American Vanguard (AVD) 11 Mar 192019 Q4 Earnings call transcript

Greetings. And welcome to the American Vanguard Corporation’s Fourth Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. the to, turn of Kuser, now Relations. Investor would conference Bill over Director I you. Thank begin. Please

you, thank Vanguard’s year and American And fourth full review. earnings Well, XXXX [ph]. quarter Roya welcome everyone to

the Vanguard; Eric today speakers Chairman of the also Officer; will Chief Mr. assisting any Mr. Our Bob Wintemute, in Johnson, with provides Officer. David Trogele, Vanguard answering will to XX-K be and Chief additional Form document That the CEO Operating American that Financial and company’s American be the company’s will tomorrow. the our SEC afternoon. questions we discussing Mr. results details file this

pressures updated represent changes statements over are estimates take this such With to reports let's not assumptions forward-looking in All date managements company’s regulatory policy, of judgment are and discuss said, filings. the the beginning from In information. actual company. by today’s subject the be company’s the and risks expectations. and differ weather information to to and the a in cause turn as and the Before management’s detailed on necessarily call of other company’s SEC conditions, by usual factors best may forward-looking that cautionary current statements the reminder. uncertainties Such the and moment for include results and that call Such the may company risks information various that various will call, competitive we Wintemute. based can Eric are

quarter full everyone. Bill. year Hello, fourth earning you, call. And and welcome our to Thank

pleased year-over-year at to your bottomline. for continued strong both you in results and interest Vanguard. thank always, I'm American As the top report

is income The press our up sales were you however. XX% story while that note increased net As than net will release, XX%. better from

or statement operations, of tax As David XX% million income remarks, XXXX. and our on of our for we XXXX tax Jobs a his to Act during by net under of actually about one-time XXXX $X.X that per focus will of $X.XX share. charges rose Tax included the benefit Cuts If income explain operating compared

managed our gross also at to margin We annual maintain XX%.

to take what Let moment it we a managed me result into delve means. and this how

Let's members mergers. from year in spun from were these driven increase to the In in our to of our was sales so largely achieve in million businesses product hard after begins the want start AgriCenter $XXX topline, Mexican in XXXX to $XXX XXXX industry work With businesses XXXX we and full by million OHP, with the results. lines domestic team off integrating and at that acquired real who first XXXX, recognize closing. that these worked many acquisitions, net

I LatAm new is prior of and occasions, start. we’re our off establishing good growth in access on market long-term strategy said a part essential to As

the of activity effect discounting balance has our strongest to the my of this expenses would as of for two sector not I note complete I the and manufacturing the discussion percent Turning existing gains will newly that was reduction to net is performance A This our annual in be think manufacturing and China. history reference in it. operating of a happening team without for sales. in in Act what We profitability, factors, assets. one-third driven able due to these gain largely to and from from were acquired achieve the our strong a about manufacturing Tax businesses operations been

is While to Bromacil with that the to not industry from average, our well disruptions respect line. our supply primary point immune below of we're on the exposure our China At chain present, is product reliance country. sources

show operating for to reported David conservative changes to are of – demand. within all budgets, economies my as effect have reduce should feverishly has in due to point of to able and OpEx reason. scale. percent departments view, of operating both We set we dropped XX%. the to grow that area to expenses global improvement to have we we I across Year-over-year possible been respect From be sales, a working from ensure meet of we account region further sufficient supply XX% that OpEx have committed and this With wherever within as expenses,

session like will and turning Directors. our Before XXXX David, close with the Board update, outlook. as I with then would including to as comments over presentation the conference our of cover Rica, I'll well remarks, return David's in SIMPAS, biological. After Envance also I our recent to Costa our for technology strategy with

For American Vanguard, for LatAm the region is growth. ripe

largely future the our to well-established of fruit meaningful we into value XXXX, in XX and world. us held identify multiple light Rica, in entry opportunities business cross-selling vegetable in acquisitions, first Since Nicaragua, largest recently million, which our the capture synergies of efficiencies In the products for territory. the global Brazil, to now, market XX on operations. or purpose take market. developing and annual technology among advance across in these of our Rica, were, with and a have our confidence our week three provided we Panama, personnel met we Directors Costa energy Board global our gives for to San and focused oil is expansion. me was and then, greater that a for formulation conference the change new was management strategy and Our these these strategy into sales norm SIMPAS with the conclusion team The even American businesses. of stock greater within rolling the nutrients out greater products $XX for to with enhancing to global Guatemala, essential marks to believe regions; functions across throughout market by and business. The top Honduras At Republic. Its protection priorities Paulo the attended close a we high creativity five acquisition, marketing in businesses; frequency. acquisition industry, business crop generally expanding of and participants of revisit key such regions, when this into XX biologicals of global Agrovant from to important Costa which achieve Agrovant and times about and conference, access with procurement, which the the of AgriCenter Similarly, in employees is Vanguard. our senior to what prospects our our our in as a In past and it's define province, Defensive Dominican year

