1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________ COMMISSION FILE NUMBER 0-6354 AMERICAN VANGUARD CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 95-2588080 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification Number) 4695 MacArthur Court, Newport Beach, California 92660 - ----------------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (949) 260-1200 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE ISSUERS 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 -- 2,870,274 shares outstanding as of August 8, 2001.
2 AMERICAN VANGUARD CORPORATION INDEX PART I - FINANCIAL INFORMATION Page Number ----------- Item 1. Financial Statements. Consolidated Statements of Operations for the three and six months ended June 30, 2001 and 2000 1 Consolidated Balance Sheets as of June 30, 2001 and December 31, 2000 2 Consolidated Statements of Cash Flows for the six months ended June 30, 2001 and 2000 4 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosure About Market Risk 12 PART II - OTHER INFORMATION 13 SIGNATURE PAGE 14
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) <TABLE> <CAPTION> For the three months For the six months ended June 30 ended June 30 ------------------------------ ------------------------------ 2001 2000 2001 2000 ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> Net sales $ 19,908,900 $ 17,803,800 $ 34,772,200 $ 29,589,600 Cost of sales 10,661,200 9,017,100 19,723,600 15,300,600 ------------ ------------ ------------ ------------ Gross profit 9,247,700 8,786,700 15,048,600 14,289,000 Settlement income (88,100) -- (296,400) -- Gain on sale of emission credits -- -- (465,500) Operating expenses 7,481,100 7,166,200 12,492,400 12,131,300 ------------ ------------ ------------ ------------ Operating income 1,854,700 1,620,500 3,318,100 2,157,700 Interest expense 492,500 473,200 962,000 881,900 Interest income (2,500) (1,200) (4,800) (2,300) ------------ ------------ ------------ ------------ Income before income tax expense 1,364,700 1,148,500 2,360,900 1,278,100 Income tax expense 545,800 459,300 944,300 511,200 ------------ ------------ ------------ ------------ Net income $ 818,900 $ 689,200 $ 1,416,600 $ 766,900 ============ ============ ============ ============ Earnings per common share $ .29 $ .23 $ .49 $ .26 ============ ============ ============ ============ Earnings per common share - assuming dilution $ .28 $ .23 $ .48 $ .25 ============ ============ ============ ============ Weighted average shares outstanding (note 4) 2,867,753 2,968,390 2,868,834 2,969,546 ============ ============ ============ ============ Weighted average shares outstanding - assuming dilution (notes 4 & 5) 2,946,099 3,019,484 2,945,267 3,016,740 ============ ============ ============ ============ </TABLE> See notes to consolidated financial statements. 1
4 AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> June 30, Dec. 31, ASSETS (NOTE 8) 2001 2000 ----------- ----------- (Unaudited) (Note) <S> <C> <C> Current assets: Cash $ 1,332,600 $ 361,000 Receivables: Trade 15,585,200 21,323,400 Other 165,100 1,526,300 ----------- ----------- 15,750,300 22,849,700 ----------- ----------- Inventories (note 2) 24,954,800 21,202,800 Prepaid expenses 828,300 764,200 Deferred tax asset 568,800 568,800 ----------- ----------- Total current assets 43,434,800 45,746,500 Property, plant and equipment, net (note 3) 10,436,200 9,012,800 Land held for development 210,800 210,800 Intangible assets 10,218,900 10,657,100 Other assets 422,200 463,700 ----------- ----------- $64,722,900 $66,090,900 =========== =========== </TABLE> (Continued) See notes to consolidated financial statements. 2
5 AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> June 30, Dec. 31, LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000 ----------- ----------- (Unaudited) (Note) <S> <C> <C> Current liabilities: Current installments of long-term debt $ 3,384,900 $ 3,575,400 Accounts payable 3,018,200 6,913,600 Accrued expenses and other payables 5,971,800 4,985,300 Income taxes payable 84,900 1,149,500 ----------- ----------- Total current liabilities 12,459,800 16,623,800 Note payable to bank (note 6) 18,500,000 15,800,000 Long-term debt, excluding current installments 2,226,600 2,847,300 Other long-term liabilities 118,000 117,700 Deferred income taxes 1,414,500 1,414,500 ----------- ----------- Total liabilities 34,718,900 36,803,300 ----------- ----------- Stockholders' Equity: Preferred stock, $.10 par value per share; Authorized 400,000 shares; none issued -- -- Common stock, $.10 par value per share, authorized 10,000,000 shares; issued and outstanding 3,115,856 shares at June 30, 2001 and 2,827,039 shares at December 31, 2000 (note 4) 311,500 282,700 Additional paid-in capital (note 4) 9,288,600 5,906,600 Retained earnings (note 4) 22,120,500 24,354,600 ----------- ----------- 31,720,600 30,543,900 Less treasury stock at cost, 245,582 shares at June 30, 2001 and 183,285 shares at December 31, 2000 1,716,600 1,256,300 ----------- ----------- Total stockholders' equity 30,004,000 29,287,600 ----------- ----------- $64,722,900 $66,090,900 =========== =========== </TABLE> Note: The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date. See notes to consolidated financial statements. 3
