s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2020MARCH 31, 2021
☐ | 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 001-13795
AMERICAN VANGUARD CORPORATION
Delaware | 95-2588080 |
(State or other jurisdiction of Incorporation or organization) | (I.R.S. Employer 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, $.10 par value |
| AVD |
| New York Stock Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☐ |
| Accelerated Filer | ☒ |
Non-Accelerated Filer | ☐ |
| Smaller reporting company | ☐ |
Emerging growth company | ☐ |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
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—30,179,13930,828,461 shares as of July 29, 2020.April 30, 2021.
AMERICAN VANGUARD CORPORATION
INDEX
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| Page Number |
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| 3 | |
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| 4 | |
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| Condensed Consolidated Balance Sheets |
| 5 |
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| 6 | |
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| 7 | |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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PART I. FINANCIAL INFORMATION
Item 1. | FINANCIAL STATEMENTS |
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
|
| For the three months ended March 31 |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||
Net sales |
| $ | 104,555 |
|
| $ | 113,104 |
|
| $ | 200,517 |
|
| $ | 212,780 |
|
| $ | 116,155 |
|
| $ | 95,962 |
|
Cost of sales |
|
| 64,249 |
|
|
| 71,451 |
|
|
| 121,830 |
|
|
| 129,425 |
|
|
| (71,024 | ) |
|
| (57,581 | ) |
Gross profit |
|
| 40,306 |
|
|
| 41,653 |
|
|
| 78,687 |
|
|
| 83,355 |
|
|
| 45,131 |
|
|
| 38,381 |
|
Operating expenses |
|
| 33,555 |
|
|
| 35,362 |
|
|
| 70,100 |
|
|
| 70,162 |
|
|
| (41,444 | ) |
|
| (36,545 | ) |
Adjustment to bargain purchase gain on business acquisition |
|
| (33 | ) |
|
| — |
| ||||||||||||||||
Operating income |
|
| 6,751 |
|
|
| 6,291 |
|
|
| 8,587 |
|
|
| 13,193 |
|
|
| 3,654 |
|
|
| 1,836 |
|
Change in fair value of an equity investment |
|
| 1,066 |
|
|
| — |
| ||||||||||||||||
Other income |
|
| 672 |
|
|
| — |
| ||||||||||||||||
Interest expense, net |
|
| 1,274 |
|
|
| 1,925 |
|
|
| 2,782 |
|
|
| 3,537 |
|
|
| (946 | ) |
|
| (1,508 | ) |
Income before provision for income taxes and loss on equity method investment |
|
| 5,477 |
|
|
| 4,366 |
|
|
| 5,805 |
|
|
| 9,656 |
| ||||||||
Income tax expense |
|
| 1,565 |
|
|
| 1,224 |
|
|
| 1,360 |
|
|
| 2,584 |
| ||||||||
Income before loss on equity method investment |
|
| 3,912 |
|
|
| 3,142 |
|
|
| 4,445 |
|
|
| 7,072 |
| ||||||||
Income before provision for income taxes (benefit) and loss on equity method investment |
|
| 4,446 |
|
|
| 328 |
| ||||||||||||||||
Income tax (expense) benefit |
|
| (1,362 | ) |
|
| 205 |
| ||||||||||||||||
Income before loss from equity method investment |
|
| 3,084 |
|
|
| 533 |
| ||||||||||||||||
Loss from equity method investment |
|
| 25 |
|
|
| 36 |
|
|
| 38 |
|
|
| 60 |
|
|
| (13 | ) |
|
| (13 | ) |
Net income attributable to American Vanguard |
| $ | 3,887 |
|
| $ | 3,106 |
|
| $ | 4,407 |
|
| $ | 7,012 |
| ||||||||
Net income |
| $ | 3,071 |
|
| $ | 520 |
| ||||||||||||||||
Earnings per common share—basic |
| $ | .13 |
|
| $ | .11 |
|
| $ | .15 |
|
| $ | .24 |
|
| $ | 0.10 |
|
| $ | 0.02 |
|
Earnings per common share—assuming dilution |
| $ | .13 |
|
| $ | .11 |
|
| $ | .15 |
|
| $ | .24 |
|
| $ | 0.10 |
|
| $ | 0.02 |
|
Weighted average shares outstanding—basic |
|
| 29,413 |
|
|
| 29,001 |
|
|
| 29,350 |
|
|
| 28,989 |
|
|
| 29,737 |
|
|
| 29,288 |
|
Weighted average shares outstanding—assuming dilution |
|
| 29,854 |
|
|
| 29,540 |
|
|
| 29,904 |
|
|
| 29,560 |
|
|
| 30,523 |
|
|
| 29,948 |
|
See notes to the Condensed Consolidated Financial Statements.condensed consolidated financial statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
|
| For the three months ended March 31 |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
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| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||
Net income |
| $ | 3,887 |
|
| $ | 3,106 |
|
| $ | 4,407 |
|
| $ | 7,012 |
|
| $ | 3,071 |
|
| $ | 520 |
|
Comprehensive income: |
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|
|
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Foreign currency translation adjustment |
|
| 324 |
|
|
| 657 |
|
|
| (8,739 | ) |
|
| (1,112 | ) | ||||||||
Other comprehensive loss: |
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|
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|
|
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Foreign currency translation adjustment, net |
|
| (2,503 | ) |
|
| (9,063 | ) | ||||||||||||||||
Comprehensive income (loss) |
| $ | 4,211 |
|
| $ | 3,763 |
|
| $ | (4,332 | ) |
| $ | 5,900 |
|
| $ | 568 |
|
| $ | (8,543 | ) |
See notes to the Condensed Consolidated Financial Statements.condensed consolidated financial statements.
4
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS
|
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Current assets: |
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Cash and cash equivalents |
| $ | 8,600 |
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| $ | 6,581 |
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| $ | 13,765 |
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| $ | 15,923 |
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Receivables: |
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Trade, net of allowance for doubtful accounts of $2,658 and $2,300, respectively |
|
| 123,406 |
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| 136,075 |
| ||||||||
Trade, net of allowance for doubtful accounts of $3,979 and $3,297, respectively |
|
| 156,010 |
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| 130,029 |
| ||||||||
Other |
|
| 9,324 |
|
|
| 16,949 |
|
|
| 10,247 |
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|
| 8,444 |
|
Total receivables, net |
|
| 132,730 |
|
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| 153,024 |
|
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| 166,257 |
|
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| 138,473 |
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Inventories, net |
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| 180,993 |
|
|
| 163,313 |
| ||||||||
Inventories |
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| 172,234 |
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| 163,784 |
| ||||||||
Prepaid expenses |
|
| 12,502 |
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| 10,457 |
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|
| 11,221 |
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|
| 10,499 |
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Income taxes receivable |
|
| 1,925 |
|
|
| 2,824 |
|
|
| 2,409 |
|
|
| 3,046 |
|
Total current assets |
|
| 336,750 |
|
|
| 336,199 |
|
|
| 365,886 |
|
|
| 331,725 |
|
Property, plant and equipment, net |
|
| 59,161 |
|
|
| 56,521 |
|
|
| 65,945 |
|
|
| 65,382 |
|
Operating lease right-of-use assets |
|
| 10,034 |
|
|
| 11,258 |
|
|
| 11,207 |
|
|
| 12,198 |
|
Intangible assets, net of amortization |
|
| 194,357 |
|
|
| 198,377 |
| ||||||||
Intangible assets, net of applicable amortization |
|
| 193,776 |
|
|
| 197,514 |
| ||||||||
Goodwill |
|
| 41,278 |
|
|
| 46,557 |
|
|
| 50,505 |
|
|
| 52,108 |
|
Other assets |
|
| 19,754 |
|
|
| 21,186 |
|
|
| 18,492 |
|
|
| 18,602 |
|
Deferred income tax assets, net |
|
| 4,213 |
|
|
| 2,764 |
| ||||||||
Total assets |
| $ | 661,334 |
|
| $ | 670,098 |
|
| $ | 710,024 |
|
| $ | 680,293 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | LIABILITIES AND STOCKHOLDERS’ EQUITY |
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
| ||||||||||||
Current liabilities: |
|
|
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|
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|
Current installments of other liabilities |
| $ | 217 |
|
| $ | 1,513 |
|
| $ | 909 |
|
| $ | 2,647 |
|
Accounts payable |
|
| 52,599 |
|
|
| 64,881 |
|
|
| 60,946 |
|
|
| 59,253 |
|
Deferred revenue |
|
| 4,347 |
|
|
| 6,826 |
|
|
| 32,316 |
|
|
| 43,611 |
|
Accrued program costs |
|
| 60,264 |
|
|
| 47,699 |
|
|
| 53,196 |
|
|
| 45,441 |
|
Accrued expenses and other payables |
|
| 9,610 |
|
|
| 12,815 |
|
|
| 15,865 |
|
|
| 16,184 |
|
Operating lease liabilities, current |
|
| 4,771 |
|
|
| 4,904 |
|
|
| 3,664 |
|
|
| 4,188 |
|
Total current liabilities |
|
| 131,808 |
|
|
| 138,638 |
|
|
| 166,896 |
|
|
| 171,324 |
|
Long-term debt, net of deferred loan fees |
|
| 159,407 |
|
|
| 148,766 |
| ||||||||
Operating lease liabilities, long-term |
|
| 5,419 |
|
|
| 6,503 |
| ||||||||
Other liabilities, excluding current installments |
|
| 10,595 |
|
|
| 12,890 |
| ||||||||
Deferred income tax liabilities |
|
| 14,445 |
|
|
| 19,145 |
| ||||||||
Long-term debt, net |
|
| 143,423 |
|
|
| 107,442 |
| ||||||||
Operating lease liabilities, long term |
|
| 7,692 |
|
|
| 8,177 |
| ||||||||
Other liabilities, net of current installments |
|
| 8,453 |
|
|
| 9,054 |
| ||||||||
Deferred income tax liabilities, net |
|
| 23,514 |
|
|
| 23,560 |
| ||||||||
Total liabilities |
|
| 321,674 |
|
|
| 325,942 |
|
|
| 349,978 |
|
|
| 319,557 |
|
Commitments and contingent liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.10 par value per share; authorized 400,000 shares; NaN issued |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock, $.10 par value per share; authorized 40,000,000 shares; issued 33,229,078 shares at June 30, 2020 and 33,233,614 shares at December 31, 2019 |
|
| 3,324 |
|
|
| 3,324 |
| ||||||||
Common stock, $.10 par value per share; authorized 40,000,000 shares; issued 33,874,322 shares at March 31, 2021 and 33,922,433 shares at December 31, 2020 |
|
| 3,389 |
|
|
| 3,394 |
| ||||||||
Additional paid-in capital |
|
| 90,994 |
|
|
| 90,572 |
|
|
| 95,985 |
|
|
| 96,642 |
|
Accumulated other comprehensive loss |
|
| (14,437 | ) |
|
| (5,698 | ) |
|
| (11,825 | ) |
|
| (9,322 | ) |
Retained earnings |
|
| 277,939 |
|
|
| 274,118 |
|
|
| 290,657 |
|
|
| 288,182 |
|
|
|
| 357,820 |
|
|
| 362,316 |
| ||||||||
Less treasury stock at cost, 3,061,040 shares at June 30, 2020 and December 31, 2019 |
|
| (18,160 | ) |
|
| (18,160 | ) | ||||||||
Less treasury stock at cost, 3,061,040 shares |
|
| (18,160 | ) |
|
| (18,160 | ) | ||||||||
Total stockholders’ equity |
|
| 339,660 |
|
|
| 344,156 |
|
|
| 360,046 |
|
|
| 360,736 |
|
Total liabilities and stockholders' equity |
| $ | 661,334 |
|
| $ | 670,098 |
|
| $ | 710,024 |
|
| $ | 680,293 |
|
See notes to the Condensed Consolidated Financial Statements.condensed consolidated financial statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITY
For The Three and Six Months Ended June 30,March 31, 2021 and March 31, 2020
(In thousands, except share data)
(Unaudited)
|
| Common Stock |
|
| Additional |
|
| Accumulated Other |
|
|
|
|
|
| Treasury Stock |
|
|
|
|
|
| Common Stock |
|
| Additional |
|
| Accumulated Other |
|
|
|
|
|
| Treasury Stock |
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|
|
|
| ||||||||||||||||||||||||
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| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Comprehensive Loss |
|
| Retained Earnings |
|
| Shares |
|
| Amount |
|
| Total |
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Comprehensive Loss |
|
| Retained Earnings |
|
| Shares |
|
| Amount |
|
| Total |
| ||||||||||||||||
Balance, December 31, 2019 |
|
| 33,233,614 |
|
| $ | 3,324 |
|
| $ | 90,572 |
|
| $ | (5,698 | ) |
| $ | 274,118 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 344,156 |
| ||||||||||||||||||||||||||||||||
Common stock issued under ESPP |
|
| 22,776 |
|
|
| 2 |
|
|
| 350 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 352 |
| ||||||||||||||||||||||||||||||||
Balance, December 31, 2020 |
|
| 33,922,433 |
|
| $ | 3,394 |
|
| $ | 96,642 |
|
| $ | (9,322 | ) |
| $ | 288,182 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 360,736 |
| ||||||||||||||||||||||||||||||||
Stocks issued under ESPP |
|
| 25,120 |
|
|
| 2 |
|
|
| 338 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 340 |
| ||||||||||||||||||||||||||||||||
Cash dividends on common stock ($0.02 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (586 | ) |
|
| — |
|
|
| — |
|
|
| (586 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (596 | ) |
|
| — |
|
|
| — |
|
|
| (596 | ) |
Foreign currency translation adjustment, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,063 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,063 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,503 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,503 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,357 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,357 |
| ||||||||||||||||||||||||||||||||
Stock based compensation |
|
| — |
|
|
| — |
|
|
| 1,792 |
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,792 |
| ||||||||||||||||||||||||||||||||
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| (73,231 | ) |
|
| (7 | ) |
|
| (2,787 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,794 | ) | ||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,071 |
|
|
| — |
|
|
| — |
|
|
| 3,071 |
| ||||||||||||||||||||||||||||||||
Balance, March 31, 2021 |
|
| 33,874,322 |
|
| $ | 3,389 |
|
| $ | 95,985 |
|
| $ | (11,825 | ) |
| $ | 290,657 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 360,046 |
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Balance, December 31, 2019 |
|
| 33,233,614 |
|
| $ | 3,324 |
|
| $ | 90,572 |
|
| $ | (5,698 | ) |
| $ | 274,118 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 344,156 |
| ||||||||||||||||||||||||||||||||
Stocks issued under ESPP |
|
| 22,776 |
|
|
| 2 |
|
|
| 350 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 352 |
| ||||||||||||||||||||||||||||||||
Cash dividends on common stock ($0.02 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (586 | ) |
|
| — |
|
|
| — |
|
|
| (586 | ) | ||||||||||||||||||||||||||||||||
Foreign currency translation adjustment, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,063 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,063 | ) | ||||||||||||||||||||||||||||||||
Stock based compensation |
|
| — |
|
|
| — |
|
|
| 1,357 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,357 |
| ||||||||||||||||||||||||||||||||
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| (67,969 | ) |
|
| (7 | ) |
|
| (2,522 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,529 | ) |
|
| (67,969 | ) |
|
| (7 | ) |
|
| (2,522 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,529 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 520 |
|
|
| — |
|
|
| — |
|
|
| 520 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 520 |
|
|
| — |
|
|
| — |
|
|
| 520 |
|
Balance, March 31, 2020 |
|
| 33,188,421 |
|
|
| 3,319 |
|
|
| 89,757 |
|
|
| (14,761 | ) |
|
| 274,052 |
|
|
| 3,061,040 |
|
|
| (18,160 | ) |
|
| 334,207 |
|
|
| 33,188,421 |
|
| $ | 3,319 |
|
| $ | 89,757 |
|
| $ | (14,761 | ) |
| $ | 274,052 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 334,207 |
|
Foreign currency translation adjustment, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 324 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 324 |
| ||||||||||||||||||||||||||||||||
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,188 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,188 |
| ||||||||||||||||||||||||||||||||
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| 40,657 |
|
|
| 5 |
|
|
| 49 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 54 |
| ||||||||||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,887 |
|
|
| — |
|
|
| — |
|
|
| 3,887 |
| ||||||||||||||||||||||||||||||||
Balance, June 30, 2020 |
|
| 33,229,078 |
|
| $ | 3,324 |
|
| $ | 90,994 |
|
| $ | (14,437 | ) |
| $ | 277,939 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
|
| 339,660 |
|
See notes to the Condensed Consolidated Financial Statements.
