American Vanguard Reports Fourth Quarter & Full Year 2018 Results
American Vanguard Corporation (NYSE:AVD) today announced financial results for the fourth quarter and full year ended December 31, 2018.
Fiscal 2018 Fourth Quarter Financial Highlights – versus Fiscal 2017 Fourth Quarter:
- Net sales were $131 million, compared to $116 million in 2017, an increase of 13%
- Operating income was $11.4 million in 2018, compared to $8.4 million in 2017, an increase of 33%
- Net income was $7.4 million in 2018, compared to $8.4 million in 2017 (which included a one-time $3.4 million tax benefit)
- Earnings per diluted share of $0.25 in 2018, compared to $0.28 in 2017 (which included a one-time tax benefit of approximately $0.11)
- EBITDA1 of $16.6 million in 2018, compared to $14.6 million in 2017
Fiscal 2018 Financial Highlights – versus Fiscal 2017:
- Net sales were $454 million in 2018, compared to $355 million in 2017, an increase of 28%
- Operating income was $39 million in 2018, compared to $26.8 million in 2017, an increase of 46%
- Net income was $24.2 million in 2018, compared to $20.3 million in 2017 (which included a one-time $3.4 million tax benefit)
- Earnings per diluted share of $0.81 in 2018, compared to $0.68 in 2017 (which included a one-time tax benefit of approximately $0.11)
- EBITDA of $61.1 million in 2018, compared to $48.8 million in 2017
Financial Note: Fourth Quarter 2017 and Full-Year 2017 Net Income and Earnings per share includes a one-time tax benefit gained by the Company upon the enactment of the Tax Cut and Jobs Act on December 22, 2017. The effect on 2017 was an increase of $3.4 million in Net income for both the quarter and full year periods. This amounts to an earnings per share adjustment of $0.11 for the same periods.
Eric Wintemute, Chairman and CEO of American Vanguard, stated: “Our 46% improvement in operating income was driven by both our existing businesses (approximately one third) and the new products and businesses acquired during the second half of 2017 (approximately two thirds). These acquisitions broadened and diversified our product portfolio and expanded the footprint of our international business, which now constitutes one-third of our consolidated revenue. All of these assets were purchased at attractive investment values, leaving us with ample borrowing capacity to pursue additional acquisitions in 2019 and beyond.”
Mr. Wintemute continued: “Our full-year gross profit margin remained strong at 40%, and we experienced outstanding factory utilization with under absorption costs down about $11 million year-over-year. Net income rose 19% for the full year, and, if adjusted for the $3.4 million one-time tax benefit recorded in 2017, it would have been 43%. During the same period, EBITDA2 increased by 25%.”
Mr. Wintemute concluded: “Late last year, during a period of overall equity market volatility, the Board of Directors authorized a share repurchase program, under which we have repurchased approximately $10 million in company common stock. We believe this has served to enhance stock price stability, while reversing dilution from past equity grants. With a full year’s experience in integrating our new businesses, our outlook for 2019 remains positive. Despite early season wet weather conditions in the US, we expect our global revenues for 2019 will exceed $500 million, our gross profit margins should remain in the 38% to 40% range, and our operating expenses are targeted at 31% of sales. We look forward toward giving you a more detailed presentation on the 2018 year during our upcoming earnings call.”
Conference Call
Eric Wintemute, Chairman & CEO, Bob Trogele, EVP & COO and David T. Johnson, VP & CFO, will conduct a conference call focusing on the financial results and strategic themes…at 4:30 pm ET on March 11, 2019. Interested parties may participate in the call by dialing (201) 493-6744. Please call in 10 minutes before the call is scheduled to begin, and ask for the American Vanguard call. The conference call will also be webcast live via the News and Media section of the Company’s web site at www.american-vanguard.com. To listen to the live webcast, go to the web site at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the Company’s web site.
About American Vanguard
American Vanguard Corporation is a diversified specialty and agricultural products company that develops and markets products for crop protection and management, turf and ornamentals management and public and animal health. American Vanguard is included on the Russell 2000® and Russell 3000® Indexes and the Standard & Poor’s Small Cap 600 Index. To learn more about American Vanguard, please reference the Company’s web site at www.american-vanguard.com.
