides, fungicides, molluscicides, growth regulators, and soil
fumigants, are marketed in liquid, powder, and granular forms. AMVAC's business
is continually undergoing an evolutionary change. Years ago AMVAC considered
itself a distributor-formulator, but now primarily manufactures, distributes,
and formulates its own proprietary products or custom manufactures or formulates
for others.
In January 1997, AMVAC purchased the rights, title and interest
to Vapam(R) (Metam Sodium), a soil fumigant, from Zeneca, Inc. The official
closing was December 31, 1996. The purchase included all inventories of
Vapam(R), Environmental Protection Agency ("EPA") registration rights issued
under the Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA") and
certain other assets. AMVAC has manufactured Metam Sodium at its Los Angeles
facility since 1988. AMVAC will pay Zeneca a royalty on all Metam Sodium sold by
AMVAC in the United States, Canada and Mexico in accordance with the terms and
conditions of a definitive agreement.
In November of 1993, AMVAC purchased from E.I. du Pont de Nemours
& Company ("Du Pont") the rights, title and interest in Bidrin(R), an
insecticide for cotton crops, including EPA registration rights issued under
FIFRA. The Company purchased Du Pont's inventory of Bidrin(R) at Du Pont's
approximate cost, and will pay a royalty on all Bidrin(R) sold by the Company to
customers in the United States through December 1997.
The chemical industry in general is cyclical in nature. The
demand for AMVAC's products tends to be slightly seasonal. Seasonal usage,
however, does not necessarily follow calendar dates, but more closely follows
varying growing seasonal patterns, weather conditions and weather related
pressure from pests, and customer marketing programs and requirements.
The Company does not believe that backlog is a significant factor
in its business. The Company primarily sells its products on the basis of
purchase orders, although it has entered into requirements contracts with
certain customers.
ConAGRA, Inc. accounted for 29% of the Company's sales in 1997.
ConAGRA, Inc. and Terra International accounted for 33% and 10%, respectively of
the Company's sales in 1996. ConAGRA, Inc., Terra International, Sumitomo
Chemical and Ciba Geigy
2
<PAGE> 5
Corporation accounted for 24%, 14%, 11% and 10%, respectively, of the Company's
sales in 1995.
COMPETITION
AMVAC faces competition from many domestic and foreign
manufacturers in its marketplaces. Competition in AMVAC's marketplace is based
primarily on efficacy, price, safety and ease of application. Many of such
competitors are larger and have substantially greater financial and technical
resources than AMVAC. AMVAC's ability to compete depends on its ability to
develop additional applications for its current products and expand its product
lines and customer base. AMVAC competes principally on the basis of the quality
of its products and the technical service and support given to its customers.
The inability of AMVAC to effectively compete in several of AMVAC's principal
products would have a material adverse effect on AMVAC's results of operations.
Generally, the treatment against pests of any kind is broad in
scope, there being more than one way or one product for treatment, eradication,
or suppression. The Company has attempted to position AMVAC in small niche
markets in order to reduce the impact of competition. These markets are small by
nature, require significant and intensive management input, ongoing product
research, and are near product maturity. These types of markets tend not to
attract larger chemical companies due to the smaller volume demand, and larger
chemical companies have been divesting themselves of products that fall into
such niches as is evidenced by AMVAC's successful acquisitions of Vapam(R),
Bidrin(R) and NAA.
AMVAC's proprietary product formulations are protected to the
extent possible as trade secrets and, to a lesser extent, by patents and
trademarks. Although AMVAC considers that, in the aggregate, its trademarks,
licenses, and patents constitute a valuable asset, it does not regard its
business as being materially dependent upon any single or several trademarks,
licenses, or patents. AMVAC's products also receive protection afforded by the
effect of FIFRA legislation that makes it unlawful to sell any pesticide in the
United States unless such pesticide has first been registered by the EPA as well
as under state laws of similar effect. Substantially all of AMVAC's products are
subject to EPA registration and re-registration requirements and are
conditionally registered in accordance with FIFRA. This licensing by EPA is
based, among other things, on data demonstrating that the product will not cause
unreasonable adverse effects on human health or the environment when it is used
according to approved label directions. All states where any of AMVAC's products
are used require a registration by that specific state before it can be marketed
or used. State registrations are renewed annually, as appropriate. The EPA and
state agencies have required, and may require in the future, that certain
scientific data requirements be performed on registered products sold by AMVAC.
AMVAC, on its own behalf and in joint efforts with other suppliers, has, and is
currently furnishing, certain required data relative to specific products.
3
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Under FIFRA, the federal government requires registrants to
submit a wide-range of scientific data to support U.S. registrations. This has
significantly increased AMVAC's operating expenses in such areas as testing and
the production of new products. This regulation makes AMVAC products less
vulnerable to direct competition, however more vulnerable because of significant
cost increases which the Company may not have the ability to pass on. AMVAC
expensed $2,241,300, $1,932,700, and $3,717,400 during 1997, 1996 and 1995,
respectively, related to gathering this information. Based on facts known today,
AMVAC estimates it will spend approximately $3,200,000 in 1998. Because
scientific analyses are constantly improving, it cannot be determined with
certainty whether or not material new or additional tests may be required by the
regulatory authorities. Additionally, while FIFRA Good Laboratory Practice
standards specify the minimum practices and procedures which must be followed in
order to ensure the quality and integrity of data related to these tests
submitted to the EPA, there can be no assurance the EPA will not request certain
tests/studies be repeated. AMVAC expenses these costs on an incurred basis. See
also PART I, Item 7 of this Annual Report for discussions pertaining to research
and development expenses.
RAW MATERIALS
The Company utilizes numerous firms as well as internal sources
to supply the various raw materials and components used by AMVAC in
manufacturing its products. Many of these materials are readily available from
domestic sources. In those instances where there is a single source of supply or
where the source is not domestic, the Company seeks to secure its supply by
either long-term arrangements or advance purchases from its suppliers. The
Company believes that it is considered to be a valued customer to such
sole-source suppliers.
ENVIRONMENTAL
During 1997 AMVAC continued activities to address environmental
conditions at the railroad right-of-way which is located adjacent to AMVAC's
Commerce California facility (the "Facility"). The railroad right-of-way is
jointly owned by the Union Pacific Railroad and the Burlington Northern and
Santa Fe Railway Company, and is managed on behalf of both companies by the
latter. The site investigation and remediation activities have been conducted
pursuant to a January 10, 1996, enforceable agreement and order entered into by
AMVAC and the California Department of Toxic Substances Control ("DTSC").
A site investigation and health risk assessment were conducted
and completed by AMVAC during the first two quarters of 1997. AMVAC prepared a
draft Remedial Action Plan ("RAP") in May, 1997 which evaluated several options
for remediating soils at the railroad right-of-way. The RAP concluded that the
most appropriate option for remediation was the excavation and offsite disposal
of soils which exceeded risk-based cleanup levels. DTSC approved the draft RAP
on June 25, 1997. Remedial activities commenced on July 4, 1997 and were
completed on July 12, 1997. A post-remediation report
4
<PAGE> 7
was prepared by AMVAC and submitted to DTSC on October 13, 1997. AMVAC is
currently awaiting DTSC approval of the remedial activities.
In March, 1997 the Facility was accepted into the DTSC's
Expedited Remedial Action Program ("ERAP"). The remaining environmental
investigation and any remediation activities related to the ten underground
storage tanks at the Facility which had been closed in 1995 will be addressed by
AMVAC under ERAP. Soil characterization activities at other areas of the
Facility are expected to commence in the second or third quarter of 1998 and to
be conducted in phases over the next two to three years. These activities are
required at all facilities which currently have, or in the past had, hazardous
waste management permits, because AMVAC previously held a hazardous waste
storage permit. AMVAC is subject to these requirements.
The Company is subject to numerous federal and state laws and
governmental regulations concerning environmental matters and employee health
and safety. The Company continually adapts its manufacturing process to the
environmental control standards of various regulatory agencies. The EPA and
other federal and state agencies have the authority to promulgate regulations
that could have an impact on the Company's operations.
AMVAC expends substantial funds to minimize the discharge of
materials into the environment and to comply with the governmental regulations
relating to protection of the environment. Wherever feasible, AMVAC recovers raw
materials and increases product yield by recycling in order to partially offset
increasing pollution abatement costs.
The Company is committed to a long-term environmental protection
program that reduces emissions of hazardous materials into the environment, as
well as to the remediation of identified existing environmental concerns.
Federal and state authorities may seek fines and penalties for violation of the
various laws and governmental regulations. As part of its continuing
environmental program, except as disclosed in PART I, Item 3, Legal Proceedings,
of this Annual Report, the Company has been able to comply with such proceedings
and orders without any materially adverse effect on its business.
The Company continues to make compliance with environmental
requirements an important company policy. As environmental quality requirements
and standards become stricter, the Company may have to incur additional
substantial costs to maintain regulatory compliance.
EMPLOYEES
As of March 23, 1998, the Company employed approximately 200
persons. This figure includes approximately 20 temporary (full-time) individuals
hired as contract personnel. AMVAC, on an ongoing basis, due to the seasonality
of its business, uses temporary contract personnel to perform certain duties
primarily related to packaging of its products. The Company believes it is cost
5
<PAGE> 8
beneficial to employ temporary contract personnel. None of the Company's
employees are subject to a collective bargaining agreement.
The Company believes it maintains positive relations with its
employees.
EXPORT OPERATIONS
The Company opened an office in August 1994, in the United
Kingdom to conduct business in the European chemical market. The new office,
operating under the name AMVAC Chemical UK Ltd., focuses on developing product
registration and distributor networks for AMVAC's product lines throughout
Europe. The office is located in Surrey, England, a city southwest of London.
The operating results of this operation were not material to the Company's total
operating results for the years ended December 31, 1997 and 1996.
The Company arranges most of its foreign sales through
export/import brokers. The Company classifies as export sales all products
bearing foreign labeling shipped to a foreign destination.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Export Sales $6,646,000 $3,535,500 $3,374,700
</TABLE>
INSURANCE
Management believes its facilities and equipment are adequately
insured against loss from usual business risks. The Company has purchased claims
made products liability insurance. There can be no assurance, however, that such
products liability coverage insurance will continue to be available to the
Company, or if available, that it will be provided at an economical cost to the
Company.
6
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ITEM 2 PROPERTIES
The Company's corporate headquarters are located in Newport
Beach, California. This facility is leased. See PART IV, Item 14, Note 11 of
this report for further information.
AMVAC owns in fee approximately 152,000 square feet of improved
land in Commerce, California, on which substantially all of its plant and some
of its warehouse facilities and offices are located.