condensed consolidated financial statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For The Three and Six Months Ended June 30, 2019
(In thousands, except share data)
(Unaudited)
|
| Common Stock |
|
| Additional |
|
| Accumulated Other |
|
|
|
|
|
| Treasury Stock |
|
|
|
|
| ||||||||||||
|
| Shares |
|
| Amount |
|
| Paid-in Capital |
|
| Comprehensive Loss |
|
| Retained Earnings |
|
| Shares |
|
| Amount |
|
| AVD Total |
| ||||||||
Balance, December 31, 2018 |
|
| 32,752,827 |
|
| $ | 3,276 |
|
| $ | 83,177 |
|
| $ | (4,507 | ) |
| $ | 262,840 |
|
|
| 2,902,992 |
|
| $ | (15,556 | ) |
| $ | 329,230 |
|
Common stock issued under ESPP |
|
| 22,441 |
|
|
| 2 |
|
|
| 336 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 338 |
|
Cash dividends on common stock ($0.02 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (580 | ) |
|
| — |
|
|
| — |
|
|
| (580 | ) |
Foreign currency translation adjustment, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,769 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,769 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,485 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,485 |
|
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| 419,295 |
|
|
| 42 |
|
|
| (930 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (888 | ) |
Shares repurchased |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 158,048 |
|
|
| (2,604 | ) |
|
| (2,604 | ) |
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,906 |
|
|
| — |
|
|
| — |
|
|
| 3,906 |
|
Balance, March 31, 2019 |
|
| 33,194,563 |
|
|
| 3,320 |
|
|
| 84,068 |
|
|
| (6,276 | ) |
|
| 266,166 |
|
|
| 3,061,040 |
|
|
| (18,160 | ) |
|
| 329,118 |
|
Cash dividends on common stock ($0.02 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (580 | ) |
|
| — |
|
|
| — |
|
|
| (580 | ) |
Foreign currency translation adjustment, net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 657 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 657 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 1,510 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,510 |
|
Stock options exercised; grants, termination and vesting of restricted stock units (net of shares in lieu of taxes) |
|
| 9,628 |
|
|
| 1 |
|
|
| 36 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,106 |
|
|
| — |
|
|
| — |
|
|
| 3,106 |
|
Balance, June 30, 2019 |
|
| 33,204,191 |
|
| $ | 3,321 |
|
| $ | 85,614 |
|
| $ | (5,619 | ) |
| $ | 268,692 |
|
|
| 3,061,040 |
|
| $ | (18,160 | ) |
| $ | 333,848 |
|
See notes to the Condensed Consolidated Financial Statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
| For the Six Months Ended June 30, |
|
| For the three months ended March 31 |
| ||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 4,407 |
|
| $ | 7,012 |
|
| $ | 3,071 |
|
| $ | 520 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization of property, plant and equipment and intangible assets |
|
| 9,665 |
|
|
| 9,233 |
| ||||||||
Amortization of other long-term assets and deferred loan fees |
|
| 2,104 |
|
|
| 2,146 |
| ||||||||
Amortization of discounted liabilities |
|
| 7 |
|
|
| — |
| ||||||||
Adjustments to reconcile net income to net cash used in operating activities: |
|
|
|
|
|
|
|
| ||||||||
Depreciation and amortization of fixed and intangible assets |
|
| 5,403 |
|
|
| 4,762 |
| ||||||||
Amortization of other long-term assets |
|
| 1,200 |
|
|
| 967 |
| ||||||||
Accretion of discounted liabilities |
|
| 18 |
|
|
| 4 |
| ||||||||
Amortization of deferred loan fees |
|
| 81 |
|
|
| 59 |
| ||||||||
Provision for bad debts |
|
| 392 |
|
|
| 445 |
|
|
| 682 |
|
|
| 359 |
|
Revision of deferred consideration |
|
| — |
|
|
| (2,888 | ) | ||||||||
Loan principal and interest forgiveness |
|
| (672 | ) |
|
| — |
| ||||||||
Stock-based compensation |
|
| 2,545 |
|
|
| 2,995 |
|
|
| 1,792 |
|
|
| 1,357 |
|
Change in deferred income taxes |
|
| (1,562 | ) |
|
| (572 | ) | ||||||||
Decrease in deferred income taxes |
|
| (269 | ) |
|
| (910 | ) | ||||||||
Change in fair value of an equity investment |
|
| (1,066 | ) |
|
| — |
| ||||||||
Loss from equity method investment |
|
| 38 |
|
|
| 60 |
|
|
| 13 |
|
|
| 13 |
|
Net foreign currency adjustment |
|
| 594 |
|
|
| 86 |
| ||||||||
Adjustment to bargain purchase gain on business acquisition |
|
| 33 |
|
|
| — |
| ||||||||
Changes in assets and liabilities associated with operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in net receivables |
|
| 16,421 |
|
|
| 7,841 |
| ||||||||
Increase in net receivables |
|
| (30,422 | ) |
|
| (6,578 | ) | ||||||||
Increase in inventories |
|
| (21,706 | ) |
|
| (27,635 | ) |
|
| (9,615 | ) |
|
| (16,446 | ) |
Increase in prepaid expenses and other assets |
|
| (2,297 | ) |
|
| (1,844 | ) |
|
| (1,052 | ) |
|
| (776 | ) |
Increase in net operating lease liability |
|
| 7 |
|
|
| 73 |
| ||||||||
Decrease (increase) in income tax receivable |
|
| 899 |
|
|
| (4,480 | ) | ||||||||
Decrease in accounts payable |
|
| (12,351 | ) |
|
| (10,224 | ) | ||||||||
(Increase) decrease in income tax receivable/payable, net |
|
| 638 |
|
|
| (597 | ) | ||||||||
Decrease in net operating lease liability |
|
| (18 | ) |
|
| — |
| ||||||||
Increase in accounts payable |
|
| 2,293 |
|
|
| 1,617 |
| ||||||||
Decrease in deferred revenue |
|
| (2,431 | ) |
|
| (19,438 | ) |
|
| (11,293 | ) |
|
| (2,342 | ) |
Increase in accrued program costs |
|
| 12,577 |
|
|
| 11,823 |
|
|
| 7,770 |
|
|
| 6,016 |
|
Decrease in other payables and accrued expenses |
|
| (3,621 | ) |
|
| (6,719 | ) |
|
| (1,187 | ) |
|
| (2,094 | ) |
Net cash provided by (used in) operating activities |
|
| 5,688 |
|
|
| (32,086 | ) | ||||||||
Net cash used in operating activities |
|
| (32,600 | ) |
|
| (14,069 | ) | ||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
| (6,386 | ) |
|
| (7,216 | ) |
|
| (2,904 | ) |
|
| (2,980 | ) |
Acquisition of business, product lines, and intangible assets |
|
| (3,889 | ) |
|
| (24,302 | ) | ||||||||
Investments |
|
| (1,190 | ) |
|
| — |
| ||||||||
Intangible assets |
|
| (41 | ) |
|
| — |
| ||||||||
Net cash used in investing activities |
|
| (11,465 | ) |
|
| (31,518 | ) |
|
| (2,945 | ) |
|
| (2,980 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings under line of credit agreement |
|
| 10,502 |
|
|
| 67,800 |
|
|
| 35,900 |
|
|
| 19,400 |
|
Net payments from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholding) |
|
| (2,123 | ) |
|
| (513 | ) | ||||||||
Repurchase of common stock |
|
| — |
|
|
| (2,604 | ) | ||||||||
Net payments from the issuance of common stock (sale of stock under ESPP, exercise of stock options, and shares purchased for tax withholdings) |
|
| (2,454 | ) |
|
| (2,177 | ) | ||||||||
Payment of cash dividends |
|
| (1,168 | ) |
|
| (1,160 | ) |
|
| (593 | ) |
|
| (582 | ) |
Net cash provided by financing activities |
|
| 7,211 |
|
|
| 63,523 |
|
|
| 32,853 |
|
|
| 16,641 |
|
Net increase (decrease) in cash and cash equivalents |
|
| 1,434 |
|
|
| (81 | ) | ||||||||
Net decrease in cash and cash equivalents |
|
| (2,692 | ) |
|
| (408 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
| 585 |
|
|
| 220 |
|
|
| 534 |
|
|
| (629 | ) |
Cash and cash equivalents at beginning of period |
|
| 6,581 |
|
|
| 6,168 |
|
|
| 15,923 |
|
|
| 6,581 |
|
Cash and cash equivalents at end of period |
| $ | 8,600 |
|
| $ | 6,307 |
|
| $ | 13,765 |
|
| $ | 5,544 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
| ||||||||
Cash paid during the period for: |
|
|
|
|
|
|
|
| ||||||||
Interest |
| $ | 2,902 |
|
| $ | 3,339 |
| ||||||||
Income taxes, net |
| $ | 1,901 |
|
| $ | 7,583 |
| ||||||||
|
|
|
|
|
|
|
|
|
See notes to the Condensed Consolidated Financial Statements.
condensed consolidated financial statements.
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except share data)
(Unaudited)
1. Summary of Significant Accounting Policies —The accompanying unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements of American Vanguard Corporation and Subsidiaries (“AVD” or “the Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of consolidating adjustments, eliminations and normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2020March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021. The financial statements and related notes do not include all information and footnotes required by US GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2019.2020.
The Company is closely monitoring the impact of the novel coronavirus (COVID-19) pandemic on all aspects of its business, including how the pandemic has impacted, and will likely impact its customers, business partners, and employees. The Company is considered an essential business by most governments in the jurisdictions and territories in which the Company operates and, as a result, did not incur significant disruptions from the COVID-19 pandemic during the threethree-months ended March 31, 2021 and six months2020. During the three-month period ended June 30, 2020. At this point in the year, however, the Company can identify a number of effects on its overall performance as a result of the coronavirus. While none of them alone is material, taken together, they would constitute several million dollars in lost sales opportunities and an indeterminate level of profitability. First, whileMarch 31, 2021, the Company has recordedexperienced strong sales of newdemand for its products, particularly soybeanmore stability in foreign exchange rates and, rice herbicides, the Company believes that those sales would likely have been higher but for the fact that the Company was constrained from holding in-personin some jurisdictions in which it operates, return to more normal business activities including more face-to-face meetings with existingcustomers and potential new customerssuppliers etc., albeit at a much-reduced level as compared to promote those products. Second, demand for certain commodities – specifically, corn, potatoes and fruits and vegetables – have experiencedpre-pandemic times. The Company established a drop from restaurants that have been closed (in whole or in part) due topandemic working group at the coronavirus. This, in turn, has softened demand for somestart of the Company’s products that are used on those cropsCOVID-19 pandemic. That group meets bi-weekly and could affect future contracts. Third, local currenciesis presently monitoring the safety of its employees, especially in Brazil Mexico and Australia have sufferedIndia, as those countries are experiencing a significant declinesurge in value versusnew virus variants. During the US dollar during the first halfsame period of the prior year which,our business operated comparatively normally, however, was impacted by adverse movements in turn, has affected both sales and to a lesser extent profitability of our international business. While it is not possible to identify all of the reasons for the fluctuation insome key currency exchange rates with certainty, it is not unreasonable to includeas the pandemic among its causes.news spread across the globe.
Looking forward, the Company is unable to predict the impact that the pandemic may have on its future financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its customers in the near term will depend on future developments, which are highly uncertain and, beyond extrapolating our experience oversince the past six months,start of the pandemic, cannot be predicted with confidence. The Company continues to monitor its business for adverse impacts of the pandemic, including volatility in the foreign exchange markets, demand, supply-chain disruptions in certain markets, and increased costs of employee safety, among others.
Update to Significant Accounting Policies:
On January 1, 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326)”, along with related clarifications and improvements. As a result, we updated our significant accounting policies for the measurement of credit losses below. Refer to Note 15 “Recent Accounting Standards” for further information related to the Company's adoption of this standard.
Allowance for Credit Losses – The Company maintains an allowance to cover its Current Expected Credit Losses ("CECL") on its trade receivables, other receivables and contract assets arising from the failure of customers to make contractual payments. The Company estimates credit losses expected over the life of its trade receivables and contract assets based on historical information combined with current conditions that may affect a customer’s ability to pay and reasonable and supportable forecasts. In most instances, the Company’s policy is to write-off trade receivables when they are deemed uncollectible. The vast majority of the Company's trade receivables are less than 365 days.
Under the CECL impairment model, the Company develops and documents its allowance for credit losses on its trade receivables based on multiple portfolios. The determination of portfolios are based primarily on geographical location, type of customer and aging.
2. Leases—Leases — The Company has operating leases for warehouses, manufacturing facilities, offices, cars, railcars and certain equipment. The lease term includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not terminate) that the Company is reasonably certain to exercise. The Company has leases with a lease term ranging from 1one year to 20 years.
Finance leases are immaterial to the Condensed Consolidated Financial Statements.accompanying condensed consolidated financial statements. There were no lease transactions with related parties as of June 30, 2020.and for the three-month periods presented in the table below.
The operating lease expense for the three months ended June 30,March 31, 2021 and 2020 was $1,454 and 2019 was $1,396 and $1,400, respectively, and $2,791 and $2,758 for the six months ended June 30, 2020 and 2019,$1,395, respectively. Lease expenses related to variable lease payments and short-term leases were immaterial. AdditionalOther information related to operating leases are as follows:
|
| Three months ended June 30, 2020 |
|
| Three months ended June 30, 2019 |
|
| Six months ended June 30, 2020 |
|
| Six months ended June 30, 2019 |
| ||||
Cash paid for amounts included in the measurement of lease liabilities |
| $ | 1,382 |
|
| $ | 1,348 |
|
| $ | 2,778 |
|
| $ | 2,685 |
|
ROU assets obtained in exchange for new liabilities |
| $ | 677 |
|
| $ | 1,682 |
|
| $ | 1,502 |
|
| $ | 2,052 |
|
|
| Three months ended March 31, 2021 |
|
| Three months ended March 31, 2020 |
| ||
Cash paid for amounts included in the measurement of lease liabilities |
| $ | 1,465 |
|
| $ | 1,396 |
|
ROU assets obtained in exchange for new liabilities |
| $ | 376 |
|
| $ | 825 |
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term (in years) |
|
| 4.53 |
|
|
| 3.15 |
|
Weighted-average discount rate |
|
| 3.83 | % |
|
| 3.67 | % |
The weighted-average remaining lease term and discount rate related to the operating leases as of June 30, 2020 were as follows:
|
| |||
|
|
|
Future minimum lease payments under non-cancellable operating leases as of June 30, 2020,March 31, 2021 were as follows:
2020 (excluding six months ended June 30, 2020) |
| $ | 2,659 |
| ||||
2021 |
|
| 3,709 |
| ||||
|
| March 31, 2021 |
| |||||
2021 (excluding three months ended March 31, 2021) |
| $ | 3,166 |
| ||||
2022 |
|
| 2,129 |
|
|
| 2,970 |
|
2023 |
|
| 1,005 |
|
|
| 2,008 |
|
2024 |
|
| 460 |
|
|
| 1,256 |
|
2025 |
|
| 1,025 |
| ||||
Thereafter |
|
| 894 |
|
|
| 2,019 |
|
Total lease payments |
|
| 10,856 |
|
| $ | 12,444 |
|
Less: imputed interest |
|
| 666 |
|
|
| 1,088 |
|
Total |
| $ | 10,190 |
|
| $ | 11,356 |
|
Amounts recognized in the Condensed Consolidated Balance Sheets: |
|
|
|
| ||||
|
|
|
|
| ||||
Amounts recognized in the condensed consolidated balance sheet: |
|
|
|
| ||||
Operating lease liabilities, current |
| $ | 4,771 |
|
| $ | 3,664 |
|
Operating lease liabilities, long-term |
| $ | 5,419 |
| ||||
Operating lease liabilities, long term |
| $ | 7,692 |
|
3. Revenue Recognition—Recognition —The Company recognizes revenue from the sale of its products, which include crop and non-crop products. The Company sells its products to customers, which include distributors, retailers, and growers. In addition, the Company recognizes royalty income from licensing agreements. Based on similar economic and operational characteristics, the Company’s business is aggregated into 1 reportable segment. Selective enterprise information of sales disaggregated by category and geographic region is as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 44,670 |
|
| $ | 47,575 |
|
| $ | 95,032 |
|
| $ | 97,845 |
|
| $ | 54,755 |
|
| $ | 50,362 |
|
US non-crop |
|
| 13,872 |
|
|
| 16,955 |
|
|
| 24,865 |
|
|
| 28,222 |
|
|
| 17,453 |
|
|
| 10,993 |
|
Total US |
|
| 58,542 |
|
|
| 64,530 |
|
|
| 119,897 |
|
|
| 126,067 |
|
|
| 72,208 |
|
|
| 61,355 |
|
International |
|
| 46,013 |
|
|
| 48,574 |
|
|
| 80,620 |
|
|
| 86,713 |
|
|
| 43,947 |
|
|
| 34,607 |
|
Total net sales: |
| $ | 104,555 |
|
| $ | 113,104 |
|
| $ | 200,517 |
|
| $ | 212,780 |
|
| $ | 116,155 |
|
| $ | 95,962 |
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods and services transferred at a point in time |
| $ | 103,846 |
|
| $ | 113,104 |
|
| $ | 199,622 |
|
| $ | 212,401 |
|
| $ | 115,971 |
|
| $ | 95,776 |
|
Goods and services transferred over time |
|
| 709 |
|
|
| — |
|
|
| 895 |
|
|
| 379 |
|
|
| 184 |
|
|
| 186 |
|
Total net sales: |
| $ | 104,555 |
|
| $ | 113,104 |
|
| $ | 200,517 |
|
| $ | 212,780 |
|
| $ | 116,155 |
|
| $ | 95,962 |
|
Performance Obligations— A performance obligation is a promise in a contract or sales order to transfer a distinct good or service to the customer and is the unit of account in ASC 606.customer. A transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Certain of the Company’s sales orders have multiple performance obligations, as the promise to transfer individual goods or services is separately identifiable from other promises in the sales orders. For sales orders with multiple performance obligations, the Company allocates the sales order’s transaction price to each performance obligation based on its relative stand-alone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. The Company’s performance obligations are satisfied either at a point in time or over time as work progresses.
