UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Year Ended December 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From To
Commission file number 001-13795
AMERICAN VANGUARD CORPORATION
Delaware
(State or other jurisdiction of
Incorporation or organization)
4695 MacArthur Court, Newport Beach, California
(Address of principal executive offices)
95-2588080
(I.R.S. Employer
Identification Number)
92660
(Zip Code)
(949) 260-1200
(Registrant’s telephone number, including area code)
Title of each class
Common Stock, $.10 par value
Securities registered pursuant to Section 12(b) of the Act:
Trading
Symbol(s)
AVD
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ☐ No ☒
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 ☒ No ☐
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). Yes ☒ No ☐
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.
Large accelerated filer
Non-accelerated filer
☐
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☒
☐
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock of the registrant held by non-affiliates is $523.8 million. This figure is estimated as of June 30, 2021 at which
date the closing price of the registrant’s Common Stock on the New York Stock Exchange was $17.51 per share. For purposes of this calculation, shares owned by
executive officers, directors, and 5% stockholders known to the registrant have been deemed to be owned by affiliates. The number of shares of $.10 par value Common
Stock outstanding as of June 30, 2021, was 31,200,611. The number of shares of $.10 par value Common Stock outstanding as of March 1, 2022 was 30,944,838.
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
December 31, 2021
PART I
Page No.
Item 1.
Business ................................................................................................................................................................
Item 1A. Risk Factors ..........................................................................................................................................................
Item 1B. Unresolved Staff Comments .................................................................................................................................
Item 2.
Properties ..............................................................................................................................................................
Item 3.
Legal Proceedings .................................................................................................................................................
Item 4.
Mine Safety Disclosures .......................................................................................................................................
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities ..............................................................................................................................................................
Item 6.
Reserved ...............................................................................................................................................................
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ...............................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ..............................................................................
Item 8.
Financial Statements and Supplementary Data .....................................................................................................
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...............................
Item 9A. Controls and Procedures .......................................................................................................................................
Item 9B. Other Information .................................................................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections .................................................................
PART III
Item 10. Directors, Executive Officers and Corporate Governance ....................................................................................
Item 11. Executive Compensation ......................................................................................................................................
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .............
Item 13. Certain Relationships and Related Transactions, and Director Independence ......................................................
Item 14. Principal Accountant Fees and Services ...............................................................................................................
Item 15. Exhibits and Financial Statement Schedule ..........................................................................................................
Item 16. Form 10-K Summary ............................................................................................................................................
SIGNATURES AND CERTIFICATIONS ...............................................................................................................................
PART IV
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1
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
(Dollars in thousands, except per share data)
PART I
Unless otherwise indicated or the context otherwise requires, the terms “Company,” “we,” “us,” and “our” refer to American
Vanguard Corporation and its consolidated subsidiaries (“AVD”).
Forward-looking statements in this report, including without limitation, statements relating to the Company’s plans, strategies,
objectives, expectations, intentions, and adequacy of resources, are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and
uncertainties. (Refer to Part I, Item 1A, Risk Factors and Part II, Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operation, included in this Annual Report.)
All dollar amounts reflected in the consolidated financial statements are expressed in thousands, except per share data.
ITEM 1
BUSINESS
American Vanguard Corporation (“AVD”) was incorporated under the laws of the State of Delaware in January 1969 and
operates as a holding company. Unless the context otherwise requires, references to the “Company” or the “Registrant,” in this Annual
Report refer to AVD. The Company conducts its business through its principle operating subsidiaries, including AMVAC Chemical
Corporation (“AMVAC”) for its domestic business and AMVAC Netherlands BV (“AMVAC BV”) for its international business.
The subsidiaries in the U.S. include: AMVAC, GemChem, Inc. (“GemChem”), Envance Technologies, LLC (“Envance”),
TyraTech Inc. (“TyraTech”) and OHP Inc. (“OHP”).
Internationally, the Company operates its business through the following subsidiaries: AMVAC BV, AMVAC Hong Kong
Limited (“AMVAC Hong Kong”), AMVAC Mexico Sociedad de Responsabilidad Limitada (“AMVAC M”), AMVAC de Costa Rica
Sociedad de Responsabilidad Limitada (“AMVAC CR Srl”), AMVAC Singapore Pte, Ltd (“AMVAC Sgpr”), Grupo AgriCenter
(including the parent AgriCenter S.A. and its subsidiaries) (“AgriCenter”), AMVAC do Brasil Representácoes Ltda (“AMVAC do
Brasil”), AMVAC do Brazil 3p LTDA (“AMVAC 3p”), American Vanguard Australia PTY Ltd (“AVD Australia”), AgNova
Technologies PTY Ltd (“AgNova”), and the Agrinos group (“Agrinos”).
Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable segment.
Refer to Part II, Item 7 for selective enterprise information.
AMVAC is a California corporation that traces its history from 1945 and is a manufacturer of chemical, biological and
biorational products that develops and markets solutions for agricultural, commercial and consumer uses. It synthesizes and formulates
chemicals and ferments and extracts microbial products for crops, turf and ornamental plants, and human and animal health protection.
These products, which include insecticides, fungicides, herbicides, soil health, plant nutrition, molluscicides, growth regulators, and
soil fumigants, are marketed in liquid, powder, and granular forms. AMVAC primarily synthesizes, formulates, and distributes its own
proprietary products or custom manufactures, formulates or distributes for others. In addition, the Company has carved out a
leadership position in closed delivery systems, currently offers certain of its products in SmartBox, Lock ‘n Load and EZ Load
systems, and is commercializing a precision application technology known as SIMPAS (see “Intellectual Property” below) which
permits the delivery of multiple products (from AMVAC and/or other companies) at variable rates in a single pass. AMVAC has
historically expanded its business through both the acquisition of established chemistries, the development and commercialization of
new formulations or compounds through licensing arrangements, self-funded research and development of precision application
technology and the expansion of its global distribution network to gain broader market access.
AMVAC BV is a Netherlands Corporation that was established in 2012 and is based in Utrecht, near Amsterdam in the
Netherlands. AMVAC BV sells product both directly and through its network of subsidiaries in various international territories.
Below is a description of the Company’s acquisition/licensing activity over the past three years.
On July 1, 2021, the Company completed the purchase of certain assets from Syngenta Crop Protection related to the herbicide
trifloxysulfuron (Envoke), including end-use registrations, data compensation claims, trademarks, formulation know-how, and books
and records.
2
On October 8, 2020, the Company’s Australian subsidiary, AVD Australia, completed the purchase of all the outstanding shares
of AgNova, an Australian company that sources, develops, and distributes specialty crop protection and production solutions for
agricultural and horticultural producers and for selected non-crop users. AgNova has an established reputation for cost-effective
product development from original concept through evaluation, registration, marketing, and sales, with new technologies flowing from
its development pipeline. AgNova is committed to the provision of innovative, value-adding solutions for agriculture and related
industries. The acquired assets included product registration, trade names and trademarks, customer lists, workforce, fixed assets, and
existing working capital.
On October 2, 2020, the Company’s principal operating subsidiary, AMVAC, completed the purchase of all the outstanding
shares of the Agrinos Group Companies (Agrinos) from Agrinos AS, a Norwegian holding company, from a liquidation proceeding
of that entity before a Norwegian bankruptcy court in Oslo, Norway. In addition to the shares of Agrinos, AMVAC acquired a bank of
microbial and micronutrients, as well as about 150 pending or issued patents. Agrinos is a fully integrated biological input supplier
with proprietary technology, manufacturing facilities, and global distribution capabilities. Its High Yield Technology® product
platform works in conjunction with other nutritional crop inputs to increase crop yield, improve soil health and reduce the
environmental footprint of traditional agricultural practices. The acquired assets included product registration, trade names and
trademarks, customer lists, workforce, fixed assets, two factories and existing working capital.
On April 1, 2020, the Company’s principal operating subsidiary, AMVAC, acquired 6,250,000 common shares of Clean Seed
Capital Group Ltd. (Clean Seed), representing an ownership of approximately 8%. In addition, AMVAC licensed from Clean Seed
certain intellectual property rights related to Clean Seed’s SMART planting technologies.
On December 20, 2019, the Company’s principal operating subsidiary, AMVAC, completed the purchase of certain assets
related to four herbicide products from E.I. du Pont de Nemours and Company for use in the U.S.. The purchased assets included end-
use registrations, registration data, trademarks (specifically, Classic®, First Rate®, Python® and Hornet®), on-hand inventory,
commercial sales information, know-how and certain product supply arrangements.
On July 1, 2019, the Company completed the acquisition of three crop protection products for the U.S. market from Raymat
Crop Science, Inc. and its affiliate, Esstar Crop Science, Inc. The acquired products are the miticide etoxazole (Stifle), the insect
growth regulator diflubenzuron (Cavalier), and a rice herbicide bispyribac sodium (Arroz). The acquired assets included product
registrations, trademarks and trade names, customer lists and associated on-hand inventory.
On January 10, 2019, the Company’s international subsidiary AMVAC do Brazil completed the purchase of the shares of
Agrovant and Defensive, two distribution companies based in Brazil. Agrovant and Defensive market and distribute crop protection
products and micronutrients with focus on the fruit and vegetable market segments throughout Brazil. The acquired entities held assets
that consist of product registrations, trade names and trademarks, customer lists, workforce, fixed assets, and existing working capital.
Agrovant and Defensive were merged in 2020 and renamed to AMVAC 3p.
Seasonality
The agricultural chemical industry, in general, is cyclical in nature. The demand for AVD’s products tends to be seasonal.
Seasonal usage, however, does not necessarily follow calendar dates, but more closely follows growing patterns, weather conditions,
geography, weather related pressure from pests and customer marketing programs. Further, growing seasons vary by geographical
region; thus, there is no single seasonal cycle affecting our sales. Rather, multiple seasons transpire over the course of the calendar
year.
Backlog
AVD primarily sells its products based on purchase orders. The purchase orders are typically fulfilled within a short time frame.
As a result, backlog is not considered a significant factor of, or a valid metric for, AVD’s business. The 2021 year, however, did end
with a significantly larger than normal backlog of orders that is expected to result in a strong start to the 2022 financial year as demand
for the Company’s products remains high.
Customers
The Company’s largest three customers accounted for 17%, 14% and 8% of the Company’s sales in 2021; 17%, 12% and 10%
in 2020; and 18%, 14% and 7% in 2019.
3
Distribution
In the U.S. AMVAC predominantly distributes its products through national distribution companies and buying groups or co-
operatives, which purchase AMVAC’s goods on a purchase order basis and, in turn, sell them to retailers/growers/end-users.
Internationally, AMVAC BV has sales offices or wholly owned distributors in Mexico, Central America, Brazil, Australia, and
India, and sales force executives or sales agents in several other territories. The Company’s domestic and international distributors,
agents and customers typically have long-established relationships with retailers/end-users, far-reaching logistics, transportation
capabilities and/or customer service expertise. The markets for AVD’s products vary by region, target crop, use and type of
distribution channel. AVD’s customers are experts at addressing these various markets.
Competition
In its many marketplaces, AVD faces competition from both domestic and foreign manufacturers. Many of our competitors are
larger and have substantially greater financial and technical resources than AVD. AVD’s capacity to compete depends on its ability to
develop additional applications (including delivery systems and precision application technologies) for its current products and/or
expand its product lines and customer base. AVD competes principally based on quality, product efficacy, price, technical service and
customer support. In some cases, AVD has positioned itself in smaller niche markets, which are no longer addressed by larger
companies. In other cases, for example in the Midwest corn and soybean markets, the Company competes directly against larger
competitors.
Manufacturing
Through its six manufacturing facilities (see Item 2, Properties), AVD synthesizes many of the technical grade active
ingredients that are in its end-use products. Further, the Company formulates and packages its end-use products at four of its own
facilities or at the facilities of third-party formulators in the U.S. and at various international locations. In addition, the Company owns
two biological fermentation sites, one site in the U.S., and one in Mexico, and, in addition, has a product manufacturing arrangement
at a third-party facility in India.
Raw Materials
AVD utilizes numerous companies to supply the various raw materials and components used in manufacturing its products.
Many of these materials are readily available from domestic sources. In those instances where there is a single source of supply or
where the source is not domestic, AVD seeks to secure its supply by either long-term (multi-year) arrangements or purchasing on long
lead times from its suppliers. Further, where the availability or cost of certain raw materials may be subject to the effect of tariffs
and/or supply chain disruption, the Company may order goods at times or in volumes out of the ordinary course to optimize pricing
and to ensure supply.
Intellectual Property
AVD’s proprietary product formulations are protected, to the extent possible, as trade secrets and, to a lesser extent, by patents.
Certain of the Company’s closed delivery systems are patented, and the Company has both pending and issued patents relating to its
equipment portfolio, particularly with respect to its SIMPAS and ULTIMUS technology. In addition, the Company owns multiple
issued patents relating to both its low-impact Envance solutions as well as its Agrinos biological and microbial solutions. Further,
AVD’s trademarks bring value to its products in both domestic and foreign markets. AVD considers that, in the aggregate, its product
registrations, trademarks, licenses, customer lists and patents constitute valuable assets. While it does not regard its current business as
being materially dependent upon any single product registration, trademark, license, or patent, it believes that patents will play an
increasingly important role in its developmental equipment and green solution technologies.
EPA Registrations
In the U.S., AVD’s products also receive protection afforded by the terms of the Federal Insecticide, Fungicide and Rodenticide
Act (“FIFRA”), pursuant to which it is unlawful to sell any pesticide in the U.S., unless such pesticide has first been registered by the
U.S. Environmental Protection Agency (“USEPA”). Most of the Company’s products that are sold in the U.S. are subject to USEPA
registration and periodic re-registration requirements and are registered in accordance with FIFRA. This registration by USEPA is
based, among other things, on data demonstrating that the product will not cause unreasonable adverse effects on human health or the
environment, when used according to approved label directions. In addition, each state requires a specific registration before any of
AVD’s products can be marketed or used in that state. State registrations are predominantly renewed annually with a smaller number
of registrations that are renewed on a multiple year basis. Foreign jurisdictions typically have similar registration requirements by
statute.
4
In addition, certain of the Company’s biological products are labeled organic under the Organic Materials Review Institute
(“OMRI”), Washington State Department of Agriculture (“WSDA”) and/or California Department of Food and Agriculture (“CDFA”)
and, as such, are subject to the requirements of those certification standards, including with respect to raw materials and processes. As
is the case with synthetic products, these biological products are also subject to specific labeling requirements that may vary from state
to state.
The USEPA, state, and foreign agencies have required, and may require in the future, that certain scientific data requirements be
performed on registered products sold by AVD. AVD, on its own behalf and in joint efforts with other registrants, has furnished, and
is currently furnishing, required data relative to specific products. Under FIFRA, the federal government requires registrants to submit
a wide range of scientific data to support U.S. registrations, including in the case of adding labeled uses. This requirement results in
operating expenses in such areas as regulatory compliance, with USEPA and other such bodies in the markets in which the Company
sells its products. In addition, at times, the Company is required to generate new formulations of existing products and/or to produce
new products in order to remain compliant. The Company expensed $16,568, $15,613 and $13,989, during 2021, 2020 and 2019,
respectively, on these activities.
Registration
Product development
Total
Environmental
2021
2020
2019
$
$
10,612 $
5,956
16,568 $
10,914 $
4,699
15,613 $
9,046
4,943
13,989
AVD is subject to numerous federal and state laws and governmental regulations concerning environmental matters and
employee health and safety at its six manufacturing facilities both in the U.S. and abroad. The Company continually adapts its
manufacturing, storage, transportation, handling and disposal processes to the environmental control standards of the various
regulatory and other agencies to which it is subject. The USEPA and other foreign, federal and state agencies have the authority to
promulgate regulations that could have an impact on the Company’s operations.
AVD expends substantial funds to minimize the risk of discharge of materials in the environment and to comply with the
governmental regulations relating to protection of the environment. Wherever feasible, the Company recovers and recycles raw
materials and increases product yield in order to partially offset increasing pollution abatement costs.
The Company is committed to a long-term environmental protection program that reduces emissions of hazardous materials into
the environment, as well as to the remediation of identified existing environmental concerns.
Human Capital Resources
We believe that, beyond being essential to our operations, our people have inestimable worth independent of our business. As
outlined in our Human Rights Policy (see, www.american-vanguard.com under ESG tab), we believe that it is fundamental to our
corporate responsibility and, indeed, to our humanity, that we recognize, respect and nurture the freedom and dignity of all persons.
Accordingly, we have insinuated that belief throughout the fabric of our operations in our approach toward our employees. Indeed, the
first two core values underlying our commitment to sustainability (see, Update to Corporate Sustainability Report, www.american-
vanguard.com under ESG tab) are “Safety First” – which is a culture that begins with highly-regulated manufacturing plants,
continues into the design of science-backed products and extends into market-leading delivery systems – and “Making a Difference” –
under which, by rewarding achievement and giving our employees a voice, we attract diverse employees who want to make a
difference in their careers, in the company and in the communities that we serve.
Our Human Capital program consists of the following elements:
• Board Oversight – through our Nominating and Corporate Governance Committee (“N&CG”), our board of directors
oversees human capital-related risks and opportunities. At least annually, the N&CG Committee requires that management
update succession planning for key executives, including with respect to planning for the future with a commitment toward
diversity, equity and inclusion.
• Strategy – the Company’s human capital strategy has two primary elements: giving our employees a voice and providing
them with generous benefits (including an unrivalled health benefits plan and awards of common stock to the entire
workforce). As we have covered in our Update to Corporate Sustainability Report, our company is a destination for highly
qualified employees who are drawn to a workplace where they can make a difference. Our managerial approach is that our
functions work in a collaborative manner – cutting across departmental lines to arrive at better solutions with a high level of
efficiency. This strategy has enabled the Company to maximize retention, even in an increasingly competitive employment
market.
5
• Compensation – as mentioned in our Strategy above, compensation is an essential element of our human capital approach.
During the pandemic in the midst of the so-called “Great Resignation” that affected many industries, we took measures to
incentivize our workforce to remain with us, including across-the-board wage increases in certain of our manufacturing
facilities. To the extent that our highly skilled personnel are being recruited by other companies, we endeavor to keep an
open conversation on their needs and, where appropriate, have increased their total compensation (through a combination of
wage, stock and/or vacation) to retain them.
• Voice – our management style is to solicit good ideas from employees, involve them in implementation and give them
recognition for ideas that succeed. For example, personnel from virtually any department (be it sales, technology, product
development or otherwise) can submit ideas to our Innovation Review Committee (“IRC”) for consideration and potential
funding. The IRC continues to be a source of new product ideas that has enabled us to launch several new formulations and
other solutions on an annual basis. Similarly, our Beekeeper platform is a company-only social media channel on which
employees anywhere in the world can report on their accomplishments, commendations of others and local developments.
• Diversity, Equity and Inclusion (“DEI”) – the Company continues to expand its DEI program. In 2021, with the retirement
of Lawrence Clark from our board of directors, the Company called upon the Latino Corporate Directors Association to
help recruit Marisol Angelini as a new director. With Ms. Angelini’s addition to the board, three of nine members (33%) of
our board are female and three of nine (again, 33%) are from underrepresented groups (LGBTQ, Middle Eastern and
Latinx). Based upon the Company’s most current EEO-1 (“Equal Employment Opportunity”) Report, representation of
African Americans in our domestic workforce exceeds the prevalence of that group in the national population, while
representation of Hispanic personnel is slightly below the national average. Nevertheless, during 2022, the Company is
working on a plan to advance its commitment to DEI throughout the workforce.
The Company employed 804 employees as of December 31, 2021, and 771 employees as of December 31, 2020. From time to
time, due to the seasonality of its business, AVD uses temporary contract personnel to perform certain duties primarily related to
packaging of its products. None of the Company’s employees are subject to a collective bargaining agreement. The Company believes
it maintains positive relations with its employees.
Domestic operations
AMVAC is a California corporation that was incorporated under the name of Durham Chemical in August 1945. The name of
the corporation was subsequently changed to AMVAC in January 1971. As the Company’s main operating subsidiary, AMVAC owns
and/or operates the Company’s domestic manufacturing facilities. AMVAC manufactures, formulates, packages and sells its products
in the U.S. and is a wholly owned subsidiary of AVD.
GemChem is a California corporation that was incorporated in 1991 and was subsequently purchased by the Company in 1994.
GemChem sells into the pharmaceutical, cosmetic and nutritional markets and, in addition, purchases key raw materials for the
Company. GemChem is a wholly owned subsidiary of AVD.
DAVIE owns real estate for corporate use only. The site is the home to the Company’s research center and provides
accommodation for the Company’s production control team. DAVIE is a wholly owned subsidiary of AVD.
On October 2, 2017, AMVAC purchased substantially all the assets of OHP, a domestic distribution company specializing in
products for the turf and ornamental market. OHP markets and sells end use products for third parties, either under third-party brands
or else as its own label products.
Envance is a Delaware Limited Liability Company that was formed in 2012 by AMVAC and joint venture partner TyraTech.
Envance and TyraTech became wholly owned subsidiaries of the Company on November 9, 2018. Envance has the rights to develop
and commercialize pesticide products and technologies based on TyraTech’s intellectual property. Products are made from natural oils
in global consumer, commercial, professional, crop protection and seed treatment markets. Envance is taking products to market
primarily by licensing its intellectual property to third parties.
International operations
In July 2012, the Company formed AMVAC CV, which is incorporated in the Netherlands, for the purpose of managing foreign
sales on behalf of the Company. AMVAC CV is owned jointly by AMVAC as the general partner, and AVD International, LLC (also
formed in July 2012 as a wholly owned subsidiary of AMVAC), as the limited partner, and is a wholly owned subsidiary of AVD. In
November 2019, AMVAC Hong Kong was formed and is wholly owned subsidiary of AMVAC. AMVAC Hong Kong took over the
role of AMVAC CV as of January 1, 2020.