DAVIE owns in fee approximately 72,000 square feet of warehouse
and office space on approximately 118,000 square feet of land in Commerce,
California, which is leased to AMVAC.
AMVAC's manufacturing facilities are divided into five
cost-centers; Vapam (Metam Sodium), PCNB, granular products, small packaging,
and the production and formulation of all other products. All production areas
are designed to run on a continuous twenty-four hour per day basis.
AMVAC regularly adds chemical processing equipment to enhance its
production capabilities. AMVAC believes its facilities are in good operating
condition and are suitable and adequate for AMVAC's foreseeable needs, have
flexibility to change products, and can produce at greater rates as required.
Facilities and equipment are insured against losses from fire and other usual
business risks. The Company knows of no material defects in title to, or
encumbrances on, any of its properties except that substantially all of the
Company's assets are pledged as collateral under the Company's loan agreements
with its primary lender. For further information, refer to Note 3 of the Notes
to the Consolidated Financial Statements in PART IV, Item 14 of this Annual
Report.
AMVAC purchased unimproved land in Texas for possible future
expansion.
GemChem's facilities consist of administration and sales offices
which are leased.
The Company believes its properties to be suitable and adequate
for its current purposes.
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ITEM 3 LEGAL PROCEEDINGS
DBCP LAWSUITS
A. CALIFORNIA MATTERS
In 1997, Amvac was served with a Complaints in two actions filed
in the San Francisco Superior Court entitled the Sultana Community Services
District v. Shell Oil Co., et.al. and the County of San Joaquin v. Shell Oil
Co., et. al. Both Complaints allege property damage resulting from
Dibromochloropropane ("DBCP") contamination of water supply. Both complaints
name as defendants AMVAC, Shell Oil Company, Dow Chemical Company, Occidental
Chemical Company, Chevron Chemical Company, and Velsicol Chemical Company. In
Sultana Plaintiff has not produced documentation to support its claim for
damage. Any damages proven may be significantly offset by Plaintiff's receipt of
a Government grant for a new well. In County of San Joaquin discovery is
proceeding slowly and the claims are subject to a statute of limitation defense.
It is currently impossible to predict the outcome or the cost that will be
involved in the defense of this matter.
B. HAWAII MATTERS
AMVAC and the Company were served with Complaints, on February 7,
1997 and March 4, 1997 respectively, in the action filed in the Circuit Court of
the Second Circuit, State of Hawaii entitled Board of Water Supply of the County
of Maui v. Shell Oil Co., et.al. The suit names as defendants AMVAC, Shell Oil
Company, The Dow Chemical Company, Occidental Chemical Company, Occidental
Petroleum Corporation, Occidental Chemical Corporation, and Brewer Environmental
Industry, Inc. The Compliant alleges property damage resulting from DBCP
contamination of the Board's water wells. Jurisdictional disputes have delayed
any formal discovery and there remain numerous procedural defenses. It is
currently impossible to predict the outcome or the cost that will be involved in
the defense of this matter.
On October 20, 1997, AMVAC was served with a Complaint in which
it was named as a Defendant, filed in the Circuit Court, First Circuit, state of
Hawaii entitled Patrickson, et.al. v. Dole Food Co., et.al. alleging damages
sustained from injuries caused by Plaintiff's exposure to DBCP while applying
the product in their native countries. Other named defendants are: Dole Food
Co., Dole Fresh Fruit, Dole Fresh Fruit International, Pineapple Growers
Association of Hawaii, Shell Oil Company, Dow Chemical Company, Occidental
Chemical Corporation, Standard Fruit Company, Standard Fruit & Steamship,
Standard Fruit company De Costa Rica, Standard Fruit company De Honduras,
Chiquita Brands, Chiquita Brands International, Martrop Trading corporation, and
Del Monte Fresh Produce. The case has been removed to U.S. District Court.
Defendants are waiting for the Court's ruling on their Motion to Dismiss based
on numerous procedural grounds. It is currently impossible to predict the
outcome or the cost that will be involved in the defense of this matter.
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C. MISSISSIPPI MATTERS
On May 30,1996, AMVAC was served with five Complaints in which it
is named as a Defendant. Other named defendants are: Coahoma Chemical Co. Inc.,
Shell Oil Company, Dow Chemical Co., Occidential Chemical Co., Standard Fruit
Co., Standard Fruit and Steamship Co., Dole Food Co., Inc., Dole Fresh Fruit
Co., Chiquita Brands, Inc., Chiquita Brands International, Inc. and Del Monte
Fresh Produce, N.A. The cases were filed in the Circuit Court of Harrison
County, First Judicial District of Mississippi. Each case alleged damages
sustained from injuries caused by Plaintiff's exposure to DBCP while applying
the product in their native countries. These cases have been removed to U.S.
District Court for the Southern District of Mississippi, Southern Division.
Three of the cases were conditionally dismissed. Another case was closed for
administrative purposes due to its similarity to the other matters. Only one
case is still open but no substantive activity has occurred since its filing. It
is currently impossible to predict the outcome or the cost that will be involved
in the defense of these matters.
PHOSDRIN(R) LAWSUIT
On September 21, 1995, AMVAC was served with a complaint filed in
the Superior Court of King County, Washington on September 12, 1995 entitled
Ricardo Ruiz Guzman, et. al. v. Amvac Chemical Corporation, et. al. (the "Guzman
Case"). The Complaint is for unspecified monetary damages based on Plaintiffs'
(farm workers') alleged injuries from their exposure to the pesticide
Phosdrin(R). On October 14, 1997 the Court dismissed with prejudice all
Plaintiffs' claims against AMVAC. Plaintiffs have appealed the judgement to the
United States Court of Appeals for the Ninth Circuit. It is currently impossible
to predict the outcome of the matter. AMVAC's insurance carrier has assumed
costs of the appeal.
NAA DATA TRADE SECRET
On November 1, 1996 AMVAC filed an action in U.S. District Court
in Oregon against four defendants relating to their misuse of AMVAC's exclusive
right associated with Naphthalene Acetic Acid ("NAA") (Amvac Chemical
Corporation v. Termilind, Inc., et.al.). On November 25, 1996, defendants
Termilind and Inchema asserted counterclaims against AMVAC: violation of
antitrust laws (Sherman Act section 2 and ORS 646.730), unfair competition,
tortious interference, defamation, and breach of contract. Termilind and Inchema
seek treble damages in the amount of $6 million for the antitrust claims, and
compensatory damages in the amount of $2 million, together with punitive and
exemplary damages. On November 1, 1996, AMVAC filed a demand for arbitration
with the American Arbitration Association seeking approximately $8 million in
compensation from Termilind. It is impossible to predict the outcome or the cost
that will be involved with this matter.
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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 1997 to a vote
of security holders, through the solicitation of proxies or otherwise.
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PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On January 27, 1998 the Company announced the listing of its
$0.10 par value common stock ("Common Stock") on the American Stock Exchange
under the ticker symbol AVD. The Company's Common Stock traded on The NASDAQ
Stock Market under the symbol AMGD from March 3, 1987 through January 26, 1998.
The following table sets forth the range of high and low sales
prices as reported on NASDAQ's National Market System for the Company's Common
Stock for the calendar quarters indicated.
<TABLE>
<CAPTION>
Calendar 1997 HIGH LOW
------ -----
<S> <C> <C>
First Quarter 8 3/4 6 1/4
Second Quarter 8 1/16 6 1/4
Third Quarter 10 7/8 6 7/8
Fourth Quarter 10 5 5/8
Calendar 1996
First Quarter 15 1/2 4 7/8
Second Quarter 14 9 1/2
Third Quarter 7 1/2 6 1/8
Fourth Quarter 7 7/8 6 1/2
</TABLE>
The Company's share activity is reported in the Wall Street
Journal and is listed as "AMVNGRD".
As of March 23, 1998, the number of shareholders of the Company's
Common Stock was approximately 600 which includes beneficial owners with shares
held in brokerage accounts under street name and nominees.
On March 4, 1998, the Company announced that the Board of
Directors declared a cash dividend of $.07 per share which will be distributed
on March 25, 1998 to shareholders of record at the close of business on March
13, 1998.
The Company distributed a cash dividend of $.06 per share on
March 31, 1997 to shareholders of record at the close of business on March 20,
1997.
The Company distributed a $.06 cash dividend and a 10% stock
dividend on March 15, 1996 to shareholders 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. Shareholders entitled to fractional
shares resulting from the 10% stock dividend received cash in lieu of such
fractional shares based on $9.50 per share.
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The Company, as disclosed above, has issued a cash dividend in
each of the last three years (1996, 1997 and 1998). There is no assurance as to
future dividends because they depend on future earnings, capital requirements,
and financial condition. In addition, the payment of dividends is subject to
certain loan covenants described in Note 3 to the Notes to Consolidated
Financial Statements, which limit payments of cash dividends to a maximum of 25%
of net income.
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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
ITEM 6 SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT FOR WEIGHTED AVERAGE NUMBER
OF SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 67,701 $ 48,628 $ 55,402 $ 45,098 $ 45,478
========== ========== ========== ========== ==========
Operating income $ 4,785 $ 3,523 $ 5,971 $ 3,346 $ 4,160
========== ========== ========== ========== ==========
Income from operations
before income tax
expense $ 3,283 $ 2,611 $ 5,043 $ 1,465 $ 3,333
========== ========== ========== ========== ==========
Net income $ 2,025 $ 1,616 $ 3,124 $ 1,203 $ 2,225
========== ========== ========== ========== ==========
Basic and diluted
net income per
common share(1) $ .81 $ .65 $ 1.23 $ .47 $ .89
========== ========== ========== ========== ==========
Total assets $ 55,206 $ 48,028 $ 39,341 $ 40,929 $ 36,025
========== ========== ========== ========== ==========
Long-term debt and capital
lease obligations, less
current portion $ 3,980 $ 4,373 $ 5,540 $ 3,695 $ 4,316
========== ========== ========== ========== ==========
Stockholders' equity $ 21,260 $ 19,386 $ 18,005 $ 15,143 $ 13,503
========== ========== ========== ========== ==========
Weighted average number
of shares(1) 2,507,829 2,472,883 2,546,471 2,562,398 2,509,536
========== ========== ========== ========== ==========
Dividends per share of
common stock(2) $ .06 $ .06 $ -- $ -- $ --
========== ========== ========== ========== ==========
</TABLE>
The selected consolidated financial data set forth above with respect to each of
the calendar years in the five-year period ended December 31, 1997, have been
derived from the Company's consolidated financial statements and are qualified
in their entirety by reference to the more detailed consolidated financial
statements and the independent certified public accountants' reports thereon
which are included elsewhere in this
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Report on Form 10-K for the three years ended December 31, 1997. See ITEM 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
- ------------------
1 All per share amounts have been restated to reflect a 10% stock dividend (see
footnote 2 below).
