American Vanguard narrows loss in Q2-25; credit terms tighten
American Vanguard (AVD) Q2-25 10-Q highlights:
- Net sales grew 1% YoY to $129.3 m; U.S. crop +1%, U.S. non-crop +3%, International flat.
- Cost-of-sales fell 2%, lifting gross margin to 31% (29% LY). Gross profit +7% to $40.5 m.
- Operating expenses -23% to $36.2 m as transformation spending fell to $1.6 m (vs $7.3 m). Operating income swung to $4.4 m (-$9.2 m).
- After $4.5 m net interest and $0.8 m tax expense, quarterly net loss narrowed sharply to $0.8 m (-$11.7 m); EPS -$0.03.
- 1H-25: revenue -7% to $245.1 m; gross margin 29% (30% LY); operating break-even ($0.1 m); net loss $9.3 m vs -$10.2 m.
- Cash used in operations -$39.8 m (vs -$49.4 m LY) driven by $46.2 m drawdown of customer prepayments and $9.8 m inventory build.
- Debt climbed to $189.5 m (12/24: $147.3 m); average borrowing rate 8.4% Q2.
- May-25 Eleventh Amendment cut revolver to $245 m and suspended leverage & FCCR covenants through 2025, adding minimum liquidity & EBITDA tests. Company had $31.8 m available capacity at 6-30-25.
- No dividends permitted under amended facility.
- Material weaknesses in ICFR (Australia, close process, risk assessment) persist.
- Legal exposure: out-of-spec insecticide lots may create material claims; loss not yet estimable.
Management sees early ag-market recovery, expects lower transformation spend and continues talks to extend credit facility (matures Aug-26).
Positive
- Gross margin improved 200 bp YoY to 31% on lower manufacturing costs.
- Operating income turned positive to $4.4 m from a $9.2 m loss.
- Operating expenses fell 23% driven by sharp drop in transformation costs.
Negative
- Net loss persists (-$0.8 m Q2; -$9.3 m YTD) despite margin gains.
- Debt increased 29% YTD to $189.5 m with interest burden at 9%.
- Eleventh Amendment reduces credit capacity and adds strict liquidity/EBITDA covenants.
- Recurring material weaknesses in internal controls remain unremediated.
- Potentially material legal claims from contaminated insecticide lots; loss not estimable.
Insights
TL;DR – Margin rebound and opex cuts nearly eliminate losses, but leverage and control issues cap upside.
Quarterly results show tangible progress: gross margin +200 bp, opex ratio down nine points, delivering positive operating income even on flattish revenue. The cost discipline (transformation spend unwind, head-count cuts) appears sustainable and should support FY profitability if volumes stabilize. However, liquidity hinges on an amended revolver that shrinks over 2025 and carries high SOFR-based spreads; interest already absorbs the entire operating gain. Net debt/TTM EBITDA remains elevated and covenant suspensions signal lender caution. Continued ICFR weaknesses and a potential product liability claim add risk. Overall impact: modestly positive operationally, offset by balance-sheet and control headwinds.
TL;DR – Credit amendment buys time, but tighter limits and new liquidity/EBITDA triggers increase financing risk.
The Eleventh Amendment waives Q1 covenant breaches but trims the revolver to $200 m by year-end and imposes monthly liquidity floors ($20-35 m) plus step-up EBITDA hurdles. With customer prepayments shrinking and working-capital absorption high, headroom could narrow quickly; only $31.8 m remained unused at quarter-end. Failure to extend or refinance before Aug-26 poses refinancing risk at a time of 8-9% floating coupons. Material weakness in Australian controls and pending insecticide claims could further complicate lender negotiations or insurance recoveries. Investors should monitor liquidity compliance and debt talks closely.
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did AVD's Q2-25 earnings compare with Q2-24?
What is American Vanguard's current debt level?
Why did the company stop paying dividends in 2025?
What new covenants were added to AVD's credit agreement?
Are there any significant legal or compliance issues disclosed?
hi
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED
FOR THE TRANSITION PERIOD FROM TO
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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.
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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 —
AMERICAN VANGUARD CORPORATION
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PART I—FINANCIAL INFORMATION |
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Financial Statements (unaudited) |
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Condensed Consolidated Statements of Operations |
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Condensed Consolidated Statements of Cash Flows |
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Notes to Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Quantitative and Qualitative Disclosures About Market Risk |
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Controls and Procedures |
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PART II—OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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Item 1A. |
Risks Factors |
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Purchases of Equity Securities by the Issuer |
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Exhibits |
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SIGNATURES |
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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)
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Operating expenses |
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Selling, general and administrative |
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Research, product development and regulatory |
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Transformation |
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Operating income (loss) |
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Change in fair value of equity investment |
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Interest expense, net |
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Loss before provision for income taxes |
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Net loss |
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Net loss per common share—assuming dilution |
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Weighted average shares outstanding—assuming dilution |
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See notes to the Condensed Consolidated Financial Statements.
3
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
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For the Three Months |
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For the Six Months |
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2025 |
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2024 |
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2024 |
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Net loss |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment, net of tax effects |
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Comprehensive income (loss) |
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See notes to the Condensed Consolidated Financial Statements.
4
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
ASSETS |
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June 30, |
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December 31, |
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Current assets: |
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Cash |
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Receivables: |
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Trade, net of allowance for credit losses of $ |
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Other |
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Inventories |
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Prepaid expenses |
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Income taxes receivable |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets, net |
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Intangible assets, net of amortization |
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Goodwill |
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Deferred income tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Customer prepayments |
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Accrued program costs |
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Accrued expenses and other payables |
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Operating lease liabilities, current |
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Income taxes payable |
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Total current liabilities |
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Long-term debt |
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Operating lease liabilities, long term |
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Deferred income tax liabilities |
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Other liabilities |
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Total liabilities |
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Commitments and contingent liabilities (Note 13) |
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Stockholders' equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Retained earnings |
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Less treasury stock at cost, |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See notes to the Condensed Consolidated Financial Statements.