6
AMVAC BV is a registered Dutch private limited liability company that was formed in July 2012. AMVAC BV is located in the
Netherlands and is wholly owned by AMVAC CV. During 2021, the international business sold the Company’s products in 54
countries, as compared to 55 countries in 2020.
AMVAC M is a wholly owned subsidiary of AMVAC BV and was originally formed in 1998 (as Quimica Amvac de Mexico
S.A. de C.V and subsequently changed to AMVAC Mexico Sociedad de Responsabilidad Limitada “AMVAC M”) to conduct the
Company’s business in Mexico.
AMVAC Sgpr is a wholly owned subsidiary of AMVAC BV and was formed on April 12, 2016. This new entity was formed to
conduct the Company’s business in the Asia Pacific and China region.
On October 27, 2017, AMVAC BV purchased 100% of the stock of AgriCenter, which owned shares in subsidiaries located in
Costa Rica, Panama, Nicaragua, Honduras, the Dominican Republic, Mexico, Guatemala, and El Salvador. These affiliated entities,
collectively known as AgriCenter, market, sell and distribute end-use chemicals, including the Company’s own products, and
biological products throughout Central America primarily for crop applications.
On January 10, 2019, AMVAC BV acquired 100% of the stock of Agrovant and Defensive, two distribution companies based in
Brazil. Agrovant and Defensive market and distribute crop protection products and micronutrients with focus on the fruit and
vegetable market segments throughout Brazil. On December 31, 2020, Agrovant and Defensive merged and renamed the resulting
entity, AMVAC 3p.
On October 8, 2020, American Vanguard Australia Pty Ltd acquired 100% of the stock of AgNova, an Australian company that
sources, develops, and distributes specialty crop protection and production solutions for agricultural and horticultural producers, and
for selected non-crop users.
On October 2, 2020, the Company’s principal operating subsidiary, AMVAC, completed the purchase of all outstanding shares
of Agrinos and certain intellectual property rights. Agrinos is a fully integrated biological input supplier with proprietary technology,
internal manufacturing, and global distribution capabilities and has operating entities in the U.S., Mexico, India, Brazil, China,
Ukraine, and Spain.
The Company classifies as international sales all products bearing foreign labeling shipped to a foreign destination.
International sales
Percentage of net sales
The Company’s Operations in a Pandemic
2021
2020
$ 214,635 $ 186,980 $ 185,961
2019
38.5 %
40.8 %
39.7 %
Since the start of the coronavirus pandemic early in 2020, the Company has made sustained efforts to ensure the health and
safety of the workforce while ensuring continuity of the business, which, under applicable federal guidelines (https://ww.cisa.gov) is
part of the nation’s critical infrastructure (as part of the “Food and Agriculture,” “Chemical” and “Public Works and Infrastructure
Support Services” sectors). Our network of international subsidiaries is accorded similar status by governments in the territories in
which they operate. In the workplace, the Company has designed and implemented protocols for social distancing, made provisions
for the workforce to work remotely where possible, and established quarantine policies for those who present COVID-like symptoms
or may have been in contact with those who have. Further, the Company keeps current with local, state, federal and international laws
and restrictions that could affect the business and provide real-time information to the workforce. The Company has also prepared
contingency plans to permit the continued operation of its factories, in the event that there are critical staffing issues due to attrition.
Further, the Company continuously monitors supply chain, transport, logistics and border closures and has reached out to third parties
to make clear that the Company is continuing to operate, and that it has its own policies relating to health and is committed to
compliance with COVID-19 policies of its business partners.
As has been the case with many other employers, since the start of 2021, the Company has encouraged its workforce to receive
vaccinations against COVID-19 through various means, including incentive programs. The surge of the Delta variant in early 2021
had a comparatively low impact on the Company’s workforce. However, the Omicron variant, which began to spread throughout the
world in late 2021, proved to be transmissible to people who were vaccinated or unvaccinated. As a result, like many employers, the
Company experienced a surge in COVID-19 infections at the end of the fourth quarter in 2021 carrying over into the first quarter of
2022. Based upon tracking and tracing, we believe that most of these cases came from community (as opposed to workplace)
transmission. Further, compared to the Delta surge and earlier variants, these cases typically presented with mild symptoms. All told,
the Company has been able to manage its business with minimal impact during the years ended December 31, 2021 and 2020.
7
As of this writing, the Omicron surge is dropping dramatically in many regions, including the U.S. Barring the advent of another
variant, between natural immunity from infection and vaccine immunity, populations in many countries will be increasingly less
vulnerable to coronavirus. However, the efficacy of boosters, variability in social restrictions and evolution of the virus are not yet
known. Consequently, the Company is unable to predict the ultimate impact that the pandemic may have on its future financial
condition, results of operations and cash flows in the near- to mid-term. The Company continues to monitor its business for adverse
impacts of the pandemic, including volatility in the foreign exchange markets, demand, supply-chain disruptions in certain markets,
and increased costs of employee safety, among others.
Risk Management
The Company’s Environmental, Social and Corporate Governance (“ESG”) strategy is fully described on our website
(www.american-vanguard.com); just click on the “ESG” tab. The reader will also find the Company’s updated Corporate
Sustainability Report (dated February 2022) under the same tab.
Available Information
The Company makes available free of charge (through its website, www.american-vanguard.com), its Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). All reports filed with the
SEC are available free of charge on the SEC website, www.sec.gov. Also available free of charge on the Company’s website are the
Company’s Audit Committee, Compensation Committee, Finance Committee and Nominating and Corporate Governance Committee
Charters, the Company’s Corporate Governance Guidelines, the Company’s Code of Conduct and Ethics, and the Company’s
Employee Complaint Procedures for Accounting and Auditing Matters. Beneath the ESG tab at that site, you will also find links to the
Company’s Corporate Sustainability Reports, Climate Change Commitment and Human Rights Policy. The Company’s Internet
website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on
Form 10-K.
8
ITEM 1A. RISK FACTORS
Regulatory/Legislative/Litigation Risks
The regulatory climate remains challenging to the Company’s interests both domestically and internationally—Various
agencies within the U.S. (both federal and state) and foreign governments continue to exercise increased scrutiny in permitting
continued uses (or the expansion of such uses) of many chemistries, including several of the Company’s products and, in some cases,
have initiated or entertained challenges to these uses. The challenge of the regulatory climate is more pronounced in certain
geographical regions (outside the U.S.) where the Company faces resistance to the continued use of certain of its products. For
example, the European Union (“EU”) employs a hazard-based analysis when considering whether product registrations can be
maintained; under this approach, EU regulatory authorities typically do not weigh benefit against risk in their assessments and
routinely cancel products for which a safer alternative is available, notwithstanding the benefit of the cancelled product. There is no
guarantee that this regulatory climate will change in the near term or that the Company will be able to maintain or expand the uses of
many of its products in the face of such regulatory challenges.
The Russian invasion of the Ukraine may expand into a broader international conflict that could adversely affect multiple
channels of commerce and markets. While business operations relating to the Ukraine constitute an immaterial part of the
Company’s overall business, there is no guarantee that the current conflict will not draw military intervention from other countries or
retaliation from Russia, which, in turn, could lead to a much larger conflict. If such escalation should occur, supply chain, trade routes
and markets currently served by the Company could be adversely affected, which, in turn, could materially, adversely affect the
Company’s business operations and financial performance.
Product liability judgments on glyphosate and cases involving other pesticides by domestic courts present a litigation risk to
companies in this industry—Multiple judgments have been rendered by domestic courts in product liability cases against
Bayer/Monsanto in connection with injuries allegedly arising from exposure to the herbicide product, glyphosate. The basis was
purported carcinogenicity based largely upon the findings of a certain international organization, despite significant scientific evidence
to the contrary. While the Company does not sell glyphosate, the theory of these results could put one or more of the Company’s
products at risk. Further, a number of product liability cases involving paraquat have been filed in domestic courts. While the
Company is not a party to these cases and discontinued its limited sales of this herbicide shortly after acquiring an end-use registration
as part of a larger acquisition, there is no guarantee that one or more product liability actions would not be brought against the
Company on a similar basis, and it is possible that adverse rulings in any such actions could have a material adverse effect upon the
Company’s financial performance in future reporting periods.
The trend of passing pesticide “ban-bills” in various states could put one or more of the Company’s products at risk—In
certain states, including Maryland and New York, state and/or local legislatures have passed legislation banning the use of specific
pesticides, such as chlorpyrifos, or pesticide in general, in spite of valid registrations at USEPA and/or the equivalent state agency.
While the Company does not sell chlorpyrifos products, there is no guarantee that one or more of its registered products would not be
targeted in state or local legislation of this nature. Further, such legislation could have a material adverse effect upon the Company’s
financial performance in future reporting periods.
Use of the Company’s products is subject to continuing challenges from activist groups—Use of agrochemical products,
including the Company’s products, is regularly challenged by activist groups in many jurisdictions under a multitude of federal, state
and foreign statutes, including FIFRA, the Food Quality Protection Act, Endangered Species Act (“ESA”) and the Clean Water Act, to
name a few. These challenges typically take the form of lawsuits or administrative proceedings against the USEPA and/or other
federal, state or foreign agencies, the filing of amicus briefs in pending actions, the introduction of legislation that is inimical to the
Company’s interests, and/or adverse comments made in response to public comment invited by regulatory agencies in the course of
registration, re-registration or label expansion. The most prominent of these actions include a line of cases under which environmental
groups have sought to suspend, cancel or otherwise restrict the use of pesticides that have been approved by USEPA on the ground
that that agency failed to confer with the National Marine Fishery Service and/or the Fish and Wildlife Service under the ESA with
respect to biological opinions relating to the use of such products. While industry has been active in defending registrations and
proposing administrative and legislative approaches to address serious resource issues at the affected agencies, these cases continue to
be brought. It is possible that one or more of these challenges could succeed, resulting in a material adverse effect upon one or more of
the Company’s products and consolidated financial statements.
9
USEPA has proposed further limitations and taken action on the continued registration of organophosphates— In
September 2015, the USEPA published in the Federal Register a memorandum entitled, “Literature Review on Neurodevelopmental
Effects & FQPA Safety Factor Determination for the Organophosphate Pesticides,” in which it adopted a position recommending the
application of a 10X safety factor under the FQPA (Food Quality Protection Act) in light of the alleged possibility of
neurodevelopmental harm to women and children based on epidemiological data. Since that time, in the face of objection from
industry, the agency has applied this safety factor to all registered Organophosphate Pesticides (“Ops” or “OP”), including those
owned by the Company, as they have come up for review or renewal. The Company, like many in our industry, believes that applying
this safety factor is not based upon sound science and that the limited studies upon which the agency is relying (for which raw data is
not available even to the agency) do not establish a causal link between the perceived harm and the use of its products. In addition,
finding that the tolerances for chlorpyrifos (an organophosphate not sold by the Company) that had been established under FFDCA
could not be deemed with reasonable certainty to cause no harm, USEPA revoked those tolerance factors and consequently cancelled
the registrations for chlorpyrifos. There is no guarantee that USEPA will not employ a similar standard of review against one or more
of the Company’s organophosphates. Accordingly, the Company intends to take all action necessary to defend its registrations. We
have been joined in this effort by other companies that are similarly concerned about the potential impact of USEPA’s action.
Nevertheless, there is no guarantee that the Company’s actions will alter the course that USEPA has proposed; if the agency’s position
becomes final, some uses of the Company’s OP products could be limited or cancelled. Such action could have a material adverse
effect upon the Company’s financial performance in future reporting periods.
The distribution and sale of the Company’s products are subject to prior governmental approvals and thereafter ongoing
governmental regulation—The Company’s products are subject to laws administered by federal, state and foreign governments,
including regulations requiring registration, approval and labeling of its products. The labeling requirements restrict the use of, and
type of, application for our products. More stringent restrictions could make our products less available, which would adversely affect
our revenues and profitability and cash flows. Substantially all the Company’s products are subject to the USEPA (and/or similar
agencies in the various territories or jurisdictions in which we do business) registration and re-registration requirements and are
registered in accordance with FIFRA or similar laws. Such registration requirements are based, among other things, on data
demonstrating that the product will not cause unreasonable adverse effects on human health or the environment when used according
to approved label directions. All states, where any of the Company’s products are used, also require registration before products, such
as the Company sells, can be marketed or used in that state. Governmental regulatory authorities have required, and may require in the
future, that certain scientific data requirements be fulfilled on the Company’s products. The Company, on its behalf and also in joint
efforts with other registrants, has furnished, and is currently furnishing certain required data relative to its products. There can be no
assurance, however, that the USEPA or similar agencies will not request that certain tests or studies be repeated, or that more stringent
legislation or requirements will not be imposed in the future. The Company can provide no assurance that any testing approvals or
registrations will be granted on a timely basis, if at all, or that its resources will be adequate to meet the costs of regulatory
compliance.
The manufacturing of the Company’s products is subject to governmental regulations— The Company currently owns and
operates five manufacturing facilities which are located in Los Angeles, California; Axis, Alabama; Hannibal, Missouri; Marsing,
Idaho; Clackamas, Oregon; and Etchojoa, Mexico (the “Facilities”). The Facilities operate under the laws and regulations imposed by
relevant country, state and local authorities. The manufacturing of key ingredients for certain of the Company’s products occurs at the
Facilities. An inability to renew or maintain a license or permit, or a significant increase in the fees for such licenses or permits, could
impede the Company’s manufacture of one or more of its products and/or increase the cost of production; this, in turn, would
materially and adversely affect the Company’s ability to provide customers with its products in a timely and affordable manner.
Pandemic/Climate Risks
The COVID-19 pandemic is creating risk, uncertainties and adverse conditions in many industries both here and abroad.
The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic
will impact its customers, business partners, and employees. While the Company did not incur significant disruptions from the
COVID-19 pandemic during the years ended December 31, 2021 and 2020, the Company is unable to predict the impact that the
pandemic will have on its future financial condition, results of operations and cash flows due to numerous uncertainties. The extent to
which the COVID-19 pandemic impacts the Company’s operations and those of its customers will depend on future developments,
which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the
actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and
containment measures, among others. There is no guarantee that the Company will be able to operate without material disruption for
the duration of the pandemic or that its financial conditions and results of operations and cash flows will not be materially adversely
affected by the pandemic in future periods.
10
Disruption in the global supply chain is creating delays, unavailability and adverse conditions for our industry, including
significant price increases especially with regard to ocean bound shipments. With the prolongation of the coronavirus pandemic, the
global supply chain has been under increased stress stemming from container shortages, a lack of domestic truck drivers and a shift in
consumer buying habits. Consequently, ocean cargo both inbound to, and, in some cases, outbound from, the U.S. has experienced
significant delays, while domestic ports and regional warehouses have been filled beyond capacity. To date, while experiencing
disruptions in the supply of raw materials, intermediates, finished goods and packaging, the Company has been able to carry on
business without a material adverse effect upon its overall operations or financial performance. Further, there is no guarantee that the
supply chain condition will materially improve any time soon or that the company will continue to avoid material disruption. Such
disruption could have a material adverse effect on the company’s operations, financial condition or cash flows.
Climate Change may adversely affect the Company’s business—Over the course of the past several years, global climate
conditions have become increasingly inconsistent, volatile and unpredictable. Many of the regions in which the Company does
business have experienced excessive moisture, cold, drought and/or heat of an unprecedented nature at various times of the year. In
some cases, these conditions have either reduced or obviated the need for the Company’s products, whether pre-plant, at-plant, post-
emergent or at harvest. Further, the random nature of climactic change has made it increasingly difficult to forecast market demand
and, consequently, financial performance, from year-to-year. There is no guarantee that climate change will abate in the near future,
and it is possible that such change will continue to hinder the Company’s ability to forecast its sales performance with accuracy and
otherwise adversely affect the Company’s financial performance.
The Company’s business may be adversely affected by weather effects and commodity prices—Demand for many of the
Company’s products tends to vary with weather conditions and weather-related pressure from pests. Adverse weather conditions, then,
may reduce the Company’s revenues and profitability. In light of the possibility of adverse seasonal effects, there can be no assurance
that the Company will maintain sales performance at historical levels in any particular region. Similarly, demand for the Company’s
products used in row crops tends to vary with the commodity prices of those crops in the U.S., particularly corn, soybeans and cotton.
These prices may be driven in part by weather, pest pressure, the domestic farm economy and international markets (e.g., yield and
pricing from similar crops grown in Brazil). There is no guarantee that the U.S. farm economy and row crop commodity prices will
maintain sufficient strength and stability to support the Company’s products at or above historical levels.
The Company may be subject to environmental liabilities—The Company is fully committed toward minimizing the risk of
discharge of materials into the environment and to complying with governmental regulations relating to protection of the environment,
its neighbors and its workforce. Nevertheless, federal and state authorities may seek fines and penalties for any violation of the various
laws and governmental regulations. In addition, while the Company continually adapts its manufacturing processes to the
environmental control standards of regulatory authorities, it cannot entirely eliminate the risk of accidental contamination or injury
from hazardous or regulated materials. In short, the Company may be held liable for significant damages or fines relating to any
environmental contamination, injury, or compliance violation which could have a material adverse effect on the Company’s
consolidated financial condition, statements of operations and cash flows.
Acquisition/Investment Risks
Newly acquired businesses or product lines may not generate forecasted results—While the Company conducts due diligence
using a combination of internal and third party resources and applies what it believes to be appropriate criteria for each transaction
before making acquisitions, there is no guarantee that a business or product line acquired by the Company will generate results that
meet or exceed results that were forecasted by the Company when evaluating the acquisition. There are many factors that could affect
the performance of a newly acquired business or product line. While the Company uses assumptions that are based upon due diligence
and other market information in valuing a business or product line prior to concluding an acquisition, actual results generated post-
closing could vary widely from the Company’s forecast and, as such, could have a material effect upon the Company’s overall
financial performance.
The Company’s investment in foreign businesses may pose additional risks—With the expansion of its footprint
internationally, the Company now carries on business at a material level in some jurisdictions that have a history of political,
economic or currency-related instability and customers with a potentially higher risk profile regarding accounts receivable collectivity
compared to the Company’s legacy business. While such instability may not be present at the current time, there is no guarantee that
conditions will not change in one or more jurisdictions quickly and without notice, nor is there any guarantee that the Company would
be able to recoup its investment in such territories in light of such changes and potential losses due to political factors, economic
factors, devaluation of local currencies, or the collectability risk from customers. Adverse changes of this nature could have a material
effect upon the Company’s overall financial performance.
11
The Company’s investment in technology may not generate forecasted returns—The Company has had a history of investing
in technological innovation, including with respect to product delivery systems, natural oil technology and biologicals, as one of its
core strategies. These investments are based upon the premise that new technology will allow for safer handling or lower overall
toxicity profile of the Company’s product portfolio, appeal to regulatory agencies and the market we serve, gain commercial
acceptance, and command a return that is sufficiently in excess of the investment. However, there is no guarantee that a new
technology will be successfully commercialized, generate a material return or maintain market appeal. Further, many types of
development costs must be expensed in the period in which they are incurred. This, in turn, tends to put downward pressure on period
profitability. There can be no assurance that these expenses will be recovered through successful long-term commercialization of a
new technology.
The Company’s growth has been fueled in part by acquisitions—Over the past few decades, the Company’s growth has been
driven by acquisitions and licensing of both established and developmental products from third parties. There is no guarantee that
acquisition targets or licensing opportunities meeting the Company’s investment criteria will remain available or will be affordable. If
such opportunities do not present themselves, then the Company may be unable to duplicate historical growth rates in future years.
The Company is dependent upon sole source suppliers for certain of its raw materials and active ingredients—There are a
limited number of suppliers of certain important raw materials used by the Company in a number of its products. Certain of these raw
materials are available solely from single sources either domestically or overseas. In connection with supply chain disruptions in 2021,
phosphorus and related compounds were increasingly difficult to source for our entire industry; ensuring a continuous supply required
extraordinary efforts both with respect to sourcing and production planning. That said, there is no guarantee that any of our suppliers
will be willing or able to supply these products to the Company reliably, continuously and at the levels anticipated by the Company or
required by the market. If these sources prove to be unreliable and the Company is not able to supplant or otherwise second source
these products, it is possible that the Company will not achieve its projected sales which, in turn, could adversely affect the Company's
consolidated financial statements.
The Company faces competition in certain markets from new technologies and demand for organically produced food— The
Company faces competition from larger companies that market new chemistries and other similar technologies in certain of the crop
protection sectors in which the Company competes. There is no guarantee that the Company will maintain its market share or pricing
levels in sectors that are subject to competition from companies that market new technologies. Further, it is possible that increased
demand for organic crops may, over time, reduce the demand for the Company’s products.
The Company faces competition from generic competitors that source product from countries having lower cost structures—
The Company continues to face competition from competitors around the globe that may enter the market through either offers to pay
data compensation, or similar means in foreign jurisdictions, and then subsequently source material from countries having lower cost
structures (typically India and China). These competitors typically tend to operate at thinner gross margins and, with low costs of
goods, tend to drive pricing and profitability of subject product lines downward. There is no guarantee that the Company will maintain
market share and pricing when facing such generic competitors, or that such competitors will not offer generic versions of the
Company’s products in the future.
The Company’s key customers typically carry competing product lines and may be influenced by the Company’s larger
competitors—A significant portion of the Company’s products are sold to national distributors in the U.S., which also carry product
lines of competitors that are much larger than the Company. Typically, revenues from the sales of these competing product lines and
related program incentives constitute a greater part of our distributors’ income than do revenues from sales and program incentives
arising from the Company’s product lines. With the recent consolidation among domestic distribution companies, these considerations
have become more pronounced. In light of these facts, there is no assurance that such customers will continue to market our products
aggressively or successfully, or that the Company will be able to influence such customers to continue to purchase our products
instead of those of our competitors.