2 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 shareholders 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.
The Company distributed a $.06 cash dividend March 31, 1997 to shareholders
of record at the close of business on March 20, 1997.
On March 4, 1998, the Company announced that the Board of Directors declared
a cash dividend of $.07 per share to be distributed on March 25, 1998 to
shareholders of record at the close of business on March 13, 1998.
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ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
RESULTS OF OPERATIONS
1997 COMPARED WITH 1996:
The Company reported net income of $2,024,700 or $.81 per share in 1997 as
compared to net income of $1,615,500 or $.65 per share in 1996. The increase in
net income in 1997 was primarily attributable to growth of the Company. The
Company achieved record level sales in 1997, however, a decrease in the gross
profit percentage as well as an increase in interest expense incurred to finance
the growth of the Company resulted in the increase in net income not being
proportionate to the increase in sales.
Net sales increased 39% to $67,700,500 in 1997 as compared to $48,627,900 in
1996. The reason for the significant increase in sales was due to the strong
demand for certain of the Company's product lines during 1997. The $19,072,600
increase was primarily driven by increased sales of Metam Sodium, Bidrin,
Mevinphos and Naled products. The increase in Metam Sodium sales was
attributable to the acquisition of the Vapam product line in December 1996.
Sales of Mevinphos were driven by export orders which were the result of a
concentrated effort to develop foreign markets.
Gross profits increased by $7,037,000 to $27,384,900 in 1997 from
$20,347,900 in 1996. Despite the increase in gross profits, the gross profit
percentage decreased to 40.5% in 1997 from 41.8% in 1996. The gross profit
percentage in 1997 was negatively impacted due to competitive pricing pressures
for certain of the Company's products and an enhancement of the Company's PCNB
manufacturing facility. The Company invested in an octane recovery and waste
reduction system for the PCNB manufacturing facility which effort curtailed PCNB
manufacturing for approximately seventy-five days during the quarter ended
September 30, 1997. Based upon historical performance, PCNB manufacturing
operations would have absorbed in excess of one million dollars of manufacturing
costs during the seventy-five day period. The octane recovery and waste
reduction system is expected to save an estimated $350,000 per year.
Operating expenses increased by $5,775,200 to $22,600,100 in 1997 from
$16,824,900 in 1996. The following is a discussion of operating expenses:
Selling and Regulatory:
15
<PAGE> 18
Selling and regulatory expenses increased by $1,657,900 to $7,758,400 in
1997 from $6,100,500 in 1996. The Company, in order to support and grow
the Vapam product line, as well as certain other product lines, made
investments in its technical, sales and marketing infrastructure which
included the hiring of additional technical and sales individuals. This
program accounted for approximately $1,031,000 of the increase in
selling and regulatory expenses. The Company's registration related
costs, both domestically and internationally, as well as environmental
related taxes and assessments increased by approximately $221,800 due to
the growth of the Company during 1997. Variable selling expenses,
primarily rebates and royalties, accounted for the balance of the
increase in selling and regulatory expenses.
General, Administrative and Corporate:
General, administrative and corporate costs increased by $2,033,300 to
$6,212,100 in 1997 from $4,178,800 in 1996. The increase was primarily
attributable to an increase in legal fees of $1,081,000. Most of this
increase has been incurred in legal actions in which the Company is
plaintiff. General, administrative and corporate expenses also increased
in 1997 due to the amortization of goodwill purchased in connection with
the acquisition of the Vapam product line in December 1996 in the amount
of $317,600. The Company also completed railroad remediation work
related to the railroad siding matter (see additional discussion in PART
I, Item 1, Business, Environmental) which resulted in total
expenditures of approximately $526,000. The balance of the increase in
general, administrative and corporate expenses in 1997 resulted from
increases in personnel and costs related thereto.
Research and Development:
Research and development costs increased by $304,400 to $3,328,200 in
1997 from $3,023,800 in 1996 primarily as a result of increased costs to
generate scientific data related to the registration of the Company's
products. Increases in data generation costs for DDVP products,
Mevinphos products and Metam Sodium products accounted for the
majority of the increase in research and development costs. The changes
in data generation costs are a function of the status of related
research studies and current regulatory requirements.
Freight, Delivery and Warehousing:
Freight, delivery and warehousing costs increased by $1,780,400 to
$5,301,400 in 1997 from $3,521,000 in 1996. This increase was primarily
attributable to the overall increase in sales volume
16
<PAGE> 19
with most of the increase related to Metam Sodium freight, delivery and
storage costs. As a result of the acquisition of Vapam in December 1996,
the Company established additional storage sites and added additional
rail cars to its rail car fleet in order to handle the increased volume.
These costs, along with increased trucking and rail car freight charges
due to the significant increase in volume in 1997, accounted for
approximately $1,600,000 of the increase in freight, delivery and
warehousing expenses.
Interest costs were $1,513,400 in 1997 as compared to $919,900 in 1996. The
average level of borrowing under the Company's line of credit agreement
increased by $8,865,100 to $13,288,600 in 1997 from $4,423,500 in 1996. The
average level of long-term debt decreased by $1,884,000 to $4,990,900 in 1997
from $6,174,900 in 1996. On a combined basis, the Company's average debt for
1997 was $18,279,500 as compared to $10,598,400, in 1996. The significantly
higher debt during 1997, which was used to finance the growth of the Company,
accounted for the increase in interest costs.
Income tax expense increased by $262,200 to $1,258,100 in 1997 as compared to
$995,900 in 1996. Higher pre-tax income was the reason for the increased income
tax expense. The Company's effective tax rate of 38.3% for 1997 was comparable
to the 38.1% effective tax rate for 1996. See Note 4 to the Consolidated
Financial Statements for additional analysis of the changes in income tax
expense.
Weather patterns can have an impact on the Company's operations. The Company
manufactures and formulates chemicals for crops, human and animal health
protection. 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 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 good an
indicator as full-year comparisons.
1996 COMPARED WITH 1995:
The Company reported net income of $1,615,500 or $.65 per share in 1996 as
compared to net income of $3,124,000 or $1.23 per share in 1995. (All per share
amounts have been restated, where applicable to give effect to a 10% stock
dividend paid on March 15, 1996 to stockholders of record as of February 29,
1995.) The decrease in net income in 1996 was primarily attributable to a
$6,774,200 or 12.2% decrease in net sales. The reduction in net income was
tempered by a decrease in operating expenses of $1,864,500 or 10.0%.
Net sales decreased to $48,627,900 in 1996 as compared to $55,402,100 in 1995.
Of the $6,774,200 decrease in net sales, approximately $5,041,900 was
attributable to a reduction in
17
<PAGE> 20
AMVAC's net sales. The reductions occurred primarily in cotton related products
which decreased a combined $10,935,700, and resulted from unanticipated weather
conditions, a softness in pest populations, and competitive conditions. The
decreases were offset to an extent by increased sales of Metam Sodium products
in the amount of $4,035,100 which was attributable to the Company's emphasis on
expanding its market share. GEMCHEM's nonagricultural sales declined from
approximately $4,100,000 in 1995 to approximately $2,626,800 in 1996 reflecting
continuing aggressive competition in the market and a reduction in marketing
efforts applied to GEMCHEM's pharmaceutical products.
Gross profits decreased by $4,312,500 to $20,347,900 in 1996 from $24,660,400 in
1995. The gross profit percentage decreased to 41.8% in 1996 from 44.5% in 1995.
The decrease in 1996 is largely attributable to the reduction in sales without
realizing a corresponding reduction in fixed manufacturing overhead. Gross
profits were also negatively impacted by pricing allowances provided by the
Company on some of its products in order to retain or expand market share.
Operating expenses decreased by $1,864,500 to $16,824,900 in 1996 from
$18,689,400 in 1995. The following is a discussion of operating expenses:
Selling and Regulatory:
Selling and regulatory expenses decreased by $672,400 to $6,100,500 in
1996 from $6,772,900 in 1995. The decrease in selling and regulatory
expenses is primarily attributable to a decrease in variable selling
costs. Due to the significant decrease in Bidrin sales in 1996, related
Bidrin rebates and royalties decreased by approximately $830,000.
Rebates on NAA products increased an additional $400,000 in 1996 over
the $943,500 increase in 1995 as a result of continuing and expanded
agreements with distributors to promote the Company's products in the
market and support pricing. Royalties on NAA products decreased
approximately $100,000 in 1996 due to the expiration of a related
royalty agreement. Rebates on Phosdrin decreased approximately $200,000
in 1996 due to the reversal of an accrual deemed no longer necessary as
a result of the completion of the Phosdrin recall as mandated by the
Environmental Protection Agency in July 1996. Although most selling
related expenses declined, expenses of GEMCHEM increased approximately
$185,600 in 1996 reflecting increased sales efforts, mostly the hiring
of additional sales personnel. Product liability insurance, which varies
directly with sales levels, also decreased approximately $80,000 in 1996
as a result of the decreased sales volume.
General, Administrative and Corporate:
General, administrative and corporate costs increased by $117,000 to
$4,178,800 in 1996 from $4,061,800 in 1995. The increase was primarily
attributable to rent expense for the
18
<PAGE> 21
Company's corporate headquarters which was $82,400 higher than in 1995
and the incurrence of $49,000 in salary expense for AMVAC's executive
vice president hired in 1996. Although the accrual for the remaining
expected costs in connection with the phase out of Phosdrin in the
amount of $175,000 recorded in 1995 did not impact 1996, the Company did
record an accrual of $150,000 for estimated railroad remediation costs
in connection with the ongoing railroad siding matter (see additional
discussion in PART I, Item 3, Legal Proceedings).
Research and Development:
Research and development costs, which include costs incurred to generate
scientific data and other activities performed in the department,
decreased by $1,822,600 to $3,023,800 in 1996 from $4,846,400 in 1995.
Costs incurred to generate scientific data accounted for the most
significant portion of this decrease. The PCNB, Bidrin and NAA product
groups experienced significant declines in scientific data generation of
approximately $1,070,000, $390,000 and $290,000, respectively, in 1996
due to the maturation of the products and of the related research
studies being conducted.
Freight, Delivery and Warehousing:
Freight, delivery and warehousing costs increased by $513,500 to
$3,521,000 in 1996 from $3,008,300 in 1995. There was a reduction in non
rail car freight costs to customers of approximately $89,200 as a result
of the decline in sales volume in 1996. However, rail car and internal
freight costs increased approximately $553,800. Most of this increase
was in rail car freight which increased because of the increased sales
volume of Metam Sodium products and also because of efforts to increase
Metam Sodium inventory at storage sites as of the end of 1996 in
anticipation of sales expected to materialize in the first quarter of
1997. Due to personnel additions to the department, employee wages
increased approximately $56,700 in 1996.