6 AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED) <TABLE> <CAPTION> Increase (decrease) in cash 2001 2000 ----------- ----------- <S> <C> <C> Cash flows from operating activities: Net income $ 1,416,600 $ 766,900 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,037,400 1,578,400 Changes in assets and liabilities associated with operations: Decrease in receivables 7,099,400 2,554,800 Increase in inventories (3,752,000) (4,385,200) Increase in prepaid expenses (64,100) (27,600) Increase (decrease) in accounts payable (3,895,400) 1,532,600 Decrease in other payables and accrued expenses (77,800) (1,605,300) ----------- ----------- Net cash provided by operating activities 1,764,100 414,600 ----------- ----------- Cash flows from investing activities: Capital expenditures (1,993,400) (250,900) Net decrease in other noncurrent assets 12,300 21,200 ----------- ----------- Net cash used in investing activities (1,981,100) (229,700) ----------- ----------- </TABLE> (Continued) 4
7 AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED) <TABLE> <CAPTION> Increase (decrease) in cash 2001 2000 ----------- ----------- <S> <C> <C> Cash flows from financing activities: Net additions under lines of credit agreement $ 2,700,000 $ 1,700,000 Reductions in long-term debt (811,200) (1,121,800) Exercise of Stock Options 47,500 31,400 Payment of cash dividends (287,400) (319,700) Purchase of treasury stock (460,300) (71,500) ----------- ----------- Net cash provided by financing activities 1,188,600 218,400 ----------- ----------- Increase (decrease) in cash 971,600 403,300 Cash at beginning of year 361,000 550,200 ----------- ----------- Cash as of June 30 $ 1,332,600 $ 953,500 =========== =========== </TABLE> SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES: During the six months ended June 30, 2000, the Company completed the acquisition of two established product lines from two large chemical manufacturers. In connection with these acquisitions, the Company recorded intangible assets in the amount of $1,450,000 in consideration of its debt obligation in the same amount. See notes to consolidated financial statements. 5
8 AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation, have been included. Operating results for the three and six-month periods ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 2. Inventories - The components of inventories consist of the following: <TABLE> <CAPTION> June 30, 2001 December 31, 2000 ------------- ----------------- <S> <C> <C> Finished products $21,157,100 $17,358,300 Raw materials 3,797,700 3,844,500 ----------- ----------- $24,954,800 $21,202,800 =========== =========== </TABLE> 3. Property, plant and equipment at June 30, 2001 and December 31, 2000 consists of the following: <TABLE> <CAPTION> June 30, December 31, 2001 2000 ----------- ----------- <S> <C> <C> Land $ 2,441,400 $ 2,441,400 Buildings and improvements 4,728,200 4,952,000 Machinery and equipment 24,298,900 23,938,100 Office furniture and fixtures 2,654,700 2,599,800 Automotive equipment 136,900 136,900 Construction in progress 2,085,600 284,100 ----------- ----------- 36,345,700 34,352,300 Less accumulated depreciation 25,909,500 25,339,500 ----------- ----------- $10,436,200 $ 9,012,800 =========== =========== </TABLE> 6
9 AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED 4. On March 20, 2001, the Company announced that the Board of Directors declared a cash dividend of $.11 per share as well as a 10% stock dividend. Both dividends were distributed on April 13, 2001 to stockholders of record at the close of business on March 30, 2001. The cash dividend was paid on the number of shares outstanding prior to the stock dividend. Stockholders entitled to fractional shares resulting from the stock dividend received cash in lieu of such fractional shares based on $11.89 per share, the closing price of the Company's stock on March 30, 2001. The Company distributed 282,867 shares of Common Stock in connection with the Common Stock dividend. As a result Common Stock was increased by $28,300, additional paid-in capital was increased by $3,335,000, and retained earnings was decreased by $3,363,300. All stock related data in the consolidated financial statements reflect the stock dividend for all periods presented. 5. Earnings Per Share ("EPS")- Basic EPS is computed as net income divided by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects potential dilution that could occur if securities or other contracts, which, for the Company, consists of options to purchase shares of the Company's common stock, are exercised. 6. On April 4, 2001, the Company's bank amended its fully-secured long-term line of credit agreement. The credit availability was temporarily increased from $24,000,000 to $30,000,000 for the period April 4, 2001 through August 1, 2001. On August 1, 2001 the credit availability was automatically reduced back to $24,000,000. The expiration date of the credit agreement was also extended to July 1, 2002. (See note 8.) 7. During the six months ended June 30, 2001, the Company purchased 40,072 shares of its Common Stock at an average sales price of $11.49 per share for a total of $460,300. These purchases were in accordance with the Company's buyback program which was announced on November 2, 2000. 8. Substantially all of the Company's assets not otherwise specifically pledged as collateral on existing loans and capital leases, are pledged as collateral under the Company's credit agreement with a bank. As referenced in note 1, for further 7