Industry consolidation may threaten the Company’s position in various markets—The global agricultural chemical industry
continues to undergo significant consolidation. Many of the Company’s competitors have grown or are expected to grow through
mergers and acquisitions. As a result, these competitors will tend to be in position to realize greater economies of scale, offer more
diverse portfolios and thereby exert greater influence throughout the distribution channels. Consequently, the Company may find it
more difficult to compete in various markets. While such merger activity may generate acquisition opportunities for the Company,
there is no guarantee that the Company will benefit from such opportunities. Further, there is a risk that the Company’s future
performance may be hindered by the growth of its competitors through consolidation.
12
The Company is dependent on a limited number of customers, which makes it vulnerable to the continued relationship with
and financial health of those customers—Our top three customers accounted for 39% of the Company’s sales in 2021, 2020 and
2019. The Company’s future prospects may depend on the continued business of such customers and on our continued status as a
qualified supplier to such customers. The Company cannot guarantee that these key customers will continue to buy products from us
at current levels. The loss of a key customer could have a material adverse effect on the Company’s consolidated financial statements.
General Risks
The carrying value of certain assets on the Company’s consolidated balance sheets may be subject to impairment depending
upon market trends and other factors—The Company regularly reviews the carrying value of certain assets, including long-lived
assets, inventory, fixed assets and intangibles. Depending upon the class of assets in question, the Company takes into account various
factors including, among others, sales, trends, market conditions, cash flows, profit margins and the like. Based upon this analysis,
where circumstances warrant, the Company may leave such carrying values unchanged or adjust them as appropriate. There is no
guarantee that these carrying values can be maintained indefinitely, and it is possible that one or more such assets could be subject to
impairment which, in turn, could have an adverse impact upon the Company’s consolidated financial statements.
The Company’s computing systems are subject to cyber security risks—In the course of its operations the Company relies on
its computing systems, including access to the internet, the use of third-party applications and the storage and transmission of data
through such systems. While the Company has implemented security measures to protect these systems, there is no guarantee that a
third-party will not penetrate these defenses through hacking, phishing or otherwise and either compromise, corrupt or shut down
these systems. Further, in the event of such incursion it is possible that confidential business information and private personal data
could be taken. Such an event could adversely affect both the Company’s ability to operate, its reputation with key stakeholders and
its overall financial performance.
Reduced financial performance may limit the Company’s ability to borrow under its credit facility—The Company has
historically grown net sales and net income through the expansion of current product lines, the acquisition of product lines from third
parties and the acquisition of both domestic and international distributors with strong niche market positions. In order to finance such
acquisitions, the Company has drawn upon its senior credit facility. However, the Company’s borrowing capacity under the senior
credit facility depends, in part, upon its satisfaction of a negative covenant that sets a maximum ratio of borrowed debt to earnings (as
measured over the trailing 12-month period). There is no guarantee that the Company will continue to generate earnings necessary to
ensure that it has sufficient borrowing capacity to support future acquisitions or that, when necessary, the lender group will amend the
senior credit facility to provide for such borrowing capacity. Further, despite the Company’s long-standing relationship with its
lenders, in light of the uncertainties in global financial markets, there is no guarantee that the Company’s lenders will be either willing
or able to continue lending to the Company at such rates and in such amounts as may be necessary to meet the Company’s working
capital needs.
The Company is subject to taxation related risks in multiple jurisdictions—The Company is a U.S. based multinational
company subject to tax in multiple U.S. and foreign tax jurisdictions. Significant judgment is required in determining our global
provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we believe
our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these
positions may be contested or overturned by jurisdictional tax authorities, which may have a significant impact on our global provision
for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or
applied. In 2017, the U.S. enacted significant tax reform, and in the long-term certain provisions of the new law may adversely affect
us. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in the EU, as
well as a number of other countries and organizations such as the Organization for Economic Cooperation and Development, are
actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business.
If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our business, financial
condition, results of operations, or cash flows may be adversely impacted.
To the extent that capacity utilization is not fully realized at its manufacturing facilities, the Company may experience lower
profitability—While the Company endeavors continuously to maximize utilization of it manufacturing facilities, our success in these
endeavors is dependent upon many factors, including fluctuating market conditions, product life cycles, weather conditions in our key
markets, availability of raw materials, manufacturing equipment performance, retention of the workforce and regulatory constraints,
among other things. There can be no assurance that the Company will be able to maximize the utilization of capacity at its
manufacturing facilities. Underutilization of such manufacturing resources could have a material adverse effect upon the Company’s
financial performance.
The Company’s continued success depends, in part, upon a limited number of key employees—Within certain functions, the
Company relies heavily on a small number of key employees to manage ongoing operations and to perform strategic planning. In
some cases, there are no internal candidates who are qualified to succeed these key personnel in the short term. In the event that the
Company were to lose one or more key employees, there is no guarantee that Company could replace them with people having
comparable skills. Further, the loss of key personnel could adversely affect the operation of our business.
13
ITEM 1B. UNRESOLVED STAFF COMMENTS
None
ITEM 2
PROPERTIES
AMVAC owns in fee the Facility constituting approximately 152,000 square feet of improved land in Commerce, California
(“Commerce”) on which its West Coast manufacturing, some of its warehouse facilities and some of its manufacturing administrative
offices are located.
DAVIE owns in fee approximately 72,000 square feet of warehouse, office and laboratory space on approximately 118,000
square feet of land in Commerce, California, which is leased to AMVAC. In 2013, the Company made a significant investment in the
Glenn A. Wintemute Research Center, which houses the Company’s primary research laboratory supporting synthesis, formulation
and other new product endeavors.
In 2001, AMVAC completed the acquisition of a manufacturing facility (the “Axis Facility”) from E.I. DuPont de Nemours and
Company (“DuPont”). The Axis Facility was one of three such units located on DuPont’s 510-acre complex in Axis, Alabama. The
acquisition consisted of a long-term ground lease of 25 acres and the purchase of all improvements thereon. The facility is a multi-
purpose plant designed for synthesis of active ingredients and formulation and packaging of finished products. In 2018, FMC
Corporation acquired from DuPont a business unit, which held, among other things, the Axis Facility. Prior to expiration of the lease,
AMVAC and FMC negotiated the terms of a new lease, which has a term of 15 years and the option to renew for two, 5-year periods.
On December 28, 2007, AMVAC purchased certain manufacturing assets relating to the production of Thimet and Counter and
located at BASF’s multi-plant facility situated in Hannibal, Missouri (the “Hannibal Site”). Subject to the terms and conditions of the
Agreement, AMVAC purchased certain buildings, manufacturing equipment, office equipment, fixtures, supplies, records, raw
materials, intermediates and packaging constituting the “T/C Unit” of the Hannibal Site. The parties entered into a ground lease and a
manufacturing and shared services agreement, under which BASF continues to supply various shared services to AMVAC for the
Hannibal Site.
On March 7, 2008, AMVAC acquired from Bayer CropScience Limited Partnership, (“BCS LP”), a U.S. business of Bayer
CropScience GmbH, a facility (the “Marsing Facility”) located in Marsing, Idaho, which consists of approximately 17 acres of
improved real property. The Marsing Facility is engaged in the blending of liquid and powder raw materials and the packaging of
some of the Company’s finished goods inventory in liquid, powder and pelletized formulations which are sold both in the U.S. and
internationally. In addition, during 2019, the Company purchased approximately three acres of unimproved real estate immediately
adjacent to the Marsing Facility for potential storage and operational use in the future.
On October 2, 2020, AMVAC completed the purchase of all outstanding shares of Agrinos which is a fully integrated biological
input supplier with proprietary technology, internal manufacturing, and global distribution capabilities. Its High Yield Technology®
product platform works in conjunction with other nutritional crop inputs to increase crop yield, improve soil health and reduce the
environmental footprint of traditional agricultural practices. Agrinos has two primary biological production facilities, a state-of-the-art
microbial fermentation facility based in Clackamas, Oregon, and a facility in Sonora, Mexico. The Clackamas and Sonora facilities are
used as both manufacturing sites, and operational centers for global supply chain and logistics.
AVD regularly adds chemical processing equipment to enhance or expand its production capabilities. The Company believes its
facilities are in good operating condition, are suitable and adequate for current needs and have flexibility to change products. Facilities
and equipment are insured against losses from fire as well as other usual business risks. The Company knows of no material defects in
title to, or encumbrances on, any of its properties except that substantially all of the Company’s assets are pledged as collateral under
the Company’s credit facility agreements with its primary lender group. For further information, refer to Note 3 of the Notes to the
Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
AVD owns approximately 42 acres of unimproved land in Texas for possible future expansion.
The Company leases approximately 19,953 square feet of office space located at 4695 MacArthur Court in Newport Beach,
California. In 2020, the lease was amended and was extended to expire on June 30, 2026. The premises have served as the Company’s
corporate headquarters since 1995.
The facilities occupied by GemChem, OHP, Envance and TyraTech (Envance and TyraTech are co-located), AMVAC BV,
AMVAC M, AMVAC CR Srl, AMVAC Sgpr, AgNova, Agrinos, AMVAC 3p and AgriCenter, consist of administration,
development centers (in the case of Envance and TyraTech) and/or sales offices which are leased. In addition, AMVAC 3p leases
warehouse space in Jaboticabal, Brazil.
14
ITEM 3
LEGAL PROCEEDINGS
Please refer to Note 5 of the Notes to the Consolidated Financial Statements in Part II, item 8 of this Annual Report on Form 10-
K.
ITEM 4 MINE SAFETY DISCLOSURES
Not Applicable
15
PART II
ITEM 5 MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Effective March 7, 2006, the Company listed its $0.10 par value common stock (“Common Stock”) on the New York Stock
Exchange under the ticker symbol AVD. From January 1998 through March 6, 2006, the Common Stock was listed on the American
Stock Exchange under the ticker symbol AVD. The Company’s Common Stock traded on The NASDAQ Stock Market under the
symbol AMGD from March 1987 through January 1998.
Holders
As of March 3, 2022, the number of stockholders of the Company’s Common Stock was approximately 6,296, which includes
beneficial owners with shares held in brokerage accounts under street name and nominees.
Dividends
The Company has issued a cash dividend in each of the last twenty-four years dating back to 1996. Cash dividends declared
during the past three years are summarized in the table below.
Declaration Date
December 13, 2021
September 13, 2021
June 8, 2021
March 10, 2021
Total 2021
December 7, 2020
March 9, 2020
Total 2020
December 9, 2019
September 16, 2019
June 10, 2019
March 6, 2019
Total 2019
Distribution Date
January 10, 2022
October 15, 2021
July 8, 2021
April 15, 2021
January 6, 2021
April 16, 2020
January 9, 2020
October 17, 2019
July 12, 2019
April 10, 2019
Record Date
December 27, 2021 $
October 1, 2021
June 24, 2021
March 15, 2021
$
December 23, 2020 $
March 26, 2020
$
December 26, 2019 $
October 3, 2019
June 28, 2019
March 27, 2019
$
Dividend
Per Share
Total
Paid
0.020 $
0.020
0.020
0.020
0.080 $
0.020 $
0.020
0.040 $
0.020 $
0.020
0.020
0.020
0.080 $
594
594
600
596
2,384
592
586
1,178
582
581
580
580
2,323
Share Repurchase Programs
On March 8, 2022, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an aggregate
number of up to 1,000,000 shares of its common stock, par value $0.10 per share, in the open market, over the succeeding one year at
a price not to exceed $20 per share, subject to limitations and restrictions under applicable securities laws.
On August 30, 2021, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an
aggregate number of 300,000 shares of its common stock, par value $0.10 per share, in the open market over the succeeding six
months. During 2021, the Company purchased 300,000 shares of its common stock for a total of $4,579 at an average price of $15.26
per share.
On November 5, 2018, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an
aggregate number of shares with a total purchase price not to exceed $20,000 of its common stock, par value $0.10 per share, in the
open market, at a price not to exceed $17 per share, subject to limitations and restrictions under applicable securities laws. The Shares
Repurchase Program expired on March 8, 2019. During 2019, the Company purchased 158,048 shares at an average price of $16.48
per share, for a total of $2,604. During 2018, the Company purchased 452,358 shares at an average price of $16.11 per share, for a
total of $7,287.
16
Securities Authorized for Issuance under Equity Compensation Plans
Number of securities
to
be issued upon exercise
of outstanding options,
warrants, and rights
Weighted average
exercise price of
outstanding options,
warrants, rights
Number of securities
remaining available for
future issuance under
equity compensation plans
222,694 $
222,694 $
11.49
11.49
870,345
870,345
Plan Category
Equity compensation plans
approved
by security holders
Total
Stock Performance Graph
The following graph presents a comparison of the cumulative, five-year total return for the Company, the S&P 500 Stock Index,
and a peer group (Specialty Chemical Industry). The graph assumes that the beginning values of the investments in the Company, the
S&P 500 Stock Index, and the peer group of companies each was $100 on December 31, 2016. All calculations assume reinvestment
of dividends. Returns over the indicated period should not be considered indicative of future returns.
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2021
250.00
225.00
200.00
175.00
150.00
125.00
100.00
75.00
50.00
25.00
0.00
2016
2017
2018
2019
2020
2021
American Vanguard Corporation
Morningstar Specialty Chemicals Index
S&P 500 Index - Total Return
S&P 400 Specialty Chemicals Index
ITEM 6
RESERVED
17
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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;
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.
The discussion and analysis of our financial condition and results of operations for 2021, as compared to 2020 appears below.
As permitted by SEC rules, we have omitted the discussion and analysis of our financial condition and results of operations for 2020
compared to 2019. See Item 7, “Management’s Discussions and Analysis of Financial Condition and Results of Operations”, in our
Annual Report on Form 10-K for the year ended December 31, 2020, for this discussion.
MANAGEMENT OVERVIEW
The Company’s performance in 2021 was stronger in most all respects as compared to the prior year. The domestic agricultural
economy continued an upcycle that started at the end of 2020 following several years in a downcycle. With that trend, commodity
prices for many crops, including corn, soybeans and cotton, rose and remained strong. Both growers and the distribution channel,
which had previously worked down inventory to very low levels, began to replenish their stocks of crop inputs. At the same time,
pandemic restrictions were relieved in many regions and were only partially reinstated with the emergence at the end of 2021 of the
Omicron variant of the coronavirus. Despite supply chain disruptions and some associated cost escalation, particularly on in-bound
freight, and the year-end pandemic surge, the markets for the Company’s products were more robust. Net sales for 2021 rose 21%, as
compared to 2020 ($556,872, as compared to $458,704), and net income was up about 22% ($18,587, as compared to $15,242). It is
also interesting to note that operating income rose 35% (to $30,946 in 2021 from $22,908 in 2020) and that, but for the one-time
benefit in 2020 of $4,657 arising from a bargain purchase gain relating to the Agrinos acquisition, the improvement in operating
income would have been 65% year-over-year.
In summary, our results for 2021 were as follows. Net sales performance was improved across all our businesses. The top line of
our U.S. Crop segment was up by 25%, led by strong demand for soil insecticides and cotton products. Sales of our U.S. Non-Crop
business was up 30% due largely to strong demand for our mosquito adulticide product, as customers replenished channel inventory.
International sales rose with the addition of businesses that had been acquired late in 2020 (Agrinos and AgNova), continued strong
performance in Mexico and overall strong performance in other regions.
As a result of the sales dynamics just described, gross profit during 2021 was approximately 24% above that of 2020 ($213,243
vs. $172,590). Further, gross profit when expressed as a percentage of sales was 38%, which was in line with the prior year. Operating
expenses increased by 18% ending at $182,468, as compared to $154,339 in 2020; however, operating expenses (which include
outbound freight) as a percent of net sales decreased to 33% from 34% compared to 2020.
With a lower average debt level and a decrease in the effective interest rate, our interest expense dropped by about 29% (to
$3,687 in 2021 from $5,178 in 2020) due to timing of our borrowings, continued strong cash generated from increased sales, customer
prepayment programs and a reduction in effective interest rates. For 2021, we reported income before provision for income taxes and
loss on equity method investment of $27,141, as compared to $18,447 in 2020. Despite a higher effective tax rate and income taxes,
our net income was $18,587 in 2021 as compared to $15,242, which represents an increase of about 22%.
When considering the consolidated balance sheet, long-term debt decreased to $52,240 as of December 31, 2021, from $107,442
as of December 31, 2020. The decreased level of debt was driven by the Company’s strong cash management during 2021, including a
continued strong response from the Company’s biggest customers to our early-pay programs. The Company’s liquidity position
improved with a closing borrowing availability of $178,705 as of December 31, 2021, as compared to $86,736 as of December 31,
2020. Furthermore, inventories decreased to $154,306, as of December 31, 2021, as compared to inventories of $163,784, as of
December 31, 2020.
18
Results of Operations
2021 Compared with 2020:
Net sales:
U.S. crop
U.S. non-crop
Total U.S.
International
Total net sales
Cost of sales:
U.S. crop
U.S. non-crop
Total U.S.
International
Total cost of sales
Gross profit:
U.S. crop
U.S. non-crop
Total U.S.
International
Total gross profit
Gross margin:
U.S. crop
U.S. non-crop
Total U.S.
International
Total gross margin
2021
2020
$ Change
% Change
$ 263,632 $ 211,357 $
60,367
271,724
186,980
$ 556,872 $ 458,704 $
78,605
342,237
214,635
$ 154,064 $ 118,634 $
32,525
151,159
134,955
$ 343,629 $ 286,114 $
41,162
195,226
148,403
$ 109,568 $
37,443
147,011
66,232
92,723 $
27,842
120,565
52,025
$ 213,243 $ 172,590 $
52,275
18,238
70,513
27,655
98,168
35,430
8,637
44,067
13,448
57,515
16,845
9,601
26,446
14,207
40,653
25%
30%
26%
15%
21%
30%
27%
29%
10%
20%
18%
34%
22%
27%
24%
42%
48%
43%
31%
38%
44%
46%
44%
28%
38%
Net sales of our U.S. crop business were about 25% higher than those of the prior year ($263,632 vs. $211,357). Reopening of
the economy, transportation needs fueling ethanol, and improving grower profitability due to higher crop commodity prices, all
contributed to strong demand for AVD’s crop protection products. Despite the second year of challenging COVID-19 pandemic
conditions characterized by the Delta variant and, at the end of the year, the Omicron variant and supply chain disruptions, overall
demand in the U.S. crop segment continued the steady improvement that had started with the 2019-2020 crop season, and our
customers in the distribution channel gradually returned to more normal procurement practices. We had very strong performance in
corn, with sales of soil insecticides and post-emergent herbicides posting a 45% year-over-year increase. Similarly in cotton, a strong
commodity price stimulated demand for our foliar insecticides and harvest defoliant which generated sales that were up 84%, as
compared to those of 2020. We also recorded stronger sales in our soybean products, Thimet for peanuts, and Dacthal for a wide range
of fruits and vegetables. Partially offsetting these increases, sales of our soil fumigant business declined slightly due to year-end
logistics difficulties in transporting this large volume liquid product, particularly in the Pacific Northwest region.
Cost of sales within the domestic crop business was higher in 2021 (up 30% to $154,064 from $118,634 in 2020), on sales that
increased 25%, gross profit improved by 18% ($109,568 in 2021 vs. $92,723 in 2020), and gross margin was 42% of sales as
compared to 44% last year.
Net sales of our U.S. non-crop business were up about 30% ($78,605 in 2021 vs. $60,367 in 2020) largely due to our Dibrom®
mosquito adulticide sales, which nearly doubled in 2021, as demand from mosquito control distributors was driven by significant
tropical storm and hurricane activity and the normal need to refill channel inventory in readiness for the next season. Net sales of pest
strips and other commercial pest control products increased strongly in 2021, as restaurants, schools, malls, and many other
commercial enterprises reopened with the lifting of pandemic restrictions. Net sales from our OHP nursery and ornamental business
were 19% higher than 2020, as demand for homeowner garden and landscape products accelerated during the year at retail locations
around the country. Finally, our TyraTech/Envance revenues grew over 71% driven by both direct product sales and royalty income
which exceeded prior year performance.
Cost of sales in our U.S. non-crop business rose by 27% in comparison to the prior year ($41,162 in 2021 vs. $32,525 in 2020),
gross profit increased by 34% (from $27,842 in 2020 to $37,443 in 2021), and gross margin percentage increased to 48% in 2021, as
compared to 46% in 2020.
19
Net sales of our international businesses increased by 15% in 2021 ($214,635 vs. $186,980 in 2020). During 2021, our
international group successfully integrated two important new businesses. Our AgNova acquisition more than doubled our existing
business in Australia, while our Agrinos biological products expanded our footprint in more than a half dozen countries worldwide.
We enjoyed strong demand for our soil fumigants and our bromacil herbicides, particularly in Mexico, and experienced steady sales of
our Counter nematicide in Central America and Brazil. Further, we experienced slightly higher sales in our AgriCenter Central
American distribution business, despite supply chain challenges, limited customer access (in light of coronavirus protocols), and
competitive market conditions.
Cost of sales in our international business increased by 10% (to $148,403 in 2021 from $134,955 in 2020), on sales that
increased 15%, gross profit rose 27% from the prior year (to $66,232 in 2021 vs. $52,025 in 2020), and gross margin improved to
31%, as compared to 28% reported in 2020.
On a consolidated basis, gross profit for the year increased by 24% (ending at $213,243 in 2021, as compared to $172,590 in
2020) on sales up 21%. Total gross margin percentage remained the same as prior year at 38%.