5
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For The Three and Six Months Ended June 30, 2025
(In thousands, except share data)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated |
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Treasury Stock |
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Shares |
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Amount |
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Retained |
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Shares |
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Amount |
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Total |
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Balance, January 1, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stocks issued under ESPP |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustment, net |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised; grants, |
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— |
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— |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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Balance, March 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Foreign currency translation adjustment, net |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised; grants, termination |
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( |
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( |
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— |
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— |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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Balance, June 30, 2025 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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See notes to the Condensed Consolidated Financial Statements.
6
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For The Three and Six Months Ended June 30, 2024
(In thousands, except share data)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated |
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Treasury Stock |
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Comprehensive |
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Amount |
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AVD |
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Balance, January 1, 2024 |
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$ |
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$ |
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$ |
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Stocks issued under ESPP |
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— |
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— |
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Cash dividends on common stock declared |
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— |
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( |
) |
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— |
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— |
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( |
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Foreign currency translation adjustment, net |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Stock options exercised; grants, |
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( |
) |
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— |
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— |
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— |
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— |
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( |
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Net income |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2024 |
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( |
) |
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Cash dividends on common stock declared |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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Foreign currency translation adjustment, net |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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|
||
Stock options exercised; grants, termination |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Balance, June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
$ |
( |
) |
|
$ |
|
||||||
See notes to the Condensed Consolidated Financial Statements.
7
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating |
|
|
|
|
|
|
||
Depreciation of property, plant and equipment and amortization of intangible assets |
|
|
|
|
|
|
||
Amortization of other long-term assets |
|
|
|
|
|
|
||
Amortization and accretion of deferred loan fees and discounted liabilities |
|
|
|
|
|
|
||
Gain on disposal of property, plant and equipment |
|
|
( |
) |
|
|
|
|
Impairment of assets |
|
|
|
|
|
|
||
Provision for estimated credit losses |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Change in deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Changes in liabilities for uncertain tax positions or unrecognized tax benefits |
|
|
( |
) |
|
|
|
|
Change in equity investment fair value |
|
|
|
|
|
( |
) |
|
Unrealized foreign currency transaction gains |
|
|
( |
) |
|
|
( |
) |
Changes in assets and liabilities associated with operations: |
|
|
|
|
|
|
||
Increase in net receivables |
|
|
( |
) |
|
|
( |
) |
Increase in inventories |
|
|
( |
) |
|
|
( |
) |
Increase in prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Change in income tax receivable/payable, net |
|
|
( |
) |
|
|
( |
) |
Decrease in net operating lease liability |
|
|
( |
) |
|
|
( |
) |
Increase in accounts payable |
|
|
|
|
|
|
||
Decrease in customer prepayments |
|
|
( |
) |
|
|
( |
) |
Increase in accrued program costs |
|
|
|
|
|
|
||
Decrease in other payables and accrued expenses |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Proceeds from disposal of property, plant and equipment |
|
|
|
|
|
|
||
Intangible assets |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Payments under line of credit agreement |
|
|
( |
) |
|
|
( |
) |
Borrowings under line of credit agreement |
|
|
|
|
|
|
||
Payment of deferred loan fees |
|
|
( |
) |
|
|
|
|
Net receipt from the issuance of common stock under ESPP |
|
|
|
|
|
|
||
Net payment for tax withholding on stock-based compensation awards |
|
|
( |
) |
|
|
( |
) |
Payment of cash dividends |
|
|
|
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
Net increase in cash and cash equivalents |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
See notes to the Condensed Consolidated Financial Statements.
8
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 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, normal recurring accruals, and immaterial restatements) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The condensed consolidated 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, 2024.
Transformation — Transformation expenses on the condensed consolidated statements of operations include costs related to the Company’s digital and structural transformation project. The digital transformation effort is intended to ensure that business process owners have access to current and complete data that has been generated through standardized systems and processes. The structural transformation effort is intended to improve operating leverage by applying business analytics to current operations, structures, products and services and identifying process improvements, as well as pricing and go-to-market strategies. Transformation expenses primarily include costs for consulting services, severance costs relating to the Company’s former CEO, and costs incurred in connection with the staffing and execution of the Company’s transformation initiatives. In addition, the Company has incurred costs associated with write-offs and write downs of certain assets.
Recent Issued Accounting Guidance — In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. This ASU is effective for the Company beginning with the Form 10-K for the year ending December 31, 2025. The Company is currently evaluating the impact of adopting this ASU on its income tax disclosures.
In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses", and in January 2025, the FASB issued ASU No. 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date". ASU 2024-03 requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. For public business entities, ASU 2024-03, as clarified by ASU 2025-01, is effective for the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.
The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to its condensed consolidated financial statements.
Immaterial restatements — Subsequent to the issuance of the Company's condensed consolidated financial statements for the three and six months ended June 30, 2024, the Company determined that it did not appropriately account for outstanding checks in the amount of $
Further, the Company netted its borrowings against its repayments in the amount of $
Therefore, the accompanying condensed consolidated statement of cash flows for the six months ended June 30, 2024 has been restated from the amounts previously reported.
9
The table below summarizes the effects of the restatement by financial-statement line item affected:
|
|
Six Months Ended June 30, 2024 |
|
|||||||||
|
|
Previously Reported |
|
|
Adjustments |
|
|
As Restated |
|
|||
Increase in accounts payable |
|
$ |
|
|
$ |
|
|
|
|
|||
Net cash used in operating activities |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Payments under line of credit agreement |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
( |
) |
Borrowings under line of credit agreement |
|
$ |
|
|
$ |
|
|
|
|
|||
Net cash provided by financing activities |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The Company evaluated the materiality of these errors and concluded that they were not material individually or in the aggregate to the prior period condensed consolidated financial statements.
2. Revenue 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. Substantially all revenue is recognized at a point in time. The Company has
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. crop |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. non-crop |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
International |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total net sales: |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company sometimes receives payments from its customers in advance of goods and services being provided in return for early cash incentive programs. These payments are included in customer prepayments on the condensed consolidated balance sheets. Revenue recognized for the three and six months ended June 30, 2025, that was included in customer prepayments at the beginning of 2025, was $
3. Accrued Program Costs — The Company offers various discounts to customers based on the volume purchased within a defined period, other pricing adjustments, some grower volume incentives or other key performance indicator driven payments made to distributors, retailers or growers, usually at the end of a growing season. The Company describes these payments as “Programs.” Programs are a critical part of doing business in both the U.S. crop and non-crop chemicals marketplaces. These discount Programs represent variable consideration. Revenues from sales are recorded at the net sales price, which is the transaction price, less an estimate of variable consideration. Variable consideration includes amounts expected to be paid to its customers using the expected value method. Each quarter management compares individual sale transactions with Programs to determine what, if any, Program 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 adjusts the accumulated accrual to properly reflect 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.