10 information, refer to the consolidated financial statements and footnotes thereto (specifically note 3) included in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. 9. Reclassification - Certain items have been reclassified in the prior period consolidated financial statements to conform with the June 30, 2001, presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS The Company, from time-to-time, may discuss forward-looking statements including assumptions concerning the Company's operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to a number of risks, uncertainties and other factors. In connection with the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important factors which, among other things, could cause the actual results and events to differ materially from those set forth in or implied by the forward- looking statements and related assumptions contained in the entire Report. Such factors include, but are not limited to: product demand and market acceptance risks; the effect of economic conditions; weather conditions; changes in regulatory policy; the impact of competitive products and pricing; changes in foreign exchange rates; product development and commercialization difficulties; capacity and supply constraints or difficulties; availability of capital resources general business regulations, including taxes and other risks as detailed from time-to-time in the Company's reports and filings filed with the U.S. Securities and Exchange Commission. RESULTS OF OPERATIONS QUARTER ENDED JUNE 30: The Company reported net income of $818,900 or $.28 per share (assuming dilution) in the second quarter ended June 30, 2001 as compared to $689,200 or $.23 per share for the same period in 2000. The $818,900 of net income for 2001 includes after tax income of $52,900 or $.02 per diluted share, related to settlement income. (Refer to disclosure below.) Net sales increased by 12% or $2,105,100 to $19,908,900 for the quarter ended June 30, 2001 from $17,803,800 for the same period in 2000. The increase in sales levels was a result of increased sales of the Company's herbicide and fungicide product lines. 8
11 The gross profit margin for the quarter ended June 30, 2001 declined to 46% from 49% for the same period in 2000. The lower margin was due to the changes in the sales mix of the Company's products. Operating expenses, which are net of other income, increased to $7,481,100 for the quarter ended June 30, 2001 as compared to $7,166,200 for the same period in 2000. The differences in operating expenses by specific departmental costs are as follows: o Selling expenses increased by $588,300 to $3,822,000 for the quarter ended June 30, 2001 from $3,233,700 for the same period in 2000. This increase was due primarily to increases in variable selling expenses that relate to the sales mix of the Company's products and increases in payroll and payroll related costs. o General and administrative expenses remained virtually unchanged with a modest decrease of $25,300 to $1,363,600 for the quarter ended June 30, 2001 from $1,388,900 for the same period in 2000. o Research and product development costs and regulatory registration expenses declined by $284,900 to $983,300 for the quarter ended June 30, 2001 as compared to $1,268,200 for the same period in 2000. The decrease was due primarily to a decline in costs incurred to generate scientific data related to the registration and possible new uses of the Company's products as well as a decline in payroll and payroll related items. o Freight, delivery, storage and warehousing costs increased $36,800 to $1,312,200 for the quarter ended June 30, 2001 as compared to $1,275,400 for the same period in 2000 due to the increased sales levels. Interest costs were $492,500 during the quarter ended June 30, 2001 as compared to $473,200 for same period in 2000. The Company's average overall debt for the quarter ended June 30, 2001 was $27,869,000 as compared to $24,249,000 for the same period in 2000. The higher debt levels accounted for the higher interest costs. Weather patterns can have an impact on the Company's operations. Weather conditions influence pest population by impacting gestation cycles for particular pests and the effectiveness of some of the Company's products, among other factors. The end user of some of the Company's products may, because of weather patterns, delay or intermittently disrupt field work during the planting season which may result in a reduction of the use of some of the Company's products. Because of elements inherent to the Company's business, such as differing and unpredictable weather patterns, crop growing cycles, changes in product mix of sales, ordering patterns that may vary in timing, and promotional/early order programs, measuring the Company's 9