Contract BalancesAssets and Deferred Revenue —The contract assets are included in other receivables on the condensed consolidated balance sheets and relate to royalties earned on certain functional licenses granted for the use of the Company’s intellectual property. The timing of revenue recognition, billings and cash collections may result in deferred revenue. The Company sometimes receives payments from its customers in advance of goods and services being provided in return for early cash incentive programs, resulting in deferred revenues. These liabilities are reported in deferred revenue on the Condensed Consolidated Balance Sheets at the end of each reporting period. The contract assets in the table below are related to royalties earned on certain licenses granted for the use of the Company’s intellectual property, which are recognized at a point in time and remain outstanding as well as customized products without an alternative use.
|
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Contract assets |
|
| 3,200 |
|
|
| 6,091 |
|
| $ | 4,600 |
|
| $ | 3,200 |
|
Deferred revenue |
|
| 4,347 |
|
|
| 6,826 |
|
| $ | 32,316 |
|
| $ | 43,611 |
|
Revenue recognized for the three and six months ended June 30, 2020,March 31, 2021, that was included in the deferred revenue balance at the beginning of 2020 were $101 and $2,479, respectively.2021 was $11,295. The Company expects to recognize all its remaining deferred revenue in fiscal 2021.
4.Property, Plant and Equipment — Property, plant and equipment at June 30, 2020March 31, 2021 and December 31, 20192020 consists of the following:
|
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Land |
| $ | 2,706 |
|
| $ | 2,706 |
|
| $ | 2,756 |
|
| $ | 2,756 |
|
Buildings and improvements |
|
| 18,590 |
|
|
| 18,640 |
|
|
| 19,731 |
|
|
| 19,786 |
|
Machinery and equipment |
|
| 118,056 |
|
|
| 116,757 |
|
|
| 126,425 |
|
|
| 124,199 |
|
Office furniture, fixtures and equipment |
|
| 6,886 |
|
|
| 6,228 |
|
|
| 9,530 |
|
|
| 7,403 |
|
Automotive equipment |
|
| 1,646 |
|
|
| 1,762 |
|
|
| 1,747 |
|
|
| 1,747 |
|
Construction in progress |
|
| 8,981 |
|
|
| 5,263 |
|
|
| 8,767 |
|
|
| 10,392 |
|
Total gross value |
|
| 156,865 |
|
|
| 151,356 |
| ||||||||
Total |
|
| 168,956 |
|
|
| 166,283 |
| ||||||||
Less accumulated depreciation |
|
| (97,704 | ) |
|
| (94,835 | ) |
|
| (103,011 | ) |
|
| (100,901 | ) |
Total net value |
| $ | 59,161 |
|
| $ | 56,521 |
| ||||||||
Property, plant and equipment, net |
| $ | 65,945 |
|
| $ | 65,382 |
|
The Company recognized depreciation expense related to property plant and equipment of $1,839$2,171 and $1,577$1,517 for the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively. During the three months ended June 30,March 31, 2021 and 2020, the Company eliminated $283 from such assets and accumulated depreciation $62 and $113, of fully depreciated assets. During the three months ended June 30, 2019, the Company did not eliminate any assets, and accumulated depreciation.
The Company recognized depreciation expense related to property, plant and equipment of $3,356 and $3,225 for the six months ended June 30, 2020 and 2019, respectively. During the six months ended June 30, 2020 and 2019, the Company eliminated from such assets and accumulated depreciation $396 and $710, respectively, of fully depreciated assets.
Substantially all of the Company’s assets are pledged as collateral towith its lender banks.
5.Inventories — Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (“FIFO”) or average cost method. The components of inventories consist of the following:
|
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Finished products |
| $ | 168,079 |
|
| $ | 151,917 |
|
| $ | 150,026 |
|
| $ | 149,415 |
|
Raw materials |
|
| 12,914 |
|
|
| 11,396 |
|
|
| 22,208 |
|
|
| 14,369 |
|
|
| $ | 180,993 |
|
| $ | 163,313 |
| ||||||||
Inventories |
| $ | 172,234 |
|
| $ | 163,784 |
|
6.Segment Reporting — Based on similar economic and operational characteristics, the Company’s business is aggregated into 1 reportable segment. Selective enterprise information is as follows:
|
| For the three months ended June 30, |
|
|
|
|
|
|
|
|
| |||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % Change |
| ||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 44,670 |
|
| $ | 47,575 |
|
| $ | (2,905 | ) |
|
| -6 | % |
US non-crop |
|
| 13,872 |
|
|
| 16,955 |
|
|
| (3,083 | ) |
|
| -18 | % |
US total |
|
| 58,542 |
|
|
| 64,530 |
|
|
| (5,988 | ) |
|
| -9 | % |
International |
|
| 46,013 |
|
|
| 48,574 |
|
|
| (2,561 | ) |
|
| -5 | % |
Net sales: |
| $ | 104,555 |
|
| $ | 113,104 |
|
| $ | (8,549 | ) |
|
| -8 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 21,758 |
|
| $ | 18,719 |
|
| $ | 3,039 |
|
|
| 16 | % |
US non-crop |
|
| 7,029 |
|
|
| 8,558 |
|
|
| (1,529 | ) |
|
| -18 | % |
US total |
|
| 28,787 |
|
|
| 27,277 |
|
|
| 1,510 |
|
|
| 6 | % |
International |
|
| 11,519 |
|
|
| 14,376 |
|
|
| (2,857 | ) |
|
| -20 | % |
Total gross profit: |
| $ | 40,306 |
|
| $ | 41,653 |
|
| $ | (1,347 | ) |
|
| -3 | % |
|
| For the six months ended June 30, |
|
|
|
|
|
|
|
|
|
| For the three Months Ended March 31 |
| ||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 95,032 |
|
| $ | 97,845 |
|
| $ | (2,813 | ) |
|
| -3 | % | ||||||||||||||||
US non-crop |
|
| 24,865 |
|
|
| 28,222 |
|
|
| (3,357 | ) |
|
| -12 | % | ||||||||||||||||
US total |
|
| 119,897 |
|
|
| 126,067 |
|
|
| (6,170 | ) |
|
| -5 | % | ||||||||||||||||
U.S. crop |
| $ | 54,755 |
|
| $ | 50,362 |
|
| $ | 4,393 |
|
|
| 9 | % | ||||||||||||||||
U.S. non-crop |
|
| 17,453 |
|
|
| 10,993 |
|
|
| 6,460 |
|
|
| 59 | % | ||||||||||||||||
Total U.S. |
|
| 72,208 |
|
|
| 61,355 |
|
|
| 10,853 |
|
|
| 18 | % | ||||||||||||||||
International |
|
| 80,620 |
|
|
| 86,713 |
|
|
| (6,093 | ) |
|
| -7 | % |
|
| 43,947 |
|
|
| 34,607 |
|
|
| 9,340 |
|
|
| 27 | % |
Net sales: |
| $ | 200,517 |
|
| $ | 212,780 |
|
| $ | (12,263 | ) |
|
| -6 | % | ||||||||||||||||
Total net sales: |
| $ | 116,155 |
|
| $ | 95,962 |
|
| $ | 20,193 |
|
|
| 21 | % | ||||||||||||||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 46,003 |
|
| $ | 42,214 |
|
| $ | 3,789 |
|
|
| 9 | % | ||||||||||||||||
US non-crop |
|
| 11,748 |
|
|
| 14,872 |
|
|
| (3,124 | ) |
|
| -21 | % | ||||||||||||||||
US total |
|
| 57,751 |
|
|
| 57,086 |
|
|
| 665 |
|
|
| 1 | % | ||||||||||||||||
U.S. crop |
| $ | 21,271 |
|
| $ | 24,245 |
|
| $ | (2,974 | ) |
|
| -12 | % | ||||||||||||||||
U.S. non-crop |
|
| 9,383 |
|
|
| 4,719 |
|
|
| 4,664 |
|
|
| 99 | % | ||||||||||||||||
Total U.S. |
|
| 30,654 |
|
|
| 28,964 |
|
|
| 1,690 |
|
|
| 6 | % | ||||||||||||||||
International |
|
| 20,936 |
|
|
| 26,269 |
|
|
| (5,333 | ) |
|
| -20 | % |
|
| 14,477 |
|
|
| 9,417 |
|
|
| 5,060 |
|
|
| 54 | % |
Total gross profit: |
| $ | 78,687 |
|
| $ | 83,355 |
|
| $ | (4,668 | ) |
|
| -6 | % |
| $ | 45,131 |
|
| $ | 38,381 |
|
| $ | 6,750 |
|
|
| 18 | % |
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
U.S. crop |
|
| 39 | % |
|
| 48 | % |
|
|
|
|
|
|
|
| ||||||||||||||||
U.S. non-crop |
|
| 54 | % |
|
| 43 | % |
|
|
|
|
|
|
|
| ||||||||||||||||
Total U.S. |
|
| 42 | % |
|
| 47 | % |
|
|
|
|
|
|
|
| ||||||||||||||||
International |
|
| 33 | % |
|
| 27 | % |
|
|
|
|
|
|
|
| ||||||||||||||||
Gross margin: |
|
| 39 | % |
|
| 40 | % |
|
|
|
|
|
|
|
|
7. Accrued Program Costs—Costs — The Company offers various discounts to customers based on the volume purchased within a defined time period, other pricing adjustments, some grower volume incentives or other key performance indicator driven payments, which are usually made to distributors, retailers or growers, at the end of a growing season.season, to distributors, retailers or growers. The Company describes these payments as “Programs.” Programs are a critical part of doing business in both the USU.S. crop and US non-crop chemicals market.marketplaces. These discount Programs represent variable consideration. In accordance with ASC 606, revenuesRevenues from sales are recorded at the net sales price, which is the transaction price net of the impact of Programs and includes estimates of variable consideration. Variable consideration includes amounts expected to be paid to its customers estimated using the expected value method. Each quarter-end,quarter management compares individual sale transactions with Programs to determine what, if any, estimated Programprogram liabilities have been incurred. Once this initial calculation is made for the specific quarter, sales and marketing management, along with executive and financial management, review the accumulated Program balance and, for volume driven payments, make assessments of whether or not customers are tracking in a manner that indicates that they will meet the requirements set out in agreed upon terms and conditions attached to each Program. Following this assessment, management makes adjustments to the accumulated accrual to properly reflect the Company’s best estimate of the liability at the balance sheet date. Programs are paid out predominantly on an annual basis, usually in the final quarter of the financial year or the first quarter of the following year. No significant changes in estimates were made during the three and six months ended June 30,March 31, 2021 and 2020, and 2019, respectively.
8. Cash Dividends on Common Stock —The Company has declared and paid the following cash dividends in the periods covered by this Form 10-Q:
Declaration Date |
| Record Date |
| Distribution Date |
| Dividend Per Share |
|
| Total Paid |
|
| Record Date |
| Distribution Date |
| Dividend Per Share |
|
| Total Paid |
| ||||
March 10, 2021 |
| March 15, 2021 |
| April 15, 2021 |
| $ | 0.020 |
|
| $ | 596 |
| ||||||||||||
December 7, 2020 |
| December 23, 2020 |
| January 6, 2021 |
| $ | 0.020 |
|
| $ | 593 |
| ||||||||||||
March 9, 2020 |
| March 26, 2020 |
| April 16, 2020 |
| $ | 0.020 |
|
| $ | 586 |
|
| March 26, 2020 |
| April 16, 2020 |
| $ | 0.020 |
|
| $ | 586 |
|
December 9, 2019 |
| December 26, 2019 |
| January 9, 2020 |
| $ | 0.020 |
|
| $ | 582 |
|
| December 26, 2019 |
| January 9, 2020 |
| $ | 0.020 |
|
| $ | 582 |
|
June 10, 2019 |
| June 28, 2019 |
| July 12, 2019 |
| $ | 0.020 |
|
| $ | 580 |
| ||||||||||||
March 6, 2019 |
| March 27, 2019 |
| April 10, 2019 |
| $ | 0.020 |
|
| $ | 580 |
| ||||||||||||
December 10, 2018 |
| December 27, 2018 |
| January 10, 2019 |
| $ | 0.020 |
|
| $ | 580 |
|
9. ASC 260 Earnings Per Share (“EPS”) requires dual presentation of basic EPS and diluted EPS on the face of the Condensed Consolidated Statements of Operations. 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, consist of options to purchase shares of the Company’s common stock, are exercised.
9. Earnings Per Share —The components of basic and diluted earnings per share were as follows:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AVD |
| $ | 3,887 |
|
| $ | 3,106 |
|
| $ | 4,407 |
|
| $ | 7,012 |
| ||||||||
Denominator: (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Net income |
| $ | 3,071 |
|
| $ | 520 |
| ||||||||||||||||
Denominator: |
|
|
|
|
|
|
|
| ||||||||||||||||
Weighted average shares outstanding-basic |
|
| 29,413 |
|
|
| 29,001 |
|
|
| 29,350 |
|
|
| 28,989 |
|
|
| 29,737 |
|
|
| 29,288 |
|
Dilutive effect of stock options and grants |
|
| 441 |
|
|
| 539 |
|
|
| 554 |
|
|
| 571 |
|
|
| 786 |
|
|
| 660 |
|
|
|
| 29,854 |
|
|
| 29,540 |
|
|
| 29,904 |
|
|
| 29,560 |
| ||||||||
Weighted average shares outstanding-diluted |
|
| 30,523 |
|
|
| 29,948 |
|
For the three and six months ended June 30,March 31, 2021 and 2020, and 2019, respectively, 0 stock options were excluded from the computation of diluted earnings per share.
10. Debt — The Company has a revolving line of credit that is shown as long-term debt onin the Condensed Consolidated Balance Sheetscondensed consolidated balance sheets at June 30, 2020March 31, 2021 and December 31, 2019.2020. The Company has 0 short-term debt as of June 30, 2020March 31, 2021 and December 31, 2019. Debt2020. The debt is summarized in the following table:
Long-term indebtedness ($000's) |
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Revolving line of credit |
| $ | 160,000 |
|
| $ | 149,300 |
|
| $ | 143,800 |
|
| $ | 107,900 |
|
Deferred loan fees |
|
| (593 | ) |
|
| (534 | ) |
|
| (377 | ) |
|
| (458 | ) |
Net long-term debt |
| $ | 159,407 |
|
| $ | 148,766 |
| ||||||||
Total indebtedness |
| $ | 143,423 |
|
| $ | 107,442 |
|
AsThe Company’s main bank is Bank of Junethe West, a wholly-owned subsidiary of the French bank, BNP Paribas. Bank of the West has been the Company’s bank for more than 30 2017,years and is the syndication manager for the Company’s loans.