The Company, from time to time, may discuss forward-looking information. Except for the historical information contained in this release, all forward-looking statements are estimates by the Company’s management and are subject to various risks and uncertainties that may cause results to differ from management’s current expectations. Such factors include weather conditions, changes in regulatory policy and other risks as detailed from time-to-time in the Company’s SEC reports and filings. All forward-looking statements, if any, in this release represent the Company’s judgment as of the date of this release.
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1 Earnings before interest, taxes, depreciation and amortization. EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or any other financial measure so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The items excluded from EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define EBITDA differently.
2 The Company believes that the use of EBITDA is useful to investors in that it is one of the primary bases upon which borrowing capacity is calculated under the Company’s senior credit facility, it gives investors a sense of the Company’s financial conditions and results of operation without giving effect to the cost of increased acquisition activity in 2017 and it is commonly used by investors and others as a basis for supporting overall business valuations. Nevertheless, investors should not consider EBITDA in isolation or a substitute for analysis of the Company’s results as reported in accordance with GAAP.
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2018 and 2017 (In thousands, except share data) (Unaudited) |
||||||||
| 2018 | 2017 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,168 | $ | 11,337 | ||||
| Receivables: | ||||||||
|
Trade, net of allowance for doubtful accounts of $1,263 and $46, |
123,320 | 102,534 | ||||||
| Other | 10,709 | 7,071 | ||||||
| 134,029 | 109,605 | |||||||
| Inventories, net | 159,895 | 123,124 | ||||||
| Prepaid expenses | 10,096 | 10,817 | ||||||
| Total current assets | 310,188 | 254,883 | ||||||
| Property, plant and equipment, net | 49,252 | 49,321 | ||||||
| Intangible assets, net of applicable amortization | 186,583 | 180,950 | ||||||
| Goodwill | 25,790 | 22,184 | ||||||
| Other assets | 21,774 | 28,254 | ||||||
| Total assets | $ | 593,587 | $ | 535,592 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Current installments of other liabilities | $ | 1,609 | $ | 5,395 | ||||
| Accounts payable | 66,535 | 53,748 | ||||||
| Deferred revenue | 20,043 | 14,574 | ||||||
| Accrued program costs | 37,349 | 39,054 | ||||||
| Accrued expenses and other payables | 15,962 | 12,061 | ||||||
| Income taxes payable | 4,030 | 1,370 | ||||||
| Total current liabilities | 145,528 | 126,202 | ||||||
| Long-term debt | 96,671 | 77,486 | ||||||
| Other liabilities, excluding current installments | 6,795 | 10,306 | ||||||
| Deferred income tax liabilities, net | 15,363 | 16,284 | ||||||
| Total liabilities | 264,357 | 230,278 | ||||||
| Commitments and contingent liabilities | ||||||||
| Stockholders’ equity: | ||||||||
|
Preferred stock, $.10 par value per share; authorized 400,000
shares; |
— | — | ||||||
|
Common stock, $.10 par value per share; authorized 40,000,000 |
3,276 | 3,225 | ||||||
| Additional paid-in capital | 83,177 | 75,658 | ||||||
| Accumulated other comprehensive loss | (4,507 | ) | (4,507 | ) | ||||
| Retained earnings | 262,840 | 238,953 | ||||||
| 344,786 | 313,329 | |||||||
|
Less treasury stock at cost, 2,902,992 shares in 2018 and 2,450,634 |
(15,556 | ) | (8,269 | ) | ||||
| American Vanguard Corporation stockholders’ equity | 329,230 | 305,060 | ||||||
| Non-controlling interest | — | 254 | ||||||
