UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $.10 par value AVD New York Stock Exchange 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, 2023 ☐ 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 (NYSE:AVD) Q1 2023 Results Conference Call May 9, 2023 5:00 PM ET Company Participants Bill Kuser - Director of IR & Corporate Communications Eric Wintemute - Chairman & CEO Scott Hendrix - SVP of Crop Sales for U.S. & Canada David Johnson - VP, CFO & Treasurer James Thompson - Director of Business Development Ulrich Trogele - COO & Executive VP Conference Call Participants Chris Kapsch - Loop Capital Gerry Sweeney - ROTH Capital Wayne Pinsent - Gabelli Operator Welcome to the ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $0.10 par value AVD New York Stock Exchange FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023 ☐ 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 001-1379 ...

Financial Performance - In 2022, net sales increased by 9% to $609,615 compared to $557,676 in 2021, while net income rose approximately 43% to $26,618 from $18,587[131]. - Operating income for 2022 was up 31% to $40,651 from $30,946 in 2021[131]. - Gross profit for 2022 was approximately 13% higher than in 2021, amounting to $241,352 compared to $214,047[131]. - The gross profit margin improved to 40% in 2022, up from 38% in the previous year[131]. - Operating expenses increased by 10% to $200,701 in 2022, remaining flat at 33% of net sales[131]. - Long-term debt decreased to $51,477 as of December 31, 2022, from $52,240 as of December 31, 2021[134]. - The company's liquidity position improved to $200,372 as of December 31, 2022, compared to $178,705 as of December 31, 2021[134]. - The effective tax rate decreased to 23.8% in 2022 from 30.1% in 2021[132]. - The international business saw a 13% increase in net sales and a 9% increase in gross profit[131]. - Total net sales increased by 9% in 2022, reaching $609,615 compared to $557,676 in 2021[135]. - U.S. crop business net sales rose by 9% to $288,624, driven by strong demand for crop protection products despite a 20% drop in sales of a leading corn soil insecticide[135][136]. - International net sales grew by 13% to $244,282, with significant contributions from soil fumigants and a record $100 million in net sales from the LATAM region[140]. - Net income for 2022 was $27,404, or $0.94 per basic share, compared to $18,587, or $0.62 per basic share in 2021[147]. Regulatory and Compliance - The company’s products are subject to registration by the U.S. Environmental Protection Agency, with most requiring periodic re-registration[36]. - The regulatory environment remains challenging, with increased scrutiny on product registrations, particularly in the EU, which may lead to cancellations of products if safer alternatives are available[67]. - Several organophosphate products are under review by the USEPA, with potential revocation of tolerances that could limit or cancel registrations, adversely affecting financial performance[69]. - The USEPA has proposed to cancel the fungicide PCNB, which could have a material negative impact on operating results if the registration is lost[70]. - The Company is facing a notice of intention to suspend the registration of DCPA, which is critical for high-value vegetable crops, with a ruling expected from an administrative law judge[71]. Research and Development - The company has invested in research and development of its green solutions portfolio, starting basic molecular research in 2021[21]. - The company’s total product development expenses were $6,050 thousand in 2022, up from $5,956 thousand in 2021 and $4,699 thousand in 2020[41]. - Research, product development, and regulatory expenses increased by 10% to $31,816, reflecting higher international regulatory activities[141][144]. Supply Chain and Operations - The company has a significant backlog of orders at the end of 2022 due to supply chain challenges, which is atypical for its business model[28]. - The Company experienced supply chain disruptions due to the COVID-19 pandemic, leading to significant price increases and lower-than-expected net sales and profit margins in Q4 2022[66]. - The Company relies on sole source suppliers for key raw materials, and supply chain disruptions could adversely affect sales[90]. - The Company is monitoring the impact of the COVID-19 pandemic on its operations, with uncertainties regarding future financial conditions and cash flows[80]. Environmental and Sustainability Initiatives - The company continues to develop eco-friendly products, offering over 100 solutions aimed at enhancing soil health and promoting carbon sequestration[49]. - The company is focused on sustainable agriculture, aiming to ensure food security, availability, and affordability through innovative agricultural solutions[52]. - The company has a long-term environmental protection program aimed at reducing emissions of hazardous materials and remediating existing environmental concerns[44]. - The company has committed significant resources to precision application technology, such as SIMPAS and Ultimus, to optimize resource use and minimize environmental impact[51]. Workforce and Diversity - The company employed 822 employees as of December 31, 2022, an increase from 804 employees in 2021[54]. - The company has expanded its Diversity, Equity, and Inclusion (DEI) program, with 33% of its board members being female and 22% from underrepresented groups[46]. - The company has