The revolving line of credit agreement (the “Credit Agreement”) is a senior secured lending facility among AMVAC, Chemical Corporation (“AMVAC”), the Company’s principal operating subsidiary, as borrower, and affiliates (including the Company, AMVAC CV and AMVAC BV), as guarantors and/or borrowers, entered into a Third Amendment to Second Amendedon the one hand, and Restated Credit Agreement with a group of commercial lenders led by Bank of the West as agent, swing line lender and letterLetter of credit issuer. The agreement is a senior secured lending facility,Credit issuer on the other hand, consisting of a line of credit of up to $250,000, an accordion feature of up to $100,000 and a maturity date of June 30, 2022. The agreementCredit Agreement contains two key financial covenants; namely, borrowers are required to maintain a Consolidated Funded Debt Ratio (the “CFD Ratio”) of no more than 3.25-to-1 and a Consolidated Fixed Charge Covenant Ratio of at least 1.25-to-1. The Company’s borrowing capacity varies with its financial performance, measured in terms of EBITDA as defined in the Credit Agreement, for the trailing twelve-month period. Under the agreement,Credit Agreement, revolving loans bear interest at a variable rate based, at borrower’s election with proper notice, on either (i) LIBOR plus the “Applicable Rate” which is based upon the Consolidated Funded Debt Ratio (“Eurocurrency Rate Loan”) or (ii) the greater of (x) the Prime Rate, (y) the Federal Funds Rate plus 0.5%, and (z) the Daily One-Month LIBOR Rate plus 1.00%, plus, in the case of (x), (y) or (z) the Applicable Rate (“Alternate Base Rate Loan”). Interest payments for Eurocurrency Rate Loans are payable on the last day of each interest period (either one, two, three or six months, as selected by the borrower) and the maturity date, while interest payments for Alternate Base Rate Loans are payable on the last business day of each month and the maturity date.
As of November 27, 2019, AMVAC, as borrower, and certain affiliates entered into a Fourth Amendment to Second Amended and Restated Credit Agreement with its senior lenders under the terms of which the maximum limits for both Permitted Acquisitions and Investments in Foreign Subsidiaries were increased and new language The interest rate on March 31, 2021 was added with respect to Eurocurrency Rates, LIBOR Rates and ERISA.2.75%.
As of April 22, 2020, AMVAC, as borrower, and certain affiliates entered into a Fifth Amendment toamended the Second Amended and RestatedCredit Agreement. The Credit Agreement, with its senior lenders (the “Credit Agreement”), havingas amended, has the same term and loan commitments, but under whichhowever the maximum permitted CFD Ratioconsolidated funded debt ratio (the “CFD Ratio”) has been increased from 3.25-to-1 to the following schedule: 4.00-to-1 through September 30, 2020, stepping down to 3.75-to-1 through December 31, 2020, 3.5-to-1 through March 31, 2021 and 3.25-to-1 thereafter. In addition, to the extent that it completes acquisitions totaling $15 million or more in any 90-day period, AMVAC may step-up the CFD Ratio by 0.5-to-1, not to exceed 4.25-to-1, for the next three full consecutive quarters. Finally, to the extent that a proposed acquisition is at least $30 million but less than $50 million, the consent of the Lead Agent is required. Larger acquisitions continue to require the consent of a majority of the Lenders.
At June 30, 2020,March 31, 2021, the Company is compliant with all covenants to its senior credit facility.Senior Credit Facility. Based on its performance against the most restrictive covenants in the credit agreement,Credit Agreement, the Company had the capacity to increase its borrowings by up to $49,420.$50,993, according to the terms thereof. This compares to an available borrowing capacity of $30,557,$86,736 as of June 30, 2019 and $26,977 at December 31, 2019.2020 and $39,552 as of March 31, 2020. The level of borrowing capacity is driven by three factors: (1) our financial performance, as measured in EBITDA includingfor both the trailing twelve-monthtwelve month period and on a proforma basis arising from acquisitions, (2) net borrowings, and (3) the leverage covenant (the Consolidated Funded Debt ratio)Ratio).
Agrinos had an existing Paycheck Protection Program (PPP) loan in the amount of $705 as of the date it was acquired by the Company. This PPP loan was granted on April 27, 2020, $667 in principal and $5 in interest of this PPP loan was forgiven by the Small Business Administration on January 7, 2021 and Agrinos repaid the remaining outstanding balance. As a result, the PPP loan was extinguished on January 7, 2021 and the total amount forgiven of $672 was recorded as other income in the Company’s condensed consolidated statement of operations and represents a non-cash financing activity on the condensed consolidated statement of cash flows for the three months ended March 31, 2021.
11. Reclassification—Reclassifications — Certain items may have been reclassified in the prior period Condensed Consolidated Financial Statementscondensed consolidated financial statements to conform with the June 30, 2020March 31, 2021 presentation.
12. Comprehensive Income (Loss) —Total comprehensive income (loss) includes, in addition to net income, changes in equity that are excluded from the Condensed Consolidated Statementscondensed consolidated statements of Operationsoperations and are recorded directly into a separate section of stockholders’ equity on the Condensed Consolidated Balance Sheets.condensed consolidated balance sheets. For the three- and six-monththree-month periods ended June 30,March 31, 2021 and 2020, and 2019, total comprehensive income (loss) consisted of net income attributable to American Vanguard and foreign currency translation adjustments.
13. Stock-Based Compensation—The Company accounts for stock-based awards to employees and directors in accordance with FASB ASC 718, “Share-Based Payment,Compensation — ” which requires the measurement and recognition of compensation for all share-based payment awards made to employees and directors including shares of common stock granted for services and employee stock options based on estimated fair values.
The following tables illustrate the Company’s stock-based compensation, unamortized stock-based compensation, and remaining weighted average amortization period for the three and six months ended June 30, 2020 and 2019.period.
|
| Stock-Based Compensation for the Three months ended |
|
| Stock-Based Compensation for the Six months ended |
|
| Unamortized Stock-Based Compensation |
|
| Remaining Weighted Average Period (years) |
|
| Stock-Based Compensation for the Three months Period |
|
| Unamortized Stock-Based Compensation as of March 31 |
|
| Remaining Weighted Average Period (years) |
| |||||||
June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Restricted Stock |
| $ | 702 |
|
| $ | 1,478 |
|
| $ | 3,861 |
|
|
| 1.5 |
| ||||||||||||
March 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Time-Based Restricted Stock |
| $ | 1,057 |
|
| $ | 5,703 |
|
|
| 1.8 |
| ||||||||||||||||
Unrestricted Stock |
|
| 118 |
|
|
| 241 |
|
|
| 403 |
|
|
| 0.9 |
|
|
| 110 |
|
|
| 73 |
|
|
| 0.2 |
|
Performance-Based Restricted Stock |
|
| 368 |
|
|
| 826 |
|
|
| 1,873 |
|
|
| 1.5 |
|
|
| 625 |
|
|
| 2,698 |
|
|
| 1.8 |
|
Total |
| $ | 1,188 |
|
| $ | 2,545 |
|
| $ | 6,137 |
|
|
|
|
|
| $ | 1,792 |
|
| $ | 8,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Restricted Stock |
| $ | 981 |
|
| $ | 1,669 |
|
| $ | 8,091 |
|
|
| 2.2 |
| ||||||||||||
March 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Time-Based Restricted Stock |
| $ | 776 |
|
| $ | 4,555 |
|
|
| 1.5 |
| ||||||||||||||||
Unrestricted Stock |
|
| 99 |
|
|
| 195 |
|
|
| 385 |
|
|
| 0.9 |
|
|
| 123 |
|
|
| 82 |
|
|
| 0.2 |
|
Performance-Based Restricted Stock |
|
| 430 |
|
|
| 1,131 |
|
|
| 3,863 |
|
|
| 2.2 |
|
|
| 458 |
|
|
| 2,288 |
|
|
| 1.7 |
|
Total |
| $ | 1,510 |
|
| $ | 2,995 |
|
| $ | 12,339 |
|
|
|
|
|
| $ | 1,357 |
|
| $ | 6,925 |
|
|
|
|
|
The Company also granted stock options in past periods. All outstanding stock options are fully vested and exercisable and no expense was recorded during the three and six months ended June 30, 2020March 31, 2021 and 2019.2020.
Restricted and Unrestricted Stock — A summary of non-vested shares as of,nonvested time based restricted and for, the three and six months ended June 30, 2020 and 2019unrestricted stock is presented below:
|
| Six Months Ended June 30, 2020 |
|
| Six Months Ended June 30, 2019 |
|
| Three Months Ended March 31, 2021 |
|
| Three Months Ended March 31, 2020 |
| ||||||||||||||||||||
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
| ||||||||
Nonvested shares at December 31st |
|
| 719,845 |
|
| $ | 17.67 |
|
|
| 587,210 |
|
| $ | 17.59 |
|
|
| 820,624 |
|
| $ | 16.64 |
|
|
| 719,845 |
|
| $ | 17.67 |
|
Granted |
|
| 4,185 |
|
|
| 18.63 |
|
|
| 290,679 |
|
|
| 17.34 |
|
|
| — |
|
|
| — |
|
|
| 4,185 |
|
|
| 18.63 |
|
Vested |
|
| (213,781 | ) |
|
| 16.18 |
|
|
| (105,582 | ) |
|
| 15.21 |
|
|
| (197,615 | ) |
|
| 19.91 |
|
|
| (213,781 | ) |
|
| 16.18 |
|
Forfeited |
|
| (14,715 | ) |
|
| 18.08 |
|
|
| (6,589 | ) |
|
| 17.69 |
|
|
| (11,580 | ) |
|
| 16.95 |
|
|
| (14,715 | ) |
|
| 18.08 |
|
Nonvested shares at March 31st |
|
| 495,534 |
|
|
| 18.31 |
|
|
| 765,718 |
|
|
| 17.77 |
|
|
| 611,429 |
|
| $ | 15.57 |
|
|
| 495,534 |
|
| $ | 18.31 |
|
Granted |
|
| 43,168 |
|
|
| 13.45 |
|
|
| 40,522 |
|
|
| 13.34 |
| ||||||||||||||||
Vested |
|
| (37,958 | ) |
|
| 13.88 |
|
|
| (32,771 | ) |
|
| 13.35 |
| ||||||||||||||||
Forfeited |
|
| (8,221 | ) |
|
| 18.64 |
|
|
| (21,184 | ) |
|
| 17.77 |
| ||||||||||||||||
Nonvested shares at June 30th |
|
| 492,523 |
|
| $ | 18.22 |
|
|
| 752,285 |
|
| $ | 17.72 |
|
Performance-Based Restricted Stock — A summary of non-vestednonvested performance-based shares as of, and for, the three and six months ended June 30, 2020 and 2019, respectivelystock is presented below:
|
| Six Months Ended June 30, 2020 |
|
| Six Months Ended June 30, 2019 |
|
| Three Months Ended March 31, 2021 |
|
| Three Months Ended March 31, 2020 |
| ||||||||||||||||||||
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Shares |
|
| Weighted Average Grant Date Fair Value |
| ||||||||
Nonvested shares at December 31st |
|
| 345,432 |
|
| $ | 16.92 |
|
|
| 287,077 |
|
| $ | 16.87 |
|
|
| 391,771 |
|
| $ | 16.26 |
|
|
| 345,432 |
|
| $ | 16.92 |
|
Granted |
|
| — |
|
|
| — |
|
|
| 137,557 |
|
|
| 16.47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Additional granted based on performance achievement |
|
| 76,445 |
|
|
| 16.56 |
|
|
| 41,568 |
|
|
| 12.88 |
|
|
| 71,180 |
|
|
| 20.53 |
|
|
| 76,445 |
|
|
| 16.56 |
|
Vested |
|
| (184,785 | ) |
|
| 15.87 |
|
|
| (90,872 | ) |
|
| 14.73 |
|
|
| (175,087 | ) |
|
| 19.78 |
|
|
| (184,785 | ) |
|
| 15.87 |
|
Forfeited |
|
| (3,759 | ) |
|
| 17.23 |
|
|
| (3,543 | ) |
|
| 15.98 |
|
|
| (505 | ) |
|
| 19.26 |
|
|
| (3,759 | ) |
|
| 17.23 |
|
Nonvested shares at March 31st |
|
| 233,333 |
|
|
| 17.63 |
|
|
| 371,787 |
|
|
| 16.81 |
|
|
| 287,359 |
|
| $ | 15.16 |
|
|
| 233,333 |
|
| $ | 17.63 |
|
Forfeited |
|
| (2,268 | ) |
|
| 18.00 |
|
|
| (14,022 | ) |
|
| 17.11 |
| ||||||||||||||||
Nonvested shares at June 30th |
|
| 231,065 |
|
| $ | 17.63 |
|
|
| 357,765 |
|
| $ | 16.80 |
|
Stock Options — The Company has stock options outstanding under its incentive stock option plans and performance incentive stock option plan. All outstanding stock options are vested and exercisable. The following tables present details for each type of plan:
Incentive Stock Option Plans
Activity forof the three and six months ended June 30, 2020:incentive stock option plans:
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2019 |
|
| 332,823 |
|
| $ | 9.14 |
|
Options exercised |
|
| (15,836 | ) |
|
| 8.83 |
|
Balance outstanding, March 31, 2020 |
|
| 316,987 |
|
|
| 9.16 |
|
Options exercised |
|
| (9,291 | ) |
|
| 8.27 |
|
Balance outstanding, June 30, 2020 |
|
| 307,696 |
|
| $ | 9.18 |
|
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2020 |
|
| 123,087 |
|
| $ | 11.48 |
|
Options exercised |
|
| (5,838 | ) |
|
| 11.49 |
|
Balance outstanding, March 31, 2021 |
|
| 117,249 |
|
| $ | 11.48 |
|
Outstanding at June 30, 2020,March 31, 2021, summarized by exercise price:
|
| Outstanding Weighted Average |
|
| |||||||||
Exercise Price Per Share |
| Number of Shares |
|
| Remaining Life (Months) |
|
| Exercise Price |
|
| |||
$7.50 |
|
| 177,650 |
|
|
| 5 |
|
| $ | 7.5 |
|
|
$11.32—$14.49 |
|
| 130,046 |
|
|
| 52 |
|
| $ | 11.48 |
|
|
|
|
| 307,696 |
|
|
|
|
|
| $ | 9.18 |
|
|
|
| Outstanding Weighted Average |
| |||||||||
Exercise Price Per Share |
| Shares |
|
| Remaining Life (Months) |
|
| Exercise Price |
| |||
Incentive Stock Option Plan: |
|
|
|
|
|
|
|
|
|
|
|
|
$11.32 |
|
| 7,200 |
|
|
| 3 |
|
| $ | 7.5 |
|
$14.49 |
|
| 110,049 |
|
|
| 45 |
|
| $ | 11.49 |
|
|
|
| 117,249 |
|
|
|
|
|
| $ | 11.48 |
|
Performance Incentive Stock Option Plan
Activity forof the three and six months ended June 30, 2020:performance incentive stock option plan:
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2019 |
|
| 120,782 |
|
| $ | 11.49 |
|
Options exercised |
|
| (3,035 | ) |
|
| 11.49 |
|
Balance outstanding, March 31, 2020 and June 30, 2020 |
|
| 117,747 |
|
| $ | 11.49 |
|
|
| Number of Shares |
|
| Weighted Average Price Per Share |
| ||
Balance outstanding, December 31, 2020 |
|
| 114,658 |
|
| $ | 11.49 |
|
Options exercised |
|
| — |
|
|
| — |
|
Balance outstanding, March 31, 2021 |
|
| 114,658 |
|
| $ | 11.49 |
|
All the performance incentive stock options outstanding as of June 30, 2020March 31, 2021 have an exercise price per share of $11.49 and a remaining life of 5445 months.
14. Legal Proceedings — During the reporting period, there have been no material developments in legal proceedings that were reported in the Company’s Form 10-K for the year ended December 31, 2019: nevertheless, we republish the following:2020, except as described below.
EPA FIFRA/RCRA Matter. On November 10, 2016, the Company was served with a grand jury subpoena out offrom the U.S. District CourtUnited States Attorney’s Office for the Southern District of Alabama, in whichseeking documents regarding the U.S. Departmentimportation, transportation, and management of Justice (“DoJ”) sought production of documents relating to the Company’s reimportation of depleted Thimet containers from Canada and Australia.a specific pesticide. The Company retained defense counsel to assist in responding to the subpoena and otherwise defending the Company’s interests. OverAMVAC is cooperating in the courseinvestigation.