| Total stockholders’ equity | 329,230 | 305,314 | ||||||
| Total liabilities and stockholders’ equity | $ | 593,587 | $ | 535,592 | ||||
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 2018, 2017 and 2016 (In thousands, except per share data) (Unaudited) |
||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| Net sales | $ | 454,272 | $ | 355,047 | $ | 312,113 | ||||||
| Cost of sales | 271,641 | 207,655 | 183,825 | |||||||||
| Gross profit | 182,631 | 147,392 | 128,288 | |||||||||
| Operating expenses | 143,610 | 120,598 | 107,748 | |||||||||
| Operating income | 39,021 | 26,794 | 20,540 | |||||||||
| Change in fair value of derivative instrument | 1,401 | — | — | |||||||||
| Interest expense, net | 4,024 | 1,941 | 1,623 | |||||||||
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Income before provision for income taxes and loss on equity |
33,596 | 24,853 | 18,917 | |||||||||
| Provision for income taxes | 9,145 | 4,443 | 5,540 | |||||||||
| Income before loss on equity investments | 24,451 | 20,410 | 13,377 | |||||||||
| Less net loss from equity method investments | 389 | 49 | 353 | |||||||||
| Net income | 24,062 | 20,361 | 13,024 | |||||||||
| Net loss (income) attributable to non-controlling interest | 133 | (87 | ) | (236 | ) | |||||||
| Net income attributable to American Vanguard | $ | 24,195 | $ | 20,274 | $ | 12,788 | ||||||
| Earnings per common share—basic | $ | 0.83 | $ | 0.70 | $ | 0.44 | ||||||
| Earnings per common share—assuming dilution | $ | 0.81 | $ | 0.68 | $ | 0.44 | ||||||
| Weighted average shares outstanding—basic | 29,326 | 29,100 | 28,859 | |||||||||
| Weighted average shares outstanding—assuming dilution | 30,048 | 29,703 | 29,394 | |||||||||
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ANALYSIS OF SALES For the Three Years Ended December 31, 2018 (In thousands) (Unaudited) |
||||||||||
| 2018 | 2017 | 2016 | ||||||||
| Net sales: | ||||||||||
| Insecticides | $ | 150,595 | $ | 134,377 | $ | 119,226 | ||||
| Herbicides/soil fumigants/fungicides | 183,350 | 124,529 | 123,540 | |||||||
| Other, including plant growth regulators | 58,360 | 42,503 | 29,438 | |||||||
| Total crop: | 392,305 | 301,409 | 272,204 | |||||||
| Non-crop | 61,967 | 53,638 | 39,909 | |||||||
| Total net sales: | $ | 454,272 | $ | 355,047 | $ | 312,113 | ||||
| Net Sales: | ||||||||||
| U.S. | $ | 300,314 | $ | 256,142 | $ | 228,854 | ||||
| International | 153,958 | 98,905 | 83,259 | |||||||
| Total net sales: | $ | 454,272 | $ | 355,047 | $ | 312,113 | ||||
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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2018, 2017 and 2016 (In thousands) (Unaudited) |
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| 2018 | 2017 | 2016 | ||||||||||
| Increase cash | ||||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 24,062 | $ | 20,361 | $ | 13,024 | ||||||
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Adjustments to reconcile net income to net cash provided by (used operating activities: |
||||||||||||
| Depreciation and amortization of fixed and intangible assets | 18,891 | 16,959 | 16,327 | |||||||||
| Amortization of other long term assets and debt issuance costs | 4,884 | 5,221 | 5,203 | |||||||||
| Amortization of discounted liabilities | 359 | 110 | 16 | |||||||||
| Stock-based compensation | 5,805 | 4,714 | 3,167 | |||||||||
| Excess tax benefit from share based compensation | — | — | (96 | ) | ||||||||
| (Decrease) increase in deferred income taxes | (561 | ) | 398 | (151 | ) | |||||||
| Operating loss from equity method investments | 389 | 49 | 353 | |||||||||
|
Changes in assets and liabilities associated with operations, net
of combinations: |
||||||||||||
| (Increase) decrease in net receivables | (21,320 | ) | 754 | (11,817 | ) | |||||||