12 performance on a quarterly basis, (gross profit margins on a quarterly basis may vary significantly) even when such comparisons are favorable, is not as meaningful an indicator as full-year comparisons. The primary reason is that the use cycles do not necessarily coincide with financial reporting cycles. Because of the Company's cost structure, the combination of variable revenue streams, and changing product mixes, results in varying quarterly levels of profitability. SIX MONTHS ENDED JUNE 30: The Company reported net income of $1,416,600 or $.48 per share (assuming dilution) for the six months ended June 30, 2001 as compared to $766,900 or $.25 per share for the same period in 2000. The $1,416,600 of net income for 2001 includes after tax income of $457,200 or $.16 per diluted share, related to the gain on the sale of emission credits and settlement income. (Refer to disclosure below.) Net sales increased by 18% or $5,182,600 to $34,772,200 for the six months ended June 30, 2001 from $29,589,600 for the same period in 2000. The increase in sales levels was a result of increased sales of the Company's herbicide and fungicide product lines. The gross profit margin for the quarter ended June 30, 2001 declined to 43% from 48% for the same period in 2000. The lower margin was due to the changes in the sales mix of the Company's products. Operating expenses, which are net of other income, increased to $12,492,400 for the six months ended June 30, 2001 as compared to $12,131,300 for the same period in 2000. The differences in operating expenses by specific departmental costs are as follows: o Selling expenses increased by $646,700 to $5,460,500 for the six months ended June 30, 2001 from $4,813,800 for the same period in 2000. This increase was due primarily to increases in variable selling expenses that relate to the sales mix of the Company's products and increases in payroll and payroll related costs. o General and administrative expenses reflected a modest increase of $74,200 to $2,827,000 for the six months ended June 30, 2001 from $2,752,800 for the same period in 2000. Higher outside professional fees, payroll and payroll related costs accounted for the increase. o Research and product development costs and regulatory registration expenses declined by $460,400 to $1,867,700 for the six months ended June 30, 2001 as compared to $2,328,100 for the same period in 2000. The decrease was due to a decline in costs incurred to generate scientific data related to the registration and possible new uses of the Company's products as well as a decline in payroll and payroll related items. 10
13 o Freight, delivery, storage and warehousing costs increased $100,600 to $2,337,200 for the six months ended June 30, 2001 as compared to $2,236,600 for the same period in 2000 due to the increased sales levels. Interest costs were $962,000 during the six months ended June 30, 2001 as compared to $881,900 for same period in 2000. The Company's average overall debt for the six months ended June 30, 2001 was $26,709,000 as compared to $22,379,000 for the first six months of 2000. The higher debt levels accounted for the higher interest costs. In 1986, the Company constructed an incinerator to destroy a waste gas that had been previously discharged to the atmosphere pursuant to an air permit. By reducing this emission, the Company was entitled to transfer a portion of its emission credits to others. The Company recognized in the six months ended June 30, 2001, a net gain before taxes of $465,500 as a result of the sale of a portion of its credits. The Company settled negotiations with an insurance carrier related to the recovery of certain costs pertaining to the completed remediation work of a railroad siding which resulted in a net gain before taxes of $208,300 for the six months ended June 30, 2001. The Company also settled a dispute over data compensation which resulted in a net gain before taxes of $88,100 for the three and six months ended June 30, 2001. LIQUIDITY AND CAPITAL RESOURCES Operating activities provided $1,764,100 of cash during the six months ended June 30, 2001. Net income of $1,416,600, noncash depreciation and amortization of $1,037,400 and a decline in receivables of $7,099,400 provided $9,553,400 of cash for operations. Increases in inventories and prepaid expenses of $3,752,000 and $64,100, respectively, along with a decline of trade accounts payable, accrued expenses and other payables of $3,973,200, used $7,789,300 of cash for operating activities. The Company used $1,981,100 in investing activities during the six months ended June 30, 2001. It invested $1,993,400 in capital expenditures while other noncurrent assets declined by $12,300. Financing activities provided $1,188,600 for the first six months of 2001. The Company's net borrowings under its fully-secured revolving line of credit increased by $2,700,000. The Company made payments on its long-term debt of $811,200, purchased 40,072 shares of treasury stock for $460,300, paid $287,400 in cash dividends and received $47,500 in payment for the exercise of stock options. 11