Operating expenses (which include outbound freight costs) increased by $28,129 in 2021, to $182,468 or 33% of sales, as
compared to $154,339 or 34% in 2020. The differences in operating expenses by department are as follows:
2021
2020
Change
% Change
Selling
General and administrative
Research, product development and regulatory
Freight, delivery and warehousing
Total Operating Expenses
$ 48,604 $ 42,389 $
48,828
26,310
36,812
6,215
12,857
2,545
6,512
$ 182,468 $ 154,339 $ 28,129
61,685
28,855
43,324
15 %
26 %
10 %
18 %
18 %
•
•
•
•
Selling expenses increased by 15% to $48,604 for the year ended December 31, 2021, as compared to $42,389 in 2020. The
main drivers were the costs associated with the activities from the businesses acquired in the last quarter of 2020, increased
labor costs related to inflation plus some key staff additions and, increases in travel and entertainment expenses as pandemic
restrictions eased in most territories in which we operate.
General and administrative expenses increased by 26% to $61,685 for the year ended December 31, 2021, as compared to
$48,828 in 2020. The main drivers were the costs in the amount of $1,833 associated with the addition of the entities acquired in
the final quarter of 2020, the increase in short-term and long-term incentive compensation of $3,110, as a result of improved
financial performance, additional legal expenses of $2,151 largely arising from the Department of Justice investigation,
increased bad debt expenses of $649 related to our businesses in Central America, and adverse foreign exchange costs
associated with our businesses in Central and South America. Finally, the Australian business we acquired in the final quarter of
2020 has performed above expectations and as a result we recorded an expense of $758 related to the increase to the fair value
of the associated contingent consideration.
Research, product development and regulatory expenses increased by 10% to $28,855 in 2021, as compared to $26,310 in 2020.
The main drivers were increases in our product development costs, primarily resulting from increased activities in our newly
acquired businesses and work in support of our SIMPAS/ULTIMUS technology platform.
Freight, delivery and warehousing costs for the year ended December 31, 2021, increased by 18% (on sales up 21%) to $43,324,
as compared to $36,812 in 2020. This is mainly due to volume increases, product mix and locations of customers. When
expressed as a percentage of sales, freight costs decreased slightly year over year to 7.8% in 2021, as compared to 8.0% in 2020.
This was achieved despite the global inflation being seen in freight costs.
In July 2020, the Company made a strategic investment in Clean Seed Inc., in the amount of $1,190. Subsequent to the initial
investment, the Company recorded a loss to its fair value in the amount of $391 in 2021 and gain in the amount of $717 in 2020,
respectively.
In February 2016, AMVAC BV made an equity investment of $3,283 in Biological Products for Agriculture (“Bi-PA”). The
Company has elected to measure the investment at cost less impairment, if any, and to record an increase or decrease for changes
resulting from observable price changes in orderly transactions for the identical or a similar investment of Bi-PA. The Company
recorded an impairment in the amount of $399 during the year ended December 31, 2021. No impairment was recorded for the year
ended December 31, 2020.
20
Net interest expense was $3,687 in 2021, as compared to $5,178 in 2020. Interest costs are summarized in the following table:
Average Indebtedness and Interest expense
Working capital revolver
Interest income
Amortization of deferred loan fees
Amortization of other deferred liabilities
Other interest expense
Subtotal
Capitalized interest
Total
Average
Debt
2021
Interest
Expense
$ 142,238 $ 3,414
—
—
—
—
142,238 3,930
—
$ 142,238 $ 3,687
Interest
Rate
2020
Interest
Expense
2.4 % $ 170,801 $ 5,158
Average
Debt
Interest
Rate
3.0 %
(65 ) —
367 —
(4 ) —
218 —
—
—
—
—
(89 ) —
300 —
23 —
110 —
2.8 % 170,801 5,502
3.2 %
(243 ) —
—
(324 ) —
2.6 % $ 170,801 $ 5,178
3.0 %
The Company’s average debt for the year ended December 31, 2021, was $142,238, as compared to $170,801 for the year ended
December 31, 2020. On a gross basis, after adjustments related to capitalized interest and expenses related to the amortization of
deferred liabilities, our effective interest rate on our working capital revolver decreased to 2.6%, as compared to 3.0% in 2020. This
improvement was driven by U.S. fiscal policy and decreases in the LIBOR rate, and improved cash management.
Our provision for income taxes for 2021 was $8,166, as compared to $3,080 for 2020. The effective tax rate for 2021 was
30.0%, as compared to 16.7% in 2020. The increase of the effective tax rate in 2021 was due to a non-cash charge related to a
valuation allowance associated with a deferred tax asset in Brazil.
The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. Federal income tax
returns of the Company are subject to Internal Revenue Service (“IRS”) examination for the 2018 through 2020 tax years. State
income tax returns are subject to examination for the 2017 through 2020 tax years. The Company has other foreign income tax returns
subject to examination.
For the years ended December 31, 2021 and 2020, the Company recorded net losses on its equity investments of $388 and $125,
respectively.
Net income was $18,587 or $0.62 per basic share and $0.61 per diluted share in 2021 as compared to $15,242 or $0.52 per basic
share and $0.51 per diluted share in 2020.
Liquidity and Capital Resources
The Company generated $86,361 of cash from operating activities during the year ended December 31, 2021, as compared to
$90,324 in the prior year. Included in the $86,361 are net income of $18,587, plus non-cash depreciation, amortization of intangibles
and other assets and discounted future liabilities, in the amount of $26,164, loss on disposal of property, plant and equipment of $194,
amortization of deferred loan fees of $367, revision of contingent consideration of $758, and provision for bad debts in the amount of
$649. In addition, stock-based compensation of $6,880, loss from equity method investments of $388, change in fair value of
investments of $790, change in value of deferred income taxes of $2,090, change in reserves for uncertain tax positions of $1,783,
adjustment to bargain purchase gain on business acquisition in the amount of $171, decrease in environmental liability of $167, and
net foreign currency adjustment of $225, resulted in net cash provided by operating activities of $49,669, as compared to $39,931 for
the same period of 2020.
During 2021, the Company decreased working capital by $39,987, as compared to the position at December 31, 2020. Included
in this change: accounts receivables net increased by $24,347, inventories decreased by $8,130, tax receivable, net increased by
$6,051, and prepaid expenses increased by $3,354. Deferred revenue increased by $19,280, as compared to December 31, 2020,
driven by individual customer decisions to make early payments in return for early cash incentive programs. Our accounts payable
balances increased by $8,783, program accruals increased by $17,877 and other payables and accrued expenses increased by $3,986.
With regard to our program accrual, the year-over-year change is primarily driven by the mix of sales and customers in 2021, as
compared to the prior year. The Company accrues programs in line with the growing season upon which specific products are
targeted. Most of our programs relate to domestic sales. Typically, domestic crops have a growing season that ends on September 30th
of each year. During 2021, the Company made accruals in the amount of $99,482 and made payments in the amount of $81,678.
During 2020, the Company made accruals in the amount of $66,622 and made payments in the amount of $68,880.
21
Because the estimate for the program accrual is a material component of the presentation of the Company’s overall financial
performance, the Company believes that the process it uses is critical in setting the accrual at the appropriate level. The Company’s
process for developing the estimate involves a detailed review of each related transaction and includes the input of a significant
number of senior employees to enable the Company to set the accrual using consistently applied judgements, subject to the particular
circumstances of any individual transaction.
Cash used for investing activities amounted to $20,042 for the year ended December 31, 2021, as compared to $35,795 in 2020.
In 2021, the Company spent $10,524 in business and product acquisitions and on patents applications associated with its TyraTech
and Envance technology solutions. In addition, in 2021, $9,518 was spent on capital expenditures primarily focused on continuing to
invest in manufacturing infrastructure to expand production efficiency and capabilities. In 2020, the Company spent $23,356 in
business and product acquisitions including intangible assets, goodwill, working capital and fixed assets as well as patent application
costs, and $11,249 on capital expenditures primarily focused on our manufacturing facilities. Furthermore in 2020, the Company spent
$1,190 on an equity investment.
During the year ended December 31, 2021, financing activities used $65,871, as compared to $44,440 during the prior year.
This included making repayments on the Company’s senior credit facility in the amount of $55,569 during the year ended December
31, 2021. During 2020, the Company made similar repayments in the amount of $41,624. During 2021, the Company paid dividends
to stockholders amounting to $2,382, as compared to $1,168 in 2020. Furthermore, the Company paid for contingent consideration in
the amount of $1,301 and $1,227 for the years ended December 31, 2021 and 2020, respectively. Finally, the Company used $4,579 to
repurchase common stock in 2021. The Company did not repurchase stock in 2020.
The Company has various loans in place that together constitute the long-term loan balances shown in the consolidated balance
sheets as of December 31, 2021 and 2020. These are summarized in the following table:
Indebtedness
Revolving line of credit
Debt issuance costs
Total indebtedness
$
$
2021
2020
53,300 $
(1,060 )
52,240 $
107,900
(458 )
107,442
The Company’s main bank is Bank of the West, a wholly owned subsidiary of the French bank, BNP Paribas. Bank of the West
has been the Company’s bank for more than 30 years and is the syndication manager for the Company’s loans.
The Company and certain of its affiliates are parties to a revolving line of credit 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 Borrower Agent (including the Company and AMVAC
BV), as Borrowers, on the one hand, and a group of commercial lenders led by Bank of the West as administrative agent,
documentation agent, syndication agent, collateral agent, sole lead arranger and book runner, on the other hand. The Credit Agreement
consists of a line of credit of up to $275,000, an accordion feature of up to $150,000, a letter of credit and swingline sub-facility (each
having limits of $25,000) and has a maturity date of August 5, 2026. The Credit Agreement amends and restates the previous credit
facility, which had a maturity date of June 30, 2022. With respect to key financial covenants, the Credit Agreement contains two:
namely, borrowers are required to maintain a Total Leverage (“TL”) Ratio of no more than 3.5-to-1, during the first three years,
stepping down to 3.25-to-1 as of September 30, 2024, and a Fixed Charge Coverage Ratio of at least 1.25-to-1. In addition, to the
extent that it completes acquisitions totaling $15 million or more in any 90-day period, AMVAC may step-up the TL Ratio by 0.5-to-
1, not to exceed 4.00-to-1, for the next three full consecutive quarters. Acquisitions below $50 million do not require Agent consent.
The Company’s borrowing capacity varies with its financial performance, measured in terms of Consolidated EBITDA as
defined in the Credit Agreement, for the trailing twelve-month period. Under the Credit Agreement, revolving loans bear interest at a
variable rate based, at borrower’s election with proper notice, on either (i) LIBOR plus the “Applicable Margin” which is based upon
the Total Leverage (“TL”) Ratio (“LIBOR Revolver Loan”) or (ii) the greater of (x) the Prime Rate, (y) the Federal Funds Rate plus
0.5%, and (z) the Daily One-Month LIBOR Rate plus 1.00%, plus, in the case of (x), (y) or (z) the Applicable Margin (“Adjusted Base
Rate Revolver Loan”). Interest payments for LIBOR Revolver Loans are payable on the last day of each interest period (either one-,
three- or six- months, as selected by the borrower) and the maturity date, while interest payments for Adjusted Base Rate Revolver
Loans are payable on the last business day of each month and the maturity date. The interest rate on December 31, 2021, was 1.98%.
22
At December 31, 2021, 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 $178,705. This compares to
an available borrowing capacity of $86,736 as of December 31, 2020. The level of borrowing capacity is driven by three factors:
(1) our financial performance, as measured in EBITDA for trailing twelve-month period, (2) the inclusion of proforma EBITDA
related to acquisitions completed during the preceding twelve months and (3) the leverage covenant (being the number of times
EBITDA the Company may borrow under its credit facility agreement). The Company was in compliance with its debt covenants as of
December 31, 2021.
We believe that the combination of our cash flows from future operations, current cash on hand and the availability under the
Company’s credit facility will be sufficient to meet our working capital and capital expenditure requirements and will provide us with
adequate liquidity to meet our anticipated operating needs for at least the next 12 months from the issuance of the Annual Report.
Although operating activities are expected to provide cash, to the extent of growth in the future, our operating and investing activities
will use cash and, consequently, this growth may require us to access some or all of the availability under the credit facility. It is also
possible that additional sources of finance may be necessary to support additional growth.
Substantially all the Company’s assets are pledged as collateral under the Credit Agreement, as amended.
Recently Issued Accounting Guidance
Please refer to Note 3 of the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report for recently
issued and adopted accounting standards.
Foreign Exchange
The Company faces market risk to the extent that changes in foreign currency exchange rates affect our non-U.S. dollar
functional currency for some of our foreign subsidiaries’ revenues, expenses, assets and liabilities. We currently do not engage in
hedging activities with respect to such exchange rate risks.
Assets and liabilities outside the U.S. are located in regions where we have subsidiaries or joint ventures: Central America,
South America, North America, Europe, Asia, and Australia. Our investments in foreign subsidiaries and joint ventures with a
functional currency other than the U.S. dollar are generally considered long-term. Accordingly, we do not hedge these net
investments.
Inflation
Management believes inflation has had minimal impact on the Company's operations during the past two years. The Company is
working diligently with its critical raw material suppliers to control inflationary pressures, conducting contract negotiations with focus
on the following: reducing or delaying price increases due to higher environmental costs from suppliers mainly in China and India,
managing the tariff impacts by sourcing and leveraging alternate geographies where possible, and lastly, monitoring strengths of the
U.S. dollar vs other currencies in order to secure benefits and balance tariff effects. The Company recognizes there is long-term
pressure on demand for raw materials in the developing world and is utilizing its expertise to minimize inflationary pressure. The
Company has been able to push back on many of the proposed price increases for actives and intermediates that are shipped to our
U.S. factories, to either avoid, minimize or forestall them. In response to inflation and other factors that have increased the cost of
goods and services, the Company has successfully implemented price increases on its products.
CRITICAL ACCOUNTING POLICIES
Certain of the Company’s policies require the application of judgment by management in selecting the appropriate assumptions
for calculating financial estimates. These judgments are based on historical experience, terms of existing contracts, commonly
accepted industry practices and other assumptions that the Company believes are reasonable under the circumstances. These estimates
and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the
period that revisions are determined to be necessary. Actual results may differ from these estimates under different outcomes or
conditions.
23
The Company’s critical accounting policies and estimates include:
Principles of Consolidation—The Company’s consolidated financial statements include the accounts of the Company and its
subsidiaries. Less than wholly owned subsidiaries, including joint ventures, are consolidated when it is determined that the Company
has a controlling financial interest, which is generally determined when the Company holds a majority voting interest. When
protective rights, substantive rights or other factors exist, further analysis is performed in order to determine whether or not there is a
controlling financial interest. The consolidated financial statements reflect the assets, liabilities, revenues and expenses of consolidated
subsidiaries and the non-controlling parties’ ownership share is presented as a non-controlling interest. All significant intercompany
accounts and transactions are eliminated.
Revenue Recognition — Revenues from sales are recognized at the time control is transferred to the customer. This is typically
the case when the customer has made the fixed commitment to purchase the goods, the products are shipped per the customer’s
instructions, the sales price can be identified, and collection is probable. The Company has adopted procedures to ensure that revenues
are recognized when earned. The procedures are subject to management’s review and from time-to-time certain revenues are excluded
until it is clear that the title has passed and there is no further recourse to the Company. We also have some arrangements whereby
revenues are recognized over time for certain products that are deemed to have no alternative use accompanied by an enforceable right
to payment for performance completed to date. From time-to-time, the Company may offer a program to eligible customers, in good
standing, that provides extended payment terms on a portion of the sales on selected products. The Company analyzes these extended
payment programs in connection with its revenue recognition policy to ensure all revenue recognition criteria are satisfied at the time
of sale. The Company also earns royalty income from its licensing arrangements which qualify as functional licenses rather than
symbolic licenses. Upon signing a new licensing agreement, we typically receive up-front fees, which are generally characterized as
non-refundable royalties. These fees are recognized as revenue upon the execution of the license agreements. Minimum royalty fees
are recognized once the Company has an enforceable right for payment. Sales-based royalty fees are typically recognized when the
sales occur. We calculate and accrue estimated royalties based on the agreement terms and correspondence with the licensees
regarding actual sales. Allowance for doubtful accounts is established based on estimates of losses related to customer receivable
balances. Estimates are developed using either standard quantitative measures based on historical losses, adjusted for current
economic conditions, or by evaluating specific customer accounts for risk of loss.
Allowance for Doubtful Accounts or Current Expected Credit Losses —The Company maintains an allowance to cover its
Current Expected Credit Losses ("CECL") on its trade receivables, other receivables and contract assets arising from the failure of
customers to make contractual payments. The Company estimates credit losses expected over the life of its trade receivables, other
receivables and contract assets based on historical information combined with current conditions that may affect a customer’s ability
to pay and reasonable and supportable forecasts. In most instances, the Company’s policy is to write-off trade receivables when they
are deemed uncollectible. The vast majority of the Company's trade receivables, other receivables and contract assets are less than 365
days. Under the CECL impairment model, the Company develops and documents its allowance for credit losses on its trade
receivables based on multiple portfolios. The determination of portfolios is based primarily on geographical location, type of customer
and aging.
Deferred Revenue - From time to time, the Company receives pre-payments from customers which are recorded as deferred
revenue on the Company’s consolidated balance sheets. The Company does not recognize revenue on any such payments unless and
until the customer places binding purchase orders, the goods are shipped, and control is transferred to the customer.
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, and includes
estimates 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, estimated
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 will make adjustments to the
accumulated accrual to properly reflect the Company’s best estimate of 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.
Inventories — The Company values its inventories at lower of cost or net realizable value. Cost is determined by the first-in,
first-out (“FIFO”) or average cost method, including, as appropriate, raw materials, labor, factory overhead and subcontracting
services. The Company writes down its inventory to the net realizable value following assessments of slow moving and obsolete
inventory and other annual adjustments to ensure that our standard costs continue to closely reflect actual manufacturing cost.
24
Property, Plant and Equipment and Depreciation— Property, plant and equipment includes the cost of land, buildings,
machinery and equipment, office furniture and fixtures, automobiles, construction projects and significant improvements to existing
plant and equipment. Interest costs related to significant construction projects are capitalized at the Company’s current weighted
average effective interest rate. Expenditures for minor repairs and maintenance are expensed as incurred. When property or equipment
is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the gain
or loss realized on disposition is reflected in earnings. All plant and equipment assets are depreciated using the straight-line method,
utilizing the estimated useful property lives. Once placed into service, building lives range from 10 to 30 years; machinery and
equipment lives range from 3 to 15 years.
Leases —The Company has operating leases for warehouses, manufacturing facilities, offices, cars, railcars and certain
equipment. The Company recognizes operating lease right-of-use (ROU) assets and lease liabilities for all leases. The Company
measures ROU assets throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any
prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. The lease liabilities are measured at the
present value of the unpaid lease payments at the lease commencement date. Leases that include both lease and non-lease components
are accounted for as a single lease component for each asset class, except for warehouses. The minimum payments under operating
leases are recognized on a straight-line basis over the lease term in the consolidated statements of operations. Operating lease expenses
related to variable lease payments are recognized in cost of sales or as operating expenses in a manner consistent with the nature of the
underlying lease and as the events, activities, or circumstances in the lease agreement occur. Leases with a term of less than 12 months
are not recognized on the consolidated balance sheets, and the related lease expenses are recognized in the consolidated statements of
operations on a straight-line basis over the lease term. The accounting for leases requires management to exercise judgment and make
estimates in determining the applicable discount rate, lease term and payments due under a lease. Most of our leases do not provide an
implicit interest rate, nor is it available to us from our lessors. As an alternative, we use our estimated incremental borrowing rate,
which is derived from information available at the lease commencement date, including publicly available data, in determining the
present value of lease payments. We also estimated the fair value of the lease and non-lease components for some of our warehouse
leases based on market data and cost data. 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 1 year to 20 years. The operating leases of the Company do not contain major restrictions or covenants
such as those relating to dividends or additional financial obligations. Finance leases are immaterial to the consolidated financial
statements.
Intangible Assets—The primary identifiable intangible assets of the Company relate to assets associated with its product and
business acquisitions. All of the Company’s intangible assets have finite lives and are amortized. The estimated useful life of an
identifiable intangible asset is based upon a number of factors including the effects of demand, competition, and expected changes in
the marketability of the Company’s products.
Business Combinations—The Company uses its best estimates and assumptions to assign fair value to the tangible and
intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and
subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may
record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding
offset to goodwill or an adjustment to the gain from a bargain purchase. In addition, uncertain tax positions and tax-related valuation
allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to
collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the Company’s
preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the
measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any
subsequent adjustments are recorded to the Company’s consolidated statement of operations.
Certain of our acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement
of future income thresholds. The fair values of these earn-out arrangements are included as part of the purchase price of the acquired
companies on their respective acquisition dates. For each transaction, we estimate the fair value of contingent earn-out payments as
part of the initial purchase price and record the estimated fair value of contingent consideration as a liability on the consolidated
balance sheets.
We review and re-assess the estimated fair value of contingent consideration on a quarterly basis until the contingent period
ends, and the updated fair value could be materially different from the initial estimates or prior quarterly amounts. Changes in the
estimated fair value of our contingent earn-out liabilities are reported in operating results.
25
Asset Acquisitions—If an acquisition of an asset or group of assets does not meet the definition of a business, the transaction is
accounted for as an asset acquisition rather than a business combination. An asset acquisition does not result in the recognition of
goodwill and transaction costs are capitalized as part of the cost of the asset or group of assets acquired. The Company uses its best
estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition
date. The acquisitions costs are allocated to the assets acquired on a relative fair value basis. Certain of our acquisition agreements
include contingent earn-out arrangements, which are recognized only when the contingency is resolved, and the consideration is paid
or becomes payable.
Impairment—The carrying values of long-lived assets other than goodwill are reviewed for impairment annually and/or
whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company
evaluates recoverability of an asset group by comparing the carrying value to the future undiscounted cash flows that it expects to
generate from the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, measurement of
the impairment loss is based on the fair value of the asset.