| (Increase) decrease in inventories | (31,440 | ) | 16,183 | 15,901 | ||||||||
|
Decrease (increase) decrease in income tax receivable/payable, |
2,655 | (12,073 | ) | 1,186 | ||||||||
| Decrease (increase) in prepaid expenses and other assets | 186 | 647 | (3,872 | ) | ||||||||
| Increase in accounts payable | 9,097 | 3,322 | 9,015 | |||||||||
| Increase (decrease) in deferred revenue | 5,468 | 10,726 | (5,040 | ) | ||||||||
| Decrease in accrued program costs | (1,705 | ) | (4,529 | ) | (1,441 | ) | ||||||
| (Decrease) increase in other payables | (5,424 | ) | (3,841 | ) | 4,631 | |||||||
| Net cash provided by operating activities | 11,346 | 59,001 | 46,406 | |||||||||
| Cash flows from investing activities: | ||||||||||||
| Capital expenditures | (8,050 | ) | (6,666 | ) | (10,630 | ) | ||||||
| Investments | — | (950 | ) | (3,283 | ) | |||||||
| Acquisitions of businesses and intangible assets | (19,647 | ) | (81,896 | ) | (224 | ) | ||||||
| Net cash used in investing activities | (27,697 | ) | (89,512 | ) | (14,137 | ) | ||||||
| Cash flows from financing activities: | ||||||||||||
| Payments under line of credit agreement | (117,325 | ) | (103,975 | ) | (107,600 | ) | ||||||
| Borrowings under line of credit agreement | 136,300 | 141,000 | 80,000 | |||||||||
| Debt issuance cost | — | (751 | ) | — | ||||||||
| Cash paid to acquire non-controlling interest | (73 | ) | — | — | ||||||||
| Payment on other long-term liabilities | — | (26 | ) | (704 | ) | |||||||
| Excess tax benefit from share based compensation | — | — | 96 | |||||||||
|
Net payment from the issuance of common stock (sale of stock exercise of stock options and shares purchased for tax withholding) |
1,717 | (713 | ) | 241 | ||||||||
| Treasury shares | (7,287 | ) | — | — | ||||||||
| Payment of cash dividends | (2,199 | ) | (1,600 | ) | (578 | ) | ||||||
| Net cash provided by (used in) financing activities | 11,133 | 33,935 | (28,545 | ) | ||||||||
| Net (decrease) increase in cash and cash equivalents | (5,218 | ) | 3,424 | 3,724 | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | 49 | 44 | (1,379 | ) | ||||||||
| Cash and cash equivalents at beginning of year | 11,337 | 7,869 | 5,524 | |||||||||
| Cash and cash equivalents at end of year | $ | 6,168 | $ | 11,337 | $ | 7,869 | ||||||
| Supplemental cash flow information: | ||||||||||||
| Cash paid during the year for: | ||||||||||||
| Interest | $ | 3,319 | $ | 1,500 | $ | 1,748 | ||||||
| Income taxes, net | $ | 8,449 | $ | 17,841 | $ | 4,947 | ||||||
| Non-cash investing activities: | ||||||||||||
|
Consideration paid in January 2019 in connection with an asset |
$ | 3,530 | $ | — | $ | — | ||||||
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RECONCILIATION OF NET INCOME TO EBITDA For the three years ended December 31, 2018, 2017 and 2016 (Unaudited) |
||||||||||||
| 2018 | 2017 | 2016 | ||||||||||
| Net income attributable to American Vanguard | $ | 24,195 | $ | 20,274 | $ | 12,788 | ||||||
| Provision for income taxes | 9,145 | 4,443 | 5,540 | |||||||||
| Interest expense, net | 4,024 | 1,941 | 1,623 | |||||||||
| Depreciation and amortization | 23,775 | 22,180 | 21,530 | |||||||||
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EBITDA3 |
$ | 61,139 | $ | 48,838 | $ | 41,481 | ||||||
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3 Earnings before interest, taxes, depreciation and amortization. EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income (loss), operating income (loss) or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The items excluded from EBITDA are detailed in the reconciliation attached to this news release. Other companies (including the Company’s competitors) may define EBITDA differently.
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