Interest costs were $919,900 in 1996 as compared to $935,400 in 1995. The
average level of short-term borrowing decreased by $2,102,700 to $4,423,500 in
1996 from $6,526,200 in 1995. The average level of long-term debt increased by
$2,358,300 to $6,174,900 in 1996 from $3,816,600 in 1995. Although overall
average debt was higher in 1996, lower interest rates of 0.5% to 1.0% on average
debt accounted for the decrease in interest costs in 1996.
Income tax expense decreased by $923,100 to $995,900 in 1996 as compared to
$1,919,000 in 1995. Lower pre-tax income was the reason for the decreased income
tax expense. See Note 4 to the Consolidated Financial Statements for additional
analysis of the changes in income tax expense.
19
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $25,846,200 as of December 31, 1997 reflecting a $7,993,300
improvement over working capital of $17,852,900 as of December 31, 1996.
Current assets were $7,041,100 higher at December 31, 1997 than at December 31,
1996. Most of this increase was attributable to increases in trade accounts
receivable and inventory. Trade receivables increased $4,957,300 due to strong
sales in the month of December. Inventories increased $1,587,600 primarily in
consideration of expected sales volume in 1998. Current liabilities decreased
$952,200 in 1997 from the 1996 level.
The Company invested $2,768,400 in capital expenditures in 1997. These
expenditures improve and/or maintain the existing capacity of the Company's
manufacturing facility, and address the Company's continual effort to adapt its
manufacturing processes to the environmental control standards of its various
controlling agencies. The Company invested $1,375,400 of the increase in the
PCNB octane recovery system described above. The Company recognized $2,732,600
of depreciation and amortization expense in 1997. As of December 31, 1997, the
Company does not have any material commitments for future capital expenditures.
As part of an amendment to the Company's credit agreement in July 1997, the
Company increased its credit limit under its fully secured existing long-term
line of credit to $20,500,000 from $15,500,000 and extended the expiration date
of the long-term line of credit to July
20
<PAGE> 23
31, 1999 from July 31, 1998. The Company had $6,400,000 of availability under
its long-term line of credit agreement as of December 31, 1997. During 1997, the
Company refinanced an existing real estate loan whereby the old loan in the
amount of $1,133,200 was paid off and replaced by a new loan in the amount of
$1,837,500. In addition to the payoff of the real estate loan mentioned above,
the Company made principal payments on its other long-term debt in the amount of
$1,245,300 during 1997.
There has been constant public pressure upon the federal and state governments
to require FIFRA product registrants to supply new scientific data (such as
toxicological and environmental fate tests), which has resulted in government
action requiring additional studies and the submission of more data. Based on
facts known today, the Company estimates it will spend approximately $3,200,000
in 1998 on these studies. Because scientific analyses are constantly improving,
it cannot be determined with certainty whether or not material new or additional
tests may be required. For further information, refer to PART I, Item 1,
Business, Competition of this Annual Report.
AMVAC is a manufacturer and formulator of chemicals for crops, human and
animal health protection. This is a high risk industry with ever present
industry-wide litigation. For discussions pertaining to the Company's litigation
refer to PART I, Item 3, Legal Proceedings of this Annual Report.
Management believes current financial resources (working capital and borrowing
arrangements) and anticipated funds from operations will be adequate to meet
total financial needs in 1998. Management also continues to believe, to improve
its working capital position and maintain flexibility in financing interim
needs, it is prudent to explore alternate sources of financing. The Company, as
previously disclosed, is required to supply studies and the submission of data
to federal and state governmental agencies. Because scientific analyses are
constantly improving, it cannot be determined with certainty whether or not
additional tests that may be material will be required.
FOREIGN EXCHANGE
Management does not believe that the fluctuation in the value of the dollar in
relation to the currencies of its customers in the last three fiscal years has
adversely affected the Company's ability to sell products at agreed upon
prices. No assurance can be given, however, that adverse currency exchange rate
fluctuations will not occur in the future. Should adverse currency exchange
rate fluctuations occur in geographies where the Company sells/exports its
products, management does not believe such fluctuations will materially
impact the Company's operating results.
INFLATION
Management believes inflation has not had a significant impact on the Company's
operations during the past three years.
YEAR 2000 COMPLIANCE
The Company has elected to install a new Enterprise Resource Planning
Manufacturing software system, the decision of which, was not driven by Year
2000 Compliance. The new software system is Year 2000 capable. The installation
of this system is expected to be completed by the end of calendar 1998.
Management has also reviewed the Company's other software products for Year
2000 problems and believes that such systems and products are, or will soon be,
Year 2000 compliant, and management therefore does not expect Year 2000
considerations will materially impact the Company's internal operations.
21
<PAGE> 24
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data are listed at
PART IV, Item 14, Exhibits, Financial Statement Schedules, and Reports on Form
8-K in this report.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
22
<PAGE> 25
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following persons are the current Directors and Executive
Officers of Registrant:
<TABLE>
<CAPTION>
Name of
Director/Officer Age Capacity
---------------- --- --------
<S> <C> <C>
Herbert A. Kraft 74 Co-Chairman
Glenn A. Wintemute 73 Co-Chairman
Eric G. Wintemute 42 Director, President and
Chief Executive Officer
James A. Barry 47 Director, Senior Vice
President, Chief
Financial Officer,
Treasurer and Asst.
Secretary
Glenn E. Mallory 88 Director and Corporate
Secretary
Alan B. Sass 59 Director
Jesse E. Stephenson 74 Director
James Strock 41 Director
</TABLE>
Herbert A. Kraft has served as Co-Chairman of the Board since
July 1994. Mr. Kraft served as Chairman of the Board and Chief Executive Officer
from 1969 to July 1994.
Glenn A. Wintemute has served as Co-Chairman of the Board since
July 1994. Mr. Wintemute served as President of the Company and all operating
subsidiaries since 1984 and was elected a director in 1971. He served as
President of AMVAC from 1963 to July 1994.
Eric G. Wintemute has served as a director since June 1994. Mr.
Wintemute has also served as President and Chief Executive Officer since July
1994. He was appointed Executive Vice President and Chief Operating Officer of
the Company in January 1994, upon the Company's acquisition of GemChem. He co-
founded GemChem, a national chemical distributor, in 1991 and served as its
President. Mr. Wintemute was previously employed by AMVAC from 1977 to 1982.
From 1982 to 1991, Mr. Wintemute worked with R. W. Greeff
23
<PAGE> 26
& Co., Inc., a former distributor of certain of AMVAC's products. During his
tenure with R. W. Greeff & Co., Inc., he served as Vice President and Director.
He is the son of the Company's Co-Chairman, Glenn A. Wintemute.
James A. Barry has served as a director of the Company since
1994. Mr. Barry was appointed Senior Vice President in February 1998. He has
served as Treasurer since July 1994 and as Chief Financial Officer of the
Company and all operating subsidiaries since 1987. He also served as Vice
President from 1990 through February 1998 and has held the position of Assistant
Secretary since 1990. From 1990 to July 1994, he also served as Assistant
Treasurer.
Glenn E. Mallory has served as a director of the Company since
1971 and its Secretary since 1976. Mr. Mallory was appointed Vice President of
the Company in July 1994. He served as Treasurer from 1976 to July 1994. He also
served as Vice President of AMVAC from 1970 to September 1993.
Dr. Allan Sass was elected a director of the Company in June
1996. Dr. Sass served as Vice President of Technology of Wheelabrator
Technologies (an environmental issues firm) from 1994 through April 1996, and
served as Vice President of New Business Development from 1992 to 1994. He was
the Chief Executive Officer and Chairman of Westates Carbon Company, Inc. from
1985 to 1992. Westates Carbon Company, Inc. was acquired by Wheelabrator
Technologies in April 1992. From 1968 to 1985, Dr. Sass was with Occidental
Petroleum Corporation serving as President and Chief Executive Officer of
Occidental Oil Shale, reporting directly to Dr. Armand Hammer.
Jesse E. Stephenson has served as director of the Company since
1977 (except for a 10-month period following March 1992). He was the General
Manager of Calhart Corporation, then a wholly-owned subsidiary of the Company,
from 1968 to 1978. Mr. Stephenson is retired and is a private investor.
James M. Strock, age 41, was appointed a director in February
1998. Mr. Strock is President of Strock Enterprises, Inc., a consulting firm
that provides domestic and international strategic planning, environmental
consulting, and marketing and communication services. From March 1991 through
May 1997, Mr. Strock served in Governor Pete Wilson's Cabinet as California's
first Secretary for Environmental Protection. From 1989 until 1991, Mr. Strock
served as the Assistant Administrator for Enforcement (chief law enforcement
officer) of the U.S. Environmental Protection Agency. Mr. Strock's other work
experience ranges from private law practice, to service as Special Counsel to
the U.S. Senate Environment & Public Works Committee, and as a special assistant
to the Administrator of the U.S. Environmental Protection Agency. Mr. Strock
also serves on the board of Thermatrix,a publicly held company traded on NASDAQ
(Stock symbol TMX).
24
<PAGE> 27
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors, and persons who own more than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission.
The Company believes that during 1997 all reports required to be
filed under Section 16(a) by its executive officers, directors, and greater than
ten percent beneficial owners were timely filed.
25
<PAGE> 28
ITEM 11 EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash and other
compensation for services rendered for the years ended December 31, 1997, 1996,
and 1995 paid or awarded by the Corporation and its subsidiaries to the
Corporation's Chief Executive Officer and each of the four most highly
compensated executive officers of the Corporation, whose aggregate remuneration
exceeded $100,000 (the "named executive officers").
26
<PAGE> 29
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
-------------------------------------------- ----------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER RE- SECURITIES ALL
NAME ANNUAL STRICTED UNDERLYING OTHER
AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
---- ------- ----- ------ -------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric G. Wintemute 1997 244,244 -- -- -- -- -- 4,723(4)
President and 1996 201,306 -- -- -- -- -- 4,855(4)
Chief Executive Officer 1995 172,000 -- -- -- -- -- 4,993(4)
James A. Barry 1997 134,819 -- -- -- -- -- 4,608(4)
Senior Vice President, 1996 129,692 -- -- -- -- -- 3,457(4)
CFO and Treasurer 1995 122,751 -- -- -- 5,500(2) -- 4,070(4)
David B. Cassidy(3) 1997 175,414 -- -- -- -- -- 562(4)
Executive Vice 1996 45,769 -- -- -- 30,000(5) -- --
President (AMVAC) 1995 -- -- -- -- -- -- --
Herbert A. Kraft(7) 1997 -- -- -- -- -- -- 180,168(6)
Co-Chairman 1996 -- -- -- -- -- -- 226,923(6)
1995 -- -- -- -- -- -- 254,086(6)
Glenn A. Wintemute(7) 1997 -- -- -- -- -- -- 195,192(6)
Co-Chairman 1996 -- -- -- -- -- -- 226,923(6)
1995 -- -- -- -- -- -- 254,086(6)
</TABLE>
- -------------------
(1) No executive officer enjoys perquisites that exceed the lesser of
$50,000, or 10% of such officer's salary.