Since April 2018, the Department of Justice (“DOJ”) has conducted several interviews of AMVAC employees and issued supplemental document requests in connection with the past three years, government attorneys have interviewed several individuals who may be knowledgeable of the matterinvestigation. In November 2020, DOJ issued a second grand jury subpoena seeking records and have sought and received documents from the Company. At this stage, DoJ has not made clear its intentionsrelated communications with regard to eithera submission made by the Company to the Environmental Protection Agency (“EPA”) in connection with a request to amend a pesticide’s registration. Soon thereafter, DOJ also identified the Company and one of its theorynon-executive employees as targets of the case or potential criminal enforcement. Thus,government’s investigation. In January 2021, DOJ and EPA informed the Company that it is too early to tell whether a loss is probable or reasonably estimable. Accordingly,investigating violations of two environmental statutes, the Federal Insecticide, Fungicide, and Rodenticide Act (“FIFRA”) and the Resource Conservation and Recovery Act (“RCRA”), as well as obstruction of an agency proceeding and false statement statutes. DOJ also identified for the Company hasas well as for the individual target evidence that it contends supports alleged violations with respect to both the Company and the individual target. The Company is evaluating the legal and factual issues raised by the government and is engaged in discussions with DOJ regarding possible resolution.
The governmental agencies involved in this investigation have a range of civil and criminal penalties they may seek to impose against corporations and individuals for violations of FIFRA, RCRA and other federal statutes including, but not limited to, injunctive relief, fines, penalties and modifications to business practices and compliance programs, including the appointment of a monitor. If violations are established, the amount of any fines or monetary penalties which could be assessed and the scope of possible non-monetary relief would depend on, among other factors, findings regarding the amount, timing, nature and scope of the violations, and the level of cooperation provided to the governmental authorities during the investigation. As a result, the Company cannot yet anticipate the timing or predict the ultimate resolution of this investigation, financial or otherwise, which could have a material adverse effect on our business prospects, operations, financial condition and cash flow. Accordingly, we have not recorded a loss contingency onfor this matter.
15. Recent Accounting Standards:
Recent Accounting Standards Adopted:
In June 2016, the FASB issued ASU 2016-13 "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model, which requires the use of forward-looking information to calculate credit loss estimates. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes result in earlier recognition of credit losses. The Company adopted ASU 2016-13 effective January 1, 2020. The adoption of this standard did not result in any material adjustments to the Company’s Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement”,Adopted — which modifies the disclosure requirements on fair value measurements, including the consideration of costs and benefits. The Company adopted ASU 2018-13 effective January 1, 2020. The adoption of this standard did not result in any material adjustments to the Company’s Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract”. ASU 2018-15 requires that issuers follow the internal-use software guidance in Accounting Standards Codification (ASC) 350-40 to determine which costs to capitalize as assets or expense as incurred. The ASC 350-40 guidance requires that certain costs incurred during the application development stage be capitalized and other costs incurred during the preliminary project and post-implementation stages be expensed as they are incurred. The Company adopted ASU 2018-15 effective January 1, 2020. The adoption of this standard did not result in any material adjustments to the Company’s Condensed Consolidated Financial Statements.
Accounting standards not yet adopted:
In December 2019, the FASB issued ASU no. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” (“ASU No. 2019-12”). The amendment removes certain exceptions to the general income tax accounting methodology including an exception for the recognition of a deferred tax liability when a foreign subsidiary becomes an equity method investment and an exception for interim periods showing operating losses in excess of anticipated operating losses for the year. The amendment also reduces the complexity surrounding franchise tax recognition; the step up in the tax basis of goodwill in conjunction with business combinations; and the accounting for the effect of changes in tax laws enacted during interim periods. The amendments in this update are effective for the Company for fiscal years beginning after December 15, 2020, including interim periods within those years with early adoption permitted. The Company is evaluatingadopted ASU No. 2019-12 effective January 1, 2021.The adoption of this standard did not result in any material adjustments to the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on the Condensed Consolidated Financial StatementsCompany’s condensed consolidated financial statements..
16. Fair Value of Financial Instruments—Instruments — The accounting standard for fair value measurements provides a framework for measuring fair value and requires certainexpanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard established a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:
| • | Level 1 – Quoted prices in active markets for identical assets or liabilities. |
| • | Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| • | Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. |
The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, short-term investments, accounts receivable, long-term investments, accounts payable and accrued expenses, approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which are considered Level 2 liabilities, approximates fair value based upon current rates and terms available to the Company for similar debt.
The Company has one equity investment classified within Level 1 of the fair value hierarchy. Please refer to Note 18 for further details regarding this investment.
The Company measures its contingent earn-out liabilities in connection with business acquisitions at fair value on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. The Company may use various valuation techniques depending on the terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses probability distribution for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine probabilities of different outcomes occurring. The following table illustrates the Company’s contingent consideration movements related to its business acquisitions:
| ||||
|
| |||
|
|
| ||
|
|
| ||
|
|
|
|
| Three months ended March 31, 2021 |
| |
Balance, December 31, 2020 |
| $ | 2,468 |
|
Payments on existing obligations |
|
| (250 | ) |
Accretion of discounted liabilities |
|
| 16 |
|
Foreign exchange effect |
|
| (29 | ) |
Balance, March 31, 2021 |
| $ | 2,205 |
|
The current portion of the contingent consideration in the amount of $750 is included in current installments of other liabilities and the long-term portion in the amount of $1,455 is included in other liabilities on the condensed consolidated balance sheets.
17. Accumulated Other Comprehensive Loss (“AOCL”)—The following table lists the beginning balance, annualquarterly activity and ending balance of accumulated other comprehensive loss, which consists of foreign currency (FX) translation adjustments:
|
| Total |
|
| Total |
| ||
Balance, December 31, 2020 |
| $ | (9,322 | ) | ||||
FX translation |
|
| (2,503 | ) | ||||
Balance, March 31, 2021 |
| $ | (11,825 | ) | ||||
Balance, December 31, 2019 |
| $ | (5,698 | ) |
| $ | (5,698 | ) |
FX translation |
|
| (9,063 | ) |
|
| (9,063 | ) |
Balance, March 31, 2020 |
|
| (14,761 | ) |
| $ | (14,761 | ) |
FX translation |
|
| 324 |
| ||||
Balance, June 30, 2020 |
| $ | (14,437 | ) | ||||
|
|
|
|
| ||||
Balance, December 31, 2018 |
| $ | (4,507 | ) | ||||
FX translation |
|
| (1,769 | ) | ||||
Balance, March 31, 2019 |
|
| (6,276 | ) | ||||
FX translation |
|
| 657 |
| ||||
Balance, June 30, 2019 |
| $ | (5,619 | ) |
18. Equity Investments — The Company has the following equity investments:
Equity Method Investment
—On August 2, 2016, AMVAC BV entered into a joint venture with Huifeng (Hong Kong) Ltd, which is a wholly owned subsidiary of the Huifeng Group. The resulting entity, Hong Kong JV, is intended to focus on activities such as market access and technology transfer between the two members. AMVAC BV is a 50% owner of the entity. No material contributions were made subsequent to the initial investment. On June 27, 2017, both Amvac NetherlandsAMVAC BV and Huifeng Agrochemical Company, Ltd (“Huifeng”)(Hong Kong) Ltd. made individual capital contributions of $950 to the Huifeng Amvac Innovation Co. Ltd (“Hong Kong Joint Venture”). As of June 30, 2020, the Company’s ownership position in the Hong Kong Joint Venture was 50%.JV. The Company utilizes the equity method of accounting with respect to this investment. On July 7, 2017, the Hong Kong Joint VentureJV purchased the shares of Profeng Australia, Pty Ltd.(“Profeng”), for a total consideration of $1,900. The purchase consists of Profeng Australia, Pty Ltd Trustee and Profeng Australia Unit Trust. Both Trust and Trustee were previously owned by Huifeng via(via its wholly owned subsidiary Shanghai Biological Focus Center. Huifeng (Hong Kong) Ltd).
For the three and six months ended June 30,March 31, 2021 and 2020, the Company recognized losses of $25 and $38, respectively,$13 in each period, as a result of the Company’s ownership position in the Hong Kong Joint Venture. For the three and six months ended June 30, 2019, the Company recognized losses of $36 and $60, respectively. The Company’s investment in this joint venture amounted to $475$375 and $698,$500, respectively at June 30,March 31, 2021 and 2020 and 2019. are included in other assets.
19. Other Equity Investments
—In February 2016, AMVAC Netherlands BV made an investment in Biological Products for Agriculture (“Bi-PA”). Bi-PA develops biological plant protection products that can be used for the control of pests and disease of agricultural crops. As of June 30, 2020,March 31, 2021, the Company’s ownership position in Bi-PA was 15%. The equity securities are without aSince this investment does not have readily determinable fair value, because these securities are privately held, not traded on any public exchanges and not an investment in a mutual fund or similar investment. As a result, the Company has elected to alternatively measure thisthe investment at its cost minusless impairment, if any, plusand also records an increase or minusdecrease for changes resulting from observable price changes in orderly transactions for the identical or a similar investment of Bi-PA. The Company periodically reviews the same issuer. There were no observable price changes in the quarters ended June 30, 2020 and 2019.investment for possible impairment. There was 0 impairment or observable price changes on the investment as of June 30, 2020during the three months ended March 31, 2021 and 2019. The investment is not material and is recorded within other assets on the Condensed Consolidated Balance Sheets.2020.
On April 1, 2020, the CompanyAMVAC purchased 6.25 million shares, an ownership of approximately 8%, of common stock of Clean Seed Capital Group Ltd. (TSX Venture Exchange: “CSX”) for $1,190. The shares are publicly traded, have a readily determinable fair value, and are considered a Level 1 investment. The fair value of the stock amounted to $1,214$2,973 as of June 30, 2020March 31, 2021, and the Company recorded a gain in the amount of $24$1,066 for the three and six monthsthree-month period ended June 30, 2020, included as a reduction to operating expenses on the Condensed Consolidated Financial Statements.March 31, 2021.
19. 20. Income Taxes — Income tax expense was $1,565$1,362 for the three months ended June 30, 2020,March 31, 2021, as compared to $1,224income tax benefit of $205 for the comparable period in 2019.three months ended March 31, 2020. The effective tax rate for the quarterthree months ended March 31, 2021 was 28.6%30.6%, asand is based on the rates in the territories in which the Company operates. The rate has decreased compared to 28.0%prior years reflecting mix of income in the same period of the prior year. Income tax expense was $1,360 for the six months ended June 30, 2020, as compared to $2,584 for the six months ended June 30, 2019. The effective tax rate for the six months ended June 30, 2020 and 2019 was 23.4% and 26.8%, respectively.different jurisdictions. The effective tax rate is based on the projected income for the full year and is subject to ongoing review and adjustment by management.
For the three and six months ended June 30,March 31, 2020 the effective rate was 31.0%. In addition, during that period, the Company benefited from two discrete income tax benefits. First, the Company assessed its income tax positions to account for the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) which was signed into law on March 27, 2020. A provision of the act modified the amount of interest deduction allowed and therefore reduced the Company’s 2019 Global Intangible Low Tax Income (“GILTI”) inclusion. Second, the Company benefited from the tax impact of the vesting of certain stock grants. ForThese benefits did not recur in the three and six months ended June 30, 2019, the Company’s income taxes were reduced by the discrete benefitsame period of the vesting of stock grants.current year.
The Florida Department of Revenue has been auditingcompleted its audit of the Company’s state income tax returns for the years ended December 31, 2012 through December 31, 2013 and December 31, 2015 through December 31, 2018. The audit hasNo adjustments have been substantially completed with no adjustments to the audited taxproposed for these periods. The Company has also been notified by the Mississippi Department of Revenue of its intent to examine the Company’s state income tax returns for the years ended December 31, 2016 through December 31, 2018. The result of Mississippi’s audit is not determinable since the audit is presently in the initial phase.
20. Share Repurchase Program — On November 5, 2018, pursuant to a Board of Directors resolution, the Company announcedat its intention to repurchase an aggregate amount of shares with a total purchase price not to exceed $20,000 of its common stock, par value $0.10 per share, in the open market, depending upon market conditions over the short to mid-term. The Shares Repurchase Program expired on March 8, 2019. During January 2019, the Company purchased 158,048 shares for a total of $2,604 at an average price of $16.48 per share. There were 0 such purchases during the three and six months ended June 30, 2020.
preliminary stage.
21. Product and Business Acquisitions – —The Company did not complete any acquisitions during the three months ended March 31, 2021 and 2020.
During the year ended December 31, 2019,2020, the Company completed 32 acquisitions in exchange for a total cash consideration at closing of $37,972,$19,342, which was net of cash acquired of $981$1,970, and deferredcontingent consideration of $3,051.$2,007, and the settlement of a net asset adjustment of $623. In addition, the Company assumed liabilities of $19,867$10,288 and capitalized costs of $14 incurredrecognized a bargain purchase gain in the asset acquisition process.amount of $4,624. The total asset value of $60,904$36,884 was preliminarily allocated as follows: product rights $13,279,$6,645, trade names $5,452,$1,195, customer relationships $5,705,$632, goodwill $22,652,$8,672, working capital and fixed assets $10,432,$19,740. During the three months ended March 31, 2021, the Company recorded an adjustment to reduce the bargain purchase gain by the amount of $33, with a corresponding adjustment to working capital.
The purchase price allocation for both acquisitions is preliminary with respect to the valuation of contingent consideration, intangibles, property, plant and indemnification assets $3,384.equipment, income taxes and certain other working capital items as the Company is still in the process of gathering additional information and the determination of the respective fair values.
On January 10, 2019,October 2, 2020, the Company completed the acquisition of all outstanding stock of the outstanding shares of stock of 2 affiliated businesses, Defensive and Agrovant, which are located in JaboticabalAgrinos Group Companies (Agrinos), except for Agrinos AS. Agrinos has operating entities in the state of Sao Paul, Brazil.U.S., Mexico, India, Brazil, China, Ukraine, and Spain. Agrinos is a fully integrated biological input supplier with proprietary technology, internal manufacturing, and global distribution capabilities. At closing, the Company paid cash consideration of $20,679,$3,125, which was net of cash acquired of $981, deferred$1,813, and liabilities assumed of $4,963, including liabilities of $595 related to income tax matters. The acquisition was accounted for as a business combination and resulted in a preliminary bargain purchase gain of $4,624 (including a reduction of $33 recorded during the three months ended March 31, 2021). The total asset value of $12,712 has been preliminarily allocated as follows: working capital $7,458 (including trade receivables of $2,358), property, plant and equipment of $5,004, and intangible assets of $250. Agrinos was acquired out of bankruptcy. This provided the Company with an opportunity to acquire Agrinos at an advantageous purchase price which was below the preliminary fair value of Agrinos’ net assets acquired resulting in the above-mentioned bargain purchase gain.
On October 8, 2020, the Company completed the acquisition of all outstanding stock of AgNova Technologies Pty Ltd (“AgNova”). AgNova is an Australian entity that sources, develops, and distributes specialty crop protection and production solutions for agricultural and horticultural producers, and for selected non-crop users. At closing, the Company paid cash consideration of $3,051 including$16,217, which was net of cash acquired of $157, contingent consideration dependent on certain financial results for 2019,of $2,007, the settlement of a net asset adjustment of $623, and liabilities assumed of $18,160,$5,325, including liabilities of $9,111$2,529 related to income tax matters. These companies were founded in 2000The fair value of the contingent consideration of $2,007 was estimated using an income approach and are suppliers of crop protection products and micronutrients with focus on the fruit and vegetable marketsmaximum potential undiscounted payout is $2,811. The acquisition was accounted for as a business combination and the total asset value of $41,890 was$24,172 has been preliminarily allocated as follows: product registrations and product rights $6,395, trade name $1,010,names and trademarks $1,195, customer relationships $5,705,and customer lists $632, goodwill $22,652,$8,672, which is non-deductible for tax purposes, working capital $7,206, including trade receivables of $1,508, and fixedequipment $73. The allocation of the excess purchase price over the preliminary estimated fair value of the net assets $9,139acquired was provisional, pending completion of a valuation analysis. The provisional allocation to intangibles and indemnificationgoodwill was based on the proportional allocation of excess purchase price to intangible assets $3,384.and goodwill for a comparable acquisition transaction completed by the Company in a prior year for which the purchase accounting had been finalized. The operating resultsfinal determination during the measurement period of the allocation of excess purchase price to the intangible assets and goodwill could differ significantly from the provisional estimates. There were 0 adjustments to the preliminary allocations of the total asset value during the three months ended March 31, 2021. The goodwill represents the synergies expected to be achieved from the combined operations of the acquired businesses are included in our consolidated statement of operations from the date of acquisition. The goodwill recognized is expected to be deductible for income tax purposes, subject to merging AMVAC do Brasil with Defensive and Agrovant.