14 On May 24, 2001, the Company announced that Amvac Chemical Corporation, a wholly-owned subsidiary of the Company, completed the acquisition of a manufacturing facility from E.I. Du Pont de Nemours and Company ("DuPont"). The facility, termed the "C-Unit" is one of three such units located on DuPont's five hundred and ten acre complex in Axis, Alabama and the C-Unit acquisition consisted of a long-term ground lease of twenty-five acres and the purchase of all improvements thereon. The C-Unit is a multipurpose plant designed primarily to manufacture pyrethroids and organophosphates, including Fortress(R), a corn soil insecticide that the Company purchased from DuPont in 2000. The acquisition of the C-Unit significantly increased the Company's capacity while also providing flexibility and geographic diversity. Management believes, as the Company looks to acquire additional product lines, the C-Unit will allow the Company to produce compounds that could not be manufactured at the Company's Los Angeles (Commerce, California) facility and will further complement the Company's toll manufacturing capabilities. The Company will begin the commissioning phase of the C-Unit during the third quarter of 2001 and it is anticipated that this phase will be completed sometime during the first six months of 2002. The Company intends to focus its efforts, in addition to acquiring new product lines and expanding the use of its current products, on discussions with companies that in this time of consolidation in the Company's industry, may be interested in utilizing the Company's toll manufacturing capabilities in the C-Unit. In April 2001, the Company's bank amended its fully-secured long-term line of credit agreement. The credit availability was temporarily increased from $24,000,000 to $30,000,000 for the period April 4, 2001 through August 1, 2001. On August 1, 2001 the credit limit was automatically amended to $24,000,000. The expiration date of the credit agreement was also extended to July 1, 2002. The Company is presently in discussions with its bank to restructure its current debt which will include the expansion of its credit availability. Management continues to believe, to finance its planned manufacturing capacity (the C-Unit), to continue to improve its working capital position, and maintain flexibility in financing interim needs, it is prudent to explore alternate sources of financing. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. The Company's previous business combinations were accounted for using the purchase method. As of June 30, 2001, the net carrying amount of goodwill and other intangible assets is $10,218,900. Amortization expense during the six-month period ended June 30, 2001 was $438,200. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There are no material changes from the disclosures in the Company's Form 10-K filed with the U.S. Securities and Exchange Commission for the year ended December 31, 2000. 12
15 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders was held on June 22, 2001 and there were two matters voted on at the meeting. 1. Elections of directors: The seven nominees listed below were elected to serve on the Board of Directors for the ensuing year. The vote tabulation with respect to each nominee follows: <TABLE> <CAPTION> Votes Votes Cast Against Director Cast For or Withheld -------- -------- ------------------ <S> <C> <C> Herbert A. Kraft 2,701,906 11,327 Glenn A. Wintemute 2,701,906 11,327 Eric G. Wintemute 2,701,906 11,327 James A. Barry 2,701,906 11,327 John B. Miles 2,701,906 11,327 Jay R. Harris 2,701,906 11,327 Carl R. Soderlind 2,701,906 11,327 </TABLE> 2. A proposal by management relating to approval of the American Vanguard Corporation Employee Stock Purchase Plan was submitted to a vote of stockholders. The Board recommended a vote for the proposal. A total of 2,667,951 votes were cast in favor of this proposal, a total of 35,553 votes were cast against it and 9,729 votes were counted as abstentions. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (b) Reports on Form 8-K Date of the Report: June 5, 2001 Description: On June 5, 2001, American Vanguard Corporation issued a press release announcing that Amvac Chemical Corporation, a wholly-owned subsidiary of American Vanguard Corporation, completed the acquisition of a manufacturing facility from E. I. DuPont de Nemours and Company. 13
16 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: August 10, 2001 By: /s/ Eric G. Wintemute ------------------------- Eric G. Wintemute President, Chief Executive Officer and Director Dated: August 10, 2001 By: /s/ J. A. Barry ------------------------- J. A. Barry Senior Vice President, Chief Financial Officer, Secretary/Treasurer and Director 14