(2) Represents options to purchase Common Stock of the Company. The
options issued to Mr. Barry represent approximately 13% of the total options
issued by the Company in 1995. The exercise price of the options is $6.82 per
share and the options vest one-third on January 18, 1996, 1997 and 1998 and all
options expire on January 18, 2000.
(3) Mr. Cassidy joined Amvac Chemical Corporation as Executive Vice
President in September 1996.
(4) These amounts represent the Company's contribution to the Company's
Retirement Savings Plan, a qualified plan under Internal Revenue Code Section
401(k).
(5) Represents options to purchase Common Stock of the Company in
accordance with the terms and conditions of Mr. Cassidy's Employment Agreement.
(6) Amounts represent payments received by each individual (during
calendar year) under his consulting agreement.
(7) Messrs. Kraft and Wintemute retired from the Company as active
employees in July 1994. The Company entered into consulting agreements with
Messrs. Kraft and Wintemute in July 1994. In 1996 the consulting agreements were
extended for an additional year and now expire in July 2000.
27
<PAGE> 30
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board consists of Messrs.
Herbert A. Kraft, Alan B. Sass and Jesse E. Stephenson. The executive
compensation philosophy of the Company is aimed at (i) attracting and retaining
qualified executives; (ii) motivating performance to achieve specific strategic
objectives of the Company; and (iii) aligning the interest of senior management
with the long-term interest of the Company's shareholders.
28
<PAGE> 31
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Registrant, the ownership of the
Registrant's outstanding Common Stock as of March 23, 1998, by persons who are
directors, beneficial owners of 5% or more of the outstanding Common Stock and
by all directors and officers as a group is set forth below. Unless otherwise
indicated the Registrant believes that each of the persons set forth below has
the sole power to vote and to dispose of the shares listed opposite his name.
<TABLE>
<CAPTION>
Amount and
Nature
Office Name and Address of Beneficial Percent
(if any) Beneficial Owner Ownership(1) of Class
- -------- ---------------- ----------- --------
<S> <C> <C> <C>
Co-Chairman Glenn A. Wintemute 642,205(2) 25.6%
4695 MacArthur Court
Newport Beach, CA 92660
Co-Chairman Herbert A. Kraft 590,707(3) 23.6%
4695 MacArthur Court
Newport Beach, CA 92660
Goldsmith & Harris et al. 153,560(4) 6.1%
80 Pine Street
New York, NY 10005
Director, Eric G. Wintemute 69,903(6) 2.8%
President 4695 MacArthur Court
& CEO Newport Beach, CA 92660
Director Jesse E. Stephenson 46,850(5) 1.9%
4695 MacArthur Court
Newport Beach, CA 92660
Director, James A. Barry 5,500(7) --12
Sr. Vice President, 4695 MacArthur Court
CFO & Treasurer Newport Beach, CA 92660
Director Dr. Allan Sass 4,500(8) --12
4695 MacArthur Court
Newport Beach, CA 92660
Director Glenn E. Mallory 3,500(9) --12
4695 MacArthur Court
Newport Beach, CA 92660
Director James Strock 2,500(10) --12
4695 MacArthur Court
Newport Beach, CA 92660
Executive Vice David B. Cassidy 15,000(11) --12
President (AMVAC) 4695 MacArthur Court
Newport Beach, CA 92660
Directors and Officers
as a group (9) 1,380,665 53.9%
</TABLE>
Refer to footnotes on next page.
29
<PAGE> 32
ITEM 12 - Continued
Footnotes
(1) Record and Beneficial.
(2) This figure includes 22,220 shares of Common Stock owned by Mr. G. A.
Wintemute's minor children for which Mr. Wintemute is a trustee and
disclaims beneficial ownership.
(3) Mr. Kraft owns all of his shares with his spouse in a family trust, except
as to 1,430 shares held in an Individual Retirement Account.
(4) The Company has relied on information reported on a Statement on Schedule
13D filed by Goldsmith & Harris et al. with the Securities and Exchange
Commission as adjusted for the 10% stock dividend issued March 15, 1996.
(5) Mr. Stephenson holds all of his shares in a family trust. This figure
includes 3,500 shares of Common Stock Mr. Stephenson is entitled to acquire
pursuant to stock options exercisable within sixty days of the filing of
this Annual Report.
(6) This figure includes 33,000 shares of Common Stock Mr. Wintemute is
entitled to acquire pursuant to stock options exercisable within sixty days
of the filing of this Annual Report.
(7) This figure represents shares of Common Stock Mr. Barry is entitled to
acquire pursuant to stock options exercisable within sixty days of the
filing of this Annual Report.
(8) This figure includes 3,500 shares of Common Stock Dr. Sass is entitled to
acquire pursuant to stock options exercisable within sixty days of the
filing of this Annual Report.
(9) This figure represents shares of Common Stock Mr. Mallory is entitled to
acquire pursuant to stock options exercisable within sixty days of the
filing of this Annual Report.
(10) This figure represents shares of Common Stock Mr. Strock is entitled to
acquire pursuant to stock options exercisable within sixty days of the
filing of this Annual Report.
(11) This figure includes 5,000 shares of Common Stock Mr. Cassidy is entitled
to acquire pursuant to stock options exercisable within sixty days of the
filing of this Annual Report.
(12) Under 1% of class.
30
<PAGE> 33
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with their retirement from the Company as active
employees in July 1994, Messrs. Herbert A. Kraft and Glenn A. Wintemute entered
into written consulting agreements with the Company effective July 14, 1994.
Pursuant to the consulting agreements, Messrs. Kraft and Wintemute perform
management and financial consulting services for the Company as assigned by the
Board of Directors or the Chief Executive Officer. The agreements originally
were to expire on July 14, 1999. In 1996, the agreements were extended for an
additional year now scheduled to expire July 14, 2000. The agreements provide
that neither Messrs. Kraft or Wintemute will be required to expend more than 400
hours in any twelve month period or forty hours in any one month period. Under
the agreements, Messrs. Kraft and Wintemute each received $287,500 for the year
ended July 14, 1995, $243,750 for the year ended July 14, 1996 and $200,000 for
the year ended July 14, 1997. They will also, under the agreements, each receive
$156,250 for the year ending July 14, 1998, $112,500 for the year ending July
14, 1999 and $100,000 for the year ending July 14, 2000. In the event of death
or disability prior to July 14, 2000, such payments will continue to be paid to
the individual or his estate, as applicable. The agreements also provide for
continuation of medical and dental insurance benefits until the expiration of
the term of the agreements. See Note 11 of the Notes to the Consolidated
Financial Statements in PART IV, Item 14 of this Annual Report.
31
<PAGE> 34
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Index to Consolidated Financial
Statements and Supplementary Data:
DESCRIPTION
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Report of Independent Certified
Public Accountants 34
Financial Statements:
Consolidated Balance Sheets as of
December 31, 1997 and 1996 35
Consolidated Statements of Income for
the Years Ended December 31, 1997, 1996,
and 1995 37
Consolidated Statements of Changes in
Stockholders' Equity for the Years Ended
December 31, 1997, 1996, and 1995 38
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1997, 1996,
and 1995 39
Summary of Significant Accounting Policies
and Notes to Consolidated Financial
Statements 41
</TABLE>
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
(3) Exhibits:
The exhibits listed on the accompanying Index To Exhibits, page
53, are filed as part of this annual report.
(b) Reports on Form 8-K were filed during the quarter ended December
31, 1997. None.
32
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, American Vanguard Corporation has duly caused this report to be
signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN VANGUARD CORPORATION (Registrant)
/s/ Eric G. Wintemute /s/ James A. Barry
- ------------------------------- -------------------------------
By: ERIC G. WINTEMUTE By: JAMES A. BARRY
President, Senior Vice President,
Chief Executive Officer Chief Financial Officer,
and Director Treasurer and Director
March 25, 1998 March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated.
/s/ Herbert A. Kraft /s/ Glenn A. Wintemute
- ------------------------------- -------------------------------
HERBERT A. KRAFT GLENN A. WINTEMUTE
Co-Chairman Co-Chairman
March 25, 1998 March 25, 1998
/s/ Glenn E. Mallory /s/ Allan Sass
- ------------------------------- -------------------------------
GLENN E. MALLORY ALLAN SASS
Corporate Secretary and Director
Director March 25, 1998
March 25, 1998
/s/ Jesse E. Stephenson /s/ James Strock
- ------------------------------- -------------------------------
JESSE E. STEPHENSON JAMES STROCK
Director Director
March 25, 1998 March 25, 1998
33
<PAGE> 36
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
American Vanguard Corporation
We have audited the accompanying consolidated balance sheets of American
Vanguard Corporation and subsidiaries as of December 31, 1997 and 1996 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Vanguard
Corporation and their subsidiaries at December 31, 1997 and 1996 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Los Angeles, California
March 3, 1998
34
<PAGE> 37
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS (NOTE 3) 1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 746,600 $ 632,400
Receivables:
Trade 21,244,600 16,529,900
Other 441,400 198,800
----------- -----------
21,686,000 16,728,700
----------- -----------
Inventories:
Finished products 9,847,700 8,108,800
Raw materials 3,090,200 3,241,500
----------- -----------
12,937,900 11,350,300
----------- -----------
Prepaid expenses 1,035,600 653,600
----------- -----------
Total current assets 36,406,100 29,365,000
Property, plant and equipment, at cost,
less accumulated depreciation of
$18,541,200 in 1997 and $16,284,300
in 1996(notes 1,2,3, and 5) 13,439,000 12,927,500
Land held for development 210,800 210,800
Costs in excess of net assets acquired, net of
accumulated amortization of $441,000 in
1997 and $199,300 in 1996 (note 10) 3,290,500 3,532,200
Other intangible assets, net of accumulated
amortization of $144,300 in 1997 and
$25,000 in 1996 (note 10) 1,571,200 1,660,100
Other assets 288,700 332,700
----------- -----------
$55,206,300 $48,028,300
=========== ===========
</TABLE>
(CONTINUED)
35
<PAGE> 38
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
----------- -----------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt (note 2) $ 1,059,500 $ 1,160,500
Accounts payable 3,785,200 3,002,300
Accrued expenses 3,561,100 4,803,100
Accrued royalty obligation-current portion (note 10) 1,600,000 1,600,000
Income taxes payable 554,100 946,200
----------- -----------
Total current liabilities 10,559,900 11,512,100
Note payable to bank (note 3) 14,100,000 7,000,000
Long-term debt, excluding current
installments (note 2) 3,980,400 4,373,100
Accrued royalty obligation, excluding
current portion (note 10) 2,659,700 3,062,000
Deferred income taxes (note 4) 2,646,500 2,695,600
----------- -----------
Total liabilities 33,946,500 28,642,800
----------- -----------
Commitments and contingent liabilities
(notes 2, 3, 5, 6, 9 and 11)
Stockholders' equity: (note 13)
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
2,564,182 shares in 1997 and 1996 256,400 256,400
Additional paid-in capital 3,879,000 3,879,000
Retained earnings 17,483,300 15,609,000
----------- -----------
21,618,700 19,744,400
Less treasury stock, at cost, 56,600
shares in 1997 and 1996 358,900 358,900
----------- -----------
Total stockholders' equity 21,259,800 19,385,500
----------- -----------
$55,206,300 $48,028,300
=========== ===========
</TABLE>
See summary of significant accounting policies and notes to
consolidated financial statements.