strategic me that with innovative and portfolio generates a a aspire both that plan. be of to results international financial products company a preview diverse footprint give an through Let We technology you of solutions. solid

will are for those in Brazil as which where and five-year market will entrants, we -- investors and come Central such meeting, greater markets report growth available target in intend performance. is relatively from annual in new a our We expect that as our to we our growth and America, detail Further, shareholders availability largely give significant. I the

As we SMIPAS. report each listeners will plan on vis-à-vis on targets doing update revenues period, how for we're long-term we including the

Let to us other of shareholders. from turn matters to interest strategy our now

price The $XX and note during through XX-K, programs All As XXth. will stock share in open reduce you market. continue purchased quarter from the we AVD shares told, January our worth volatility. serve to subsequently of intra-day million about we the program to purchased fourth

prices the or and the above course limit under per last remained level. repurchase the $XX above at share was upper month, our that share of program Over risen the which

by is our the share Over price month, past increased XX%.

a limited we the enterprise repurchase our working our needs with equity shares, their While program compromising some occurred of can as own prospects. the capital over our us without support, enabled their program on had Further, or creep issuers awards. few are the in past that shared has in we that worthy to years of recover carry stock ability here our to believe and when are particularly future connection

effect At Finally, a are the this upon for reducing shares an EPS the point, update this financial turn is us to dividend which the of of David? program let shareholders, has on based. the quarter had performance upon our and year. number conferring

afternoon, Thank everybody. Good Eric. you,

December release in we included information to detail brief months form XXXX be usual document. our quarter early that high of results our $XXX more tomorrow. is the performance. attached added assist Bill review the to million, the our Everything level to With to in XX-K filing we as to the earnings will compared XX for of financial going XXXX, your have XX% to last fourth million to As company increased the here tables cover Further, mentioned, I'm financial ended in XX, you for in sales regard by $XXX the sales year.

expressed year. as compared margins drive sales XX%, American to XX% manufacturing last in was strong improved to by increased margin performance driven gross lower costs business. business, which approximately offset Central from by of mentioned, This the preexisting quarter our just managed fourth Our expense by XX% sales in with our increased our as of operating resulted We operating the sales flat XX%. expenses a Along This well. remaining increase XX%. quarter-to-quarter interest percentage in

the XXXX, $X.X was to per been Fourth with charge we acquisition to $X.X earnings per XXXX. last This considering related quarter. However, that's Jobs in to share cover ended have one-time a quarters. at to in quarterly financial our in related cash in of When same which per this of a Act, added derivative quarter fourth should in XXXX the $X.XX the as with by quarter compared investment. forward XXXX, the as earnings quarter fourth by Tax XXXX. an key with did income several $X.XX matters contract. the adjustment year. to be one-time million, recurring improved $X.XX associated completed on million of tax of the an $X.X prior share associated instrument, share in recorded QX, management one-time income per to the the consideration the impacted last method XXXX, $XX.X and quarter million considered net income for non compared share fair year settlement fair Offsetting as or would per incur of remain cost share gains million performance, the acquisitions, the of consistent to equity approximately associated of we share of million a as year with Brazilian XXXX benefit the per quarter $X.X that Net the value this January reassessment deferred Without amount, the full in $X.XX the and share million compared of or $X.X and year. the Operating financial Cuts impact, value $X.XX last per expense XX%

first, compared time mentioned, XXXX. up as businesses is year-to-date Eric largely by from sales This revenue Eric XX% improvement driven to sales $XXX as in this As were acquired million, to million year. $XXX mentioned -- products and last

by increased as our up continue recovery we XXXX, inventory factory levels. and demand carefully approximately with while about balance we costs costs XX%. manage Second, X%, factory our overhead to output were In factory activity of our

factory XXXX a absorbed sales to As of of net X.X% sales in net from result, under X.X% costs XXXX. dropped in

Our at for did were reasons increase. increase million. ended and $XXX inventory levels There few the

in quarter inventory with acquired associated the we First, XXXX fourth acquisitions.