implemented across-the-board wage increases in certain manufacturing facilities to retain skilled personnel during the "Great Resignation"[48]. Risks and Challenges - Climate change is creating unpredictable weather conditions that may reduce the demand for the Company's products, complicating sales forecasts[81]. - Demand for the Company's products is influenced by weather conditions and commodity prices, which may vary significantly, impacting revenues and profitability[82]. - The Company faces risks related to the Russian invasion of Ukraine, which could adversely affect supply chains and financial performance[83]. - Competition from generic competitors may pressure pricing and market share, impacting profitability[91]. - A significant portion of sales comes from a limited number of key customers, making the Company vulnerable to their financial health[95]. - The Company is subject to tax risks across multiple jurisdictions, which could adversely impact financial condition and cash flows[100]. Financial Management and Investments - The Company generated $57,105 in cash from operating activities for the year ended December 31, 2022, a decrease of 33.8% from $86,361 in the prior year[149]. - Working capital increased by $3,027 to $121,966 as of December 31, 2022, compared to $118,939 in the prior year[150]. - Cash used for investing activities was $14,470 in 2022, down from $20,042 in 2021, with $13,261 allocated to capital expenditures[153]. - Financing activities used $38,260 in 2022, a significant decrease from $65,871 in 2021, including $2,787 in dividends paid to stockholders[154]. - The Company believes cash flows from future operations and current cash on hand will be sufficient to meet working capital and capital expenditure requirements for at least the next 12 months[162]. Internal Control and Governance - The independent auditor confirmed that the Company maintained effective internal control over financial reporting as of December 31, 2022[198]. - The Company’s management is responsible for maintaining effective internal control over financial reporting, which is evaluated periodically[193]. - The audit of internal control over financial reporting was conducted in accordance with PCAOB standards, ensuring reasonable assurance of effective internal control[201]. - Internal control over financial reporting is designed to provide reasonable assurance that financial statements are prepared in accordance with generally accepted accounting principles[202].

Financial Data and Key Metrics Changes - The company reported a net sales growth of 9% for the full year 2022, with net income increasing by 47% compared to 2021 [5][12] - Gross profit margin improved to 40%, up from 38% in 2021, while operating expenses remained at 33% of sales [12][13] - Adjusted EBITDA increased by 15% year-over-year, reaching $73 million, with an EBITDA margin improvement to 12% [14][15] Business Line Data and Key Metrics Changes - The U.S. crop business grew by 9% to $289 million, while the international business saw a 13% increase to $244 million [12][14] - The non-crop business remained stable despite a 30% drop in the domestic consumer product market, with a rebound in the commercial non-crop segment [8][12] - The Green Solutions business experienced a revenue growth of 32%, increasing from $37 million in 2021 to $49 million in 2022 [24] Market Data and Key Metrics Changes - The company's international business recorded its highest sales increase, driven by strong demand for green solutions and soil fumigants in Mexico and Australia [8][9] - The Latin American business achieved a record milestone of $100 million in sales [9] Company Strategy and Development Direction - The company is focused on expanding its core business, green solutions, and precision application technologies, with a target of $694 million in revenues by 2025 [22] - The SIMPAS technology platform is being restructured into a dedicated business unit to enhance focus and drive adoption [35][70] - The company plans to continue investing in acquisitions and partnerships to grow its green solutions portfolio [19][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the 2023 outlook, expecting net sales to grow between 8% and 12% due to high demand for corn and soybean products [36] - The company anticipates improved supply chain conditions and low inventory levels, which should support sales growth [44][60] Other Important Information - The company has authorized a stock repurchase program of up to $15 million for 2023 [21] - A change in accounting treatment for outbound freight costs is planned, which will affect financial ratios but not net income [16] Q&A Session Summary Question: Market conditions and pricing actions - Management indicated that they have successfully implemented price increases to offset inflationary costs, with a strong position to maintain margins despite competitive pressures [41][42] Question: Supply chain issues and sales recovery - Management confirmed that supply chain disruptions affecting the Aztec product have improved, with production resuming and alternative products being offered [43][44] Question: Growth platforms and visibility through 2025 - Management reiterated confidence in achieving growth targets for green solutions and discussed ongoing M&A activity as a key driver for growth [49][51] Question: Channel inventories and visibility - Management noted that channel inventories are at low levels, which positions the company well for the upcoming season [56][59] Question: Metrics for evaluating early technologies in M&A - The company uses a 10-year P&L forecast and a hurdle rate of 10% to 15% for evaluating acquisitions, aiming for accretive deals from day one [62][64] Question: Gross margin improvement sustainability - Management expressed confidence in maintaining gross margin improvements through effective pricing strategies [65][66] Question: Resources for SIMPAS adoption - Management confirmed that dedicated resources are being allocated to drive SIMPAS adoption in both the U.S. and Brazil [68][70]