The Company reviews goodwill for impairment utilizing either a qualitative or quantitative assessment. If the Company decides
that it is appropriate to perform a qualitative assessment and concludes that the fair value of a reporting unit more likely than not
exceeds its carrying value, no further evaluation is necessary. If the Company performs a quantitative assessment, the Company
compares the fair value of a reporting unit with its carrying values and recognizes an impairment charge for the amount that the
carrying amount exceeds the reporting unit’s fair value. The Company annually tests goodwill for impairment at the beginning of the
fourth quarter, or earlier if triggering events occur.
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:
•
•
•
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market
participants would use in pricing the asset or liability.
The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, short-term
investments, accounts receivable, long-term investments, accounts payable and accrued expenses approximate fair value because of
the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which
are considered Level 2 liabilities, approximates fair value based upon current rates and terms available to the Company for similar
debt.
We measure our contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant
unobservable inputs classified within Level 3 of the fair value hierarchy. We may use various valuation techniques depending on the
terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses probability distribution
for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine
probabilities of different outcomes occurring.
Foreign Currency Translation—Certain international operations use the respective local currencies as their functional
currency, while other international operations use the U.S. Dollar as their functional currency. The Company considers the U.S. Dollar
as its reporting currency. Translation adjustments for subsidiaries where the functional currency is its local currency are included in
other comprehensive income (loss). Foreign currency transaction gains (losses) resulting from exchange rate fluctuation on
transactions denominated in a currency other than the functional currency are reported in earnings. Assets and liabilities of the foreign
operations denominated in local currencies are translated at the rate of exchange at the balance sheet date. Revenues and expenses are
translated at the weighted average rate of exchange during the period. Translations of intercompany loans of a long-term investment
nature are included as a component of translation adjustment in other comprehensive income (loss).
26
Income taxes—Income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect
management’s best estimate of current and future taxes to be paid. The Company is subject to income taxes in the U.S. and several
foreign jurisdictions. The Company assessed the ability to realize deferred tax assets and determined that based on the available
evidence, including a history of taxable income and estimates of future taxable income, it is more likely than not that the net deferred
tax assets relating to the Company’s operations in Brazil will not be realized and a full valuation allowance was recorded in that
jurisdiction. Significant management judgment is required in determining the provision for income taxes and deferred tax assets and
liabilities. In the event that actual results differ from these estimates, we will adjust these estimates in future periods, which may result
in a change in the effective tax rate in a future period. Accounting for income taxes involves uncertainty and judgment on how to
interpret and apply tax laws and regulations within the Company’s annual tax filings. Such uncertainties from time to time may result
in a tax position that may be challenged and overturned by a tax authority in the future, which could result in additional tax liability,
interest charges and possibly penalties. The Company classifies interest and penalties as a component of income tax expense.
ITEM 7A 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 group of lenders is evidenced by a line of credit with a variable rate of interest, which
fluctuates with changes in the lender’s reference rate (LIBOR). The Company may use derivative financial instruments for trading
purposes to protect trading performance from exchange rate fluctuations on material contracts, though there are no such instruments in
place during any periods presented in this Annual Report.
The Company conducts business in various foreign currencies, primarily when doing business in Europe, Mexico, Central and
South America. Therefore, changes in the value of the currencies of such countries or regions affect the Company’s financial position
and cash flows when translated into U.S. Dollars. The Company has mitigated, and will continue to mitigate, a portion of its currency
exchange exposure through natural hedges based on the operation of decentralized foreign operating companies in which the majority
of all costs are local-currency-based. A 10% change in the value of all foreign currencies would have an immaterial effect on the
Company’s financial position and cash flows. As part of an on-going process of assessing business risk, management has identified
risk factors which are disclosed in Item 1A. Risk Factors of this Report on Form 10-K.
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data required by this item are listed at Part IV, Item 15, Exhibits, and Financial
Statement Schedules.
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Management, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, periodically
evaluate the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)). Based upon this evaluation, as of December 31, 2021, the Chief Executive Officer and the Chief
Financial Officer have concluded that these disclosure controls and procedures are effective in ensuring that the information required
to be disclosed in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported on a
timely basis, and (ii) accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting
as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934 for the Company. The Company’s internal control
system over financial reporting is designed to provide reasonable assurance to management and the Board of Directors as to the fair,
reliable and timely preparation and presentation of consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America filed with the SEC.
27
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore,
even processes determined to be effective can provide only reasonable assurance with respect to the financial statement preparation
and presentation.
Management conducted an evaluation of the Company’s internal controls over financial reporting based on a framework set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework
(2013). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of
the effectiveness of controls and a conclusion on the evaluation. Based on this evaluation, management believes that as of
December 31, 2021, the Company’s internal control over financial reporting is effective.
BDO USA, LLP, the independent registered public accounting firm that audited the consolidated financial statements included
in the Annual Report on Form 10-K, was engaged to attest to and report on the effectiveness of AVD’s internal control over financial
reporting as of December 31, 2021. Its report is included herein.
Changes in Internal Controls over Financial Reporting
There were no changes in internal controls over financial reporting during the fourth quarter of the year ended December 31,
2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
28
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
American Vanguard Corporation
Newport Beach, California
Opinion on Internal Control over Financial Reporting
We have audited American Vanguard Corporation’s (the “Company’s”) internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements
of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2021, and the related notes and financial statement schedule listed in the accompanying index and our report dated
March 11, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, LLP
Costa Mesa, California
March 11, 2022
29
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
ITEM 9B OTHER INFORMATION
None.
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
30
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
PART III
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information set forth under the captions “Executive Officers of the Company,” “Election of Directors,” “Information about
the Board of Directors and Committees of the Board” and “Transactions with Management and Others—Section 16(a) Beneficial
Ownership Reporting Compliance” in our definitive proxy statement (the “Proxy Statement”) for our Annual Meeting of Stockholders
to be held on June 1, 2022, which will be filed with the SEC within 120 days of the end of our fiscal year ended December 31, 2021, is
incorporated herein by reference.
ITEM 11
EXECUTIVE COMPENSATION
Except as specifically provided, the information set forth under the captions “Compensation of Executive Officers” and
“Information about the Board of Directors and Committees of the Board—Compensation of Directors” in the Proxy Statement is
incorporated herein by reference.
ITEM 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The disclosure contained in Part II, Item 5 under “Equity Compensation Plan Information” is incorporated herein by reference.
Information regarding security ownership of certain beneficial owners and management is incorporated by reference to the
information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information set forth under the captions “Transactions with Management and Others” and “Information about the Board of
Directors and Committees of the Board” in the Proxy Statement is incorporated herein by reference.
ITEM 14
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information regarding principal accountant fees and services is incorporated herein by reference to the information set forth
under the caption “Ratification of the Selection of Independent Registered Public Accounting Firm—Relationship of the Company
with Independent Registered Public Accounting Firm” in the Proxy Statement.
31
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
PART IV
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) The following documents are filed as part of this report:
Index to Consolidated Financial Statements and Supplementary Data:
Description
Financial Statement Schedule:
Schedule II_A Valuation and Qualifying Accounts .........................................................................................................
Financial Statements:
Report of Independent Registered Public Accounting Firm BDO USA, LLP; Costa Mesa, California, PCAOB
ID#243 ....................................................................................................................................................................
Consolidated Balance Sheets as of December 31, 2021 and 2020 ..................................................................................
Consolidated Statements of Operations for the Years Ended December 31, 2021, 2020 and 2019 ................................
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019 ...........
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2021, 2020 and 2019 ................
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 ...............................
Notes to Consolidated Financial Statements ...................................................................................................................
(b) Exhibits Index
Page No
35
37
39
40
41
42
43
44
32
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
ITEM 15
EXHIBIT INDEX
Exhibit
Number
Description of Exhibit
3.1
Amended and Restated Certificate of Incorporation of American Vanguard Corporation (filed as Exhibit 3.1 to the
Company’s Form 10-K for the year ended December 31, 2003, which was filed on March 30, 2004, with the Securities
Exchange Commission and incorporated herein by reference).
3.2
3.3
Certificate of Amendment of Amended and Restated Certificate of Incorporation of American Vanguard Corporation
(filed as Exhibit 3.2 to the Company’s Form 10-Q/A for the period ended June 30, 2004, which was filed with the
Securities Exchange Commission on February 23, 2005, and incorporated herein by reference).
Amended and Restated Bylaws of American Vanguard Corporation dated as of June 5, 2014 (filed as Exhibit 99.1 to the
Company’s Form 8-K, which was filed with the Securities Exchange Commission on June 7, 2014, and incorporated
herein by reference.)
4
Form of Indenture (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-3 (File No. 333-122981) and
incorporated herein by reference).
10.1
American Vanguard Corporation Employee Stock Purchase Plan (filed as Appendix A to the Company’s Proxy
Statement filed with the Securities and Exchange Commission on April 23, 2018, and incorporated herein by reference).
10.2
10.3
American Vanguard Corporation Amended and Restated Stock Incentive Plan as of June 8, 2016 (filed as Appendix A to
the Company’s Proxy Statement filed with the Securities and Exchange Commission on April 25, 2016, and incorporated
herein by reference).
Form of Incentive Stock Option Agreement under the American Vanguard Corporation Fourth Amended and Restated
Stock Incentive Plan , (filed as Exhibit 10.3 with the Company’s Annual Report on Form 10-K for the period ended
December 31, 2004, which was filed with the Securities and Exchange Commission on March 16, 2005, and
incorporated herein by reference).
10.4
Form of Non-Qualified Stock Option Agreement under the American Vanguard Corporation Fourth Amended and
Restated Stock Incentive Plan , (filed as Exhibit 10.4 with the Company’s Annual Report on Form 10-K for the period
ended December 31, 2004, which was filed with the Securities and Exchange Commission on March 16, 2005, and
incorporated herein by reference).
10.5
Employment Agreement between American Vanguard Corporation and Eric G. Wintemute dated January 15, 2008 (filed
as Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, which was filed
with the Securities Exchange Commission on March 17, 2008, and incorporated herein by reference).
10.8
Form of Change of Control Severance Agreement, dated effective as of January 1, 2004, between American Vanguard
Corporation and its executive and senior officers (filed as Exhibit 10.2 to the Company’s Form 10-Q for the period ended
March 31, 2004, which was filed with the Securities Exchange Commission on May 17, 2004, and incorporated herein
by reference.)
10.9
Form of Amendment of Change of Control Severance Agreement, dated effective as of July 11, 2008, between American
Vanguard Corporation and named executive officers and senior officers (filed as Exhibit 99.1 to the Company’s Form 8-
K, which was filed on July 11, 2008, with the Securities and Exchange Commission and incorporated herein by
reference).
10.10
Form of Indemnification Agreement between American Vanguard Corporation and its Directors (as filed as Exhibit 10.7
to the Company’s Annual Report on Form 10-K for the period ended December 31, 2004, which was filed with the
Securities and Exchange Commission on March 16, 2005, and incorporated herein by reference).
10.11
Description of Compensatory Arrangements Applicable to Non-Employee Directors (as set forth on page 34 of the
Company’s Proxy Statement which was filed with the Securities and Exchange Commission on April 22, 2019, and
incorporated herein by reference).
10.12
Form of Restricted Stock Agreement between American Vanguard Corporation and named executive officers dated as of
November 13, 2020. Filed as exhibit 10.12 to the Company’s Form 10-K for the period ended December 31, 2020.
33
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
Exhibit
Number
10.14
10.15
Description of Exhibit
Form of Performance-Based Restricted Stock Units Award Agreement between American Vanguard Corporation and
named executive officer dated as of November 13, 2020. Filed as exhibit 10.14 to the Company’s Form 10-K for the
period ended December 31, 2020.
Form of American Vanguard Corporation Amended and Restated Stock Incentive Plan TSR-Based Restricted Stock
Units Award Agreement dated June 6, 2013 (filed as Exhibit 10.15 to the Company’s 10-K, which was filed with the
Securities Exchange Commission on February 28, 2014, and incorporated herein by reference).
10.16
Form of American Vanguard Corporation Amended and Restated Stock Incentive Plan Performance-Based Restricted
Stock Units Award Agreement dated June 6, 2013 (filed as Exhibit 10.16 to the Company’s 10-K, which was filed with
the Securities Exchange Commission on February 28, 2014, and incorporated herein by reference).
10.17
Third Amendment to Second Amended and Restated Credit Agreement dated as of June 30, 2017 among AMVAC and
certain affiliates on the other hand, and a group of commercial lenders led by Bank of the West as agent, swing line
lender, and letter of credit issuer, on the other hand (filed as Exhibit 10.1 to the Company’s Form 8-K, which was filed
with the Securities Exchange Commission on July 6, 2017 and is incorporated herein by reference).
10.18
Fourth Amendment to Second Amended and Restated Credit Agreement dated as of November 27, 2019, among
AMVAC and certain affiliates, on the one hand, and a group of commercial lenders led by Bank of the West as agent,
swing line lender, and letter of credit issuer, on the other hand (filed with the Company’s Form 10-K for the period
ended December 31, 2019). Third Amended and Restated Loan and Security Agreement dated August 5, 2021 by and
among American Vanguard Corporation et al. and Bank of the West et al. a form of which was filed with the SEC as an
exhibit to the Company’s Form 8-K on or about August 10, 2021.
21
23
31.1
31.2
32.1
List of Subsidiaries of the Company.*
Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.*
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
Certifications Pursuant to 18 U.S.C. Section 1350 as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
101
The following materials from American Vanguard Corp’s Annual Report on Form 10-K for the year ended December
31, 2020, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii)
Consolidated Statements of Operations; (iii) Consolidated Statements of Stockholders’ Equity; (iv) Consolidated
Statements of Comprehensive Income; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated
Financial Statements, tagged as blocks of text.*
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL
tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
*
Filed herewith.
(c) Valuation and Qualifying Accounts:
34
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
Schedule II-A—Valuation and Qualifying Accounts
Allowance for Doubtful Accounts Receivable (in thousands)
Balance at
Beginning of
Period
$
$
$
3,297
2,300
1,263
Additions
Charged to
Costs and
Expenses
Foreign
exchange
impact
Balance at
End of
Period
649
1,002
1,035
(8 ) $
(5 ) $
2 $
3,938
3,297
2,300
Inventory Reserve (in thousands)
Balance at
Beginning of
Period
Additions
Deductions
Balance at
End of
Period
$
$
$
2,868
2,130
1,989
948
1,120
573
(1,141 ) $
(382 ) $
(432 ) $
2,675
2,868
2,130
Deferred Tax Asset Valuation Allowance (in thousands)
Balance at
Additions
Charged to
Balance at
Beginning of
Period
Costs and
Expenses
Other
Comprehensive
Loss
Deductions
End of
Period
$
— $
3,304 $
958 $
— $
4,262
Fiscal Year Ended
December 31, 2021
December 31, 2020
December 31, 2019
Fiscal Year Ended
December 31, 2021
December 31, 2020
December 31, 2019
Fiscal Year Ended
December 31, 2021
See accompanying report of independent registered public accounting firm on page 38 of this annual report.
ITEM 16
FORM 10-K SUMMARY
None.
35
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, American Vanguard Corporation
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN VANGUARD CORPORATION
(Registrant)
By:
/s/ ERIC G. WINTEMUTE
Eric G. Wintemute
Chief Executive Officer
and Chairman of the Board
By:
/s/ DAVID T. JOHNSON
David T. Johnson
Chief Financial Officer
and Principal Accounting Officer
March 11, 2022
March 11, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated.
By:
/s/ ERIC G. WINTEMUTE
Eric G. Wintemute
Principal Executive Officer
and Chairman of the Board
By:
/s/ DAVID T. JOHNSON
David T. Johnson
Principal Financial Officer
and Principal Accounting Officer
March 11, 2022
March 11, 2022
By:
/s/ DEBRA EDWARDS
Debra Edwards
Director
By:
/s/ JOHN L. KILLMER
John L. Killmer
Director
March 11, 2022
March 11, 2022
By:
/s/ Marisol Angelini
Marisol Angelini
Director
By:
/s/ SCOTT D. BASKIN
Scott D. Baskin
Director
March 11, 2022
March 11, 2022
By:
/s/ MORTON D. ERLICH
Morton D. Erlich
Director
By:
/s/ ALFRED INGULLI
Alfred Ingulli
Director
March 11, 2022
March 11, 2022
By:
/s/ ESMAIL ZIRAKPARVAR
Esmail Zirakparvar
Director
By:
/s/ ÉMER GUNTER
Émer Gunter
Director
March 11, 2022
March 11, 2022
36
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors
American Vanguard Corporation
Newport Beach, California
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of American Vanguard Corporation (the “Company”) as of
December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and
cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule
listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and
the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal
Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”) and our report dated March 11, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining,
on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the
critical audit matter or on the accounts or disclosures to which it relates.
Accrued Program Costs
As discussed in notes to the 2021 consolidated financial statements, the Company offers discounts to its customers based on
various programs. As of December 31, 2021, the Company had accrued program costs of $63.2 million and program costs recorded as
a reduction of gross sales totaled $99.5 million in 2021. These discounts represent variable consideration and revenues from sales are
recorded at the net sales price, which is the transaction price, and includes estimates of variable consideration. Variable consideration
includes amounts expected to be paid to customers using the expected value method. Each quarter management compares individual
sale transactions with programs to determine what, if any, estimated program liabilities have been incurred.
37
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
We identified management’s determination of variable consideration related to program costs as a critical audit matter. The
principal considerations for our determination included significant inputs and assumptions utilized by management in determining the
variable consideration for certain programs. Auditing these elements involved especially challenging auditor judgment due to the
nature and extent of audit effort required to address this matter.
The primary procedures we performed to address the critical audit matter included:
• Testing the design and operating effectiveness of certain internal controls related to management’s accounting for program
costs, specifically including controls over: (i) the calculation of significant components of the program costs, and (ii) the
completeness and accuracy of program costs.
• Assessing the completeness and reasonableness of variable and incremental programs inclusive of significant inputs and
assumptions used to determine the variable consideration through (i) evaluating current year accrued program costs by
material product line against historical program cost payments, (ii) assessing management’s assumptions against trends and
historical metrics and (iii) performing retrospective reviews utilizing available historical payment of program costs compared
to estimates made in prior periods.
• Testing the computation of the accrued program costs by re-performing or independently calculating portions of the accrued
program costs and testing of the accrued program costs payments made to customers on a sample basis. Testing material
portions of the underlying data used to relevant source documents, accounting records and approved program rates or
amounts.
/s/ BDO USA, LLP
We have served as the Company's auditor since 1991.
Costa Mesa, California
March 11, 2022
38
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2021 and 2020
(In thousands, except share data)
Current assets:
Cash and cash equivalents
Receivables:
Assets
Trade, net of allowance for doubtful accounts of $3,938 and $3,297,
respectively
Other
Total receivables, net
Inventories, net
Prepaid expenses
Income taxes receivable
Total current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Intangible assets, net of amortization
Goodwill
Other assets
Deferred income tax assets, net
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Current installments of other liabilities
Accounts payable
Deferred revenue
Accrued program costs
Accrued expenses and other payables
Income taxes payable
Operating lease liabilities, current
Total current liabilities
Long-term debt, net of deferred loan fees
Other liabilities, excluding current installments
Operating lease liabilities, long-term
Deferred income tax liabilities, net
Total liabilities
Commitments and contingent liabilities
Stockholders’ equity:
2021
2020
$
16,285 $
15,923
$
$
149,326
9,595
158,921
154,306
12,488
—
342,000
66,111
25,386
197,841
46,260
16,292
270
694,160 $
802 $
67,140
63,064
63,245
20,745
3,006
5,059
223,061
52,240
5,335
20,780
20,006
321,422
130,029
6,969
136,998
163,784
10,499
3,046
330,250
65,382
12,198
197,514
52,108
20,077
2,764
680,293
2,647
59,253
43,611
45,441
16,184
—
4,188
171,324
107,442
9,054
8,177
23,560
319,557
Preferred stock, $.10 par value per share; authorized 400,000 shares; none issued
Common stock, $.10 par value per share; authorized 40,000,000 shares; issued
34,248,218 shares in 2021 and 33,922,433 shares in 2020
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Less treasury stock at cost, 3,361,040 shares in 2021 and 3,061,040 in 2020
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
—
—
3,426
101,450
(13,784 )
304,385
395,477
(22,739 )
372,738
694,160 $
3,394
96,642
(9,322 )
288,182
378,896
(18,160 )
360,736
680,293
See summary of significant accounting policies and notes to consolidated financial statements.
39
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2021, 2020 and 2019
(In thousands, except per share data)
Net sales
Cost of sales
Gross profit
Operating expenses
Bargain purchase gain on business acquisition
Operating income
Change in fair value of equity investments, net
Other income
Interest expense, net
Income before provision for income taxes and loss on equity method
investment
Provision for income taxes
Income before loss on equity method investment
Less loss from equity method investment
Net income
Earnings per common share—basic
Earnings per common share—assuming dilution
Weighted average shares outstanding—basic
Weighted average shares outstanding—assuming dilution
$
$
$
$
2021
2020
2019
556,872 $
(343,629 )
213,243
(182,468 )
171
30,946
(790 )
672
(3,687 )
27,141
(8,166 )
18,975
(388 )
18,587 $
0.62 $
0.61 $
29,811
30,410
458,704 $
(286,114 )
172,590
(154,339 )
4,657
22,908
717
—
(5,178 )
18,447
(3,080 )
15,367
(125 )
15,242 $
0.52 $
0.51 $
29,450
29,993
468,186
(290,832 )
177,354
(151,133 )
—
26,221
—
—
(7,209 )
19,012
(5,202 )
13,810
(209 )
13,601
0.47
0.46
29,030
29,656
See summary of significant accounting policies and notes to consolidated financial statements.