4. Stock-Based Compensation — Under the Company’s Stock Incentive Plan, as amended and restated on June 1, 2022 (“the 2022 Stock Incentive Plan”), all employees are eligible to receive non-assignable and non-transferable restricted stock (RSUs), options to purchase common stock, and other forms of equity. During the three months ended June 30, 2025 and 2024, the Company's stock-based compensation expense amounted to $
10
RSUs
A summary of nonvested RSUs outstanding is presented below:
|
|
Six Months Ended |
|
|||||
|
|
Number |
|
|
Weighted |
|
||
Nonvested shares at January 1, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Nonvested shares at June 30, 2025 |
|
|
|
|
$ |
|
||
As of June 30, 2025, the total unrecognized stock-based compensation expense related to RSUs outstanding was $
Stock Options
A summary of the incentive stock option activity for the six months ended June 30, 2025 is presented below:
|
|
Options outstanding |
|
|
Weighted Average Exercise Price Per Share |
|
Weighted Average Remaining Contractual Life (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Balance as of January 1, 2025 |
|
|
|
|
$ |
|
|
|
|
$ |
— |
|
|||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
$ |
— |
|
||
Balance as of June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
$ |
— |
|
|||
Options vested and exercisable as of June 30, 2025 |
|
|
|
|
$ |
|
|
|
|
$ |
— |
|
|||
As of June 30, 2025, the total unrecognized stock-based compensation expense related to stock options outstanding was $
5. Income Taxes —Income tax expense was $
It is expected that $
On July 4, 2025, new U.S. tax legislation was signed into law (known as the “One Big Beautiful Bill Act” or “OBBBA”) which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. The Company is currently evaluating the impact of the new legislation but does not expect it to have a material impact on the results of operations.
11
6. Earnings Per Share —
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding-basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
||||
Due to net losses for the three and six months ended June 30, 2025 and 2024, stock options and other grants were excluded from the computation of diluted net loss per share.
7. Comprehensive Income (Loss) — Total comprehensive income (loss) includes, in addition to net income (loss), changes in equity that are excluded from the condensed consolidated statements of operations and are recorded directly into a separate section of stockholders’ equity on the condensed consolidated balance sheets. For the three- and six month periods ended June 30, 2025 and 2024, total comprehensive income (loss) consisted of net income (loss) and foreign currency translation adjustments.
8. Inventories —
|
|
June 30, |
|
|
December 31, 2024 |
|
||
Finished products |
|
$ |
|
|
$ |
|
||
Raw materials |
|
|
|
|
|
|
||
Total inventories |
|
$ |
|
|
$ |
|
||
Finished products consist of products that are sold to customers in their current form as well as intermediate products that require further formulation to be saleable to customers.
9. Property, Plant and Equipment —
|
|
June 30, |
|
|
December 31, 2024 |
|
||
Land |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
||
Office furniture, fixtures and equipment |
|
|
|
|
|
|
||
Automotive equipment |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Total gross value |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total net value |
|
$ |
|
|
$ |
|
||
The Company recognized depreciation expense related to property and equipment of $
Substantially all of the Company’s assets are pledged as collateral to its banks.
10. 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
12
The operating lease expense for the three months ended June 30, 2025 and 2024, was $
|
|
Three Months Ended June 30, |
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Cash paid for amounts included in the |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
ROU assets obtained in exchange for new liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The weighted-average remaining lease term and discount rate related to the operating leases as of June 30, 2025 were as follows:
Weighted-average remaining lease term (in years) |
|
|
|
|
Weighted-average discount rate |
|
|
% |
Future minimum lease payments under non-cancellable operating leases as of June 30, 2025 were as follows:
2025 (excluding six months ended June 30, 2025) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Total |
|
$ |
|
Amounts recognized in the condensed consolidated balance sheets at June 30, 2025:
Operating lease liabilities, current |
|
$ |
|
|
Operating lease liabilities, long-term |
|
$ |
|
11. Goodwill and Intangibles — The following schedule represents the gross carrying amount and accumulated amortization of intangible assets as of June 30, 2025 and December 31, 2024. Product rights and trademarks are amortized over the lesser of the useful life ranging from
|
|
2025 |
|
|
2024 |
|
||||||||||||||||||
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
|
Gross |
|
|
Accumulated |
|
|
Net Book |
|
||||||
Product rights and patents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Trademarks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Customer lists |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total intangibles assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Domestic intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
International intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total intangibles assets - domestic and international |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
13
The following schedule represents future amortization charges related to intangible assets:
Year ending December 31, |
|
Amount |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
Amortization expense was $
The following schedule represents goodwill activity for the six months ended June 30, 2025:
|
|
Amount |
|
|
|
|
|
|
|
Goodwill at January 1, 2025 |
|
$ |
|
|
Impact of movement in exchange rates |
|
|
|
|
Goodwill at March 31, 2025 |
|
|
|
|
Impact of movement in exchange rates |
|
|
|
|
Goodwill at June 30, 2025 |
|
$ |
|
|
12. Debt — The Company has a revolving line of credit that is shown as long-term debt in the condensed consolidated balance sheets at June 30, 2025 and December 31, 2024. The Company has
Long-term indebtedness ($000's) |
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Revolving line of credit |
|
$ |
|
|
$ |
|
||
Deferred loan fees |
|
|
( |
) |
|
|
( |
) |
Total indebtedness, net of deferred loan fees |
|
$ |
|
|
$ |
|
||
The short-term portion of deferred loan fees is included in prepaid expenses on the condensed consolidated balance sheets and amounted to $
The Company and certain of its affiliates are parties to a senior credit facility agreement entitled the “Third Amended and Restated Loan and Security Agreement” dated as of August 5, 2021 (the “Credit Agreement”), which is a senior secured lending facility among AMVAC, the Company’s principal operating subsidiary, as Agent (including the Company and AMVAC BV), as "Borrowers", on the one hand, and a group of commercial lenders led by BMO Bank, N.A. (formerly Bank of the West) as administrative agent, documentation agent, syndication agent, collateral agent and sole lead arranger, on the other hand. The Credit Agreement initially consisted of a line of credit of up to $
14
The current version of the Credit Agreement was agreed upon on May 27, 2025,
In addition,
The interest rate on June 30, 2025, was
As of June 30, 2025, the Company is deemed to be in compliance with its financial covenants. Furthermore, according to the terms of the Credit Agreement, as amended, and based on the Total Revolver Commitment and the Liquidity requirement as of June 30, 2025 listed above, the Company had the capacity to increase its borrowings by up to $
The Company is in discussions with its lenders to extend its Credit Agreement. There is no guarantee that the Company will be able to extend its Credit Agreement or refinance amounts outstanding under its credit facility by the time the Credit Agreement matures on August 5, 2026.