Financial Data and Key Metrics Changes - The company's net sales increased by 3.4% to $152 million in Q3 2022 compared to $147 million in Q3 2021 [17] - Year-to-date sales were up 13%, with net income increasing by 71% and adjusted EBITDA rising by 30% [29][23] - Gross margins improved from 45% to 50% in the U.S. crop business, while non-crop sales saw a reduction in gross margin by 1% [18] Business Line Data and Key Metrics Changes - U.S. crop sales increased by 4%, contributing to a 14% rise in absolute gross profit [18] - Non-crop sales decreased by 11% year-to-date due to reduced consumer demand for lawn and garden products [8] - International sales grew by 9%, with significant contributions from Agrinos (55% growth) and Brazil (42% growth) [9] Market Data and Key Metrics Changes - High commodity prices for corn, soybeans, and wheat are supporting a strong farm economy, with corn prices rising 68% over the past two years [10] - The international business accounted for 42% of total sales, up from 40% the previous year [17] - The company noted a strong demand for agricultural products, with distribution partners optimistic about the 2023 planting season [11] Company Strategy and Development Direction - The company is focused on three growth pillars: core product growth, green solutions, and precision application innovations [30] - The company is actively pursuing acquisitions, having evaluated over 30 potential targets, with a balanced focus on core products and green solutions [31][72] - The company aims to expand its green solutions portfolio and enhance its precision application technologies [30][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the agricultural sector's upcycle continuing into 2023, despite potential headwinds such as inflation and geopolitical factors [15] - The company is well-positioned to maintain strong performance, with a robust pipeline of technology and a focus on innovation [15][36] - Management noted that they are not experiencing price pushback from customers, indicating a favorable pricing environment [58] Other Important Information - The company repurchased 1.2 million shares during Q3 2022, reflecting confidence in its business strength [6] - The effective income tax rate increased to 30.5% in Q3 2022, compared to 20.7% in Q3 2021, primarily due to jurisdictional profit mix [21] - The company has made prudent decisions to hold higher levels of inventory to meet demand amid ongoing logistics challenges [27] Q&A Session Summary Question: Thoughts on the agricultural cycle and 2023 outlook - Management indicated that there is no current indication of a downward cycle, with strong prospects for 2024 and 2025 [39][40] Question: Internal needs to drive growth in Green Solutions and SIMPAS - Management is allocating resources to support growth in these areas, including marketing and personnel [42] Question: Pricing dynamics and acquisition strategies - Management is being prudent with acquisitions, focusing on accretive opportunities and partnerships to enhance market access [45][72] Question: Volume versus price impact on sales - For the year, sales were driven 80% by price increases and 20% by volume, with Q3 showing 85% from price [49][55] Question: Future pricing expectations and cost inflation - Management does not anticipate needing to reduce prices even if cost inflation moderates, given the robust farm economy [61] Question: Shift in crop preferences and its impact - Management noted a likely shift towards corn planting due to favorable economics, which could positively impact demand for related products [68]

Financial Performance - Net sales for the three months ended September 30, 2022, were $152,117 thousand, an increase of 3.7% compared to $147,298 thousand for the same period in 2021[15]. - Gross profit for the nine months ended September 30, 2022, was $182,356 thousand, up 18.2% from $154,334 thousand in the prior year[15]. - Operating income for the three months ended September 30, 2022, increased to $11,244 thousand, representing a 25.7% rise from $8,946 thousand in the same quarter of 2021[15]. - Net income for the nine months ended September 30, 2022, was $23,506 thousand, a significant increase of 71.3% compared to $13,713 thousand for the same period in 2021[15]. - Earnings per share (basic) for the three months ended September 30, 2022, was $0.23, up from $0.18 in the same quarter of the previous year[15]. - Total net sales for the nine months ended September 30, 2022, were $449,636,000, up from $398,063,000 in 2021, reflecting a growth of 12.9%[40]. - U.S. crop sales for the nine months ended September 30, 2022, reached $220,503,000, compared to $184,052,000 in 2021, marking an increase of 19.7%[40]. - International sales for the nine months ended September 30, 2022, were $175,485,000, up from $153,448,000 in 2021, indicating a growth of 14.3%[40]. - Consolidated net sales increased by 