40
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2021, 2020 and 2019
(In thousands)
Net income
Other comprehensive loss
2021
2020
2019
$
18,587 $
15,242 $
13,601
Foreign currency translation adjustment, net of tax effects
Comprehensive income
$
(4,462 )
14,125 $
(3,624 )
11,618 $
(1,191 )
12,410
See summary of significant accounting policies and notes to consolidated financial statements
41
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years ended December 31, 2021, 2020 and 2019
(In thousands, except share data)
Balance, December 31, 2018
Stocks issued under ESPP
Cash dividends on common stock ($0.08
per share)
Foreign currency translation adjustment, net
Stock based compensation
Stock options exercised, grants, termination,
and vesting of restricted stock units (net of
shares in lieu of taxes)
Shares repurchased
Net income
Balance, December 31, 2019
Stocks issued under ESPP
Cash dividends on common stock ($0.04
per share)
Foreign currency translation adjustment, net
Stock based compensation
Stock options exercised, grants, termination,
and vesting of restricted stock units (net of
shares in lieu of taxes)
Net income
Balance, December 31, 2020
Stocks issued under ESPP
Cash dividends on common stock ($0.08
per share)
Foreign currency translation adjustment, net
Stock based compensation
Stock options exercised, grants, termination,
and vesting of restricted stock units (net of
shares in lieu of taxes)
Shares repurchased
Net income
Balance, December 31, 2021
Accumulated
Other
Additional
Paid-in
Amount Capital
3,276 $
5
83,177 $
711
Shares
32,752,827 $
47,229
Common Stock
Comprehensive Retained
loss
Earnings Shares
Treasury Stock
AVD
Amount Total
(4,507 ) $ 262,840 2,902,992 $ (15,556 ) $ 329,230
716
—
—
—
—
—
—
—
—
—
—
—
7,160
—
(1,191 )
—
(2,323 )
—
—
—
—
—
(2,323 )
(1,191 )
7,160
433,558
—
—
33,233,614
49,668
43
—
—
3,324
5
(476 )
—
—
90,572
716
—
—
—
—
—
— 158,048
—
13,601
(5,698 ) 274,118 3,061,040
—
—
—
—
(2,604 )
—
(433 )
(2,604 )
13,601
(18,160 ) 344,156
721
—
—
—
—
—
—
—
—
6,561
—
(3,624 )
—
(1,178 )
—
—
—
—
—
(1,178 )
(3,624 )
6,561
639,151
—
33,922,433
50,782
65
—
3,394
4
(1,207 )
—
96,642
739
—
—
—
—
—
15,242
(9,322 ) 288,182 3,061,040
—
—
—
—
—
(1,142 )
15,242
(18,160 ) 360,736
743
—
—
—
—
—
—
—
—
—
6,880
—
(4,462 )
—
(2,384 )
—
—
—
—
—
(2,384 )
(4,462 )
6,880
275,003
—
—
34,248,218 $
28
—
—
(2,811 )
—
—
3,426 $ 101,450 $
—
—
—
(2,783 )
(4,579 )
18,587
(13,784 ) $ 304,385 3,361,040 $ (22,739 ) $ 372,738
—
—
— 300,000
—
—
(4,579 )
—
18,587
See summary of significant accounting policies and notes to consolidated financial statements
42
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2021, 2020 and 2019
(In thousands)
Increase cash
Cash flows from operating activities:
Net income
$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment and intangible
assets
Loss on disposal of property, plant and equipment
Amortization of other long-term assets
Accretion of discounted liabilities
Amortization of deferred loan fees
Provision for bad debts
Loan principal and interest forgiveness
Fair value adjustment of contingent consideration
Decrease in environmental liability
Stock-based compensation
Increase (decrease) in deferred income taxes
Changes in liabilities for uncertain tax positions or unrecognized tax benefits
Change in equity investment fair value
Loss from equity method investment
Bargain purchase gain
Net foreign currency adjustment
Changes in assets and liabilities associated with operations, net of business
combinations:
(Increase) decrease in net receivables
Decrease in inventories
(Increase) decrease in income tax receivable, net
(Increase) decrease in prepaid expenses and other assets
Increase in net operating lease liability
Increase (decrease) in accounts payable
Increase (decrease) in deferred revenue
Increase (decrease) in accrued program costs
Increase (decrease) in other payables and accrued expenses
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Acquisitions of businesses and product lines
Intangible assets
Investment
Net cash used in investing activities
Cash flows from financing activities:
Net (payments) borrowings under line of credit agreement
Payment of contingent consideration
Net receipt from the issuance of common stock under ESPP
Net receipt from the exercise of stock options
Net payment from common stock purchased for tax withholding
Repurchase of common stock
Payment of cash dividends
Net cash (used in) 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 year
Cash and cash equivalents at end of year
$
2021
2020
2019
18,587 $
15,242 $
13,601
22,229
194
3,943
(8 )
367
649
(672 )
758
(167 )
6,880
(2,090 )
(1,783 )
790
388
(171 )
(225 )
(24,347 )
8,130
6,051
(3,354 )
286
8,783
19,280
17,877
3,986
86,361
(9,518 )
(10,000 )
(524 )
—
(20,042 )
(55,569 )
(1,301 )
743
172
(2,955 )
(4,579 )
(2,382 )
(65,871 )
448
(86 )
15,923
16,285 $
19,902
119
3,947
9
300
1,002
—
250
(1,155 )
6,561
969
(2,092 )
(717 )
125
(4,657 )
126
15,407
7,421
(287 )
140
18
(8,199 )
36,803
(2,517 )
1,607
90,324
(11,249 )
(19,342 )
(4,014 )
(1,190 )
(35,795 )
(41,624 )
(1,227 )
721
1,603
(2,745 )
—
(1,168 )
(44,440 )
10,089
(747 )
6,581
15,923 $
18,643
—
3,983
72
224
1,035
—
(4,120 )
—
7,160
2,616
263
—
209
—
275
(11,513 )
3,817
(6,855 )
(876 )
149
(7,912 )
(13,355 )
5,797
(3,600 )
9,613
(12,985 )
(37,972 )
(3,880 )
—
(54,837 )
51,900
(850 )
716
680
(1,113 )
(2,604 )
(2,323 )
46,406
1,182
(769 )
6,168
6,581
See summary of significant accounting policies and notes to the consolidated financial statements
43
AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021, 2020 and 2019
(Dollars in thousands, except share data)
(1) Description of Business and Summary of Significant Accounting Policies
American Vanguard Corporation (the “Company” or “AVD”) is primarily a specialty chemical manufacturer that develops and
markets safe and effective products for agricultural, commercial and consumer uses. The Company manufactures and formulates
chemicals for crops, human and animal protection. The consolidated financial statements include the accounts of the Company and its
subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company operates within a
single operating segment.
All U.S. Dollar amounts reflected in the notes to the consolidated financial statements are presented in thousands, except per
share data.
The Company is closely monitoring the impact of the novel coronavirus (COVID-19) pandemic on all aspects of its business,
including how the pandemic has impacted, and may possibly impact, its customers, business partners, and employees. The Company
is considered an essential business by most governments in the jurisdictions and territories in which the Company operates and, as a
result, did not incur significant disruptions from the COVID-19 pandemic during the years ended December 31, 2021 and 2020,
respectively.
Looking forward, the Company is unable to predict the impact that the pandemic may have on its future financial condition,
results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic impacts the
Company’s operations and those of its customers in the near term will depend on future developments, which are highly uncertain and,
beyond extrapolating our experience over the past year, cannot be predicted with confidence. The Company continues to monitor its
business for adverse impacts of the pandemic, including volatility in the foreign exchange markets, demand, supply-chain disruptions
in certain markets, and increased costs of employee safety, among others.
The Company believes that the combination of its cash flows from future operations, current cash on hand and the availability
under the Company’s credit facility will be sufficient to meet its working capital and capital expenditure requirements and will
provide the Company with adequate liquidity to meet its anticipated operating needs for at least the next 12 months from the issuance
of these consolidated financial statements. Although operating activities are expected to provide cash, to the extent of growth in the
future, its operating and investing activities will use cash and, consequently, this growth may require the Company to access some or
all of the availability under the credit facility. It is also possible that additional sources of finance may be necessary to support
additional growth.
Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable category.
Selective enterprise information is as follows:
Net sales:
U.S. crop
U.S. non-crop
Total U.S.
International
Total net sales
Gross profit:
U.S. crop
U.S. non-crop
Total U.S.
International
Total gross profit
2021
2020
2019
$
$
$
$
263,632 $
78,605
342,237
214,635
556,872 $
211,357 $
60,367
271,724
186,980
458,704 $
109,568 $
37,443
147,011
66,232
213,243 $
92,723 $
27,842
120,565
52,025
172,590 $
220,635
61,590
282,225
185,961
468,186
95,429
29,713
125,142
52,212
177,354
Due to elements inherent to the Company’s business, such as differing and unpredictable weather patterns, crop growing cycles,
changes in product mix of sales and ordering patterns that may vary in timing, measuring the Company’s performance on a quarterly
basis (for example, gross profit margins on a quarterly basis may vary significantly) even when such comparisons are favorable, is not
as good an indicator as full-year comparisons.
44
Reclassifications—Certain prior years’ amounts have been reclassified to conform to the current year’s presentation.
Cost of Sales— Cost of sales is the Company’s capitalized cost of inventory procurement and production that is sold in the
respective periods. These costs include direct labor, materials, and manufacturing overhead, Additionally the Company also includes
such cost centers as Health and Safety, Environmental, Maintenance and Quality Control in cost of sales.
Operating Expenses—Operating expenses include cost centers for Selling, General and Administrative, Research, Product
Development, and Regulatory, and outbound Freight, Delivery and Warehousing.
Selling
General and administrative
Research, product development and regulatory
Freight, delivery and warehousing
Total operating expenses
2021
2020
$
$
48,604 $
61,685
28,855
43,324
182,468 $
42,389 $
48,828
26,310
36,812
154,339 $
2019
45,121
46,593
24,070
35,349
151,133
Advertising Expense—The Company expenses advertising costs in the period incurred. Advertising expenses, which include
promotional costs, are recognized as selling expenses in the consolidated statements of operations and were $5,201, $4,833 and $5,520
in 2021, 2020 and 2019, respectively.
Cash and cash equivalents—The Company’s cash equivalents consist primarily of certificates of deposit with an initial term of
less than three months. For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash equivalents. The Company maintains cash and cash equivalent
balances that exceed federally insured limits with a number of financial institutions.
Inventories—The Company values its inventories at lower of cost or net realizable value. Cost is determined by the first-in,
first-out (“FIFO”) or average cost method, including material, labor, factory overhead and subcontracting services. The Company
writes down its inventory carrying values as a result of net realizable value assessments of slow moving and obsolete inventory and
other annual adjustments to ensure that its standard costs continue to closely reflect actual cost. The Company recorded an inventory
reserve allowance of $2,675 and $2,868 at December 31, 2021 and 2020, respectively.
The components of inventories, net of reserve allowance, consist of the following:
Finished products
Raw materials
Total inventories, net
2021
138,159 $
16,147
154,306 $
2020
149,415
14,369
163,784
$
$
Leases— The Company has operating leases for warehouses, manufacturing facilities, offices, cars, railcars and certain
equipment for which operating lease right-of-use (“ROU”) assets and corresponding lease liabilities are recorded. The Company
measures ROU assets throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any
prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. The lease liabilities are measured at the
present value of the unpaid lease payments at the lease commencement date. Leases that include both lease and non-lease components
are accounted for as a single lease component for each asset class, except for warehouse leases.
The minimum payments under operating leases are recognized on a straight-line basis over the lease term in the consolidated
statements of operations. Operating lease expenses related to variable lease payments are recognized in cost of sales or as operating
expenses in a manner consistent with the nature of the underlying lease and as the events, activities, or circumstances in the lease
agreement occur. Leases with a term of less than 12 months are not recognized on the consolidated balance sheets, and the related
lease expenses are recognized in the consolidated statements of operations on a straight-line basis over the lease term.
45
The accounting for leases requires management to exercise judgment and make estimates in determining the applicable discount
rate, lease term and payments due under a lease. Most of our leases do not provide an implicit interest rate, nor is it available to us
from our lessors. As an alternative, the Company uses our estimated incremental borrowing rate, which is derived from information
available at the lease commencement date, including publicly available data, in determining the present value of lease payments. The
Company also estimated the fair value of the lease and non-lease components for some of our warehouse leases based on market data
and cost data.
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 1 year
to 20 years.
The operating leases of the Company do not contain major restrictions or covenants such as those relating to dividends or
additional financial obligations. Finance leases are immaterial to the consolidated financial statements. There were no lease
transactions with related parties during 2021, 2020 and 2019.
The operating lease expense for the years ended December 31, 2021, 2020 and 2019 was $5,750, $5,662 and $5,398,
respectively. Lease expenses related to variable lease payments and short-term leases were immaterial. Additional information related
to operating leases are as follows:
Year Ended
December 31,
2021
Year Ended
December 31,
2020
Year Ended
December 31,
2019
Cash paid for amounts included in the
measurement of
lease liabilities
ROU assets obtained in exchange for new
liabilities
$
$
5,750 $
5,657 $
5,398
18,521 $
6,309 $
3,580
The weighted-average remaining lease term and discount rate related to the operating leases as of December 31, 2021, 2020 and
2019 were as follows:
Weighted-average remaining lease term (in years)
Weighted-average discount rate
December 31,
2021
December 31,
2020
6.72
4.02 %
4.62
3.81 %
Future minimum lease payments under non-cancellable operating leases as of December 31, 2021 were as follows:
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: imputed interest
Total
Amounts recognized in the consolidated balance sheets:
Operating lease liabilities, current
Operating lease liabilities, long term
$
$
$
$
$
5,899
4,884
4,130
3,705
2,852
8,254
29,724
(3,885 )
25,839
5,059
20,780
46
Revenue Recognition— The Company recognizes revenue when control of the ordered goods or services are transferred to its
customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
The Company sells its products mainly to distributors and retailers. The products include insecticides, herbicides, soil fumigants,
fungicides and biologicals. In addition, the Company recognizes royalty income related to licensing arrangements which qualify as
functional licenses rather than symbolic licenses. Upon signing a new licensing agreement, the Company typically receives up-front
fees, which are generally characterized as non-refundable royalties. These fees are recognized as revenue upon the execution of the
license agreements. Minimum royalty fees are recognized once the Company has an enforceable right for payment. Sales-based
royalty fees are typically recognized when the sales occur. The Company calculates and accrues estimated royalties based on the
agreement terms and correspondence with the licensees regarding actual sales. Based on similar economic and operational
characteristics, the Company’s business is aggregated into one reportable segment. Selective enterprise information of sales
disaggregated by category and geographic region is as follows:
2021
2020
2019
Net sales:
U.S. crop
U.S. non-crop
Total U.S.
International
Total net sales
Timing of revenue recognition:
Goods and services transferred at a point in time
Goods and services transferred over time
Total net sales
60,367
78,605
$ 263,632 $ 211,357 $ 220,635
61,590
342,237 271,724 282,225
214,635 186,980 185,961
$ 556,872 $ 458,704 $ 468,186
$ 556,372 $ 455,726 $ 464,967
3,219
$ 556,872 $ 458,704 $ 468,186
2,978
500
Net sales of U.S. crop and U.S. non-crop for 2020 in the table above were each revised. Net sales of U.S. crop sales are $11,810
lower than previously reported and net sales of U.S. non-crop are $11,810 higher than previously reported. There was no overall effect
on U.S. net sales.
Performance Obligations — A performance obligation is a promise in a contract or sales order to transfer a distinct good or
service to the customer. A transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as,
the performance obligation is satisfied. Certain of the Company’s sales orders have multiple performance obligations, as the promise
to transfer individual goods or services is separately identifiable from other promises in the sales orders. For sales orders with multiple
performance obligations, the Company allocates the sales order’s transaction price to each performance obligation based on its relative
stand-alone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells
these products. The Company’s performance obligations are satisfied either at a point in time or over time as work progresses.
On December 31, 2021, the Company had $63,064 of remaining performance obligations, which are comprised of deferred
revenue and services not yet delivered. The Company expects to recognize all these remaining performance obligations as revenue in
fiscal year 2022.
Practical Expedients — The Company has elected to use the following practical expedients (i) not to adjust the promised
amount of consideration for the effects of a significant financing component when the Company expects, at contract inception, that the
period between the Company's transfer of a promised product or service to a customer and when the customer pays for that product or
service will be one year or less and (ii) treat shipping and handling activities that occur after control of the good transfers to the
customer as fulfillment activities.
Contract Assets— The contract assets relate to royalties earned on certain functional licenses granted for the use of the
Company’s intellectual property, and a contract manufacturing agreement for the production of products without alternative use.
Contract assets
$
3,900
$
3,200
December 31,
2021
December 31,
2020
The short-term and long-term assets of $1,825 and $2,075 are included in other receivables and other assets, respectively, on the
consolidated balance sheets as of December 31, 2021. The short-term and long-term assets of $1,725 and $1,475 are included in other
receivables and other assets, respectively, on the consolidated balance sheets as of December 31, 2020.
47
Deferred Revenue—The timing of revenue recognition, billings and cash collections may result in deferred revenue in the
consolidated balance sheets. The Company sometimes receives payments from its customers in advance of goods and services being
provided, in return for participation in its pre-payments related cash incentive program. These pre-payments are held on the
Company’s consolidated balance sheets as deferred revenue until control of the related performance obligations has passed to the
customers, which is generally upon shipment of products. There is no significant financing component related to the pre-payments
since the Company expects to transfer the products within one year from the date payment is received. A similar number of the
Company’s customers participated in the Company’s cash incentive program in 2021, and at an increased average level, which
resulted in an increase in the Company’s deferred revenue balance as of December 31, 2021, compared to the prior year.
Deferred revenue
$
63,064
$
43,611
December 31,
2021
December 31,
2020
Revenue recognized for the years ended December 31, 2021, 2020, and 2019 that was included in the deferred revenue balance
at the beginning of 2021, 2020, and 2019 was $37,779, $5,652, and $20,043 respectively.
Allowance for Current Expected Credit Losses— The Company maintains an allowance to cover its Current Expected Credit
Losses ("CECL") on its trade receivables, other receivables and contract assets arising from the possible failure of customers to make
contractual payments. The Company estimates credit losses expected over the life of its trade receivables, other receivables and
contract assets based on historical information combined with current conditions that may affect a customer’s ability to pay and
reasonable and supportable forecasts. In most instances, the Company’s policy is to write-off trade receivables when they are deemed
uncollectible. The vast majority of the Company's trade receivables, other receivables and contract assets are less than 365 days.
Under the CECL impairment model, the Company develops and documents its allowance for credit losses on its trade receivables
based on multiple portfolios. The determination of portfolios is based primarily on geographical location, type of customer and aging.
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, which are
usually made at the end of a growing season, to distributors, retailers or growers. 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 net
of the impact of Programs and includes estimates of variable consideration. Variable consideration includes amounts expected to be
paid to its customers estimated using the expected value method. Each quarter management compares individual sale transactions with
Programs to determine what, if any, estimated 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 will make adjustments to the accumulated accrual to properly reflect the Company’s best estimate of 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.
Debt Issuance Costs and Debt Discount— The Company capitalizes costs incurred with borrowing and records debt issuance
costs as a reduction to the debt amount. These costs in connection with the Company’s revolving line of credit are amortized ratably
over the life of the borrowing and included in interest expense.
Property, Plant and Equipment and Depreciation— Property, plant and equipment includes the cost of land, buildings,
machinery and equipment, office furniture and fixtures, automobiles, construction projects and significant improvements to existing
plant and equipment. Interest costs related to significant construction projects are capitalized at the Company’s current weighted
average effective interest rate. Expenditures for minor repairs and maintenance are expensed as incurred. When property or equipment
is sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and the gain
or loss realized on disposition is reflected in operations. All plant and equipment are depreciated using the straight-line method,
utilizing the estimated useful property lives. See Note 2 for useful lives.
Intangible Assets— The primary identifiable intangible assets of the Company relate to assets associated with its product and
business acquisitions. All the Company’s intangible assets are amortizing assets with finite lives. The estimated useful life of an
identifiable intangible asset is based upon several factors including the effects of demand, competition, and expected changes in the
marketability of the Company’s products.
48
Business Combinations— The Company uses its best estimates and assumptions to assign fair value to the tangible and
intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and
subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may
record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding
offset to goodwill or an adjustment to the gain from a bargain purchase. In addition, when appropriate uncertain tax positions and tax-
related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company
continues to collect information and reevaluates these estimates and assumptions quarterly and records any adjustments to the
Company’s preliminary estimates to goodwill or an adjustment to the gain from a bargain purchase, provided that the Company is
within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets
acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated
statement of operations.
Certain of our acquisition agreements include contingent earn-out arrangements, which are generally based on the achievement
of future income thresholds. The fair values of these earn-out arrangements are included as part of the purchase price of the acquired
companies on their respective acquisition dates. For each transaction, the Company engages third-party valuation specialists to assist it
in making estimates of the fair value of contingent earn-out payments, both as part of the initial purchase price and at each subsequent
financial statement date until the end of the related performance period. The Company records the estimated fair value of contingent
consideration as a liability on the consolidated balance sheets.
We review and re-assess the estimated fair value of contingent consideration on a quarterly basis, and the updated fair value
could be materially different from the initial estimates or prior quarterly amounts. Changes in the estimated fair value of our
contingent earn-out liabilities are reported in operating results.
Asset Acquisitions— If an acquisition of an asset or group of assets does not meet the definition of a business, the transaction is
accounted for as an asset acquisition rather than a business combination. An asset acquisition does not result in the recognition of
goodwill and transaction costs are capitalized as part of the cost of the asset or group of assets acquired. The Company uses its best
estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition
date. The acquisitions costs are allocated to the assets acquired on a relative fair value basis.