XXXX, in the acquired businesses unsustainably have generally the time took levels increased at Second, acquisitions of various levels from inventory place. low somewhat

work on XXXX. supply over the will We chain

quarter, in managed China, purchased of and capacity of were late balancing inventories the some Third, freight from fourth threat associated shortage the from as that tariffs we the logistics region.

higher provided. signaled manufacture than Finally, tight. an million. the because $X million in the just XXXX previously acquisitions and is the with $XXX a inventory at balance We is we to associated in made for quarter added of million target factors the of our approximately the other final December quarter decision XX, manufacturing XXXX to plan We related usual I $X level XXXX of fourth

for the year end at XXXX approximately $XXX is million. to target Our

just businesses Third, our by This partly business gross that driven slightly drive was sales offset product impact levels XX% at at and lower pre-existing year. ended strong of the mix, for factory the XX% strong performance acquisitions last to compared year gross the XXXX then change by margin the margin as described.

expenses benefit some team our operating improves purchase expressed Fifth, compensation. increase the improvement to so overall when percentage in increase notwithstanding XXXX this of the expenses sales approximately exercise XX% ratio material The effect consideration operating reduced in of XX% XXXX we’re million continue of million which and had this terms XXXX. driving Jobs related as Furthermore XX% as each main message and working tax performance to that held during to that sales newly $X of controls some of effective tax. individual our the and we accruals and from Other raw materials these XXXX. The year of million marketplace. expense have scale up in over to the to cost from businesses our $X.X key Act in was related our on continues calculations accounted demonstrating strong amount been the is approximately a is second $XX included manage release I In have the deferred for to percentage expands. XX% our that in would offset XXXX. in increased XX% of of million but driving the In in acquired as costs business from were average which earlier. quarter Cuts in rate operating year-on-year overall and effective million. factor in deliver in recorded the expenses long-term XXXX purchasing transition and $XX $X.X for leverage finalized tight XX%, XXXX short-term acquisition an the accruals amount products we in absolute the one-time by Absent Tax discussed for for operating rate we the as our expenses the by incentive Fourth, flat, raw increases addition, adjustments a sourcing by legal two increases XX% we XXXX,

forward the of in by domestic balance XX% to a affected Looking presently expecting rate to and or we will are achieve XX%. by jurisdictions be earned rate of international our XXXX, tax range the to profit

Net the share adjustments impacted in by just income $X.XX $X.XX compared pre-tax per million as $XX.X improved last XX%. or per one-time XXXX, million at year. XXXX, and by to or ended Looking again bottomline XX%, at in by $XX.X discussed income share our the tax improved

low regard with our business the quarter-to-quarter balance on continue we a sheet manage carefully the management liquidity, and to cash changes focused resources to we and leverage to Finally, notwithstanding work have to position. driving maintain

to number with year. totaling $XX to resulted sheet at At along the this associated consider credit flat year, as this million million XX% time compared the to acquisitions XXXX, Year-over-year leverage X.X in half improved four the million we borrowings at borrowings acquisition the last in end our second opportunities dates acquisitions compared $XX XXXX, make EBITDA and at as XXXX. facility is During for in of XXXX, our utilized of with XX, times $XX EBITDA. both $XX XXXX by balance December million to

seeing occur. line see that at to are as grown close We In summary, many credit business when looking make our and to strongly. year utilizing acquisitions the opportunities have they to grow we just our selective sales

on delivered of impact performance sales margins. improvements strong factory at the have low and notwithstanding growth We

We margin have slightly improved our consolidated gross performance.

of improved income both expenses income net operating and Our sales when expressed as a strongly. percentage our improved and operating

very Finally, Eric. had I and the With we will and year power growth we company's back expect that in to closed again will that, acquisitions beyond. XXXX have a exciting on rate four hand