36
<PAGE> 39
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales (note 8) $ 67,700,500 $ 48,627,900 $ 55,402,100
Cost of sales 40,315,600 28,280,000 30,741,700
------------ ------------ ------------
Gross profit 27,384,900 20,347,900 24,660,400
Operating expenses (note 12) 22,600,100 16,824,900 18,689,400
------------ ------------ ------------
Operating income 4,784,800 3,523,000 5,971,000
Interest expense (1,513,400) (919,900) (935,400)
Interest income 11,400 8,300 7,400
------------ ------------ ------------
Income before
income tax expense 3,282,800 2,611,400 5,043,000
Income tax expense (note 4) 1,258,100 995,900 1,919,000
------------ ------------ ------------
Net income $ 2,024,700 $ 1,615,500 $ 3,124,000
============ ============ ============
Per share information:
Basic and diluted
Net income per share $ .81 $ .65 $ 1.23
============ ============ ============
Weighted average number
of shares 2,507,829 2,472,883 2,546,471
============ ============ ============
</TABLE>
See summary of significant accounting policies and notes to
consolidated financial statements.
37
<PAGE> 40
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 $ 233,100 $ 1,688,200 $ 13,221,600 $ -- $ 15,142,900
Net income -- -- 3,124,000 -- 3,124,000
Treasury stock acquired -- -- -- (261,500) (261,500)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1995 233,100 1,688,200 16,345,600 (261,500) 18,005,400
Common stock dividend 23,300 2,190,800 (2,214,100) -- --
Cash dividends on common
stock ($.06 per share) -- -- (138,000) -- (138,000)
Net income -- -- 1,615,500 -- 1,615,500
Treasury stock acquired -- -- -- (97,400) (97,400)
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1996 256,400 3,879,000 15,609,000 (358,900) 19,385,500
Cash dividends on common
stock ($.06 per share) -- -- (150,400) -- (150,400)
Net income -- -- 2,024,700 -- 2,024,700
------------ ------------ ------------ ------------ ------------
Balance, December 31, 1997 $ 256,400 $ 3,879,000 $ 17,483,300 $ (358,900) $ 21,259,800
============ ============ ============ ============ ============
</TABLE>
See summary of significant accounting policies and notes to
consolidated financial statements.
38
<PAGE> 41
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,024,700 $ 1,615,500 $ 3,124,000
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property, plant and equipment 2,256,900 2,204,300 2,098,700
Amortization of intangible
assets 475,700 144,800 1,316,600
Changes in assets and liabilities
associated with operations:
Increase in receivables (4,957,300) (1,242,700) (5,400)
Increase in inventories (1,587,600) (3,080,700) (1,051,700)
Decrease (increase)
in prepaid expenses (382,000) (72,600) 348,700
Increase (decrease) in
accounts payable 782,900 191,500 (80,800)
Increase (decrease) in other
payables and accrued expenses (2,036,400) 852,100 (2,279,100)
Increase (decrease) in
deferred income taxes (49,100) (226,900) 105,200
----------- ----------- -----------
Net cash provided by
(used in)operating
activities (3,472,200) 385,300 3,576,200
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (2,768,400) (1,451,400) (755,000)
Additions to intangible assets (33,100) (76,200) (226,500)
Net increase in other
noncurrent assets (68,000) (150,000) (123,800)
----------- ----------- -----------
Net cash used in
investing activities (2,869,500) (1,677,600) (1,105,300)
----------- ----------- -----------
</TABLE>
(Continued)
39
<PAGE> 42
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from financing activities:
Net borrowings (repayments) under
line of credit agreement 7,100,000 $ 3,100,000 $(4,100,000)
Proceeds from issuance of
long-term debt 1,884,800 96,600 3,702,300
Principal payments on long-term debt (2,378,500) (1,368,100) (1,797,800)
Acquisition of treasury stock -- (97,400) (261,500)
Payment of cash dividends (150,400) (138,000) --
Net cash provided by
(used in) financing 6,455,900 1,593,100 (2,457,000)
----------- ----------- -----------
activities
Net increase in cash 114,200 300,800 13,900
Cash at beginning of year 632,400 331,600 317,700
----------- ----------- -----------
Cash at end of year $ 746,600 $ 632,400 $ 331,600
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 1,562,800 $ 851,500 $ 1,011,100
Income taxes 1,721,000 1,630,900 1,119,800
=========== =========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
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.
In December 1996, the Company completed the acquisition of an established
product line from a large chemical manufacturer (see note 10). In connection
with the acquisition, the Company recorded costs in excess of net assets
acquired and other intangible assets in the amount of $4,662,000 in
consideration of a minimum royalty obligation in the same amount.
See summary of significant accounting policies and notes to consolidated
financial statements.
40
<PAGE> 43
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business and Basis of Consolidation
The Company is primarily a specialty chemical manufacturer that develops and
markets safe and effective products for agricultural and commercial uses. The
Company manufacturers and formulates chemicals for crops, human and animal
protection. One of the Company's subsidiaries, GemChem, Inc., procures certain
raw materials used in the Company's manufacturing operations and is also a
distributor of various pharmaceutical and nutritional supplement products. The
consolidated financial statements include the accounts of American Vanguard
Corporation ("Company") and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
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 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 good an
indicator as full-year comparisons.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.
Long-lived Assets
Intangible assets resulting from business acquisitions (see note 10), consist of
cost in excess of net assets (goodwill) acquired and other intangible assets,
including customer lists, product registrations, trademarks and contracts. These
intangible assets are being amortized on a straight-line basis over the period
of an expected benefit of years. Management has a policy to review intangible
assets and productive assets at each quarterly balance sheet date for possible
impairment. This policy includes recognizing write-downs if it is probable that
measurable undiscounted future cash flows and/or the aggregate net cash flows of
an asset, as measured by current revenues and costs (exclusive of depreciation
or amortization) over the asset's remaining depreciable life, are not sufficient
to recover the net book value of an asset.
Revenue Recognition
Sales are recognized upon shipment of products or transfer of title to the
customer.
41
<PAGE> 44
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Depreciation
Depreciation of property, plant and equipment is calculated on the straight-line
method over the estimated useful lives of the assets.
Fair Value of Financial Instruments
The carrying values of cash, receivables and accounts payable approximate their
fair values because of the short maturity of these instruments.
The fair value of the Company's long-term debt and note payable to bank is
estimated based on the quoted market prices for the same or similar issues or on
the current rates offered to the Company for debt of the same remaining
maturities. Such fair value approximates the respective carrying values of the
Company's long-term debt and note payable to bank.
Income Taxes
Income taxes have been provided using the asset and liability method in
accordance with Financial Accounting Standard No. 109, "Accounting for
Income Taxes".
The asset and liability method requires the recognition of deferred tax assets
and liabilities for future tax consequences of temporary differences between the
financial statement bases and tax bases of assets and liabilities at the date of
the financial statements using the provisions of the tax laws then in effect.
Per Share Information
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share
("EPS"). SFAS No. 128 requires dual presentation of basic EPS and diluted EPS on
the face of all income statements issued after December 15, 1997, for all
entities with complex capital structures. 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 174,400 shares of the Company's common stock, are exercised. These
options were anti-dilutive in 1997, 1996 and 1995, and, as such, dilutive EPS
amounts are the same as basic EPS for all periods presented. No prior year EPS
amounts have been restated as a result of SFAS 128. EPS have been retroactively
restated to reflect a 10% common stock dividend payable March 15, 1996 to common
stockholders of record as of February 29, 1996.
42
<PAGE> 45
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, and expenses at
the date that the financial statements are prepared. Actual results could differ
from those estimates.
Reclassifications
Certain prior years' amounts have been reclassified to conform to the current
year's presentation.
Recent Accounting Pronouncements
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure", ("SFAS 129") issued by the FASB is effective for
financial statements ended after December 15, 1997. The new standard reinstates
various securities disclosure requirements previously in effect under Accounting
Principles Board Opinion No. 15, which has been superseded by SFAS No. 128.
Adoption of SFAS No. 129 did not have an impact on the Comapny's financial
position or results of operations.
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", ("SFAS 130") issued by the FASB is effective for financial statements
with fiscal years beginning after December 15, 1997. SFAS 130 establishes
standards for reporting and displaying of comprehensive income and its
components in a full set of general-purpose financial statements. The Company
does not expect adoption of SFAS 130 to have an impact on its financial position
or results of operations and any effect will be limited to the form and content
of its disclosures.
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information", ("SFAS 131") issued by the FASB is
effective for financial statements with fiscal years beginning after December
15, 1997. SFAS 131 requires that public companies report certain information
about operating segments, products, services, and geographical areas in which
they operate and their major customers. The Company does not expect adoption of
SFAS 131 to have an impact on its financial position or results of operations.
The Company believes it may have expanded disclosures, in the future, with
respect to certain of these items.