Impairment— The carrying values of long-lived assets other than goodwill are reviewed for impairment annually and/or
whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The Company
evaluates recoverability of an asset group by comparing the carrying value to the future undiscounted cash flows that it expects to
generate from the asset group. If the comparison indicates that the carrying value of an asset group is not recoverable, measurement of
the impairment loss is based on the fair value of the asset. There were no circumstances that would indicate any impairment of the
carrying value of these long-lived assets and no material impairment losses were recorded in 2021, 2020, or 2019.
The Company reviews goodwill for impairment utilizing either a qualitative or quantitative assessment. If the Company decides
that it is appropriate to perform a qualitative assessment and concludes that the fair value of a reporting unit more likely than not
exceeds its carrying value, no further evaluation is necessary. If the Company performs a quantitative assessment, the Company
compares the fair value of a reporting unit with its carrying amounts and recognizes an impairment charge for the amount that the
carrying amount exceeds the reporting unit’s fair value. The Company annually tests goodwill for impairment in beginning of the
fourth quarter, or earlier if triggering events occur. The Company did not record any impairment losses in 2021, 2020, or 2019.
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:
• Level 1 – Quoted prices in active markets for identical assets or liabilities.
• Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
• Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market
participants would use in pricing the asset or liability.
The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, short-term
investments, accounts receivable, long-term investments, accounts payable and accrued expenses approximate fair value because of
the relatively short maturity of such instruments. The carrying amount of the Company’s short-term and long-term borrowings, which
are considered Level 2 liabilities, approximates fair value based upon current rates and terms available to the Company for similar
debt.
49
We measure our contingent earn-out liabilities in connection with acquisitions at fair value on a recurring basis using significant
unobservable inputs classified within Level 3 of the fair value hierarchy. We may use various valuation techniques depending on the
terms and conditions of the contingent consideration including a Monte-Carlo simulation. This simulation uses probability distribution
for each significant input to produce hundreds or thousands of possible outcomes and the results are analyzed to determine
probabilities of different outcomes occurring. Refer to Note 10 for a reconciliation of the Company’s contingent consideration.
Foreign Currency Translation— Certain international operations use the respective local currencies as their functional
currency, while other international operations use the U.S. Dollar as their functional currency. The Company considers the U.S. Dollar
as its reporting currency. Translation adjustments for subsidiaries where the functional currency is its local currency are included in
other comprehensive income (loss). Foreign currency transaction gains (losses) resulting from exchange rate fluctuation on
transactions denominated in a currency other than the functional currency are reported in earnings. Assets and liabilities of the foreign
operations denominated in local currencies are translated at the rate of exchange at the balance sheet date. Revenues and expenses are
translated at the weighted average rate of exchange during the period. Translations of intercompany loans of a long-term investment
nature are included as a component of translation adjustment in other comprehensive loss.
Income Taxes—The Company utilizes the liability method of accounting for income taxes as set forth in ASC 740. Under the
liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of
assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation
allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. In determining the need
for valuation allowances, the Company considers projected future taxable income and the availability of tax planning strategies. If in
the future the Company determines that it would not be able to realize its recorded deferred tax assets, an increase in the valuation
allowance would be recorded, decreasing earnings in the period in which such determination is made.
The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon the
Company’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where there
is greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that
may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For
those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been
recognized in the consolidated financial statements.
Per Share Information—Basic earnings per share (“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 to EPS that could occur if securities
or other contracts, which, for the Company, consists of restricted stock grants and options to purchase shares of the Company’s
common stock, are exercised as calculated using the treasury stock method.
The components of basic and diluted earnings per share were as follows:
Numerator:
Net income
Denominator:
2021
2020
2019
$
18,587 $
15,242 $
13,601
Weighted average shares outstanding—basic
Dilutive effect of stock options and grants
Weighted average shares outstanding—diluted
29,811
599
30,410
29,450
543
29,993
29,030
626
29,656
For the years ended December 31, 2021, 2020, and 2019, no options or grants were excluded from the computation.
Use of Estimates—The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities (including those related to litigation), and revenues, at the date that the consolidated financial
statements are prepared. Significant estimates relate to the allowance for doubtful accounts, inventory reserves, impairment of long-
lived assets, investments and goodwill, assets acquired, and liabilities assumed in connections with business combinations and asset
acquisitions, accrued program costs, stock-based compensation and income taxes. Actual results could materially differ from those
estimates.
Total comprehensive income—In addition to net income, total comprehensive income (loss) includes changes in equity that are
excluded from the consolidated statements of operations and are recorded directly into a separate section of stockholders’ equity on
the consolidated balance sheets. For the years ended December 31, 2021, 2020, and 2019, total comprehensive income consisted of net
income and foreign currency translation adjustments.
50
Stock-Based Compensation—The Company estimates the fair value of share-based payment awards on the date of grant. The
value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the
Company’s consolidated statements of operations.
Stock-based compensation expense recognized during the period is based on the fair value of the portion of share-based
payment awards that is ultimately expected to vest during the period. Stock-based compensation expense recognized is reduced for
estimated forfeitures. Estimated forfeitures recognized in the Company’s consolidated statements of operations reduced compensation
expense by $320, $222, and $191 for the years ended December 31, 2021, 2020, and 2019, respectively. The Company estimates that
17.2% of both restricted stock grants and performance-based restricted shares that are currently subject to vesting will be forfeited.
These estimates are reviewed quarterly and revised as necessary.
The Company uses the Black-Scholes option-pricing model (“Black-Scholes model”) to value option grants using the following
weighted average assumptions (i.e. risk-free interest rate, dividend yield, volatility and average lives). There were no stock options
granted during 2021, 2020 or 2019.
The expected volatility and expected life assumptions are complex and use subjective variables. The variables take into
consideration, among other things, actual and projected employee stock option exercise behavior. The Company estimates the
expected term or vesting period using the “safe harbor” provisions of Staff Accounting Bulletin (“SAB”) 107 and SAB 110. The
Company used historical volatility as a proxy for estimating expected volatility.
The Company values restricted stock grants using the Company’s traded stock price at closing on the date of grant. The
weighted average grant-date fair values of restricted stock grants during 2021, 2020, and 2019 were $20.00, $14.39, and
$16.84, respectively.
Recently Issued Accounting Guidance:
Recent Accounting Standards Adopted:
In December 2019, the FASB issued ASU no. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes,” (“ASU No. 2019-12”). The amendment removes certain exceptions to the general income tax accounting methodology
including an exception for the recognition of a deferred tax liability when a foreign subsidiary becomes an equity method investment
and an exception for interim periods showing operating losses in excess of anticipated operating losses for the year. The amendment
also reduces the complexity surrounding franchise tax recognition; the step up in the tax basis of goodwill in conjunction with
business combinations; and the accounting for the effect of changes in tax laws enacted during interim periods. The Company adopted
ASU 2019-12 as of January 1, 2021. The adoption did not result in a material change to the Company’s Consolidated Financial
Statements.
Accounting standards not yet adopted:
In November 2021, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2021-10, “Disclosures by
Business Entities about Government Assistance.” The ASU codifies new requirements to disclose information about the nature of
certain government assistance received, the accounting policy used to account for the transactions, the location in the financial
statements where such transactions were recorded and significant terms and conditions associated with such transactions. The
guidance is effective for annual periods beginning after December 15, 2021. The Company does do not expect the adoption of ASU
No. 2021-10 to have a material impact to its Consolidated Financial Statements.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting.” The pronouncement provides temporary optional expedients and exceptions to the
current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market
transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. The
guidance was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022.
The Company is evaluating the impact of the transition from LIBOR to alternative reference rates but does not expect a significant
impact to 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 Consolidated Financial Statements.
51
(2) Property, Plant and Equipment
Property, plant and equipment at December 31, 2021 and 2020 consist of the following:
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
2021
2020
Estimated
useful lives
$
$
2,756 $
19,844
132,159
10,094
1,832
8,199
174,884
(108,773 )
66,111 $
2,756
19,786 10 to 30 years
124,199 3 to 15 years
7,403 3 to 10 years
1,747 3 to 6 years
10,392
166,283
(100,901 )
65,382
For the years ended December 31, 2021, 2020, and 2019, the Company’s aggregate depreciation expense related to property,
plant and equipment was $8,530, $7,466, and $6,504, respectively. For the years ended December 31, 2021, 2020, and 2019, the
Company eliminated from assets and accumulated depreciation $658, $1,400 and $868 of fully depreciated assets, respectively.
(3) Long-Term Debt
Long-term debt of the Company at December 31, 2021 and 2020 is summarized as follows:
Revolving line of credit
Less debt issuance costs
2021
$
$
53,300 $
(1,060 )
52,240 $
2020
107,900
(458 )
107,442
Principal payments on long-term debt at December 31, 2021 of $53,300 are due in August 2026.
The Company’s main bank is Bank of the West, a wholly owned subsidiary of the French bank, BNP Paribas. Bank of the West
has been the Company’s bank for more than 30 years and is the syndication manager for the Company’s loans.
The Company and certain of its affiliates are parties to a revolving line of credit 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 Borrower Agent (including the Company and AMVAC
BV), as Borrowers, on the one hand, and a group of commercial lenders led by Bank of the West as administrative agent,
documentation agent, syndication agent, collateral agent, sole lead arranger and book runner, on the other hand. The Credit Agreement
consists of a line of credit of up to $275,000, an accordion feature of up to $150,000, a letter of credit and swingline sub-facility (each
having limits of $25,000) and has a maturity date of August 5, 2026. The Credit Agreement amends and restates the previous credit
facility, which had a maturity date of June 30, 2022. With respect to key financial covenants, the Credit Agreement contains two:
namely, borrowers are required to maintain a Total Leverage (“TL”) Ratio of no more than 3.5-to-1, during the first three years,
stepping down to 3.25-to-1 as of September 30, 2024, and a Fixed Charge Coverage Ratio of at least 1.25-to-1. In addition, to the
extent that it completes acquisitions totaling $15 million or more in any 90-day period, AMVAC may step-up the TL Ratio by 0.5-to-
1, not to exceed 4.00-to-1, for the next three full consecutive quarters. Acquisitions below $50 million no longer require Agent
consent. Distributions to the Company’s shareholders are limited to net income for the four fiscal quarter period ending on the fiscal
quarter immediately prior to the fiscal quarter in which the current distribution was declared.
The Company’s borrowing capacity varies with its financial performance, measured in terms of Consolidated EBITDA as
defined in the Credit Agreement, for the trailing twelve-month period. Under the Credit Agreement, revolving loans bear interest at a
variable rate based, at borrower’s election with proper notice, on either (i) LIBOR plus the “Applicable Margin” which is based upon
the Total Leverage (“TL”) Ratio (“LIBOR Revolver Loan”) or (ii) the greater of (x) the Prime Rate, (y) the Federal Funds Rate plus
0.5%, and (z) the Daily One-Month LIBOR Rate plus 1.00%, plus, in the case of (x), (y) or (z) the Applicable Margin (“Adjusted Base
Rate Revolver Loan”). Interest payments for LIBOR Revolver Loans are payable on the last day of each interest period (either one-,
three- or six- months, as selected by the borrower) and the maturity date, while interest payments for Adjusted Base Rate Revolver
Loans are payable on the last business day of each month and the maturity date. The interest rate on December 31, 2021, was 1.98%.
52
At December 31, 2021, 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 availability to increase its borrowings by up to $178,705. This compares
to an available borrowing availability of $86,736 as of December 31, 2020. The level of borrowing capacity is driven by three factors:
(1) our financial performance, as measured in EBITDA for trailing twelve-month period, (2) the inclusion of proforma EBITDA
related to acquisitions completed during the preceding twelve months and (3) the leverage covenant (being the number of times
EBITDA the Company may borrow under its credit facility agreement). The Company was in compliance with all the debt covenants
as of December 31, 2021.
Substantially all the Company’s assets are pledged as collateral under the Credit Agreement, as amended.
(4) Income Taxes
The provisions for income taxes are:
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
2021
2020
2019
$
$
6,684 $
2,149
1,106
(1,197 ) $
(3 )
2,831
(2,369 )
(1,039 )
1,635
8,166 $
2,177
403
(1,131 )
3,080 $
(235 )
(151 )
2,956
2,867
1,548
(1,783 )
5,202
Total income tax expense differed from the amounts computed by applying the U.S. Federal income tax rate of 21.0% to income
before income tax expense, as a result of the following:
Computed tax expense at statutory federal rates
Increase (decrease) in taxes resulting from:
State taxes, net of federal income tax benefit
Unrecognized tax benefits
Bargain purchase gain on business acquisition
Income tax credits
Foreign tax rate differential
Stock based compensation
Global intangible low-taxed income
Change in valuation allowance
Other
Total
$
2021
2020
2019
$
5,619 $
3,874 $
3,993
1,485
(1,783 )
(35 )
(1,206 )
262
208
162
3,304
150
8,166 $
559
(2,092 )
(978 )
(812 )
2,145
377
—
—
7
3,080 $
1,131
263
—
(819 )
341
366
249
—
(322 )
5,202
Income before provision for income taxes and losses on equity investments are:
Domestic
International
Total
2021
2020
2019
$
$
21,212 $
5,929
27,141 $
11,858 $
6,589
18,447 $
15,465
3,547
19,012
53
Temporary differences between the consolidated financial statements’ carrying amounts and tax bases of assets and liabilities
that give rise to significant portions of the net deferred tax liability at December 31, 2021 and 2020 relate to the following:
Deferred tax asset
Inventories
Program accrual
Vacation pay accrual
Accrued bonuses
Bad debt expense
Stock compensation
Domestic NOL carryforward
Foreign NOL carryforward
Tax credits
Lease liability
Accrued expenses
Unrealized foreign exchange loss
Other
Deferred tax asset
Less valuation allowance
Deferred tax asset, net
Deferred tax liability
Plant and equipment, principally due to differences in
depreciation and capitalized interest
Lease assets
Prepaid expenses
Deferred revenue
Other
Deferred tax liability
2021
2020
$
$
$
$
$
1,777 $
9,098
792
1,250
1,361
1,532
675
1,718
807
6,718
723
3,847
744
31,042 $
(4,262 )
26,780 $
37,113 $
6,600
1,666
1,014
123
46,516 $
1,416
7,306
815
589
952
2,079
708
1,434
931
3,378
347
2,798
735
23,488
—
23,488
36,878
3,332
1,508
874
1,692
44,284
Total net deferred tax liability
$
19,736 $
20,796
As of December 31, 2021, we recorded a full valuation allowance against the net deferred income tax assets related to the
Company’s operations in Brazil totaling $4,262, of which $3,304 is included in the provision for income taxes for 2021 and $958
related to unrealized foreign exchange losses for 2021 included in other comprehensive income for 2021. There was no valuation
allowance as of December 31, 2020.
Gross foreign NOLs were $5,491 and $5,021 for the year ended December 31, 2021 and 2020, respectively. Substantially all of
the Company’s foreign NOLs can be carried forward indefinitely.
Gross federal and state NOLs available across all jurisdictions in which we operate were $3,733 and $3,994 as of December 31,
2021 and 2020, respectively. The Company’s federal and state NOLs expire over varying intervals in the future.
The following is a roll-forward of the Company’s total gross unrecognized tax benefits, not including interest and penalties, for
the years ended December 31, 2021 and 2020 included in other liabilities, excluding current installments on the Company’s
consolidated balance sheets:
Balance at beginning of year
Additions for tax positions related to the current year
Additions for tax positions related to the prior years
Reduction for tax positions related to the prior years
Effect of exchange rate changes
Balance at end of year
2021
2020
3,222 $
223
56
(971 )
(104 )
2,426 $
4,395
159
16
(841 )
(507 )
3,222
$
$
54
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in
the Company’s consolidated financial statements. For the years ended December 31, 2021, 2020, and 2019 the Company had
recognized a balance of approximately $2,909, $4,195, and $6,528 respectively in interest and penalties related to unrecognized tax
benefits.
It is expected that the amount of unrecognized tax benefits will change and $1,699 of unrecognized tax benefits is expected to be
released within the next twelve months due to expiration of statute of limitations.
The Company believes it is more likely than not that the deferred tax assets detailed in the table above, exclusive of those in
Brazil with the previously mentioned full valuation allowance, will be realized in the normal course of business. It is the intent of the
Company that undistributed earnings of foreign subsidiaries are permanently reinvested. The amount of undistributed earnings was
$12,741 as of December 31, 2021. Upon distribution of earnings in the form of dividends or otherwise, the Company may still be
subject to state income taxes and withholding taxes payable to the various foreign countries. Determination of the unrecognized
deferred tax liability is not practical due to the complexities of a hypothetical calculation.
The Company is subject to U.S. federal income tax as well as to income tax in multiple state jurisdictions. Federal income tax
returns of the Company are subject to Internal Revenue Service (“IRS”) examination for the 2018 through 2020 tax years. State
income tax returns are subject to examination for the 2017 through 2020 tax years. The Company has foreign income tax returns
subject to examination.
The Mississippi Department of Revenue has completed its audit of the Company’s state income tax returns for the years ended
December 31, 2016 through December 31, 2018. The proposed adjustment for the period is immaterial.
On November 9, 2018, the Company completed the purchase of all the outstanding shares of TyraTech, Inc., a loss corporation.
The Company obtained approximately $3,971 of usable federal net operating losses through the acquisition. The Internal Revenue
Code of 1986, as amended, imposes restrictions on the utilization of NOLs in the event of an “ownership change” of a corporation.
During 2019, the Company completed the Section 382 analysis and determined that the utilization of the losses is subject to an annual
limitation of $162, with an additional $890 of net operating losses available over the first five years after the ownership change.
On October 2, 2020, the Company completed the acquisition of all outstanding stock of the Agrinos Group Companies
(Agrinos), except for Agrinos AS. Agrinos has operating entities in the U.S., Mexico, India, Brazil, China, Ukraine, and Spain.
Agrinos, Inc., an U.S. corporation with operating losses. The Company obtained approximately $126 of usable federal net operating
losses through the acquisition. The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of NOLs in the
event of an “ownership change” of a corporation. During 2021, the Company completed an analysis and determined that the potential
annual limitation on the Company’s utilization of the losses is insignificant.
(5) Litigation and Environmental
The Company records a liability in its 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 expense in connection
with loss contingencies as incurred.
A. DBCP Cases
Over the course of the past 30 years, AMVAC and/or the Company have been named or otherwise implicated in a number of
lawsuits concerning injuries allegedly arising from either contamination of water supplies or personal exposure to 1, 2-dibromo-3-
chloropropane (“DBCP®”). DBCP was manufactured by several chemical companies, including Dow Chemical Company, Shell Oil
Company and AMVAC, and was approved by the USEPA to control nematodes. DBCP was also applied on banana farms in Latin
America. The USEPA suspended registrations of DBCP in October 1979, except for use on pineapples in Hawaii. That suspension
was partially based on 1977 studies by other manufacturers that indicated a possible link between male fertility and exposure to DBCP
among their factory production workers involved with producing the product. The Company has not sold DBCP in over 40 years.
55
At present, there are four domestic lawsuits and approximately 85 Nicaraguan lawsuits filed by former banana workers in which
AMVAC has been named as a party. Only two of the Nicaraguan actions have actually been served on AMVAC. With respect to
Nicaraguan matters, there was no change in status during 2021. As described more fully below, activity in domestic cases during 2021
is as follows. The two cases remaining in Delaware include 287 plaintiffs who have appealed a lower court finding that the matter was
barred by the statute of limitations; this matter has been remanded to the trial court, following a ruling by the Delaware Supreme Court
on recognizing the doctrine of cross-jurisdictional tolling. In Hawaii, in the matter of Patrickson, et. al. v. Dole Food Company, the
parties have stipulated that the Company shall be dismissed, insofar as it was not a party to the class action case that tolled the statute
of limitations. In Adams (also in Hawai’i), there has been no activity since 2014, when the court granted dismissal of co-defendant
Dole on the basis of a worker’s compensation bar and gave plaintiffs leave to amend their complaint in light of that ruling.
Nicaraguan Matters
A review of court filings in Chinandega, Nicaragua, has found 85 suits alleging personal injury allegedly due to exposure to
DBCP and involving approximately 3,592 plaintiffs have been filed against AMVAC and other parties. Of these cases, only two –
Flavio Apolinar Castillo et al. v. AMVAC et al., No. 535/04 and Luis Cristobal Martinez Suazo et al. v. AMVAC et al., No. 679/04
(which were filed in 2004 and involve 15 banana workers) – have been served on AMVAC. All but one of the suits in Nicaragua have
been filed pursuant to Special Law 364, an October 2000 Nicaraguan statute that contains substantive and procedural provisions that
Nicaragua’s Attorney General previously expressed as unconstitutional. Each of the Nicaraguan plaintiffs’ claims $1 million in
compensatory damages and $5 million in punitive damages. In all these cases, AMVAC is a joint defendant with Dow Chemical
Company and Dole Food Company, Inc. AMVAC contends that the Nicaragua courts do not have jurisdiction over it and that Public
Law 364 violates international due process of law. AMVAC has objected to personal jurisdiction and demanded under Law 364 that
the claims be litigated in the U.S.. In 2007, the court denied these objections, and AMVAC appealed the denial. It is not presently
known as to how many of these plaintiffs claim exposure to DBCP at the time AMVAC’s product was allegedly used nor is there any
verification of the claimed injuries. Further, to date, plaintiffs have not had success in enforcing Nicaraguan judgments against
domestic companies before U.S. courts. With respect to these Nicaraguan matters, AMVAC intends to defend any claim vigorously.
Furthermore, the Company does not believe that a loss is either probable or reasonably estimable and has not recorded a loss
contingency for these matters. There were no changes in connection with these matters in 2021.