13. Legal Proceedings — The Company records a liability on its condensed consolidated financial statements for loss contingencies when a loss is known or considered probable, and the amount can be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. The Company recognizes legal expenses in connection with loss contingencies as incurred. Since the filing of the Company's Form 10-K for the period ended December 31, 2024, there is one legal matter to report in connection with this item.
Customer Claims re: Ornamental Insecticide. The Company has determined that a loss is probable arising from customer complaints received in the second quarter alleging injury to ornamental plants from the application of up to four lots (having a value of about $
15
14. Cash Dividends on Common Stock —
Declaration Date |
|
Record Date |
|
Distribution Date |
|
Dividend |
|
|
Total |
|
||
|
|
|
$ |
|
|
$ |
|
|||||
|
|
|
$ |
|
|
$ |
|
|||||
|
|
|
$ |
|
|
$ |
|
|||||
Pursuant to the Amended Loan and Security Agreement, the Company is currently prevented from paying cash dividends to shareholders. The Company has not declared or paid any dividends during the six months ended June 30, 2025.
15. Accumulated Other Comprehensive Loss —
|
|
Total |
|
|
Balance, January 1, 2025 |
|
$ |
( |
) |
Foreign currency translation adjustment, net of tax effects of ($ |
|
|
|
|
Balance, March 31, 2025 |
|
|
( |
) |
Foreign currency translation adjustment, net of tax effects of ($ |
|
|
|
|
Balance, June 30, 2025 |
|
$ |
( |
) |
|
|
|
|
|
Balance, January 1, 2024 |
|
$ |
( |
) |
Foreign currency translation adjustment, net of tax effects of ($ |
|
|
( |
) |
Balance, March 31, 2024 |
|
|
( |
) |
Foreign currency translation adjustment, net of tax effects of ($ |
|
|
( |
) |
Balance, June 30, 2024 |
|
$ |
( |
) |
16. Fair Value of Financial Instruments — The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded 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:
The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s borrowings, which are considered Level 2 liabilities, approximates fair value as they bear interest at a variable rate at current market rates.
16
17. Supplemental Cash Flow Information
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Income taxes, net of refunds |
|
$ |
|
|
$ |
|
||
Non-cash transactions: |
|
|
|
|
|
|
||
Cash dividends declared and included in accrued expenses |
|
$ |
|
|
$ |
|
||
18. Segment Reporting — The Company operates as a single operating segment, which is the business of developing, manufacturing and distributing chemical, biological and biorational products for agricultural, commercial and consumer uses. The Company synthesizes and formulates chemicals and ferments and extracts microbial products for crops, turf, ornamental plants, and human and animal health protection.
The Company’s Chief Operating Decision Maker ("CODM") is the Chief Executive Officer, who manages the Company’s operations based on consolidated financial information for purposes of evaluating financial performance and allocating resources. The financial information reviewed by the CODM includes revenue by product line and region, and key expense categories that are regularly provided for the consolidated company. The accounting policies of the Company’s single operating segment are the same as those described in the summary of significant accounting policies. Although there are other measures of operating performance used by the CODM, the Company concluded that consolidated operating income (loss) is the measure required to be disclosed as the segment measure of profit or loss. Operating income (loss) is utilized to evaluate budget versus actual results in order to gain more depth and understanding of the factors driving the business.
|
|
For the three months |
|
|
For the six months |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Material and other costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Warehousing, handling, and outbound freight |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total cost of sales |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Research, product development and regulatory |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Transformation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Operating income (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Change in fair value of an equity investment |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Interest expense, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss before provision for income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax (expense) benefit |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Asset categories provided to the CODM are consistent with those reported on the consolidated balance sheets.
17
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. Generally, “may,” “could,” “will,” “would,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue” and similar words identify forward-looking statements. Forward-looking statements appearing in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on our current expectations and are subject to risks and uncertainties that can cause 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 given that interest rate and inflation affect the debt market; the impact of, and our ability to, remediate the identified material weaknesses in our internal controls over financial reporting; and 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. Security and Exchange Commission (“SEC”). It is not possible to foresee or identify all such factors. We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this report. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in Part II, Item 1A of this Form 10-Q under the heading "Risk Factors," in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Item 3 "Quantitative and Qualitative Disclosures About Market Risk."
The forward-looking statements included in this Form 10-Q are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.
Three Months Ended June 30, 2025 and 2024:
Overview of the Company’s Performance
The agricultural economy appears to be in the early stages of a recovery. While commodity prices remain at low levels, a combination of factors, including lower inflation, anticipation of lower interest rates, and legislation supportive of growers, has improved sentiment and strengthened demand for crop protection products. Channel inventory levels remain lower than this time last year, but we are seeing dealer inventories move higher with increasing confidence in market conditions. While uncertainty around tariffs continues to cloud the outlook, global trading partners are forging ahead with their own arrangements, and short- to mid-term demand appears to be stabilizing.
Against this backdrop, overall sales for the second quarter of 2025 improved 1% compared to the second quarter of 2024. From a regional perspective, our domestic sales increased by 1%, while our international sales were largely unchanged. Our herbicide business was an area of strength with net sales increasing by 48%, as compared to the same period in the prior year, while growth regulator sales were down 37%. Other areas of the business were relatively stable, as compared to the year ago period.
