<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ___________ TO
___________
COMMISSION FILE NUMBER 0-6354
AMERICAN VANGUARD CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2588080
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
4695 MacArthur Court, Newport Beach, California 92660
----------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(949) 260-1200
--------------
(Registrant's telephone number, including area code)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.10 Par Value -- 2,692,939 shares as of November 10, 2000.
<PAGE> 2
AMERICAN VANGUARD CORPORATION
INDEX
PART I - FINANCIAL INFORMATION Page Number
-----------
Item 1.
Financial Statements.
Consolidated Statements of Operations
for the three and nine months ended
September 30, 2000 and 1999 1
Consolidated Balance Sheets
as of September 30, 2000 and
December 31, 1999 2
Consolidated Statements of Cash Flows
for the nine months ended
September 30, 2000 and 1999 4
Notes to Consolidated Financial
Statements 6
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9
PART II - OTHER INFORMATION 13
SIGNATURE PAGE 14
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the nine months
ended September 30 ended September 30
------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 21,421,800 $ 17,119,800 $ 51,011,400 $ 44,966,100
Cost of sales 12,552,100 9,764,100 27,852,700 25,225,400
------------ ------------ ------------ ------------
Gross profit 8,869,700 7,355,700 23,158,700 19,740,700
Operating expenses 6,790,400 5,706,600 18,921,700 17,062,400
Settlement expense -- 153,000 -- 153,000
------------ ------------ ------------ ------------
Operating income 2,079,300 1,496,100 4,237,000 2,525,300
Interest expense (390,400) (403,700) (1,272,300) (1,284,100)
Interest income 6,300 6,900 8,600 9,500
------------ ------------ ------------ ------------
Income before
income tax expense 1,695,200 1,099,300 2,973,300 1,250,700
Income tax expense 678,100 420,200 1,189,300 477,700
------------ ------------ ------------ ------------
Net income $ 1,017,100 $ 679,100 $ 1,784,000 $ 773,000
============ ============ ============ ============
Basic and diluted net
income per common share $ .38 $ .25 $ .66 $ .28
============ ============ ============ ============
Weighted average number
of shares 2,692,939 2,722,370 2,697,355 2,730,734
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, Dec. 31,
ASSETS (NOTE 8) 2000 1999
------------- --------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash $ 828,100 $ 550,200
Receivables:
Trade 18,094,700 15,119,800
Other 577,900 833,200
----------- -----------
18,672,600 15,953,000
----------- -----------
Inventories (note 2) 21,169,900 16,749,900
Prepaid expenses 904,400 819,600
----------- -----------
Total current assets 41,575,000 34,072,700
Property, plant and
equipment, net (note 3) 9,270,900 10,514,200
Land held for development 210,800 210,800
Intangible assets 10,910,800 10,086,400
Other assets 669,900 695,200
----------- -----------
$62,637,400 $55,579,300
=========== ===========
</TABLE>
(Continued)
2
<PAGE> 5
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, Dec. 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------- -----------
(Unaudited) (Note)
<S> <C> <C>
Current liabilities:
Current installments of
long-term debt $ 3,305,800 $ 3,022,200
Accounts payable 7,523,700 2,946,300
Accrued expenses and other payables 6,043,600 5,653,700
Income taxes payable -- 1,064,200
----------- -----------
Total current liabilities 16,873,100 12,686,400
Note payable to bank (note 6) 11,900,000 10,100,000
Long-term debt, excluding
current installments 4,903,800 5,145,600
Other long-term liabilities 125,300 101,700
Deferred income taxes 1,576,700 1,576,700
----------- -----------
Total liabilities 35,378,900 29,610,400
----------- -----------
Stockholders' Equity:
Preferred stock, $.10 par value per
share; authorized 400,000 shares;
none issued -- --
Common stock, $.10 par value per share,
authorized 10,000,000 shares; issued
and outstanding 2,827,039 shares
(2,564,182 at December 31, 1999 (note 4) 282,700 256,400
Additional paid-in capital (note 4) 5,906,600 3,879,000
Retained earnings (note 4) 21,827,400 22,520,200
----------- -----------
28,016,700 26,655,600
Treasury stock at cost
134,100 at September 30, 2000
and 114,000 shares at December 31, 1999 758,200 686,700
----------- -----------
Total stockholders' equity 27,258,500 25,968,900
----------- -----------
$62,637,400 $55,579,300
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date.
See notes to consolidated financial statements.