43
<PAGE> 46
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(1) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
ESTIMATED
1997 1996 USEFUL LIVES
---------- ---------- ------------
<S> <C> <C> <C>
Land $ 2,382,600 $ 2,382,600
Buildings and improvements 4,573,600 3,812,300 10 to 30 years
Machinery and equipment 22,864,000 20,677,000 3 to 10 years
Office furniture and fixtures 1,128,800 1,031,400 3 to 10 years
Automotive equipment 105,000 105,000 3 to 6 years
Construction in progress 926,200 1,203,500
---------- ----------
31,980,200 29,211,800
Less accumulated depreciation 18,541,200 16,284,300
---------- ----------
$13,439,000 $12,927,500
=========== ===========
</TABLE>
(2) LONG-TERM DEBT
Long-term debt of the Company at December 31, 1997 and 1996 is summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Note payable, secured by certain real
property, payable in 60 fixed
monthly installments of $87,500
commencing January 1, 1996,
plus interest at prime plus .5%
(prime was 8.5% at December 31, 1997), with
remaining unpaid principal
due December 1, 2000 $3,062,500 $4,112,500
Note payable, refinanced in November
1997 secured by certain real
property, payable in 83 fixed
monthly installments of $6,125,
plus interest at prime with remaining
unpaid principal due October 15, 2004 1,831,400 1,266,500
Note payable, secured by certain real property,
payable in 60 monthly principal and
interest installments of $923 with
remaining unpaid principal due
July 1, 2001, interest rate at 8.00% 91,300 94,900
Obligations under capitalized
leases (see note 5) 54,700 59,700
---------- ----------
5,039,900 5,533,600
Less current installments 1,059,500 1,160,500
---------- ----------
$3,980,400 $4,373,100
========== ==========
</TABLE>
44
<PAGE> 47
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Approximate principal payments on long-term debt mature as follows:
<TABLE>
<S> <C>
1998 $1,059,500
1999 1,136,600
2000 1,138,000
2001 163,300
2002 78,600
Thereafter 1,463,900
----------
$5,039,900
</TABLE>
(3) NOTE PAYABLE TO BANK
Under a credit agreement with a bank as amended on July 31, 1997, the
Company may borrow up to $20,500,000. The note bears interest at a rate
of prime plus .25% (prime was 8.5% at December 31, 1997), which is
payable monthly. Additionally, the Company, at its option, may pay a
fixed rate of interest offered by the bank for terms not less than 30
nor more than 180 days and provided that any such period of time does
not extend beyond the expiration date of the credit agreement.
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 note payable expires on
July 31, 1999. The Company had $6,400,000 available under this credit
agreement as of December 31, 1997. The credit agreement, among other
financial covenants, limits payments of cash dividends to a maximum of
25% of net income. The Company was in compliance with the financial
covenants as of December 31, 1997. The balance outstanding at December
31, 1997 was $14,100,000. The average amount outstanding during the
years ended December 31, 1997 and 1996 was $13,288,600 and $4,423,500.
The weighted average interest rate during the years ended December 31,
1997 and 1996 was 8.14% and 8.17%.
(4) INCOME TAXES
The components of income tax expense are:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal $ 997,800 $ 936,400 $ 1,255,400
State 197,600 285,200 539,800
Other, primarily foreign 8,200 1,200 18,600
Deferred:
Federal (20,700) (134,000) 242,300
State 75,200 (92,900) (137,100)
----------- ----------- -----------
$ 1,258,100 $ 995,900 $ 1,919,000
=========== =========== ===========
</TABLE>
Total income tax expense differed from the amounts computed by applying
the U.S. Federal income tax rate of 34% to income before income tax
expense as a result of the following:
45
<PAGE> 48
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Computed tax provision at
statutory Federal rates $ 1,116,200 $ 887,900 $ 1,714,600
Increase (decrease) in
taxes resulting from:
State taxes, net of
Federal income tax
benefit 180,800 144,000 300,600
Nondeductible expenses 35,900 28,000 33,000
Other (primarily foreign
taxes) 8,200 1,900 18,600
Benefit of research and
development and
alternative minimum
tax credits (83,000) (65,900) (147,800)
----------- ----------- -----------
$ 1,258,100 $ 995,900 $ 1,919,000
=========== =========== ===========
</TABLE>
Temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities that give rise to significant portions of the
net deferred tax liability at December 31, 1997 and 1996 relate to the
following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Plant and equipment, principally due
to differences in depreciation and
capitalized interest $ 2,654,800 $ 3,222,400
Inventories, principally due to
additional costs inventoried for
tax purposes pursuant to the Tax
Reform Act of 1986 (307,800) (285,300)
State income taxes (91,900) (73,000)
Vacation pay accrual (113,500) (94,300)
Imputed interest on royalty obligation 85,800 --
Discount on accounts receivable 433,000 --
Accrual for railroad remediation -- (60,200)
Other (13,900) (14,000)
----------- -----------
Net deferred income tax liability $ 2,646,500 $ 2,695,600
=========== ===========
</TABLE>
The Company believes it is more likely than not that the deferred tax
assets above will be realized in the normal course of business.
46
<PAGE> 49
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(5) LEASES
The Company leases certain manufacturing equipment, and office
furniture, fixtures and equipment under long-term capital lease
agreements.
Property, plant and equipment include the following leased property
under capital leases by major classes:
<TABLE>
<S> <C>
Machinery and equipment $ 84,800
Office furniture and fixtures 90,900
------
175,700
Less accumulated depreciation 80,900
------
$ 94,800
========
</TABLE>
The following is a schedule of future minimum lease payments for capital leases
as of December 31, 1997
Year ending December 31:
<TABLE>
<S> <C> <C>
1998 $ 24,400
1999 12,500
2000 12,500
2001 12,500
2002 5,100
--------
Total minimum lease payments 67,000
Less amount representing interest 12,300
Present value of net minimum
lease payments $ 54,700
========
</TABLE>
47
<PAGE> 50
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(6) LITIGATION AND ENVIRONMENTAL
DBCP LAWSUITS
A. California Matters
In 1997, Amvac was served with a Complaints in two actions filed in the
San Francisco Superior Court entitled the Sultana Community Services
District v. Shell Oil Co., et.al. and the County of San Joaquin v.
Shell Oil Co., et. al. Both Complaints allege property damage resulting
from DBCP contamination of water supply. Both suits name as defendants
Shell Oil Company, Dow Chemical Company, Occidental Chemical Company,
Chevron Chemical Company, and Velsicol Chemical Company. In Sultana
Plaintiff has not produced documentation to support its claim for
damage. Any damages proven may be significantly offset by Plaintiff's
receipt of a Government grant for a new well. In County of San Joaquin
discovery is proceeding slowly and the claims are subject to a statute
of limitation defense. It is currently impossible to predict the
outcome or the cost that will be involved in the defense of this
matter.
B. Hawaii Matters
AMVAC and the Company were served with Complaints, on February 7, 1997
and March 4, 1997 respectively, in which each was named as a Defendant
in the action filed in the Circuit Court of the Second Circuit, State
of Hawaii entitled Board of Water Supply of the County of Maui v. Shell
Oil Co., et.al. The suit also names as defendants Shell Oil Company,
The Dow Chemical Company, Occidental Chemical Company, Occidental
Petroleum Corporation, Occidental Chemical Corporation, and Brewer
Environmental Industry, Inc. The Compliant alleges property damage
resulting from DBCP contamination of the Board's water wells.
Jurisdictional disputes have delayed any formal discovery and there
remain numerous procedural defenses. It is currently impossible to
predict the outcome or the cost that will be involved in the defense of
this matter.
On October 20, 1997, AMVAC was served with a Complaint in which it was
named as a Defendant, filed in the Circuit Court, First Circuit, state
of Hawaii entitled Patrickson, et.al. v. Dole Food Co., et.al. alleging
damages sustained from injuries caused by Plaintiff's exposure to DBCP
while applying the product in their native countries. Other named
defendants are: Dole Food Co., Dole Fresh Fruit, Dole Fresh Fruit
International, Pineapple Growers Association of Hawaii, Shell Oil
Company, Dow Chemical Company, Occidental Chemical Corporation,
Standard Fruit Company, Standard Fruit & Steamship, Standard Fruit
company De Costa Rica, Standard Fruit company De Honduras, Chiquita
Brands,
48
<PAGE> 51
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Chiquita Brands International, Martrop Trading corporation, and Del
Monte Fresh Produce. The case has been removed to U.S. District Court.
Defendants are waiting for the Court's ruling on their Motion to
Dismiss based on numerous procedural grounds. It is currently
impossible to predict the outcome or the cost that will be involved in
the defense of this matter.
C. Mississippi Matters
On May 30,1996, AMVAC was served with five Complaints in which it is
named as a Defendant. The cases were filed in the Circuit Court of
Harrison County, First Judicial District of Mississippi. Each case
alleged damages sustained from injuries caused by Plaintiff's exposure
to DBCP while applying the product in their native countries. These
cases have been removed to U.S. District Court for the Southern
District of Mississippi, Southern Division. Three of the cases were
conditionally dismissed. Another case was closed for administrative
purposes due to its similarity to the other matters. Only one case is
still open but no substantive activity has occurred since its filing.
It is currently impossible to predict the outcome or the cost that will
be involved in the defense of these matters.
PHOSDRIN(R) LAWSUIT
On September 21, 1995, AMVAC was served with a complaint filed in the
Superior Court of King County, Washington on September 12, 1995
entitled Ricardo Ruiz Guzman, et. al. v. Amvac AMVAC Chemical
Corporation, et. al. (the "Guzman Case"). The Complaint is for
unspecified monetary damages based on Plaintiffs farm workers' alleged
injuries from their exposure to the pesticide Phosdrin(R). On October
14, 1997 the Court dismissed with prejudice all Plaintiff's claims
against AMVAC. Plaintiffs have appealed the judgement to the United
States Court of Appeals for the Ninth Circuit. It is currently
impossible to predict the outcome of the matter. AMVAC's carrier has
assumed costs of the appeal.
NAA DATA TRADE SECRET
On November 1, 1996 AMVAC filed an action in U.S. District Court in
Oregon against four defendants relating to their misuse of AMVAC's
exclusive right associated with Naphthalene Acetic Acid ("NAA") (Amvac
Chemical Corporation v. Termilind, Inc., et.al.). On November 25, 1996,
defendants Termilind and Inchema asserted counterclaims against AMVAC:
violation of antitrust laws (Sherman Act section 2 and ORS 646.730),
unfair competition, tortious interference, defamation, and breach of
49
<PAGE> 52
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
contract. Termilind and Inchema seek treble damages in the amount of $6
million for the antitrust claims, and compensatory damages in the
amount of $2 million, together with punitive and exemplary damages. On
November 1, 1996, AMVAC filed a demand for arbitration with the
American Arbitration Association seeking approximately $8 million in
compensation from Termilind. It is impossible to predict the outcome or
the cost that will be involved with this matter.
ENVIRONMENTAL
During 1997 AMVAC continued activities to address environmental
conditions at the railroad right-of-way which is located adjacent to
AMVAC's Commerce California facility (the "Facility"). The railroad
right-of-way is jointly owned by the Union Pacific Railroad and the
Burlington Northern and Santa Fe Railway Company, and is managed on
behalf of both companies by the latter. The site investigation and
remediation activities have been conducted pursuant to a January 10,
1996, enforceable agreement and order entered into by AMVAC and the
California Department of Toxic Substances Control ("DTSC").