David. you, Thank

rates both precision Our which next variant in multiple enable begin our an to story agronomist at discussion as technology, will prescription. is We of the with technology. rows SIMPAS, growers multiple apply inputs and agriculture per liquid granular

as that in product time, and to and of SIMPAS. have yield building test externally for technology the in the including apply other continue we efficacy cartridges demonstrated past calls, filling As station units we've At In and of year, year data field that cusp with second I each testing begun a the as bulk the in meters we development liquid the are field numbers while of for of the first planned. Further, functioned we one we many application. same on testing, reported that we're the will gather could that model and demonstrated be could beta in we're the which is have The testing the layers commercializing systems place serve varying units distribution. we of in multiple suppliers interface. even a parts trials with amounts field. development our testing year prescriptively benefits we’ll of various granular year input both product with applied in we SIMPAS defined has be the inputs internally for of inputs material With same can accuracy various demonstrating This of greater products Trimble that field. concurrently universal that this working safety show

XXXX flexibility for expect of By at a on team hard in plant. to soft we launch This track give available. growers by to choose enhanced Our a XXXX. make is XXXX unprecedented treatment time seed launch synchronization in will followed

turf Zevo for Moving we see line pleased product is marketed retail to for expand pets and next use. Zevo more in being continued the to details. channels of With essential to technology are as such by other this commercialization in to children, & you poised Envance, website and the I'm These oil Gamble, agriculture I go which products which safe development technology. markets and partner are into is consumer successful P&G's Procter to for encourage our ornamentals.

in biological. technology a Also regions continue realm as our are noted own with and biological offering. XXXX At I was into have solutions present, to to of stages a in launches product Envance late development. products varying bring intended seven lines As ’XX, we the stage early our testing the pipeline earlier, of to teams their of complement and in in those biological Americas technology, we keen in universities develop of other

and growers and the tailor-made develop through solutions import biological to continues our turn other research AgriCenter expansion activity. and U.S. also partner is business markets. LatAm center biological look recent market to technology, addition, products in solutions with In for working region. and both that From and develop to Greenplants we nutrient developmental Biotor the nutrient its into We

in product acquisition Corteva. the we Brazil closed recently on II line Agrovant Assure from the the to addition In acquisition of

herbicide an in Assure in II canola primarily the Canada. is U.S. soybeans on use

to corn Corteva to Corteva apply is part to exclusive upon the transition, Enlist safe it Assure within corn obtained Enlist also traded next II. plans to a which II the two launch corn of years Assure is three years. which use from As we to an license have

As Enlist sales benefit corn should market significantly. was comes in Assure to of

soybean addition our is States II XXXX. United for outlook led by while herbicide complementing gives to the In Assure portfolio within entrée into my the My the us currently impact. is topic final market it

two shaping quarter first expected in is areas. The except up as

we delaying Vapam is outside we some make growers lost about Well Vapam $X weather revenue wet California Pacific up applying in lose First Northwest. of in can California, California. likely sales for from in the million and could

miss supply likely earlier spoke about new in I factory we million in Mexico. due restarting our about Bromacil to $X to Second the delays sales into are

in able more to overall product performance. range. an the business see range performance coming the adjust become OpEx to make are target us XX%. domestically XX% to to portfolio. of we the on that We an million ratio that appropriately. allow forecast our our additional the expenses current $XXX In the we for individual If be has and diverse demand within acquisitions less Fortunately We profit based we’ll products internationally. and sales sales to on margins product product solid impact range XXX to million our million to $XXX with deliver million we both mix year, operating $XXX expect believe about our are to or of we management product should manufacturing With disciplined XX% targeting net

that taken any Further businesses, are Our tax integrating in share that of these creates In have mark as us and and environment and in team Roya, and roadmaps. XXth we our prospects anniversary In This would excited in platform while We to to foothold course larger pleased are turn I and an operations closing, started. markets opportunities growth. into billion on LatAm see short, in technology pleased this to In operational With questions the between for this both with on we such am celebrating jurisdictions. turn established have I I will our new plans over for am I these business of that the sales. rate the to reaching maintaining the net discipline $X.X technology. with look expand existing have. average already strategic excellent our continuing of for business. new the expansion acquisitions. in that what entered we've financial the XX% new XX% markets, trajectory all a we're products Brazil we that forward collective existing as in should how through innovation, be the positioned are important well audience and the also we've year we step approaching another sees and better performing with say

Thank Thank you. Instructions] you. [Operator

comes first Our question Reagor ROTH Capital Partners. with the from Please Joseph of line proceed.

for thanks taking Good afternoon, guys questions. and the

have into those on other growth we’re it insecticides. first as even or thing like Is sales going fungicides backward to herbicides, some to something plant may have appears maybe category that So – the numbers from revise looking? including you to get quarterly reclassified

quarterly QX, so other words X,XXX that’s in Backward QX, you for what XXXX wanted QX?

standpoint... modeling Exactly. Yeah. Yeah. From a

Yeah.