3
<PAGE> 6
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Increase (decrease) in cash 2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,784,000 $ 773,000
Adjustments to reconcile net income
to net cash used in
operating activities:
Depreciation and amortization 2,400,100 2,429,600
Changes in assets and liabilities
associated with operations:
Decrease (increase) in receivables (2,719,600) 5,005,000
Increase in inventories (4,420,000) (2,695,500)
Increase in prepaid expenses (84,800) (182,500)
Increase (decrease) in
accounts payable 4,577,400 (123,200)
Decrease in other payables
and accrued expenses (785,300) (2,815,800)
----------- -----------
Net cash provided by
operating activities 751,800 2,390,600
----------- -----------
Cash flows from investing activities:
Capital expenditures (477,000) (294,600)
Net increase in other noncurrent assets (28,900) (24,700)
----------- -----------
Net cash used in
investing activities (505,900) (319,300)
----------- -----------
</TABLE>
(Continued)
4
<PAGE> 7
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Increase (decrease) in cash 2000 1999
----------- -----------
<S> <C> <C>
Cash flows from financing activities:
Net additions (repayments) under
line of credit agreement $ 1,800,000 $ (800,000)
Reductions in long-term debt (1,408,200) (1,088,900)
Exercise of stock options 31,400 --
Purchase of treasury stock (71,500) (101,800)
Payment of cash dividends (319,700) (149,500)
----------- -----------
Net cash provided by (used in)
financing activities 32,000 (2,140,200)
----------- -----------
Net increase (decrease)
in cash 277,900 (68,900)
Cash at beginning of year 550,200 767,000
----------- -----------
Cash as of September 30 $ 828,100 $ 698,100
=========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES:
On September 12, 2000, the Company announced that the Board of Directors
declared a cash dividend of $.05 per share. The dividend was paid October 20,
2000 to stockholders of record as of the close of business on October 6, 2000.
On April 14, 2000, the Company distributed 256,857 shares of Common Stock in
connection with a 10% Common Stock dividend to stockholders of record as of
March 31, 2000. As a result of the stock dividend, Common Stock was increased by
$25,700, additional paid-in capital was increased by $1,997,000, and retained
earnings was decreased by $2,022,700.
During the nine months ended September 30, 2000, the Company completed the
acquisition of two established product lines from two large chemical
manufacturers. In connection with these acquisitions, the Company recorded
intangible assets in the amount of $1,450,000 and a corresponding debt
obligation in the same amount.
See notes to consolidated financial statements.
5
<PAGE> 8
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation, have been included. Operating results for the
three and nine-month periods ended September 30, 2000 are not
necessarily indicative of the results that may be expected
for the year ending December 31, 2000. For further
information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1999.
2. Inventories - The components of inventories consist of the
following:
<TABLE>
<CAPTION>
Sept. 30, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Finished products $17,436,800 $14,258,700
Raw materials 3,733,100 2,491,200
----------- -----------
$21,169,900 $16,749,900
=========== ===========
</TABLE>
3. Property, plant and equipment at September 30, 2000 and
December 31, 1999, consists of the following:
<TABLE>
<CAPTION>
Sept. 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Land $ 2,441,400 $ 2,382,600
Buildings and improvements 4,858,700 4,727,300
Machinery and equipment 24,004,500 23,825,700
Office furniture and fixtures 2,583,900 2,467,900
Automotive equipment 136,900 136,900
Construction in progress 506,300 519,400
----------- -----------
34,531,700 34,059,800
Less accumulated depreciation 25,260,800 23,545,600
----------- -----------
$ 9,270,900 $10,514,200
=========== ===========
</TABLE>
6
<PAGE> 9
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. On September 12, 2000, the Company announced that the Board of Directors
declared a cash dividend of $.05 per share. The dividend was paid on
October 20, 2000 to stockholders of record as of the close of business
on October 6, 2000.
On March 16, 2000, the Company announced that the Board of Directors
declared a cash dividend of $.13 per share as well as a 10% stock
dividend. Both dividends were distributed on April 14, 2000 to
stockholders of record at the close of business on March 31, 2000. The
cash dividend was paid on the number of shares outstanding prior to the
stock dividend. Stockholders entitled to fractional shares resulting
from the stock dividend received cash in lieu of such fractional share
based on $7.875 per share, the closing price of the Company's stock on
March 31, 2000. The Company distributed 256,857 shares of common stock
in connection with the common stock dividend. As a result common stock
was increased by $25,700, additional paid-in capital was increased by
$1,997,000, and retained earnings was decreased by $2,022,700. All stock
related data in the consolidated financial statements reflect the stock
dividend for all periods presented.