A site investigation and health risk assessment were conducted and
completed by AMVAC during the first two quarters of 1997. AMVAC
prepared a draft Remedial Action Plan ("RAP") in May, 1997 which
evaluated several options for remediating soils at the railroad
right-of-way. The RAP concluded that the most appropriate option for
remediation was the excavation and offsite disposal of soils which
exceeded risk-based cleanup levels. DTSC approved the draft RAP on June
25, 1997. Remedial activities commenced on July 4, 1997 and were
completed on July 12, 1997. A post-remediation report was prepared by
AMVAC and submitted to DTSC on October 13, 1997. AMVAC is currently
awaiting DTSC approval of the remedial activities.
In March, 1997 the Facility was accepted into the DTSC's Expedited
Remedial Action Program ("ERAP"). The remaining environmental
investigation and any remediation activities related to the ten
underground storage tanks at the Facility which had been closed in 1995
will be addressed by AMVAC under ERAP. Soil characterization activities
at other areas of the Facility are expected to commence in the second
or third quarter of 1998 and to be conducted in phases over the next
two to three years. These activities are required at all facilities
which currently have, or in the past had, hazardous waste management
permits. Because AMVAC previously held a hazardous waste storage
permit, AMVAC is subject to these requirements.
50
<PAGE> 53
The Company is committed to a long-term environmental protection
program that reduces emissions of hazardous materials into the
environment, as well as to the remediation of identified existing
environmental concerns. Federal and state authorities may seek fines
and penalties for violation of the various laws and governmental
regulations. As part of its continuing environmental program, except as
disclosed above, the Company has been able to comply with such
proceedings and orders without any materially adverse effect on its
business.
The Company continues to make compliance with environmental
requirements an important company policy. As environmental quality
requirements and standards become stricter, the Company may have to
incur additional substantial costs to maintain regulatory compliance.
(7) EMPLOYEE DEFERRED COMPENSATION PLAN
The Company maintains a deferred compensation plan (Plan) for all
eligible employees. The Plan calls for each eligible employee, at the
employee's election, to participate in an income deferral arrangement
under Internal Revenue Code Section 401(k) whereby the Company will
match the first $5.00 of weekly employee contributions. The Plan also
permits employees to contribute an additional 15% of their salaries of
which the Company will match 50% of the first 6% of the additional
contribution. The Company's contributions to the Plan amounted to
approximately $195,100, $196,600 and $175,100 in 1997, 1996 and 1995.
(8) MAJOR CUSTOMERS AND EXPORT SALES
In 1997, there were sales to a major customer that accounted for 29%
of the Company's consolidated sales. In 1996, there were two
major customers that accounted for 33% and 10% of the Company's
consolidated sales. The Company had sales to four major customers that
accounted for 24%, 14%, 11%, and 10% of the Company's consolidated
sales in 1995.
Export sales were $6,646,000, $3,535,500 and $3,374,700 for 1997, 1996
and 1995.
(9) ROYALTIES
The Company has various royalty agreements in place extending through
December 2003, some of which relate to the Company's acquisition of
certain products. Royalty expenses were $426,700, $416,900 and $786,800
for 1997, 1996 and 1995.
51
<PAGE> 54
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(10) BUSINESS ACQUISITIONS
In December 1996, the Company completed the acquisition of an
established product line from a large chemical manufacturer. The
Company acquired all of the seller's existing product as of December
31, 1996 for an agreed upon value of $1,463,800 as well as intangible
assets, including customer lists, existing contracts and product
registrations and trademarks with an agreed upon value of $1,538,500.
In consideration of the above, the Company paid cash for the existing
product and recorded a minimum obligation of $4,662,000. As a result of
the above, the Company has recorded costs in excess of net assets
acquired (goodwill) in the amount of $3,123,500. Pro forma financial
statements are not presented since the financial position and results
of operations of the product line acquired are not material in relation
to the Company.
(11) COMMITMENTS
In July 1994, the Company entered into consulting agreements with two
former employees who are the current Co-Chairmen of the Company's Board
of Directors. The agreements originally were set to expire in July 1999
and provided for total remuneration of $1,000,000 over the five year
period to be paid to each former employee. In 1996, the consulting
agreements were extended for an additional year through July 2000 with
additional remuneration of $100,000 to be paid to each former employee.
The Company also has an employment agreement with an officer of one of
its subsidiaries. The employment agreement commenced September 16, 1996
and expires August 31, 1999. The employment agreement originally
provided for an annual salary of $170,000 which amount was adjusted to
$181,488 effective January 1, 1998. Annual increases are at the
discretion of the Board of Directors but shall not be less than the
increase in an agreed upon cost of living index.
Amounts to be paid under the aforementioned consulting and employment
agreements are summarized as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
<S> <C>
1998 470,200
1999 334,500
2000 108,300
---------
$ 913,000
=========
</TABLE>
52
<PAGE> 55
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
In July 1995, the Company entered into a noncancellable operating
sublease for its corporate headquarters expiring in October 1999. The
lease contains a provision to pass through to the Company the Company's
pro rata share of the building's operating expenses commencing July 1,
1996 in excess of the amount passed through to the sublandlord during
the first year of the sublease. Rent expense for the years ended
December 31, 1997, 1996 and 1995 was $131,800, $131,800 and $49,400.
Future minimum lease payments under the terms of the sublease are as
follows:
<TABLE>
<CAPTION>
Year ending
December 31,
<S> <C>
1998 131,800
1999 109,800
-------
$241,600
========
</TABLE>
(12) RESEARCH AND DEVELOPMENT
Research and development expenses were $2,241,300, $1,932,700 and
$3,717,400 for the years ended December 31, 1997, 1996 and 1995.
(13) SUBSEQUENT EVENT
On March 4, 1998, the Company announced that the Board of Directors
declared a cash dividend of $.07 per share. The dividend will be
distributed on March 25, 1998 to stockholders of record as of March 13,
1998.
53
<PAGE> 56
INDEX TO EXHIBITS
ITEM 14(a)3
<TABLE>
<CAPTION>
Page
Sequentially
Numbered
--------
<S> <C> <C>
2.1 Purchase and Sales Agreement dated November
15, 1993, between Amvac Chemical Corporation
and E.I. du Pont de Nemours and Company.4 --
3.1 Certificate of Incorporation of
Registrant.1 --
3.2 Bylaws of Registrant (as amended as of
January 14, 1993).3 --
4.1 Specimen Certificate of Common Stock.2 --
10.1 Indemnification Agreement dated January 6, 1993
between Registrant and each of its officers and
directors.3 --
10.2 Line of Credit Agreement dated June 18, 1991, related
amendments one through eight between the Registrant and Sanwa
Bank California and related
Security Agreement.3 --
10.3 Line of Credit Agreement dated April 30, 1993, and related
amendments, between the Registrant and Sanwa Bank California
and
related Security Agreement.5 --
10.4 Line of Credit Agreement dated April 14, 1994, and related
amendments, between the Registrant and Sanwa Bank California
and related Security
Agreement.6 --
10.5 Employment Agreement between American Vanguard
Corporation and Eric G. Wintemute.6 --
10.6 Employment Agreement between American Vanguard
Corporation and Alfred J. Moskal.6 --
</TABLE>
54
<PAGE> 57
<TABLE>
<S> <C> <C>
10.7 Employment Agreement between American Vanguard
Corporation and Robert F. Gilbane.(6) --
10.8 Agreement and General Release between American
Vanguard Corporation and Herbert A. Kraft.(6) --
10.9 Agreement and General Release between American
Vanguard Corporation and Glenn A. Wintemute.(6) --
10.10 American Vanguard Corporation
1994 Stock Incentive Plan.(7) --
10.11 Amended and Restated Credit Agreement dated September 12,
1995, and related documents between the Registrant and
Sanwa Bank California.(8) --
21. List of Subsidiaries of Registrant. 56
27. Financial Data Schedule 57
</TABLE>
- ----------------------
<TABLE>
<S> <C>
(1) Incorporated by reference as an Exhibit to Registrant's Form 10
Registration Statement No. 2-85599 filed June 13, 1972.
(2) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
June 13, 1972.
(3) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
March 30, 1993.
(4) Incorporated by reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K dated November 23, 1993.
(5) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
March 30, 1994.
(6) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
March 30, 1995.
(7) Incorporated by reference as Appendix A to Registrant's Proxy Material
filed June 3, 1995.
(8) Incorporated by reference as an Exhibit to Registrant's Form 10-K filed
March 28, 1996.
</TABLE>
55
<PAGE> 1
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
EXHIBIT 21
LISTING OF SUBSIDIARIES
Subsidiaries of the Company and the jurisdiction in which each company was
incorporated are listed below. Unless otherwise indicated parenthetically, 100%
of the voting securities of each subsidiary are owned by the Company. All
companies indicated with an asterisk (*) are subsidiaries of AMVAC. All of the
following subsidiaries are included in the Company's consolidated financial
statements:
<TABLE>
<S> <C>
AMVAC Chemical Corporation California
GemChem, Inc. California
2110 Davie Corporation California
(formerly ABSCO Distributing)
AMVAC Chemical UK Ltd.* Surrey, England
Agrosevicions Amvac, SA de CV Mexico
Quimica Amvac de Mexico SA de CV Mexico
Environmental Mediation, Inc. (51%) California
Calhart Corporation California
Manufacturers Mirror & Glass
Co., Inc. California
Todagco (80%)* California
American Vanguard Corporation
of Imperial Valley (90%)* California
AMVAC Ag-Chem* California
AMVAC Chemical Corporation-Nevada* Nevada
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000005981
<NAME> AMERICAN VANGUARD CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 746,600
<SECURITIES> 0
<RECEIVABLES> 21,686,000
<ALLOWANCES> 0
<INVENTORY> 12,937,900
<CURRENT-ASSETS> 36,406,100
<PP&E> 31,980,200
<DEPRECIATION> 18,541,200
<TOTAL-ASSETS> 55,206,300
<CURRENT-LIABILITIES> 10,559,900
<BONDS> 19,139,900
256,400
0
<COMMON> 0
<OTHER-SE> 21,003,400
<TOTAL-LIABILITY-AND-EQUITY> 55,206,300
<SALES> 67,700,500
<TOTAL-REVENUES> 67,700,500
<CGS> 40,315,600
<TOTAL-COSTS> 40,315,600
<OTHER-EXPENSES> 22,600,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,502,000
<INCOME-PRETAX> 3,282,800
<INCOME-TAX> 1,258,100
<INCOME-CONTINUING> 2,024,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,024,700
<EPS-PRIMARY> .81
<EPS-DILUTED> .81
</TABLE>