Efforts by management to operate our factories more efficiently led to lower cost of goods sold, which were down 2%, as compared to the same quarter of 2024. These, together with some raw material cost improvements, led to an improvement of average gross margins to 31% of net sales, as compared to 29% in the same period of 2024.
Operating expenses declined by 23% as management continued to manage expenses closely and reduced to 28% of net sales in the quarter from 37% in the comparable period of 2024. With a sharp reduction in transformation expenses, operating profit rose to $4,366 for the second quarter of 2025, as compared to a loss of $9,232 for the same period of 2024.
Interest expense slightly increased, as compared to the same quarter of the prior year, yielding a net loss before taxes of $84, as compared to a net loss of $13,274 in the second quarter of 2024.
The Company recorded an income tax expense of $765, as compared to an income tax benefit of $1,553 in the same period of last year.
18
These factors yielded a net loss of $849, or $(0.03) per share, as compared to $11,721, or $(0.42) per share, in the prior year quarter.
RESULTS OF OPERATIONS
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
% Change |
|
||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. crop |
|
$ |
52,674 |
|
|
$ |
52,289 |
|
|
$ |
385 |
|
|
|
1 |
% |
U.S. non-crop |
|
|
19,585 |
|
|
|
19,011 |
|
|
|
574 |
|
|
|
3 |
% |
Total U.S. |
|
|
72,259 |
|
|
|
71,300 |
|
|
|
959 |
|
|
|
1 |
% |
International |
|
|
57,054 |
|
|
|
56,909 |
|
|
|
145 |
|
|
|
0 |
% |
Total net sales |
|
$ |
129,313 |
|
|
$ |
128,209 |
|
|
$ |
1,104 |
|
|
|
1 |
% |
Total cost of sales |
|
|
(88,766 |
) |
|
|
(90,446 |
) |
|
|
1,680 |
|
|
|
-2 |
% |
Total gross profit |
|
$ |
40,547 |
|
|
$ |
37,763 |
|
|
$ |
2,784 |
|
|
|
7 |
% |
Total gross margin |
|
|
31 |
% |
|
|
29 |
% |
|
|
|
|
|
|
||
Our domestic crop business recorded net sales during the second quarter of 2025 that were 1% higher than those of the second quarter of 2024 ($52,674, as compared to $52,289). Herbicide sales were driven by increased corn acres and the launch of a new product, which is capturing share from generic competitors. Soil fumigant sales were also an area of strength, up approximately 50%. Partially, offsetting these gains, sales of our growth regulators declined due to generic competition.
Our domestic non-crop business posted a 3% increase in net sales in the second quarter of 2025, as compared to the same period in the prior year ($19,585 in 2025 v. $19,011 in 2024). Delayed weed pressure negatively impacted non-crop herbicide products, but overall this business continues to grow faster than the overall portfolio.
Net sales of our international businesses were slightly higher ($57,054 in 2025, as compared to $56,909 in 2024). This increase was led by sales in our Central American business, which rose by 7%, driven by strength in our banana products. Partially offsetting these gains, sales in Australia (a much smaller business) were down approximately 40% due to drought conditions.
On a consolidated basis, gross profit for the second quarter of 2025 increased by 7% ($40,547 in 2025, as compared to $37,763 in 2024). The overall gross margin percentage ended at 31% in the second quarter of 2025, as compared to 29% in the second quarter of the prior year.
Operating expenses decreased by $10,814 to $36,181 for the three-month period ended June 30, 2025, as compared to the same period in 2024. The changes in operating expenses by department are as follows:
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
% Change |
|
||||
Selling |
|
$ |
11,633 |
|
|
$ |
13,401 |
|
|
$ |
(1,768 |
) |
|
|
-13 |
% |
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
13,791 |
|
|
|
12,402 |
|
|
|
1,389 |
|
|
|
11 |
% |
Amortization |
|
|
3,049 |
|
|
|
3,284 |
|
|
|
(235 |
) |
|
|
-7 |
% |
Legal reserves |
|
|
150 |
|
|
|
1,965 |
|
|
|
(1,815 |
) |
|
|
-92 |
% |
Asset impairment |
|
|
134 |
|
|
|
— |
|
|
|
134 |
|
|
|
100 |
% |
Research, product development and regulatory |
|
|
5,803 |
|
|
|
8,598 |
|
|
|
(2,795 |
) |
|
|
-33 |
% |
Transformation |
|
|
1,621 |
|
|
|
7,345 |
|
|
|
(5,724 |
) |
|
|
-78 |
% |
Subtotal |
|
$ |
36,181 |
|
|
$ |
46,995 |
|
|
$ |
(10,814 |
) |
|
|
-23 |
% |
19
Interest costs net of capitalized interest were $4,450 and $3,917 during the three-month period ended June 30, 2025 and 2024, respectively. Interest costs are summarized in the following table:
Average Indebtedness and Interest expense
|
|
Three months ended June 30, 2025 |
|
|
Three months ended June 30, 2024 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Interest |
|
|
Average |
|
|
Interest |
|
|
Interest |
|
||||||
Revolving line of credit (average) |
|
$ |
196,703 |
|
|
$ |
4,110 |
|
|
|
8.4 |
% |
|
$ |
214,107 |
|
|
$ |
4,023 |
|
|
|
7.5 |
% |
Amortization of deferred loan fees |
|
|
— |
|
|
|
335 |
|
|
|
— |
|
|
|
— |
|
|
|
91 |
|
|
|
— |
|
Other interest (income) expense |
|
|
— |
|
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
(54 |
) |
|
|
— |
|
Subtotal |
|
|
196,703 |
|
|
|
4,461 |
|
|
|
9.1 |
% |
|
|
214,107 |
|
|
|
4,060 |
|
|
|
7.6 |
% |
Capitalized interest |
|
|
— |
|
|
|
(11 |
) |
|
|
— |
|
|
|
— |
|
|
|
(143 |
) |
|
|
— |
|
Total |
|
$ |
196,703 |
|
|
$ |
4,450 |
|
|
|
9.0 |
% |
|
$ |
214,107 |
|
|
$ |
3,917 |
|
|
|
7.3 |
% |
The Company’s average overall debt for the three-month period ended June 30, 2025 was $196,703, as compared to $214,107 for the same period of the prior year. Our borrowings are higher as the result of expenses incurred during the balance of 2024, pertaining to one-time expenses. As can be seen from the table, the effective bank interest rate on our revolving line of credit was 8.4% and 7.5% for the three-month periods ended June 30, 2025 and 2024, respectively.