5. Earnings Per Share ("EPS")- Basic EPS is computed as net income
divided by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS reflects potential
dilution that could occur if securities or other contracts, which,
for the Company, consists of options to purchase shares of the
Company's common stock, are exercised. These options were anti-
dilutive for the periods ended September 30, 2000 and 1999, and as
such, dilutive EPS amounts are the same as basic EPS for the
periods presented.
6. Under a credit agreement with a bank, the Company may borrow up to
$24,000,000. The note payable was scheduled to expire July 31, 2000.
This fully-secured line of credit was renewed in June 2000 and now
expires on June 1, 2002. The Company had $12,100,000 available under
this credit agreement as of September 30, 2000.
(See note 9.)
7. During the nine months ended September 30, 2000, the Company completed
the acquisition of two product lines from two large chemical
manufacturers. In connection with these acquisitions, the Company
recorded intangible assets in the amount of $1,450,000 in consideration
of its debt obligation in the same amount.
7
<PAGE> 10
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
8. Substantially all of the Company's assets not otherwise specifically
pledged as collateral on existing loans and capital leases, are pledged
as collateral under the Company's credit agreement with a bank. As
referenced in note 1, for further information, refer to the consolidated
financial statements and footnotes thereto (specifically note 3)
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
9. Reclassification - Certain items have been reclassified in the prior
period consolidated financial statements to conform with the September
30, 2000, presentation.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED SEPTEMBER 30:
The Company reported net income of $1,017,100 or $.38 per share for the third
quarter ended September 30, 2000 as compared to $679,100 or $.25 per share for
the same period in 1999.
Net sales increased by $4,302,000 to $21,421,800 for the quarter ended September
30, 2000 from $17,119,800 for the same period in 1999.
Gross profits increased $1,514,000 to $8,869,700 for the three months ended
September 30, 2000 from $7,355,700 for the same period in 1999. The gross profit
margin for the quarter ended September 30, 2000 declined to 41% from 43% in the
same period in 1999. The lower margin was due to the changes in the sales mix of
the Company's products.
Operating expenses, which are net of other income, increased by $1,083,800 to
$6,790,400 for the three months ended September 30, 2000 as compared to
$5,706,600 for the same period in 1999. The differences in operating expenses by
specific departmental costs are as follows:
o Selling expenses increased by $635,700 to $2,421,300 for the third quarter
ended September 30, 2000 as compared to $1,785,600 for the same period in
1999. Increased variable selling expenses that relate to both increased
sales levels and the product mix of sales along with increased expenses
related to the Company's newly acquired soil insecticide business were the
reasons for the increase.
o General and administrative expenses increased by $230,200 to $1,492,500 for
the third quarter ended September 30, 2000 as compared to $1,262,300 for
the same period in 1999. The increase was due primarily to an increase in
outside professional fees and payroll and payroll related costs.
o Research and product development costs and regulatory/registration expenses
increased by $125,300 to $1,229,000 for the quarter ended September 30,
2000 from $1,103,700 for the same period in 1999. The increase was
primarily due to increases in costs incurred to generate scientific data
related to the registration and possible new uses of the Company's
products.
9
<PAGE> 12
o Freight, delivery, storage and warehousing costs increased $92,600 to
$1,647,700 for the quarter ended September 30, 2000 as compared to
$1,555,100 for the same period in 1999. These increased costs were due
primarily to the increased sales levels.
Interest costs were $390,400 during the three months ended September 30, 2000 as
compared to $403,700 for the same period in 1999.
Weather patterns can have an impact on the Company's operations. Weather
conditions influence pest population by impacting gestation cycles for
particular pests and the effectiveness of some of the Company's products, among
other factors. The end user of some of the Company's products may, because of
weather patterns, delay or intermittently disrupt field work during the planting
season which may result in a reduction of the use of some of the Company's
products.
Because of elements inherent to the Company's business, such as differing and
unpredictable weather patterns, crop growing cycles, changes in product mix of
sales, ordering patterns that may vary in timing, and promotional/early order
programs, measuring the Company's performance on a quarterly basis, (gross
profit margins on a quarterly basis may vary significantly) even when such
comparisons are favorable, is not as meaningful an indicator as full-year
comparisons. The primary reason is that the use cycles do not necessarily
coincide with financial reporting cycles.
NINE MONTHS ENDED SEPTEMBER 30:
The Company reported net income of $1,784,000 or $.66 per share for the nine
months ended September 30, 2000 as compared to $773,000 or $.28 per share for
the same period in 1999.