On July 1, 2019, the Company completed a product acquisition for cash consideration in the amount of $7,293 and the assumption of a liability in the amount of $300. The acquisition was accounted for as an asset acquisition and the acquired assets consist of product rights $5,108, trade names $1,200, and inventory $1,293. Costs of $8 incurred in the asset acquisition process were capitalized.
On December 20, 2019, the Company completed a product acquisition for cash consideration in the amount of $10,000 and the assumption of a liability in the amount of $1,407. The acquisition was accounted for as an asset acquisition and the acquired assets consist of product rights $8,171 and trade names $3,242. Costs of $6 incurred in the asset acquisition process were capitalized.company.
22. Foreign Currency – — The Company incurred net foreign currency transaction losses in the amount of $291$1,203 and gains of $172$837 during the three months ended June 30,March 31, 2021 and 2020, and 2019, respectively. The Company incurred net foreign currency transaction losses in the amount of $1,128 and $86 during the six months ended June 30, 2020 and 2019, respectively. These foreign currency transaction effects arerespectively, included in operating expenses on the Condensed Consolidated Financial Statements.condensed consolidated financial statements.
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Numbers in thousands) |
FORWARD-LOOKING STATEMENTS/RISK FACTORS:
The Company, from time-to-time, may discuss forward-looking statements including 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; changes in regulatory policy; 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 regulations, including taxes and other risks as detailed from time-to-time in the Company’s reports and filings filed with the U.S. Securities and Exchange Commission (the “SEC”). It is not possible to foresee or identify all such factors. For more detailed information, refer to Item 1A., Risk factors and Item 7A., Quantitative and Qualitative Disclosures about Market Risk, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.
MANAGEMENT OVERVIEW
The Company’s Operations in the Context of the COVID-19 Pandemic
In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a pandemic, and it continues to spread across the world. To limit the spread of the contagion, governments have taken various actions to slow and otherwise control the spread of the pandemic, including the issuance of stay-at-home orders, social distancing guidelines and border restrictions. At its outset, the Company took swift action to understand, contain and mitigate the risks posed by this pandemic. Specifically, we formed the Pandemic Work Group with a mission to ensure the health and safety of the workforce while ensuring continuity of the business. In the workplace, we have designed and implemented protocols for social distancing, made provisions for the workforce to work remotely where possible, and established quarantine policies for those who present COVID-like symptom or may have been in touch with those who have. Further, the group keeps current with local, state, federal and international laws and restrictions that could affect the business; provides real-time information to the workforce; and draws from political commentary and news statements concrete directions on how best to continue operations. We have also prepared contingency plans to permit the continued operation of our factories, in the event that there are critical staffing issues due to attrition. In addition, in April 2020, we amended our credit facility to support future working capital needs (see note 10 to the Condensed Consolidated Financial Statements)10). Further, we continuously monitor supply chain, transport, logistics and border closures and have reached out to third parties to make clear that we are continuing to operate, that we have our own policies relating to health (e.g., no third party visitors, no face-to-face meetings) and are committed to compliance with COVID-19 policies of our business partners. Our CEO and the leader of the Pandemic Work Group areis holding weeklybi-weekly “state of the company” calls with the functional heads of our businesses across the globe to ensure that our information is shared in a timely manner and that our direction is clear.
It is important to understand that under applicable federal guidelines (at https://www.cisa.gov), the Company is part of the nation’s “critical infrastructure” and falls within three of the 16 sectors that are specially permitted to operate: “Food and Agriculture” sector (engaged in “the production of chemicals and other substances used by the food and agriculture industry, including pesticides, herbicides etc.”), the “Chemical” sector (supporting(“supporting the operation . . . of facilities (particularly those with high risk chemicals . . . whose work cannot be done remotely and requires the presence of highly trained personnel to ensure safe operations”) and the “Public Works and Infrastructure Support Services” sector (in support of public health including pest control and exterminators, landscapers and others who provide services to residences and businesses). In issuing guidance on Coronavirus, former President Trump said, “If you work in a critical infrastructure industry, as defined by the Department of Homeland Security, such as healthcare services and pharmaceutical and food supply, you have a special responsibility to maintain your normal work schedule [emphasis added].” We have found that state COVID-19 orders and, indeed, even those of countries in which the outbreak has been most pronounced (e.g., Italy), have consistently excepted food supply as an area essential to the survival of its populations and, as such, had given special permission to companies, such as ours, to continue to operate during the pandemic.
In keeping with our charge to operate as an essential business and by virtue of our efforts to contain and mitigate the risks posed by the pandemic, we have been able to manage our business with minimal disruptionimpact during the reporting period. As mentioned earlier (see Note 1 to the Condensed Consolidated Financial Statements), the coronavirus has affected our overall performance to a degree. Lost opportunities for certain new product launches, inability to meet potential new customers face-to-face, reduced demand for commodity crops sold to restaurants, and foreign exchange effects in Brazil, Mexico and Australia, have likely limited the Company’s top-line growth by up to several million dollars and the associated profitability, to an indeterminate degree, since the inception of the pandemic.
Overview of the Company’s Performance
DespiteWhile the factfirst quarter of 2020 marked the start of a global pandemic that continued throughout the year, the first quarter of 2021 marked a favorable inflection point domestically with lower pandemic continued in forcecurves, ample supply of vaccines and increasingly shifted to our primary markets (US, LATAM and Brazil) during the second quarter,easing of social restrictions. Within this context, the Company’s overall operating results were, on balance, strong. Whilefor the first three months of 2021 improved considerably (both domestically and abroad), as compared with those of the same period of 2020. Net sales increased by 21 % ($116,155 as compared to $95,962) and net income increased by a factor of six (to $3,071 from $520).
On a consolidated basis, domestic sales rose 18% and international sales increased 27%, resulting in an overall net sales declined by 8% (to $104,555improvement of about 21%. The domestic net sales include an increase in 2020royalty and license fees from $113,104 in 2019), costour Envance proprietary solutions business of approximately $3,000. Cost of sales dropped even more (by approximately 10%increased by 23% or $13,443 due not only to $64,249 from $71,451),increased sales but also to changes in mix related to both products and territories and factory performance (including the addition of two new factory operations acquired as part of the Agrinos group). Cost of sales were 61% of sales in 2021, as compared to 60% for the same period of 2020. These factors, taken together, yielded a 18% increase in gross profit declined only 3% ($40,306 v. $41,653). Consequently,(to $45,131 from $38,381 in the comparable quarter of 2020), while average gross margin increasedpercent declined to 39% from 37%40% quarter-over-quarter. Operating expenses on an absolute basis increased by about 13%, as compared to the comparable quarter (to $41,444 from $36,545), largely due to the expanded scope of the Company’s global footprint following the acquisition of Agrinos biological products and the AgNova business in Australia. However, operating expenses as a percent of net sales due largelydropped to improved factory utilization during35% from 38% for the quarter indicating greater economies of scale for the period. Operating expenses decreased quarter-over-quarterincome for the period doubled (to $3,654 from $1,836), driven by about 5% (to $33,555the strong sales increase. The Company recorded significantly lower interest expense during the quarter as a result of working capital management in 2020part driven by strong support from $35,362some of our biggest customers participating in 2019). In 2019, operating expenses included benefits from the re-valuation of deferred purchase price consideration ($1,345), and a break-up fee associatedearly pay programs. These factors, coupled with a potential acquisition ($500), which did not recur in 2020. In lightbeneficial fair-value adjustment of improved factory performance, tighter control of operating expenses (including, for example, reduced product development, research and regulatory expenses and curtailment of travel and entertainment during the pandemic), lower interest rate expenses and a slightly higher effective tax rate,an equity investment, yielded net income for the quarter rose by 25% (to $3,887 in 2020 from $3,106 in 2019). In short, the Company was ableperiod of $3,071, a six-fold increase compared to generate higher profitability on an absolute basis, despite a reduced top line$520 in the midstfirst quarter of a global pandemic.
2020. Details on our financial performance are set forth below.
RESULTS OF OPERATIONS
Quarter Ended June 30, 2020 and 2019:March 31:
|
| For the three months ended March 31, |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 44,670 |
|
| $ | 47,575 |
|
| $ | (2,905 | ) |
|
| -6 | % |
| $ | 54,755 |
|
| $ | 50,362 |
|
| $ | 4,393 |
|
|
| 9 | % |
US non-crop |
|
| 13,872 |
|
|
| 16,955 |
|
|
| (3,083 | ) |
|
| -18 | % |
|
| 17,453 |
|
|
| 10,993 |
|
|
| 6,460 |
|
|
| 59 | % |
Total US |
|
| 58,542 |
|
|
| 64,530 |
|
|
| (5,988 | ) |
|
| -9 | % |
|
| 72,208 |
|
|
| 61,355 |
|
|
| 10,853 |
|
|
| 18 | % |
International |
|
| 46,013 |
|
|
| 48,574 |
|
|
| (2,561 | ) |
|
| -5 | % |
|
| 43,947 |
|
|
| 34,607 |
|
|
| 9,340 |
|
|
| 27 | % |
Total net sales: |
| $ | 104,555 |
|
| $ | 113,104 |
|
| $ | (8,549 | ) |
|
| -8 | % |
| $ | 116,155 |
|
| $ | 95,962 |
|
| $ | 20,193 |
|
|
| 21 | % |
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 22,912 |
|
| $ | 28,592 |
|
| $ | (5,680 | ) |
|
| -20 | % |
| $ | 33,484 |
|
| $ | 26,117 |
|
| $ | 7,367 |
|
|
| 28 | % |
US non-crop |
|
| 6,843 |
|
|
| 8,661 |
|
|
| (1,818 | ) |
|
| -21 | % |
|
| 8,070 |
|
|
| 6,274 |
|
|
| 1,796 |
|
|
| 29 | % |
Total US |
|
| 29,755 |
|
|
| 37,253 |
|
|
| (7,498 | ) |
|
| -20 | % |
|
| 41,554 |
|
|
| 32,391 |
|
|
| 9,163 |
|
|
| 28 | % |
International |
|
| 34,494 |
|
|
| 34,198 |
|
|
| 296 |
|
|
| 1 | % |
|
| 29,470 |
|
|
| 25,190 |
|
|
| 4,280 |
|
|
| 17 | % |
Total cost of sales: |
| $ | 64,249 |
|
| $ | 71,451 |
|
| $ | (7,202 | ) |
|
| -10 | % |
| $ | 71,024 |
|
| $ | 57,581 |
|
| $ | 13,443 |
|
|
| 23 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 21,758 |
|
| $ | 18,719 |
|
| $ | 3,039 |
|
|
| 16 | % |
| $ | 21,271 |
|
| $ | 24,245 |
|
| $ | (2,974 | ) |
|
| -12 | % |
US non-crop |
|
| 7,029 |
|
|
| 8,558 |
|
|
| (1,529 | ) |
|
| -18 | % |
|
| 9,383 |
|
|
| 4,719 |
|
|
| 4,664 |
|
|
| 99 | % |
Total US |
|
| 28,787 |
|
|
| 27,277 |
|
|
| 1,510 |
|
|
| 6 | % |
|
| 30,654 |
|
|
| 28,964 |
|
|
| 1,690 |
|
|
| 6 | % |
International |
|
| 11,519 |
|
|
| 14,376 |
|
|
| (2,857 | ) |
|
| -20 | % |
|
| 14,477 |
|
|
| 9,417 |
|
|
| 5,060 |
|
|
| 54 | % |
Total gross profit |
| $ | 40,306 |
|
| $ | 41,653 |
|
| $ | (1,347 | ) |
|
| -3 | % | ||||||||||||||||
Total gross profit: |
| $ | 45,131 |
|
| $ | 38,381 |
|
| $ | 6,750 |
|
|
| 18 | % | ||||||||||||||||
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
|
| 49 | % |
|
| 39 | % |
|
|
|
|
|
|
|
|
|
| 39 | % |
|
| 48 | % |
|
|
|
|
|
|
|
|
US non-crop |
|
| 51 | % |
|
| 50 | % |
|
|
|
|
|
|
|
|
|
| 54 | % |
|
| 43 | % |
|
|
|
|
|
|
|
|
Total US |
|
| 49 | % |
|
| 42 | % |
|
|
|
|
|
|
|
|
|
| 42 | % |
|
| 47 | % |
|
|
|
|
|
|
|
|
International |
|
| 25 | % |
|
| 30 | % |
|
|
|
|
|
|
|
|
|
| 33 | % |
|
| 27 | % |
|
|
|
|
|
|
|
|
Total gross margin |
|
| 39 | % |
|
| 37 | % |
|
|
|
|
|
|
|
| ||||||||||||||||
Gross margin: |
|
| 39 | % |
|
| 40 | % |
|
|
|
|
|
|
|
|
Our domestic crop business recorded net sales that were about 6% lower9% higher than those of secondthe first quarter 20192020 ($44,670 v. $47,575)54,755 as compared to $50,362). When viewed by type of product and crop, sales were mixed. In general, duringDuring the secondfirst quarter, we saw an improved procurement pattern in the distribution channel adopted conservative procurement practices in light domestic market, as rising crop commodity prices caused growers and retailers to increase their purchases
of the COVID-19 pandemic, price trends for crop commodities prices and concerns relating to near-term export demand. Salesprotection inputs. Among our corn products, sales of our lower-margin burn-downImpact® herbicide Parazone®brands increased sharply, while those of our granular soil insecticides, including Aztec®, SmartChoice®, Force®, Thimet ® and Counter®, were up 8% as compared to the prior year. Soybean products, such as Scepter® and our fungicide Equus® decreased duringpost-emergent products Hornet® and Python® recorded higher sales, as compared to the quarter. In addition, a significant declinesame quarter in planted cotton acres from lower commodity prices resulted in2020. By contrast, we experienced a drop in net sales of our foliar insecticide Bidrin.Bidrin® due to carryover of inventory from last season when weather was dry and insect pressure was low. Further, our Impact® post-emergent herbicide generated reduced sales. Partially offsetting these reductions, are our recently acquired herbicide products Classic®, First Rate® and Python®, usedsoil fumigants posted a somewhat softer performance than the prior year due primarily on soybeans, all contributed positively during the period. Further, net sales of our corn soil insecticides, led by our premium brand Aztec®, were higher during the quarter.to water allocation restrictions in California.
Cost of sales within the domestic crop business was considerablyincreased significantly both as a result of the increased volumes just discussed, and as a result of both a mix change and lower thanfactory output, as compared to the secondfirst quarter of 2019, generating2020. This generated a 16% increasereduction of 12% in gross profit (from $18,719$24,245 in the first quarter of 2020 to $21,758)$21,271 this year). This improvement rose from increased sales of recently introduced, higher margin products and improved factory performance. As a result, gross profit margin rose to 49% for our crop business during the second quarter as compared to 39% for the comparable period last year.
Our domestic non-crop business showed decreasedincreased net sales (down about 18% to $13,872by 59% (to $17,453 from $16,955)$10,993) quarter-over-quarter. In this category, our Dibrom® mosquito adulticide and our pest strips business sales accounted for more than the entire decline,both grew, influenced by timing shifts in customer procurement relative to the prior year. Partially offsetting this decline, we received increased royaltyprocurement. Royalty and license fees for our Envance essential oil technologyproprietary solutions increased by approximately $3,000, as compared to the secondfirst quarter of 2019. We expect to recognize additional royalty fees during the remaining quarters of 2020 and in future years. Netlast year. In addition, we recorded improved net sales from our OHP nursery and ornamental business, were flat with last year, as demand for homeowner garden and landscape products in big box stores remained steady in spiterecovered following the lifting of pandemicpandemic-related stay-at-home restrictions at retail locations around the country.certain locations.