Income tax expense was $765 for the three months ended June 30, 2025, as compared to an income tax benefit of $1,553 for the three months ended June 30, 2024. The effective income tax rate for the three months ended June 30, 2025, was computed based on the estimated effective tax rate for the full year which is approximately 28%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. During the fourth quarter ended December 31, 2024, the Company established a valuation allowance against the U.S. entities net deferred tax assets. The company continues to maintain valuation allowances established against the net deferred tax assets of the U.S. and certain international entities, primarily in Brail, for the three months ended June 30, 2025. During the three months ended June 30, 2025, several of the Company's international business outside of Brazil were profitable resulting in an income tax expense.
We generated losses before provision for income taxes of $84 and $13,274 for the three months ended June 30, 2025 and 2024, respectively. Our net loss, after income taxes, for the three-month period ended June 30, 2025, was $849 or ($0.03) per basic and diluted share, as compared to $11,721 or ($0.42) per basic and diluted share in the same quarter of 2024.
Six Months Ended June 30, 2025 and 2024:
Overview of the Company’s Performance
Distributor destocking negatively impacted first-half 2025 results, as compared to the year ago period. This phenomenon was particularly strong during the first quarter but trailed off as the second quarter progressed. Nevertheless, the early first-half conditions
20
negatively impacted sales and gross profit for the six-month period taken as a whole. Agricultural commodities trended higher during the first few months of the year but were unable to maintain their gains as the first half year progressed. Corn prices finished the first six months slightly lower than at the start of the year, while soybean prices were flat.
On a consolidated basis, domestic sales were down 7% and international sales were down 6%, as compared to the same period of last year Overall net sales decreased by 7% ($245,113 in 2025, as compared to $263,352 in 2024) largely driven by channel destocking. Cost of goods sold decreased by 5% on an absolute basis due to lower volumes. In spite of improved factory performance, these factors, taken together, yielded a gross profit that was lower than the same period of 2024 ($71,106, as compared to $80,181) and the average gross margin percentage declined slightly to 29% from 30% in the first half of 2024.
During the first half of 2025, operating expenses declined by about 18% as compared to the first half of 2024, and operating expenses as a percent of sales decreased to 28%, as compared to 32% for the same period prior year. Transformation costs for the period dropped significantly.
Overall, the business recorded an operating income of $56 for the first half of the year, as compared to an operating loss of $3,141 during the first half of 2024.
The Company incurred an income tax expense of $1,152 during the six-month period, as compared to an income tax benefit of $69 during the first half of 2024, yielded a net loss for the period of $9,311, as compared to $10,169 for the same period of the prior year, and a loss per share of $0.33, as compared to $0.36, as compared to the first half of last year.
RESULTS OF OPERATIONS
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
% Change |
|
||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. crop |
|
$ |
110,201 |
|
|
$ |
119,542 |
|
|
$ |
(9,341 |
) |
|
|
-8 |
% |
U.S. non-crop |
|
|
34,834 |
|
|
|
36,787 |
|
|
|
(1,953 |
) |
|
|
-5 |
% |
Total U.S. |
|
|
145,035 |
|
|
|
156,329 |
|
|
|
(11,294 |
) |
|
|
-7 |
% |
International |
|
|
100,078 |
|
|
|
107,023 |
|
|
|
(6,945 |
) |
|
|
-6 |
% |
Total net sales |
|
$ |
245,113 |
|
|
$ |
263,352 |
|
|
$ |
(18,239 |
) |
|
|
-7 |
% |
Total cost of sales |
|
$ |
(174,375 |
) |
|
$ |
(183,171 |
) |
|
$ |
8,796 |
|
|
|
-5 |
% |
Total gross profit |
|
$ |
70,738 |
|
|
$ |
80,181 |
|
|
$ |
(9,443 |
) |
|
|
-12 |
% |
Total gross margin |
|
|
29 |
% |
|
|
30 |
% |
|
|
|
|
|
|
||
Our domestic crop business recorded net sales that were 8% lower than those of first half of 2024 ($110,201 as compared to $119,542 in 2024). Weakness in the first half sales, as compared to the year ago period, can be attributed to not having revenue from a product that was previously recalled; further cotton acreage was down substantially leading to weakness in products with exposure to this crop. Broadly, channel destocking in the early portion of 2025 continued to negatively impacted overall results.
Our domestic non-crop business recorded a 5% decrease in net sales for the first half of the year (to $34,834 from $36,787). Fungicide and pest strip sales were weak during the first half of 2024. Also, a delayed weed season led to weakness, as compared to the first half of 2024.
Net sales of our international businesses were down 6% as compared to the first half of 2024 ($100,078 versus $107,023 in 2024). Australian sales were weaker due to the ongoing drought, which were partially offset by strength in granular soil insecticides. Herbicide sales were off nearly 20% in the first half of the year, due to a weak agave season and a change in product mix.
On a consolidated basis, gross profit for the six months of 2025 decreased ending at $70,738, as compared to $80,181 last year. Gross margin performance in 2025 decreased to 29% from 30% compared to the first half of 2025.