Net sales increased by $6,045,300 to $51,011,400 for the nine months ended
September 30, 2000 from $44,966,100 for the same period in 1999.
Gross profits increased $3,418,000 to $23,158,700 for the nine months ended
September 30, 2000 from $19,740,700 for the same period in 1999. The gross
profit margin for the nine months ended September 30, 2000 increased to 45% from
44% in the same period in 1999. The improvement in margin was due to the changes
in the sales mix of the Company's products.
10
<PAGE> 13
Operating expenses, which are net of other income, increased by $1,859,300 to
$18,921,700 for the nine months ended September 30, 2000 as compared to
$17,062,400 for the same period in 1999. The differences in operating expenses
by specific departmental costs are as follows:
o Selling expenses increased by $2,286,200 to $7,234,900 for the nine months
ended September 30, 2000 as compared to $4,948,700 for the same period in
1999. Increased variable selling expenses that relate to both increased
sales levels and the product mix of sales along with increased expenses
related to the Company's newly acquired soil insecticide business were the
reasons for the increase.
o General and administrative expenses declined by $871,700 to $4,245,300 for
the nine months ended September 30, 2000 as compared to $5,117,000 for the
same period in 1999. The decline was due primarily to a reduction in legal
expenses.
o Research and product development costs and regulatory/registration expenses
increased by $289,500 to $3,557,100 for the nine months ended September 30,
2000 from $3,267,600 for the same period in 1999. The increase was
primarily due to increases in costs incurred to generate scientific data
related to the registration of the Company's products.
o Freight, delivery, storage and warehousing costs increased $155,300 to
$3,884,400 for the nine months ended September 30, 2000 as compared to
$3,729,100 for the same period in 1999. These increased costs were due
primarily to the increased sales levels.
Interest costs were $1,272,300 during the nine months ended September 30, 2000
as compared to $1,284,100 for the same period in 1999.
11
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
Operating activities provided $751,800 of cash during the first nine months of
2000 primarily from net income of $1,784,000, non- cash depreciation and
amortization of $2,400,100, an increase in accounts payable and accrued expenses
of $3,792,100 offset by increases of $4,420,000, $2,719,600 and $84,800 in
inventories, accounts receivable and prepaid expenses, respectively. The
increase in inventories during the first nine months of the year was in
anticipation of product demand during the fourth quarter 2000. Payables and
accrued expenses declined due to payments of trade payables, income taxes,
product rebates and royalties, and other related expenses.
The Company used $505,900 in investing activities for the period ended September
30, 2000. It invested $477,000 in capital expenditures and increased its other
noncurrent assets by $28,900.
Financing activities provided $32,000 for the nine months ended September 30,
2000. The Company's net borrowings under its fully-secured revolving line of
credit increased by $1,800,000. The Company reduced its long-term debt by
$1,408,200, paid $319,700 in cash dividends, and purchased 8,700 shares of
treasury stock for $71,500.
The Company's fully-secured $24,000,000 long-term line of credit was renewed in
June 2000 and now expires on June 1, 2002. As of September 30, 2000, the Company
had $12,100,000 in availability under its fully-secured long-term line of
credit.
Management continues to believe, to continue to improve its working capital
position and maintain flexibility in financing interim needs, it is prudent to
explore alternate sources of financing.
* * *
The Company, from time-to-time, may discuss forward-looking information. Except
for the historical information contained in this report, all forward-looking
statements are estimates by the Company's management and are subject to various
risks and uncertainties that may cause results to differ from management's
current expectations. Such factors include weather conditions, changes in
regulatory policy and other risks as detailed from time-to-time in the Company's
SEC reports and filings. All forward-looking statements, if any, in this report
represent the Company's judgement as of the date of this report. The Company
disclaims, however, any intent or obligation to update forward- looking
statements.
12
<PAGE> 15
PART II. OTHER INFORMATION
The Company was not required to report any matters or changes for any items of
Part II except as disclosed below.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the three months
ended September 30, 2000.
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN VANGUARD CORPORATION
Dated: November 10, 2000 By: /s/ Eric G. Wintemute
-------------------------------------
Eric G. Wintemute
President,
Chief Executive Officer
and Director
Dated: November 10, 2000 By: /s/ J. A. Barry
-------------------------------------
J. A. Barry
Senior Vice President,
Chief Financial Officer,
Secretary/Treasurer
and Director
14
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
27 Financial Data Schedule