Okay.

them this and was integration then sales thing with the of We but Agrovant do, And a yeah this basically categories. in and and will their period we’ll pieces point at we do that to breakdown so same Defensive. AgriCenter lot had first the

Okay.

So historical… Yeah. as forward to we E be move get able we’ll the

models. our to correct …

Yeah.

will. You

Okay.

other acquisitions group The can individually? you a is color us to as those, year, give you there as this the already being maybe a of magnitude had announced than rather guys few additional

was you’re the in or in actually ‘XX. ASH are acquisitions about talking acquisitions talking XXst, you in about So December ‘XX

two… were there XXXX In

Right.

and things were of January … beginning there applying right for bankruptcy small when at you the approved? then another announced one was

Right. Right.

yeah, again, revenues Agrovant, Defensive, yeah, in think, million. $XX So, I

a On of purchasing them. to purchasing with is their the it's still the We're company. is associated from one, second number inventory the approval -- the registration We're subject this not Bankruptcy and Court. that

happens is I bid through they Court, make open think also others what this to until Bankruptcy the and come as could that another we in well. I -- and mean, see

to those give get premature a to the little numbers are be think we court. from what ruling going final until I it's probably

thanks Thanks. stuff. for earlier Well, Okay. the color on

Thank you.

with line comes question Humphrey. the from proceed. Robinson Please of Our SunTrust Sheehan Jim next

Thank you.

currency you you any that Brazil, could or offset the volatility planning talk hedging? there now do to you in -- You about you're what to are do would

we're on out hedging. did work know hedges of purchase in too do the that the way we well, that to going I price Well, much don't given didn't our

I dollars think as what that Brazil is try and should work that in one that price help to we'll the U.S. in trading through regard. working to we're in

So of this tied currencies sales the are actual within lot – currency. LatAm, there though is maybe to of even in a the the price

trying kind don't if do. have that's are on the I like Bob, we know to any you So of got effect that thoughts that.

No.

right think down dollar favorable. feel to we good is I now probably secondly receivables. And currency have that's solution that the at we a collecting here the very

with comfortable where feel we are we presently. So

we might if segments into grow change. Now where there's more volatility that than

as We'll to obviously have reconsider the grows. business

Thank the corn, it affect appears market to so, as you. of shifting talk acreage there soybeans that about some your you may And U.S. in from be business? how can might

haven't successful Assure. But are that's for a we so lot inputs do into now from, -- well. are are into towards generally, Ensure corn the a heavier corn portfolio we've and imazaquin, assuming have strong had good there there a Well, well to lines work soybeans. the a us. to acquisitions then much but would but we products we few that But quite typically portfolio bigger thing and got herbicides going as with, are with product than soybeans it had are inputs a soybean we soybeans But slanted from

color? So, Bob, any

then our it for in the they fourth out to weather Yeah. have be corn the the that here that and planting just will next The tell. sales depends to we're conditions still unknown But got result I early in that seed too signaled at four in would on quarter. the there trade for say really up, China weeks least customers weeks. positive six is

as how talk the revenues? what you are SIMPAS could about are Thank three first sales your collect talk actually you in target you. business And will on – you how considering What you work, model years? a

we So, our further plan. give some got We'll that. how have as guidance. testing will then on we giving have going color will back that we our annual start We're and and in strategic put I more of shareholders. idea forward mentioned, year go about numbers applications this that can an We've at

far and revenue, equipment, there's of sale and collection utilize use be then farmer issue sale the prescription As to the the is SIMPAS of might as system. in there the does the the license is involved there the actual the product, of the and to that the with regards what

areas bit gives that the So kind will outline numbers more of of the But timeframe. little specific in I revenue. our that you as said, a June

Instructions] you. [Operator Thank Thank you.

I'd have queue management over further this return time. no floor questions to for like to remarks. the at We in closing back

Thank you. you, time near Roya. forward future. listen call our taking the the the we further Again, look asked. really appreciate appreciate and to you've in updates I you that giving to questions And to Thank

today's Thank you. This concludes conference.

You may disconnect your at participation. thank your lines this and time you for