21
Operating expenses decreased by $12,640 to $70,682 for the six-month period ended June 30, 2025, as compared to the same period in 2024. The changes in operating expenses by department are as follows:
|
|
2025 |
|
|
2024 |
|
|
Change |
|
|
% Change |
|
||||
Selling |
|
$ |
22,356 |
|
|
$ |
26,281 |
|
|
$ |
(3,925 |
) |
|
|
-15 |
% |
General and administrative: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
26,630 |
|
|
|
25,715 |
|
|
|
915 |
|
|
|
4 |
% |
Amortization |
|
|
6,115 |
|
|
|
6,559 |
|
|
|
(444 |
) |
|
|
-7 |
% |
Legal reserves |
|
|
150 |
|
|
|
1,965 |
|
|
|
(1,815 |
) |
|
|
-92 |
% |
Asset impairment |
|
|
134 |
|
|
|
— |
|
|
|
134 |
|
|
|
100 |
% |
Research, product development and regulatory |
|
|
11,485 |
|
|
|
14,305 |
|
|
|
(2,820 |
) |
|
|
-20 |
% |
Transformation |
|
|
3,812 |
|
|
|
8,497 |
|
|
|
(4,685 |
) |
|
|
-55 |
% |
|
|
$ |
70,682 |
|
|
$ |
83,322 |
|
|
$ |
(12,640 |
) |
|
|
-15 |
% |
Interest costs net of capitalized interest were $8,215 in the first six-month period of 2025, as compared to $7,610 in the same period of 2024. Interest costs are summarized in the following table:
Average Indebtedness and Interest expense
|
|
Six months ended June 30, 2025 |
|
|
Six months ended June 30, 2024 |
|
||||||||||||||||||
|
|
Average |
|
|
Interest |
|
|
Interest |
|
|
Six months ended June 30, 2025 |
|
|
Interest |
|
|
Interest |
|
||||||
Revolving line of credit (average) |
|
$ |
179,710 |
|
|
$ |
7,659 |
|
|
|
8.5 |
% |
|
$ |
195,375 |
|
|
$ |
7,679 |
|
|
|
7.9 |
% |
Amortization of deferred loan fees |
|
|
— |
|
|
|
570 |
|
|
|
— |
|
|
|
— |
|
|
|
182 |
|
|
|
— |
|
Other interest expense |
|
|
— |
|
|
|
15 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
Subtotal |
|
|
179,710 |
|
|
|
8,244 |
|
|
|
9.2 |
% |
|
|
195,375 |
|
|
|
7,866 |
|
|
|
8.1 |
% |
Capitalized interest |
|
|
— |
|
|
|
(29 |
) |
|
|
— |
|
|
|
— |
|
|
|
(256 |
) |
|
|
— |
|
Total |
|
$ |
179,710 |
|
|
$ |
8,215 |
|
|
|
9.1 |
% |
|
$ |
195,375 |
|
|
$ |
7,610 |
|
|
|
7.8 |
% |
22
The Company’s average overall debt for the six-month period ended June 30, 2025, was $179,710, as compared to $195,375 for the same period of the prior year. Our borrowings increased as a result of higher inventory levels. As can be seen from the table above, our effective bank interest rate on our revolving line of credit was 8.5% for the six months ended June 30, 2025, as compared to 7.9% in 2024.
Income tax expense was $1,152 for the six months ended June 30, 2025, as compared to an income tax benefit of $69 for the three months ended June 30, 2024. The effective income tax rate for the six months ended June 30, 2025, was computed based on the estimated effective tax rate for the full year which is approximately 28%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. During the fourth quarter ended December 31, 2024, the Company established a valuation allowance against the U.S. entities net deferred tax assets. The company continues to maintain valuation allowances established against the net deferred tax assets of the U.S. and certain international entities, primarily in Brazil, for the six months ended June 30, 2025. During the six months ended June 30, 2025, several of the Company's international business outside of Brazil were profitable resulting in an income tax expense.
We incurred a loss before provision before income taxes of $8,159 for the six months ended June 30, 2025, as compared to a loss before taxes of $10,238 for the six months ended June 30, 2024. Our net loss, after income taxes, for the six-month period ended June 30, 2025 was $9,311 or $0.33 per basic and diluted share, as compared to $10,169 or $0.036 per basic and per diluted share in the same period of 2024.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s operating activities utilized net cash of $39,836 during the six-month period ended June 30, 2025, as compared to $49,357 during the six months ended June 30, 2024. Included in the $39,836 are net loss of $9,311, plus non-cash depreciation, amortization of intangibles and other assets and discounted future liabilities, in the amount of $10,027, and provision for bad debts in the amount of $1,999, change in deferred income taxes of $200 and changes in liabilities for uncertain tax positions or unrecognized tax benefits of $60. Also included are stock-based compensation of $981, asset impairment of $134, and net foreign currency adjustments of $855.
During the six-month period of 2025, the Company increased working capital by $21,381, as compared to an increase of $49,375 during the same period of the prior year. Included in this change: inventories increased by $9,785, as compared to $27,770 for the same period of 2024. While increases in inventories are normal for the Company’s annual cycle, the Company has seen distinct changes in buying patterns across its global markets as customers are pushing back purchase close to time of use as they manage working capital and interest expense. In response the Company has focused on holding inventory levels down including holding down manufacturing output.
Customer prepayments decreased by $46,187, as compared to $53,468 in the same period of 2024, driven by customer decisions regarding the amount of prepayments they made during the final quarter of 2024, and by purchase orders received from those customers during the first two quarters and the product mix and payment terms on those purchase orders. Our accounts payable balances increased by $24,547, as compared to $34,292 in the same period of 2024, reflecting both the timing and terms of the related purchase orders. Accounts receivables increased by $3,293, as compared to a decrease of $11,962 in the same period of 2024. Prepaid expenses increased by $1,863, as compared to $3,730 in the same period of 2024. Income tax receivable changed by $1,024 as compared to $7,129 in the prior year. Accrued programs increased by $10,267, as compared to $18,209 in the prior year, driven by changes in mix of sales (products attract different program arrangements) and lower sales in our US Crop business (which is the main driver from programs). Finally, other payables and accrued expenses decreased by $15,073, as compared to an increase of $1,665 in the prior year.
Accrued program costs are recorded 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 first six months of 2025, the Company made accruals for programs in the amount of $41,451 and payments in the amount of $31,032, resulting in a net increase in accrued program costs of $10,267. During the first six months of the prior year, the Company made accruals in the amount of $44,633 and made payments in the amount of $26,615, resulting in a net increase of accrued program costs of $18,018.
Cash used for investing activities for the six-month period ended June 30, 2025, and 2024 was $1,085 and $6,398, respectively. In 2025, the Company spent $1,020 on purchases of fixed assets primarily focused on continuing to invest in manufacturing infrastructure, as compared to $4,944 for the same period of prior year. The Company made a payment of $88 for a product acquisition.