Cost of sales within the domestic non-crop business declinedrose by about 21% (from $8,661$6,274 to $6,843)$8,070) quarter-over-quarter. This decreaseincrease was influenced by quarterly product mix withvolume driven. As indicated in the table, our costs increased at a portionslower rate than sales primarily because of sales coming fromthe strong performance on royalty and license fees of the Envance natural oils licensing fees which carry no costtechnology business. As a result of goods component. Grossthese dynamics, gross profit for domestic non-crop decreasedincreased by 18%99% (from $8,558$4,719 in 20192020 to $7,029$9,383 in 2020); by contrast, gross profit margin for the non-crop business increased to 51% for the quarter as compared to 50% during the second quarter of 2019.2021).
Net sales of our international businesses were downrose by about 5%27% during the period ($46,01334,607 in 2020 v. $48,574to $43,947 in 2019)2021). Several factors contributed to this result. In Europe,The addition of sales offrom our Mocap® insecticide dropped sharply in connectionrecently acquired AgNova business, an established crop protection business, effectively increased our Australian sales by seven times quarter over quarter. Mexico posted strongly improved sales with the phase-out of that product following the cancellation of its registration in the EU. Sales performance was down about 5% in Central America largely due to difficulties experienced with in-field sales restrictions from the COVID-19 pandemic. Mexico sales reflected steadyincreased demand for granular insecticides, bromacil herbicides, and soil fumigants offset by some sales that were missed due to production difficulties at our regional toll manufacturer.for use on high-value vegetable crops. In Brazil, net sales declined due to portfolio streamlining (to optimize our sales resources) andincreased significantly despite delays in customer procurement arising from economic uncertainty. The performances of our Brazilianuncertainty and Mexican businesses were further affectedcontinued widespread COVID-19 limitations. Partially offsetting these gains, sales performance was slightly lower in Central America due to consolidation by a devaluationcertain AgriCenter suppliers, logistical difficulties arising from the pandemic and hurricane activity in the Brazilian real and the Mexican peso.Honduras.
Cost of sales in our international business increased slightly (about 1%) from $34,198by 17% (from $25,190 in 20192020 to $34,494$29,470 in 2020.2021), primarily driven by the addition of AgNova and by the strong growth of our other businesses in North and Central America. Gross profit for International declinedthe international businesses increased by approximately 20% from $14,376 in 2019 to $11,519about 54% (from $9,417 in 2020 and gross profit margin dropped from 30%to $14,477 in 2019 to 25% in the second quarter of 2020.2021).
On a consolidated basis, gross profit for the first quarter decreasedof 2021 increased by 3%18% (from $41,653$38,381 in 20192020 to $40,306$45,131 in 2020)2021). However, theThe change in volume and mix, described above, had the impact of increasing absolute gross profit by 18% and reducing gross margin percentage by approximately 2% and included a much improved quarter-over-quarter factory performance. Overall1%. As mentioned above, overall gross margin percentage improved toended at 39% in the first quarter of 2021, as compared to 37%40% in the first quarter of the prior year.
Operating expenses decreasedincreased by $1,807$4,899 or 13% to $33,555$41,444 for the three months ended June 30, 2020,March 31, 2021, as compared to the same period in 2019.2020. The differences in operating expenses by department are as follows:
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| Change |
|
| % Change |
| ||||||||
Selling |
| $ | 10,031 |
|
| $ | 11,770 |
|
| $ | (1,739 | ) |
|
| -15 | % |
| $ | 11,133 |
|
| $ | 10,474 |
|
| $ | 659 |
|
|
| 6 | % |
General and administrative |
|
| 10,491 |
|
|
| 9,182 |
|
|
| 1,309 |
|
|
| 14 | % |
|
| 15,848 |
|
|
| 12,504 |
|
|
| 3,344 |
|
|
| 27 | % |
Research, product development and regulatory |
|
| 6,104 |
|
|
| 6,856 |
|
|
| (752 | ) |
|
| -11 | % |
|
| 6,616 |
|
|
| 6,154 |
|
|
| 462 |
|
|
| 8 | % |
Freight, delivery and warehousing |
|
| 6,929 |
|
|
| 7,554 |
|
|
| (625 | ) |
|
| -8 | % |
|
| 7,847 |
|
|
| 7,413 |
|
|
| 434 |
|
|
| 6 | % |
|
| $ | 33,555 |
|
| $ | 35,362 |
|
| $ | (1,807 | ) |
|
| -5 | % |
| $ | 41,444 |
|
| $ | 36,545 |
|
| $ | 4,899 |
|
|
| 13 | % |
• | Selling expenses |
• | General and administrative expenses increased by |
• | Research, product development costs and regulatory expenses |
• | Freight, delivery and warehousing costs for the three months ended |
On April 1, 2020, the Company made a strategic investment in Clean Seed Inc., in the amount of $1,190. During the three months ended March 31, 2021, the Company recorded positive fair value adjustments in the amount of $1,066.
During the three months ended March 31, 2021, a Paycheck Protection Program loan assumed on the acquisition of Agrinos in the fourth quarter of 2020 was fully extinguished with the majority of the balance forgiven and recorded as other income in the Company’s condensed consolidated statements of operations in the amount of $672.
Interest costs net of capitalized interest were $1,274 during$946 in the first three months ended June 30, 2020,of 2021, as compared to $1,925$1,508 in the same period of 2019.2020. Interest costs are summarized in the following table:
Average Indebtedness and Interest expense
|
| Three months ended June 30, 2020 |
|
| Three months ended June 30, 2019 |
|
| Q1 2021 |
|
| Q1 2020 |
| ||||||||||||||||||||||||||||||||||||
|
| Average Debt |
|
| Interest Expense |
|
| Interest Rate |
|
| Average Debt |
|
| Interest Expense |
|
| Interest Rate |
|
| Average Debt |
|
| Interest Expense |
|
| Interest Rate |
|
| Average Debt |
|
| Interest Expense |
|
| Interest Rate |
| ||||||||||||
Revolving line of credit (average) |
| $ | 185,989 |
|
| $ | 1,248 |
|
|
| 2.7 | % |
| $ | 178,616 |
|
| $ | 1,908 |
|
|
| 4.3 | % |
| $ | 125,299 |
|
| $ | 860 |
|
|
| 2.7 | % |
| $ | 165,076 |
|
| $ | 1,496 |
|
|
| 3.6 | % |
Amortization of deferred loan fees |
|
| — |
|
|
| 80 |
|
|
| — |
|
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| — |
|
|
| 80 |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
|
| — |
|
Amortization of other deferred liabilities |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18 |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
Other interest (income) expense |
|
| — |
|
|
| 26 |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| 48 |
|
|
| — |
|
|
| — |
|
|
| 30 |
|
|
| — |
|
Subtotal |
|
| 185,989 |
|
|
| 1,357 |
|
|
| 2.9 | % |
|
| 178,616 |
|
|
| 2,008 |
|
|
| 4.5 | % |
| $ | 125,299 |
|
| $ | 1,006 |
|
|
| 3.2 | % |
| $ | 165,076 |
|
| $ | 1,588 |
|
|
| 3.8 | % |
Capitalized interest |
|
| — |
|
|
| (83 | ) |
|
| — |
|
|
| — |
|
|
| (83 | ) |
|
| — |
|
|
| — |
|
|
| (60 | ) |
|
| — |
|
|
| — |
|
|
| (80 | ) |
|
| — |
|
Total |
| $ | 185,989 |
|
| $ | 1,274 |
|
|
| 2.7 | % |
| $ | 178,616 |
|
| $ | 1,925 |
|
|
| 4.3 | % |
| $ | 125,299 |
|
| $ | 946 |
|
|
| 3.0 | % |
| $ | 165,076 |
|
| $ | 1,508 |
|
|
| 3.7 | % |
The Company’s average overall debt for the three months ended June 30, 2020March 31, 2021 was $185,989,$125,299, as compared to $178,616$165,076 for the three months ended June 30, 2019. DuringMarch 31, 2020. Our borrowings in the quarter, we continuedthree months ended March 31, 2021 were lower mainly due to focus on managingthe increased participation from our biggest customers in our 2020 year-end early pay program, partially offset by the acquisition activity over the last 12 months and the associated investment in expanded working capital for our expanded business and controlling our usage of revolving debt.capital. As can be seen from the table above, our effective bank interest rate on our revolving line of credit was 2.7% for the three months ended June 30, 2020,March 31, 2021, as compared to 4.3%3.6% in 2019. The lower interest cost recorded in the three months ended June 30, 2020, as compared to the same period of the prior year, was substantially due to lower interest rates on borrowings in the US, which was part of Federal Government efforts to stimulate the overall economy.
2020.
Income tax expense was $1,565increased by $1,567 to $1,362 for the three months ended June 30, 2020,March 31, 2021, as compared to $1,224income tax benefit of $205 for the comparable period in 2019.2020. The underlying effective tax rate for the quarterthree months ended March 31, 2021 and 2020 was 28.6%30.6% and 31.0%, as compared to 28.0% in the same period of the prior year. The effective tax rate for all interim periods is based on the projected income for the full year and is subject to ongoing review and adjustment by management. The increase in effective tax rate is primarily driven by the mix of our domestic and international income.
Duringrespectively. During the three months ended June 30,March 31, 2020, and 2019, we recognized losses of $25 and $36, respectively, on our investment in the Hong Kong joint venture, which is a 50% owned equity investment.
Our overall net income for the three months ended June 30, 2020 was $3,887 or $0.13 per basic and diluted share, as compared to $3,106 or $0.11 per basic and diluted share in the same period of 2019.
Six Months Ended June 30, 2020 and 2019:
Overview of the Company’s Performance
The first six months of 2020 were shaped, in part, by the advent of the coronavirus, which expanded with increasing effect into regions primarily served by the Company. Domestic markets within our industry were slowed during the first quarter but gained traction in the second. By contrast, our international businesses enjoyed greater consistency during the first quarter and saw softer markets in the second. All told, the Company’s overall operating results for the first six months of 2020 declined as compared with those of the same period of 2019. Net sales were down about 6% ($200,517 compared to $212,780) and gross profit was down 6% ($78,687 v. $83,355). Gross margin remained the same at 39% of net sales, and operating expenses were essentially flat ($70,100 v. $70,162). Net income ended at $4,407, as compared to $7,012 for the same period of 2019.
On a consolidated basis, with domestic sales down 5% and international sales down by about 7%, overall net sales were down by about 6% (or $12,263). Cost of sales were down 6% on an absolute basis, while, as a percent of net sales, they remained at 61%. Factory performance was improved during the first half of 2020 as compared to that of 2019. These factors, taken together, yielded a decline in gross profit of $4,668. In the first half of 2020 operating expenses remained flat on an absolute basis, with considerably lower sales and marketing expenditures due largely to reduced travel and entertainment activities and customer visit limitations caused by restrictions in place related to the pandemic. Operating expenses as a percent of net sales rose from 33% to 35% for the period. It should be noted that, during the first half of 2019, the Company benefittedbenefited from a credit of about $2,888 relating to deferred purchase price consideration, and no such credit was recorded in 2020. Consequently, operating income for the period decreased by $4,606. After significantly lower interest expense and a higher overall effective tax rate, net income for the period declined to $4,407 from $7,012 during the first half of the prior year. Details on our financial performance are set forth below.
RESULTS OF OPERATIONS
Six months ended June 30, 2020 and 2019
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % Change |
| ||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 95,032 |
|
| $ | 97,845 |
|
| $ | (2,813 | ) |
|
| -3 | % |
US non-crop |
|
| 24,865 |
|
|
| 28,222 |
|
|
| (3,357 | ) |
|
| -12 | % |
Total US |
|
| 119,897 |
|
|
| 126,067 |
|
|
| (6,170 | ) |
|
| -5 | % |
International |
|
| 80,620 |
|
|
| 86,713 |
|
|
| (6,093 | ) |
|
| -7 | % |
Total net sales: |
| $ | 200,517 |
|
| $ | 212,780 |
|
| $ | (12,263 | ) |
|
| -6 | % |
Cost of sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 49,029 |
|
| $ | 55,027 |
|
| $ | (5,998 | ) |
|
| -11 | % |
US non-crop |
|
| 13,117 |
|
|
| 13,929 |
|
|
| (812 | ) |
|
| -6 | % |
Total US |
|
| 62,146 |
|
|
| 68,956 |
|
|
| (6,810 | ) |
|
| -10 | % |
International |
|
| 59,684 |
|
|
| 60,289 |
|
|
| (605 | ) |
|
| -1 | % |
Total cost of sales: |
| $ | 121,830 |
|
| $ | 129,245 |
|
| $ | (7,415 | ) |
|
| -6 | % |
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
| $ | 46,003 |
|
| $ | 42,214 |
|
| $ | 3,789 |
|
|
| 9 | % |
US non-crop |
|
| 11,748 |
|
|
| 14,872 |
|
|
| (3,124 | ) |
|
| -21 | % |
Total US |
|
| 57,751 |
|
|
| 57,086 |
|
|
| 665 |
|
|
| 1 | % |
International |
|
| 20,936 |
|
|
| 26,269 |
|
|
| (5,333 | ) |
|
| -20 | % |
Total gross profit |
| $ | 78,687 |
|
| $ | 83,355 |
|
| $ | (4,668 | ) |
|
| -6 | % |
Gross margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US crop |
|
| 48 | % |
|
| 43 | % |
|
|
|
|
|
|
|
|
US non-crop |
|
| 47 | % |
|
| 53 | % |
|
|
|
|
|
|
|
|
Total US |
|
| 48 | % |
|
| 45 | % |
|
|
|
|
|
|
|
|
International |
|
| 26 | % |
|
| 30 | % |
|
|
|
|
|
|
|
|
Total gross margin |
|
| 39 | % |
|
| 39 | % |
|
|
|
|
|
|
|
|
Our domestic crop business recorded net sales that were about 3% below than those of first half of 2019 ($95,032 v. $97,845). When viewed by type of product and crop, sales were mixed. During the first half, we saw careful procurement patterns in the domestic market, as low crop commodity prices and concerns about near-term demand from Asia caused growers and retailers to purchase crop protection inputs at a cautious and deliberate pace. Also, with a significant decline in planted cotton acres (relating to lower commodity prices), we experienced a first half drop in net sales of Bidrin® products. We also saw a (first quarter) decrease in sales of our NAA plant growth regulator used primarily on tree nuts and pome fruits, which arose in large part from timing of orders by certain of our larger customers. Partially offsetting these declines, soil fumigants posted a 17% increase during the first six months of 2020 due to strong performance in the first quarter, as drier weather conditions in California and the Pacific Northwest facilitated more widespread product application than had been the case early in 2019. With respect to our corn products, net sales of corn soil insecticides, including Aztec®, SmartChoice® and Counter®, were up in the first half, while our Impact® herbicide experienced decreased sales in part as a result of some product formulation issues that were substantially resolved during the quarter. Recently acquired products, including our rice herbicide Arroz®, our soybean herbicides (FirstRate, Classic and Python) and our miticide Stifle, added a strong incremental upside during the first half of the year.
Cost of sales within the domestic crop business declined 11%, as compared to the first six months of 2019, driven by mix of products, including the recently acquired products detailed above, and the improved factory performance in the first half of 2020, as compared to the same period of 2019. As a result, gross profit rose by about 9% (from $42,214 to $46,003).
Our domestic non-crop business recorded a decrease in net sales (down about 12% to $24,865 from $28,222) versus the first half of 2019. In this category, our Dibrom® mosquito adulticide sales declined significantly, influenced by relatively full channel inventories and timing shifts in customer procurement and relatively low pest pressure for the first half of the year. We expect demand for Dibrom will strengthen during the balance of 2020 with tropical storm activity predicted to intensify. Royalty fees for our Envance essential oil technology were comparable to the first half of last year; and we expect to recognize additional license fees and royalties during the balance of 2020. Driven by first quarter performance, our OHP nursery and ornamental business posted increased sales, as demand for homeowner garden and landscape products in big box stores remained strong in spite of pandemic restrictions at retail locations.
Cost of sales within the domestic non-crop business declined by about 6% (from $13,929 to $13,117) during the first half of 2020 versus the comparable period in 2019. Gross profit for domestic non-crop decreased by 21% (from $14,872 in 2019 to $11,748 in 2020) due primarily to lower sales of our highly profitable Dibrom mosquito adulticide.