3% to $152,117 in Q3 2022, compared to $147,298 in Q3 2021, driven by a 9% increase in international sales[106]. - Net income rose by 23% to $6,741 in Q3 2022, up from $5,498 in Q3 2021, reflecting improved profitability[106]. - Gross profit increased by 8% to $61,384 in Q3 2022, with gross margin improving to 40% from 39% year-over-year[107]. Assets and Liabilities - Total current assets as of September 30, 2022, were $436,801 thousand, an increase from $342,000 thousand as of December 31, 2021[21]. - Total liabilities increased to $413,607 thousand as of September 30, 2022, compared to $321,422 thousand at the end of 2021[21]. - Cash and cash equivalents rose to $20,808 thousand as of September 30, 2022, from $16,285 thousand at the end of the previous year[21]. - Total stockholders' equity decreased to $362,568 thousand as of September 30, 2022, from $372,738 thousand at the end of 2021[21]. - Long-term indebtedness from the revolving line of credit increased to $149,300 million as of September 30, 2022, from $53,300 million as of December 31, 2021[55]. - The Company's total Funded Debt was $149.3 million, with a Consolidated EBITDA of $77.2 million, resulting in a leverage ratio of 1.93, well below the maximum allowed ratio of 3.5[58]. - Long-term net debt increased to $148,414,000 as of September 30, 2022, compared to $52,240,000 on December 31, 2021[152]. Cash Flow and Investments - Net cash used in operating activities for the nine months ended September 30, 2022, was $(45,678,000), compared to $(174,000) in 2021[29]. - Cash used for investing activities decreased to $9,978 in 2022 from $18,431 in 2021, with no product acquisition in the current year[148]. - Financing activities provided $59,797, with net borrowings under the Credit Agreement amounting to $96,000 during the nine-month period ended September 30, 2022[149]. - The company has the capacity to increase its borrowings by up to $120.8 million, compared to $94.9 million available as of September 30, 2021[58]. Shareholder Activities - The company declared cash dividends of $0.025 per share for the quarter ending March 31, 2022, totaling $742,000[24]. - The company declared a cash dividend of $0.025 per share in September 2022, totaling $715 million paid out[51]. - The company announced a share repurchase program to buy back up to 1,000,000 shares of its common stock over the next year, with no repurchases made in the same periods of 2021[96]. - The company repurchased shares totaling 606,000 during the quarter ending June 30, 2022[24]. - The company repurchased a total of 720,350 shares of common stock during the three-month period ended September 30, 2022, at an average price of $19.06 per share, totaling $13,731,000[166]. - An accelerated share repurchase arrangement was executed on August 22, 2022, for $20,000,000, resulting in an initial delivery of 802,810 shares at an average price of $19.93[169]. Tax and Regulatory Matters - The Company reported an income tax expense of $2,963 for the three-month period ended September 30, 2022, compared to $1,517 for the same period in 2021, reflecting an effective tax rate increase from 20.7% to 30.5%[95]. - For the nine-month period ended September 30, 2022, the income tax expense was $10,187, up from $5,324 in 2021, with the effective tax rate increasing from 27.4% to 30.2%[95]. - The Company has been cooperating with an ongoing investigation by the DOJ and EPA regarding environmental statutes, with discussions for potential resolution expected to resume soon[76]. - The Company is engaged in settlement discussions with the USEPA regarding the suspension of DCPA, with a hearing date set for January 24, 2023[80]. Operational Insights - The company experienced strong demand for its domestic crop and international products during the nine-month period ended September 30, 2022[32]. - The company plans to continue meeting demand by adjusting prices and optimizing factory performance amid inflationary pressures[106]. - Operating expenses rose by $1,730 to $50,140 for the three-month period ended September 30, 2022, reflecting a 4% increase compared to the same period in 2021[117]. - Research, product development, and regulatory expenses increased by $2,020 to $23,241, driven by infield activities and international product defense[135]. Market Risks and Controls - The company has not engaged in hedging activities for foreign currency exchange rate risks, which may affect revenues and expenses from non-U.S. dollar functional currencies[157]. - The company is exposed to market risks related to interest rate fluctuations due to its variable rate line of credit[157]. - The company continues to assess business risks, including inflation and increased interest rates, which could adversely impact financial performance[164]. - As of September 30, 2022, the company's disclosure controls and procedures were deemed effective by management[159]. - There were no material changes to the critical accounting policies during the reporting period ending September 30, 2022[155].

American Vanguard Corporation (NYSE:AVD) Q2 2022 Earnings Conference Call August 9, 2022 4:30 PM ET Company Participants William Kuser - Director of IR Eric Wintemute - Chairman and CEO David Johnson - CFO Ulrich Trogele - COO Conference Call Participants Gerry Sweeney - ROTH Capital Chris Kapsch - Loop Capital Operator Greetings. Welcome to the American Vanguard Corporation Second Quarter 2022 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. A questio ...