23
During the six months ended June 30, 2025, financing activities provided $41,479, as compared to $63,190 during the same period of the prior year. Net borrowings under the Credit Agreement amounted to $42,169 during the six-month period ended June 30, 2025, as compared to $65,259 in the same period of the prior year. The Company did not declare and pay dividends for the first six months of 2025, as compared to paying $1,670 during the six months ended June 30, 2024. The Company received $333 for the issuance of shares under our Employee Stock Purchase Program ("ESPP") and exercise of stock options for the six months ended June 30, 2025, as compared to $430 for the same period in prior year. Lastly, in exchange for shares of common stock returned by employees, the Company paid $142 and $829 for tax withholding on stock-based compensation awards during the six months ended June 30, 2025 and 2024, respectively.
The Company has a revolving line of credit that is shown as long-term debt in the condensed consolidated balance sheets at June 30, 2025 and December 31, 2024. These are summarized in the following table:
Long-term indebtedness ($000's) |
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Revolving line of credit |
|
$ |
189,500 |
|
|
$ |
147,332 |
|
Deferred loan fees |
|
|
(1,844 |
) |
|
|
(1,532 |
) |
Net long-term debt |
|
$ |
187,656 |
|
|
$ |
145,800 |
|
As of June 30, 2025, the Company is deemed to be in compliance with its financial covenants.
At June 30, 2025, according to the terms of the Credit Agreement, as amended, and based on our performance against the most restrictive covenant listed above, the Company had the capacity to increase its borrowings by up to $31,836, compared to $28,623 as of December 31, 2024.
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 1 in the accompanying notes to the condensed consolidated financial statements for recently issued 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, 2024, 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, 2024.
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, 2024.
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.
24
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
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. The Company’s management, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, completed their evaluation, as of June 30, 2025, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures . Based on this evaluation, and as a result of the material weaknesses in our internal control over financial reporting further described in Management’s Report on Internal Control Over Financial Reporting in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, our principal executive officer and principal financial officer, concluded that as of June 30, 2025, our disclosure controls and procedures were not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate to allow timely decisions regarding required disclosure. Specifically, in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, management identified the following material weaknesses associated with the control environment, control activities and risk assessment components of the COSO framework:
In addition, management identified a deficiency that constituted a material weakness related to the review of customer agreements related to the accrued Program costs and customer prepayments balances. The Company did not perform a sufficiently precise review in order to appropriately consider all agreed-upon terms with customers in its determination of the accrued Program costs and customer prepayments balances.
In order to remediate these matters, we have identified the following remediation measures:
We will consider the material weakness to be fully remediated once the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively. We have established the process of identifying these transactions and adding additional internal reviews to account for them under current accounting standards. These processes will be tested in the coming months.
25
We do not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Changes in Internal Control over Financial Reporting
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.
26
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 13 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 Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed on May 29, 2025. The following disclosure amends and supplements those risk factors and, except to the extent stated below, there are no material changes to the risk factors as so stated.
Reduced financial performance may adversely affect the Company’s ability to maintain a capital structure that is sufficient to meet working capital needs. Because the Company’s credit agreement expires in August 2026, under applicable accounting rules, if the credit agreement is not extended or replaced by the time that the Company reports its financial results for the quarter and period ending September 30, 2025, then such debt (which is currently recorded as long term debt) will need to be recorded as current debt on the Company's balance sheet. In addition, such a characterization could lead to the accounting conclusion that the Company was not able to operate as a going concern. The threat of such result could have an adverse effect upon relationships with business partners. Thus, it is in the Company's best interest to extend or replace the credit agreement as soon as possible and, at any rate, well prior to such filing date. However, despite improved financial performance in the immediately preceding quarter, in light of poor financial performance of the prior several quarters, there is no guarantee that the Company will be able to maintain capital sufficient to meet its working capital needs or that such capital will be available on terms that are as favorable as those under the current agreement. Failure to obtain capital in a timely fashion or in inadequate amounts or on unfavorable terms could have an adverse effect upon the Company’s financial performance and/or could impair the Company’s ability to carry on business as a going concern.
The MAHA Commission and MAHA movement may adversely affect demand for the Company’s crop inputs. By virtue of Executive Order, the Administration has established a “Make America Healthy Again” or MAHA Commission consisting of Administrators of the Department of Health and Human Services, the Department of Agriculture and the Environmental Protection Agency. Shortly after the commission’s establishment, the Center for Biological Diversity filed a petition with the commission and its constituent agencies seeking the cancellation of certain pesticides in the name of purported advancing children’s health. At the same time, the ideology at the foundation of the commission has engendered a MAHA movement which has influenced several states to introduce legislation that would call for labeling of foods that were grown with various pesticides. While the MAHA Commission has yet to take a formal position on pesticide use, and state legislatures are still considering food-labeling legislation, there is no guarantee that the commission will support the use of crop inputs or that state legislatures will rein in further requirements on food labeling. In short, it is possible that both federal agencies and state legislatures could impose significant limitations on the use of pesticides in food production in a manner that could adversely affect the Company’s product sales and overall financial performance.
Item 2. Purchases of Equity Securities by the Issuer
Pursuant to the Third Amended Loan and Security Agreement, effective November 7, 2023, the Company is currently prevented from making stock repurchases.
27
Item 6. Exhibits
Exhibits required to be filed by Item 601 of Regulation S-K:
Exhibit No. |
|
Description |
|
|
|
10.1 |
|
2022 Stock Incentive Plan.*† |
|
|
|
31.1 |
|
Certification of the Acting 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 June 30, 2025, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations; (ii) Condensed Consolidated Statements of Comprehensive Income; (iii) Condensed Consolidated Balance Sheets; (iv) Condensed Consolidated Statement of Stockholders’ Equity; (v) Condensed Consolidated Statements of Cash Flows; and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. |
|
|
|
104 |
|
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, has been formatted in Inline XBRL. |
* Filed herewith.
† Indicates a management contract or compensatory plan.
28
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: July 31, 2025 |
By: |
/s/ DOUGLAS A. KAYE III |
|
|
Douglas A. Kaye III |
|
|
Chief Executive Officer |
|
|
|
Dated: July 31, 2025 |
By: |
/s/ david t. johnson |
|
|
David T. Johnson |
|
|
Chief Financial Officer & Principal Accounting Officer |
29