Net sales of our international businesses were down by about 7% during the period ($80,620 in 2020 v. $86,713 in 2019). Several factors contributed to this result. In Europe, sales of our Mocap® insecticide declined during the phase-out of that product following the cancellation of its registration in the EU. In Canada, we experienced a sharp decline in Assure II sales as a result of intense second quarter price competition; the Company elected to maintain brand value rather than match the downward price trend. Sales performance was down slightly in Central America resulting from COVID-19 limitations on in-person/field sales & marketing efforts. Mexico posted improved sales with continuing demand for granular insecticides, bromacil herbicides, and soil fumigants for use on high-value vegetable crops. In Brazil, net sales declined due to lower first half disease pressure in soybeans (reducing demand for our fungicide products), portfolio streamlining and delays in procurement arising from uncertainty relating to the economy and the spread of the pandemic. The performances of our Brazilian and Mexican businesses, as reported in our Condensed Consolidated Financial Statements, were further affected by a devaluation in the Brazilian real and the Mexican peso. The average exchange rate of the Brazilian real and the Mexican peso decreased by approximately 21% and 11% for the six month period ended June 30, 2020 compared to the same period in the prior year.
Cost of sales in our international business decreased by 1% (from $60,289 in 2019 to $59,684 in 2020) primarily driven by mix and currency changes. Gross profit for the international businesses dropped by about 20% (from $26,269 in 2019 to $20,936 in 2020). This resulted from reduced sales of certain high margin products, including Mocap insecticide, Bromacil and Assure II herbicides. In addition, we experienced higher sales of low-margin products from our business in Australia.
On a consolidated basis, gross profit for the six months of 2020 decreased by 6% (from $83,355 in 2019 to $78,687 in 2020), as a result of reduced sales volumes detailed above. Factory performance was significantly better in the first six months of 2020, as compared to the same period of 2019. Gross margin performance, when expressed as a percentage of sales, remained flat at 39%.
Operating expenses decreased by $62 to $70,100 for the six months ended June 30, 2020, as compared to the same period in 2019. The differences in operating expenses by department are as follows:
|
| 2020 |
|
| 2019 |
|
| Change |
|
| % Change |
| ||||
Selling |
| $ | 20,505 |
|
| $ | 22,697 |
|
| $ | (2,192 | ) |
|
| -10 | % |
General and administrative |
|
| 22,996 |
|
|
| 20,473 |
|
|
| 2,523 |
|
|
| 12 | % |
Research, product development and regulatory |
|
| 12,257 |
|
|
| 12,539 |
|
|
| (282 | ) |
|
| -2 | % |
Freight, delivery and warehousing |
|
| 14,342 |
|
|
| 14,453 |
|
|
| (111 | ) |
|
| -1 | % |
|
| $ | 70,100 |
|
| $ | 70,162 |
|
| $ | (62 | ) |
|
| 0 | % |
|
|
|
|
|
|
|
|
Interest costs net of capitalized interest were $2,782 in the first six months of 2020, as compared to $3,537 in the same period of 2019. Interest costs are summarized in the following table:
Average Indebtedness and Interest expense
|
| Six months ended June 30, 2020 |
|
| Six months ended June 30, 2019 |
| ||||||||||||||||||
|
| Average Debt |
|
| Interest Expense |
|
| Interest Rate |
|
| Average Debt |
|
| Interest Expense |
|
| Interest Rate |
| ||||||
Revolving line of credit (average) |
| $ | 175,475 |
|
| $ | 2,744 |
|
|
| 3.1 | % |
| $ | 160,782 |
|
| $ | 3,485 |
|
|
| 4.3 | % |
Amortization of deferred loan fees |
|
| — |
|
|
| 139 |
|
|
| — |
|
|
| — |
|
|
| 103 |
|
|
| — |
|
Amortization of other deferred liabilities |
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Other interest (income) expense |
|
| — |
|
|
| 57 |
|
|
| — |
|
|
| — |
|
|
| 59 |
|
|
| — |
|
Subtotal |
|
| 175,475 |
|
|
| 2,946 |
|
|
| 3.4 | % |
|
| 160,782 |
|
|
| 3,647 |
|
|
| 4.5 | % |
Capitalized interest |
|
| — |
|
|
| (164 | ) |
|
| — |
|
|
| — |
|
|
| (110 | ) |
|
| — |
|
Total |
| $ | 175,475 |
|
| $ | 2,782 |
|
|
| 3.2 | % |
| $ | 160,782 |
|
| $ | 3,537 |
|
|
| 4.4 | % |
The Company’s average overall debt for the six months ended June 30, 2020 was $175,475, as compared to $160,782 for the six months ended June 30, 2019. During the period, we continued to focus on our usage of revolving debt, while funding working capital for the newly acquired products and businesses. As can be seen from the table above, our effective bank interest rate on our revolving line of credit was 3.1% for the six months ended June 30, 2020, as compared to 4.3% in 2019.
Income tax expense decreased by $1,224 to end at $1,360 for the six months ended June 30, 2020, as compared to income tax expense of $2,584 for the comparable period in 2019. The effective tax rate for the six months ended June 30, 2020 was 23.4%, which included two discrete income tax benefits during the six months ended June 30, 2020.benefits. First, the Company assessed its income tax positions to account for the Coronavirus Aid Relief and Economic Security Act (“CARES Act”) which was signed into law on March 27, 2020. A provision of the act modified the amount of interest deduction allowed and therefore reduced the Company’s 2019 Global Intangible Low Tax Income (“GILTI”) inclusion. Second, the Company benefited from the tax impact of the vesting of certain stock grants. DuringThese benefits in the six months ended June 30, 2019,prior year did not recur in the Company’s effective tax rate was 26.8%.current year. The effective tax rate for all interim periods is based on the projected income for the full year and is subject to ongoing review and adjustment by management.
During the sixthree months ended June 30,March 31, 2021 and 2020 and 2019, the Companywe recognized lossesa loss of $38 and $60, respectively,$13 in each period, on itsour investment in the Hong Kong joint venture which is a 50% owned equity investment.
Our overall net income for the sixfirst three months ended June 30, 2020of 2021 was $4,407$3,071 or $0.15$0.10 per basic and diluted share, as compared to $7,012$520 or $0.24$0.02 per basic and diluted share in the same periodquarter of 2019.2020.
LIQUIDITY AND CAPITAL RESOURCES
The Company’sCompany used cash of $32,600 in operating activities provided net cash of $5,688 during the sixthree months ended June 30, 2020,March 31, 2021, as compared to utilizing $32,086$14,069 during the sixthree months ended June 30, 2019.March 31, 2020. Included in the $5,688$32,600 are net income of $4,407,$3,221, plus non-cash depreciation, amortization of intangibles and other assets and discounted future liabilities, in the amount of $11,776,$6,621, amortization of deferred loan fees of $81 and provision for bad debts in the amount of $392.$682. Also included are stock-based compensation of $2,545,$1,792, losses from equity method investment of $38,$13, decrease in deferred income taxes of $1,562$269, change in equity investment fair value of $1,066, forgiveness of a PPP loan of $672, and net foreign currencyan adjustment to the bargain purchase gain of $594.$33. These together provided net cash inflowsoutflows of $18,190,$10,436, as compared to $18,517$7,131 for the same period of 2019.2020.
During the sixfirst three months of 2020,2021, the Company increased working capital by $7,381,$38,589, as compared to an increase of $48,935$14,161 during the same period of the prior year. Included in this change: inventories increased by $21,706$9,615 (normal at this point in the season), as compared to $27,635$16,446 for the first halfquarter of 2019.2020. Deferred revenue decreased by $2,431,$11,293, as compared to $19,438$2,342 in the same period of 2019,2020, driven by customer decisions regarding demand, payment timing and our cash incentive programs. Our accounts payable balances decreasedincreased by $12,351,$2,293, as compared to $10,224$1,617 in the same period of 2019, reflecting slower production activity this year in efforts to control inventory level.2020. Accounts receivables decreasedincreased by $16,421,$30,422, as compared to $7,841$6,578 in the same period of 2019.2020. This is primarily driven by increased group sales and strong international growth. Prepaid expenses increased by $2,297,$1,052, as compared to $1,844$776 in the same period of 2019.2020. Income tax receivable net decreased by $899,$638, as compared to an increaseincreasing by $4,480$597 in the prior year. Accrued programs increased by $12,577,$7,770, as compared to $11,823$6,016 in the prior year. The change reflected some changesyear, which is normal at this point in product mix and domestic programs.the growing season. Finally, other payables and accrued expenses decreased by $3,621,$1,187, as compared to $6,719$2,094 in the prior year as a result of the reduced incentive compensation accrual.year.
With regard to our program accrual, the increase (as noted above) primarily reflects our mix of sales and customers in the first six monthsquarter of 2020,2021, as compared to the prior year. The Company accrues programs in line with the growing season upon which specific products are targeted. Typically crop products have a growing season that ends on September 30th of each year. During the six monthsfirst quarter of 2020,2021, the Company made accruals for programs in the amount of $33,336$18,815 and made payments in the amount of $20,771.$11,060. During the first six monthsquarter of the prior year, the Company made accruals in the amount of $29,220$17,189 and made payments in the amount of $17,397.$11,192.
Cash used for investing activities was $11,465$2,904 for the sixthree months ended June 30, 2020,March 31, 2021, as compared to $31,518$2,980 for the sixthree months ended June 30, 2019.March 31, 2020. The Company spent $6,386$2,904 on fixed assets acquisitions primarily focused on continuing to invest in manufacturing infrastructure and $5,079$41 on investments and intangible assets.patents for the Envance technology business.
During the sixthree months ended June 30, 2020,March 31, 2021, financing activities provided $7,211,$32,853, from borrowings on the Company’s senior credit facility, as compared to $63,523$16,641 for the same period of the prior year. This is principally from the reduced borrowings on the Company’s senior credit facility. In the first halfquarter of 2020, the Company2021, we paid dividends to stockholders amounting to $1,168,$593, as compared to $1,160$582 in the same period of 2019.2020.
The Company has a revolving line of credit that is shown as long-term debt in the Condensed Consolidated Balance Sheetscondensed consolidated balance sheets at June 30, 2020March 31, 2021 and December 31, 2019. These are2020. The debt is summarized in the following table:
Long-term indebtedness ($000's) |
| June 30, 2020 |
|
| December 31, 2019 |
| ||||||||||
Long-term indebtedness |
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||||
Revolving line of credit |
| $ | 160,000 |
|
| $ | 149,300 |
|
| $ | 143,800 |
|
| $ | 107,900 |
|
Deferred loan fees |
|
| (593 | ) |
|
| (534 | ) |
|
| (377 | ) |
|
| (458 | ) |
Net long-term debt |
| $ | 159,407 |
|
| $ | 148,766 |
| ||||||||
Total indebtedness |
| $ | 143,423 |
|
| $ | 107,442 |
|
At June 30, 2020,March 31, 2021, the Company is compliant with all covenants to its Senior Credit Facility. Based on its performance against the most restrictive covenants in the Credit Agreement (see supraNote 10), the Company had the capacity to increase its borrowings by up to $49,420,$50,993, according to the terms thereof. This compares to an available borrowing capacity of $30,557$86,736 as of June 30, 2019 and $26,977 at December 31, 2019.2020 and $39,552 as of March 31, 2020. The level of borrowing capacity is driven by three factors: (1) our financial performance, as measured in EBITDA for both the trailing twelve monthtwelve-month period and on a proforma basis arising from acquisitions, (2) net borrowings, (3) the leverage covenant (the Consolidated Funded Debt Ratio).
We believe that anticipated cash flow from operations, existing cash balances and available borrowings under our amended senior credit facility will be sufficient to provide us with liquidity necessary to fund our working capital and cash requirements for the next twelve months.
RECENTLY ISSUED ACCOUNTING GUIDANCE
Please refer to Note 15 in the accompanying Notes to the Condensed Consolidated Financial Statements for recently issued and adopted accounting standards.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company continually re-assesses the critical accounting policies used in preparing its financial statements. In the Company’s Form 10-K filed with the SEC for the year ended December 31, 2019,2020, the Company provided a comprehensive statement of critical accounting policies. These policies have been reviewed in detail as part of the preparation work for this Form 10-Q. After our review of these matters, we have determined that, during the subject reporting period, there has been no material change to the critical accounting policies that are listed in the Company’s Form 10-K for the year ended December 31, 2019, except for the adoption of Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326)”, along with related clarifications and improvements.2020.
Certain of the Company’s policies require the application of judgment by management in selecting the appropriate assumptions for calculating financial estimates. These judgments are based on historical experience, terms of existing contracts, commonly accepted industry practices and other assumptions that the Company believes are reasonable under the circumstances. These estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the Condensed Consolidated Financial Statementscondensed consolidated financial statements in the period that revisions are determined to be necessary. Actual results may differ from these estimates under different outcomes or conditions.
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company is exposed to market risk related to changes in interest rates, primarily from its borrowing activities. The Company’s indebtedness to its primary lender is evidenced by a line of credit with a variable rate of interest, which fluctuates with changes in the lender’s reference rate. For more information, please refer to the applicable disclosures in the Company’s Form 10-K filed with the SEC for the year ended December 31, 2019.2020.
The Company faces market risk to the extent that changes in foreign currency exchange rates affect our non-U.S. dollar functional currency as to foreign subsidiaries’ revenues, expenses, assets and liabilities. The Company currently does not engage in hedging activities with respect to such exchange rate risks.
Assets and liabilities outside the U.S. are located in regions where the Company has subsidiaries or joint ventures: Central America, South America, North America, Europe, Asia, and Australia. The Company’s investments in foreign subsidiaries and joint ventures with a functional currency other than the U.S. dollar are generally considered long-term. Accordingly, the Company does not hedge these net investments.
Item 4. | CONTROLS AND PROCEDURES |
As of June 30, 2020,March 31, 2021, the Company has a comprehensive set of disclosure controls and procedures designed to ensure that all information required to be disclosed in our filings under the Securities Exchange Act (1934) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. As of June 30, 2020,March 31, 2021, the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, has concluded, based on their evaluation, that the Company’s disclosure controls and procedures are effective to provide reasonable assurance of the achievement of the objectives described above.
There were no changes in the Company’s internal controls over financial reporting that occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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 1. | Legal Proceedings |
Please refer to Note 14 in the accompanying Notes to the Condensed Consolidated Financial Statements for legal updates.
Item 1A. | Risk Factors |
The Company continually re-assesses the business risks, and as part of that process detailed a range of risk factors in the disclosures in American Vanguard’s Report on Form 10-K for the fiscal year ended December 31, 2019,2020, filed on March 10, 2020.31, 2021. In preparing this document, we have reviewed all the risk factors included in that document and find that there are no material changes to those risk factors, except for the following:
The Covid-19 pandemic is creating risk, uncertainty and adverse conditions in many industries both here and abroad. The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic has impacted and may, in the future,will impact its customers, business partners, and employees. While the Company did not incur significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2020,March 31, 2021, the coronavirus did have the effect of limiting sales on new product launches, limiting interactions with potential new customers, reducing demand for products used on crops that are purchased by restaurants, and negatively impacted foreign currency exchange rates in Brazil, Mexico and Australia. The Company is unable to predict the impact that the pandemic will have on its financial condition, results of operations and cash flows in future reporting due to numerous uncertainties. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. There is no guarantee that the Company will be able to operate without material disruption for the duration of the pandemic or that its financial conditions and results of operations will not be materially adversely affected by the pandemic in future quarters.
|
|
The table below summarizes the number of shares of our common stock that were repurchased during the six months ended June 30, 2019 under the share repurchase program. The shares and respective amount are recorded as treasury shares on the Company’s Condensed Consolidated Balance Sheets.
Month ended |
| Total number of shares purchased |
|
| Average price paid per share |
|
| Total amount paid |
| |||
January 31, 2019 |
|
| 158,048 |
|
| $ | 16.48 |
|
| $ | 2,604 |
|
Total number of shares repurchased |
|
| 158,048 |
|
| $ | 16.48 |
|
| $ | 2,604 |
|
Item 6. | Exhibits |
Exhibits required to be filed by Item 601 of Regulation S-K:
Exhibit No. |
| Description |
|
|
|
31.1 |
| Certification of Chief Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. |
|
|
|
31.2 |
| Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002. |
|
|
|
32.1 |
| Certification Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. |
|
|
|
101 |
| The following materials from American Vanguard Corp’s Quarterly Report on Form 10-Q for the quarter ended |
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: | By: | /s/ eric g. wintemute |
|
| Eric G. Wintemute |
|
| Chief Executive Officer and Chairman of the Board |
|
|
|
Dated: | By: | /s/ david t. johnson |
|
| David T. Johnson |
|
| Chief Financial Officer & Principal Accounting Officer |
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