Delaware DBCP Cases
Chavez. On or about May 31, 2012, HendlerLaw, P.C. filed several actions involving claims for personal injury allegedly
arising from exposure to DBCP on behalf of 230 banana workers from Costa Rica, Ecuador and Panama. Defendant Dole
subsequently brought a motion to dismiss these matters under the “first-to-file” theory of jurisdiction, specifically in light of the fact
that they involved identical claims and claimants as matters that had been brought by the same law firm in Louisiana. These Delaware
matters were consolidated into one matter (“Chavez”). On August 21, 2012, the U.S. District Court granted defendants’ motion to
dismiss the actions with prejudice, finding that the same claimants and claims had been pending in the Hendler-Louisiana cases where
they had been first filed. However, plaintiffs appealed the dismissal, and on September 2, 2016, the Third Circuit Court reversed the
District Court decision, finding that it was not proper for the trial court to have dismissed these cases with prejudice even though the
Louisiana courts had dismissed the same claims for expiration of the statute of limitations. In reaching its decision, the Third Circuit
reasoned that no court had yet addressed the merits of the matter, that Delaware’s statute of limitations may differ from that of
Louisiana, and that it would have been proper for the Delaware trial court to have dismissed the matter without prejudice (that is, with
the right to amend and refile). Accordingly, Chavez was remanded to the U.S. District Court in Delaware on September 2, 2016,
where it remained until it was stayed in June 2017 (as indicated in “Marquinez” below) and subsequently reactivated in March 2018.
Abad Castillo and Marquinez. On or about May 31, 2012, two cases (captioned Abad Castillo and Marquinez) were filed with
the U.S. District Court for the District of Delaware (USDC DE No. 1:12-CV-00695-LPS) involving claims for physical injury arising
from alleged exposure to DBCP over the course of the late 1960’s through the mid-1980’s on behalf of 2,700 banana plantation
workers from Costa Rica, Ecuador, Guatemala, and Panama. Defendant Dole brought a motion to dismiss 22 plaintiffs from Abad
Castillo on the ground that they were parties in cases that had been filed by HendlerLaw P.C. in Louisiana. On September 19, 2013,
the appeals court granted, in part, and denied, in part, the motion to dismiss, holding that 14 of the 22 plaintiffs should be dismissed.
On May 27, 2014, the district court granted Dole’s motion to dismiss the matter without prejudice on the ground that the applicable
statute of limitations had expired in 1995. Then, on August 5, 2014, the parties stipulated to summary judgment in favor of defendants
(on the same ground as the earlier motion) and the court entered judgment in the matter. Plaintiffs were given an opportunity to
appeal; however, only 57 of the 2,700 actually entered an appeal. Thus, only 57 plaintiffs remain in Marquinez.
56
On or about June 18, 2017, the Third Circuit Court submitted a certified question of law to the Delaware Supreme Court on the
question of when the tolling period ended. At that time, as mentioned above, the Chavez case was stayed, pending the ruling of the
state’s highest court. The Delaware Supreme Court heard oral argument on January 17, 2018 and, on March 15, 2018, ruled on the
matter, finding that federal court dismissal in 1995 on the grounds of forum non conveniens did not end class action tolling, and that
such tolling ended when class action certification was denied in Texas state court in June 2010. Thus, both Marquinez and Chavez are
now pending at the district court, following the appeals court’s ruling. Discovery has commenced, and the court is considering
proposed schedules for completing discovery over the next 12-24 months. At this stage, defendants have identified multiple claimants
whose medical examinations disqualify them from discovery. Plaintiffs seek to complete a limited number of medical examinations in
each country in order to enable a representative subgroup of claimants to proceed with the litigation, while defendants seek to
complete all medical examinations before proceeding. At this stage in the proceedings, the Company does not believe that a loss is
probable or reasonably estimable for either Chavez or Marquinez and has not recorded a loss contingency for these matters.
Hawaiian DBCP Matters
Patrickson, et. al. v. Dole Food Company, et al. In October 1997, AMVAC was served with two complaints in which it was
named as a defendant, filed in the Circuit Court, First Circuit, State of Hawai’i and in the Circuit Court of the Second Circuit, State of
Hawai’i (two identical suits) entitled Patrickson, et. al. v. Dole Food Company, et. al (“Patrickson Case”) alleging damages sustained
from injuries (including sterility) to banana workers caused by plaintiffs’ exposure to DBCP while applying the product in their native
countries. Other named defendants include Dole Food Company, Shell Oil Company and Dow Chemical Company. After several
years of law and motion activity, the court granted judgment in favor of the defendants based upon the statute of limitations on July
28, 2010. On August 24, 2010, the plaintiffs filed a notice of appeal. On April 8, 2011, counsel for plaintiffs filed a pleading to
withdraw and to substitute new counsel. On October 21, 2015, the Hawai’i Supreme Court granted the appeal and overturned the
lower court decision, ruling that the State of Hawai’i now recognizes cross-jurisdictional tolling, that plaintiffs filed their complaint
within the applicable statute of limitations and that the matter is to be remanded to the lower court for further adjudication. However,
in November 2018, the parties stipulated that, because it was not named as a defendant in the Carcamo matter (class action matter that
gave rise to the tolling of the statute of limitations), AMVAC should be dismissed from this matter. Thus, we expect that the Company
will be dismissed with prejudice from this action as soon as the court issues an order, and accordingly have not recorded a loss
contingency in connection therewith. There were no changes in this matter during 2021.
Adams v. Dole Food Company et al. On approximately November 23, 2007, AMVAC was served with a suit filed by two
former Hawaiian pineapple workers (and their spouses), alleging that they had testicular cancer due to DBCP exposure; the action is
captioned Adams v. Dole Food Company et al in the First Circuit for the State of Hawaii. Plaintiff alleges that they were exposed to
DBCP between 1971 and 1975. AMVAC denies that any of its product could have been used at the times and locations alleged by
these plaintiffs. Following the dismissal of Dole Food Company on the basis of the exclusive remedy of worker’s compensation
benefits, plaintiffs appealed the dismissal. The court of appeals subsequently remanded the matter to the lower court in February 2014,
effectively permitting plaintiffs to amend their complaint to circumvent the workers’ compensation bar. There has been no activity in
the case since that time. The Company does not believe that a loss is either probable or reasonably estimable and has not recorded a
loss contingency for this matter. There were no changes in connection with this matter in 2021.
Other Matters
EPA FIFRA/RCRA Matter. On November 10, 2016, the Company was served with a grand jury subpoena from the United
States Attorney’s Office for the Southern District of Alabama, seeking documents regarding the importation, transportation, and
management of a specific pesticide in substantially empty, closed containers. The Company retained defense counsel to assist in
responding to the subpoena and otherwise defending the Company’s interests. AMVAC is co-operating in the investigation.
Since April 2018, the Department of Justice (“DOJ”) has conducted several interviews of AMVAC employees and issued
supplemental document requests in connection with the investigation. In November 2020, DOJ issued a second grand jury subpoena
seeking records and related communications with regard to a submission made by the Company to the Environmental Protection
Agency (“EPA”) in connection with a request to amend a pesticide’s registration. Soon thereafter, DOJ also identified the Company
and one of its non-executive employees as targets of the government’s investigation. In January 2021, DOJ and EPA informed the
Company that it is investigating violations of two environmental statutes, the Federal Insecticide, Fungicide, and Rodenticide Act
(“FIFRA”) and the Resource Conservation and Recovery Act (“RCRA”), as well as obstruction of an agency proceeding and false
statement statutes. DOJ also identified for the Company, as well as for the individual target, evidence that it contends supports alleged
violations with respect to both the Company and the individual target. As part of discussions regarding possible resolution, in October
2021, the Company presented its evaluation of the legal and factual issues raised by the government (which do not include any
allegations of harm to human health or the environment) to both DOJ and USEPA. Further, three corporate witnesses were called to
be interviewed by the grand jury in Mobile, Alabama in February 2022.
57
The governmental agencies involved in this investigation have a range of civil and criminal penalties they may seek to impose
against corporations and individuals for violations of FIFRA, RCRA and other federal statutes including, but not limited to, injunctive
relief, fines, penalties and modifications to business practices and compliance programs, including the appointment of a monitor. If
violations are established, the amount of any fines or monetary penalties which could be assessed and the scope of possible non-
monetary relief would depend on, among other factors, findings regarding the amount, timing, nature and scope of the violations, and
the level of cooperation provided to the governmental authorities during the investigation. As a result, the Company cannot yet
anticipate the timing or predict the ultimate resolution of this investigation, financial or otherwise, which could have a material
adverse effect on our business prospects, operations, financial condition, and cash flows. Accordingly, we have not recorded a loss
contingency for this matter.
Harold Reed v. AMVAC et al. During January 2017, the Company was served with two Statements of Claim that had been filed
on March 29, 2016 with the Court of Queen’s Bench of Alberta, Canada (as case numbers 160600211 and 160600237) in which
plaintiffs Harold Reed (an applicator) and 819596 Alberta Ltd. dba Jem Holdings (an application equipment rental company) allege
physical injury and damage to equipment, respectively, arising from a fire that occurred during an application of the Company’s
potato sprout inhibitor, SmartBlock, at a potato storage facility in Coaldale, Alberta on April 2, 2014. Four other related matters were
subsequently consolidated into this case (alleging loss of potatoes, damage to equipment, damage to Quonset huts and loss of business
income). The parties have exchanged written discovery, and depositions of persons most knowledgeable took place during the first
quarter of 2019. Citing the length of the cases’ pendency and the expense, in December 2019, plaintiff Reed voluntarily dismissed two
actions (160600211 and 160600237) for no consideration. Over the course of 2020, discovery was completed, and the parties held a
mediation on March 11, 2021; however, no settlement was reached. Thus, pre-trial discovery will likely continue. The Company
believes that it is not primarily at risk but that a loss is probable and reasonably estimable and, to that end, has recorded a loss
contingency in an amount that is not material to its financial performance or operations cash flows.
Pitre etc. v. Agrocentre Ladauniere et al. On February 11, 2022, a strawberry grower named Les Enterprises Pitre, Inc. filed a
complaint in the Superior Court, District of Labelle, Province of Quebec, Canada, entitled Pitre, etc. v. Agrocentre Ladauniere, Inc.
etal, including Amvac Chemical Corporation, seeking damages in the amount of approximately $5 million arising from stunted
growth of, and reduced yield from, its strawberry crop allegedly from the application of AMVAC’s soil fumigant, Vapam, in spring of
2021. Plaintiff alleges that its application consultant’s advice was, in effect, incomplete and misleading (in light of the product’s label)
and, further, that the language of the product label was insufficient to warn the user about the proper time interval between application
and planting of seedling plants. The Company believes that the claims have no merit and intends to defend the matter. At this stage in
the proceedings, there is no sufficient information to form a judgment as to either the probability or amount of loss; thus, the
Company has not set aside a reserve in connection with this matter.
(6) Employee Deferred Compensation Plan and Employee Stock Purchase Plan
The Company maintains a deferred compensation plan (“the Plan”) for all eligible employees. The Plan calls for each eligible
employee, at the employee’s election, to participate in an income deferral arrangement under Internal Revenue Code Section 401(k).
The plan allows eligible employees to make contributions, which cannot exceed 100% of compensation, or the annual dollar limit set
by the Internal Revenue Code. The Company matches the first 5% of employee contributions. The Company’s contributions to the
Plan amounted to $2,273, $2,172 and $1,997 in 2021, 2020 and 2019, respectively.
During 2001, the Company’s Board of Directors adopted the AVD Employee Stock Purchase Plan (the “ESPP Plan”). The Plan
allows eligible employees to purchase shares of common stock through payroll deductions at a discounted price. An original aggregate
number of approximately 1,000,000 shares of the Company’s Common Stock, par value $0.10 per share (subject to adjustment for any
stock dividend, stock split or other relevant changes in the Company’s capitalization) were allowed to be sold pursuant to the Plan,
which is intended to qualify under Section 423 of the Internal Revenue Code. The Plan allows for purchases in a series of offering
periods, each six months in duration, with new offering periods (other than the initial offering period) commencing on January 1 and
July 1 of each year. The initial offering period commenced on July 1, 2001. Pursuant to action taken by the Company’s Board of
Directors on December 10, 2010, the expiration of the Plan was extended to December 31, 2013. The Plan was amended and restated
on June 30, 2011, following stockholders’ ratification of the extended expiration date. The Plan was amended as of June 6, 2018,
following stockholders’ ratification of a ten-year extension to the expiration date (which now stands at December 31, 2028). Under the
Plan, as amended as of June 6, 2018, 995,000 shares of the Company’s common stock were authorized. As of December 31, 2021,
2020, and 2019, 543,180, 593,962, and 643,630 shares, respectively, remained available under the plan. The expense recognized under
the Plan was immaterial during the years ended December 31, 2021, 2020 and 2019, respectively.
Shares of common stock purchased through the Plan in 2021, 2020 and 2019 were 50,782, 49,668 and 47,229, respectively.
58
(7) Major Customers and International Sales
In 2021, there were three customers that accounted for 17%, 14% and 8%, respectively, of the Company’s consolidated sales. In
2020, there were three customers that accounted for 17%, 12%, and 10% of the Company’s consolidated sales. In 2019, there were
three customers that accounted for 18%, 14% and 7% of the Company’s consolidated sales.
The Company primarily sells its products to distributors, buying cooperatives, other co-operative groups and, in certain
territories, end users, and extends credit based on an evaluation of the customer’s financial condition. The Company had three
significant customers who each accounted for approximately 11%, 4% and 4% of the Company’s receivables as of December 31,
2021. The Company had three significant customers who each accounted for approximately 8%, 4% and 3% of the Company’s
receivables as of December 31, 2020. The Company has long-standing relationships with its customers and the Company considers its
overall credit risk for accounts receivables to be moderate.
International sales for 2021, 2020 and 2019 were as follows:
South and Central America
Mexico
Asia
Australia
Canada
Africa
Middle East
Europe
Total international net sales
2021
108,975 $
40,724
26,234
20,257
10,377
3,468
2,357
2,243
214,635 $
2020
102,281 $
33,517
19,290
9,902
10,572
6,072
3,054
2,292
186,980 $
2019
111,106
28,835
15,554
2,798
11,637
6,750
2,392
6,889
185,961
$
$
(8) Product and Business Acquisitions
The Company completed one product acquisition during the year ended December 31, 2021. The acquisition was completed on
July 1, 2021, for $10,000 in cash consideration. The acquisition was accounted for as an asset acquisition and the $10,000 in
consideration was allocated as follows: product registrations and product rights $8,225, trade names and trademarks $1,650, and
prepaid asset $125.
During the year ended December 31, 2020, the Company completed two acquisitions:
On October 2, 2020, the Company completed the acquisition of all outstanding stock of the Agrinos Group Companies (Agrinos),
except for Agrinos AS. Agrinos has operating entities in the U.S., Mexico, India, Brazil, China, Ukraine, and Spain. Agrinos is a fully
integrated biological input supplier with proprietary technology, internal manufacturing, and global distribution capabilities. At
closing, the Company paid cash consideration of $3,125, which was net of cash acquired of $1,813. The acquisition was accounted for
as a business combination and resulted in a bargain gain. The purchase consideration was allocated as follows:
Preliminary
Allocation at
December 31, 2020
Adjustments to Fair
Value recorded in
2021
Final Allocation
Trade receivables
Inventory and other current assets
Property, plant, and equipment
Product registrations and product rights
Liabilities assumed
Bargain
Total
$
$
2,358 $
5,133
5,004
250
(4,963 )
(4,657 )
3,125 $
(81 ) $
238
137
(200 )
77
(171 )
— $
2,277
5,371
5,141
50
(4,886 )
(4,828 )
3,125
Agrinos was acquired out of bankruptcy. This provided the Company with an opportunity to acquire Agrinos at an advantageous
purchase price which was below the fair value of Agrinos’ net assets acquired, resulting in the above-mentioned bargain purchase
gain. The liabilities assumed include liabilities of $407 related to income tax matters.
59
On October 8, 2020, the Company completed the acquisition of all outstanding stock of AgNova Technologies Pty Ltd
(“AgNova”). AgNova is an Australian entity that sources, develops, and distributes specialty crop protection and production solutions
for agricultural and horticultural producers, and for selected non-crop users. The purchase price consideration was as follows:
Preliminary
Consideration at
December 31, 2020
Adjustments to
Consideration
recorded in 2021
Cash
Less cash acquired
Contingent consideration
Total consideration
$
$
16,997 $
(157 )
2,007
18,847 $
Final Consideration
16,997
(157 )
1,052
17,892
— $
—
(955 )
(955 ) $
The fair value of the contingent consideration was estimated using a Monte Carlo Simulation. The acquisition was accounted for
as a business combination and the purchase consideration was allocated as follows:
Preliminary
Allocation at
December 31, 2020
Adjustments to Fair
Value recorded in
2021
Final Allocation
$
Trade receivables
Inventory and other current assets
Property, plant, and equipment
Product registrations and product rights
Trade names and trademarks
Distribution agreements
Customer relationships and customer
lists
Goodwill
Liabilities assumed
Total consideration
$
1,508 $
5,698
73
6,395
1,195
—
632
8,672
(5,326 )
18,847 $
— $
—
—
1,932
(844 )
3,584
(246 )
(4,054 )
(1,327 )
(955 ) $
1,508
5,698
73
8,327
351
3,584
386
4,618
(6,653 )
17,892
The liabilities assumed include liabilities of $3,857 related to income tax matters.
During the year ended December 31, 2019, the Company completed three acquisitions:
On January 10, 2019, the Company completed the acquisition of all outstanding shares of stock of two affiliated businesses,
Agrovant and Defensive (subsequently merged to form AMVAC 3p), which are located in Jaboticabal in the state of Sao Paul, Brazil.
At closing the Company paid cash consideration of $20,679, which was net of cash acquired of $981, deferred consideration of $3,051
including contingent consideration dependent on certain financial results for 2019, and liabilities assumed of $18,160, including
liabilities of $9,111 related to income tax matters. These companies were founded in 2000 and are suppliers of crop protection
products and micronutrients with focus on the fruit and vegetable market segments. The acquisition was accounted for as a business
combination and the total asset value of $41,890 was allocated as follows: trade name $1,010, customer relationships $5,705, goodwill
$22,652, working capital and fixed assets $9,139 and indemnification assets $3,384. The operating results of the acquired businesses
are included in our consolidated statement of operations from the date of acquisition. The goodwill recognized is expected to be
deductible for income tax purposes, subject to merging AMVAC do Brasil with AMVAC 3p.
The two other acquisitions completed in 2019 related to product lines which were purchased for a total cash consideration at
closing of $17,307, including transaction costs of $14. In addition, the Company assumed liabilities in the amount of $1,707. These
acquisitions were accounted for as asset acquisitions because the Company did not acquire any substantive processes. The acquired
assets consist of product rights $13,279, trade names $4,442, and inventory $1,293.
Cash paid at closing for the asset acquisitions and business combinations was funded through our revolving line of credit. Pro-
forma financial information is not included herein as the pro-forma impact of the acquisitions is not material.
60
(9) Intangible Assets and Goodwill
The following schedule represents intangible assets recognized in connection with product acquisitions (See Note 1 for the
Company’s accounting policy regarding intangible assets):
Intangible assets at December 31, 2018
Additions during fiscal 2019
Write offs
Impact of movement in exchange rates
Amortization expense
Intangible assets at December 31, 2019
Additions during fiscal 2020
Write offs
Impact of movement in exchange rates
Amortization expense
Intangible assets at December 31, 2020
Additions during fiscal 2021
Measurement period adjustment
Impact of movement in exchange rates
Amortization expense
Intangible assets at December 31, 2021
Goodwill at December 31, 2018
Additions during fiscal 2019
Impact of movement in exchange rates
Goodwill at December 31, 2019
Additions during fiscal 2020
Other
Impact of movement in exchange rates
Goodwill at December 31, 2020
Measurement period adjustment
Impact of movement in exchange rates
Goodwill at December 31, 2021
Intangible assets and goodwill at December 31, 2021
Amount
186,467
25,368
(264 )
(1,158 )
(12,152 )
198,261
12,675
(41 )
(637 )
(12,744 )
197,514
10,524
4,226
(710 )
(13,713 )
197,841
25,906
22,652
(1,885 )
46,673
8,830
617
(4,012 )
52,108
(4,054 )
(1,794 )
46,260
244,101
$
$
$
$
$
$
The following schedule represents the gross carrying amount and accumulated amortization of intangible assets and goodwill.
Product rights and trademarks are amortized over their expected useful lives of 25 years. Customer lists are amortized over their
expected useful lives of nine to ten years.
Product Rights
Trademarks
Customer Lists
Total intangibles assets
Goodwill
Total intangibles and goodwill
2021
Accumulated
Amortization
Net Book
Value
2020
Accumulated
Amortization
Net Book
Value
Gross
Gross
99,228 $ 161,165
$ 271,632 $ 110,090 $ 161,542 $ 260,393 $
8,111 29,224
9,870 30,708 37,335
40,578
10,966
7,125
4,414
5,591 11,539
5,375
323,176 125,335 197,841 309,267 111,753 197,514
46,260
— 52,108
— 46,260 52,108
$ 369,436 $ 125,335 $ 244,101 $ 361,375 $ 111,753 $ 249,622
61
The following schedule represents future amortization charges related to intangible assets:
Year ending December 31,
2022
2023
2024
2025
2026
Thereafter
Amount
13,878
13,369
12,963
12,675
12,531
132,425
197,841
$
$
(10) Contingent Consideration
The following schedule represents the Company’s contingent consideration liability under acquisitions agreements:
Obligations under acquisition agreements at December 31, 2018 $
Additional obligations acquired
Fair value adjustment
Accretion of discounted liabilities
Foreign exchange effect
Obligations under acquisition agreements at December 31, 2019
Additional obligations acquired
Fair value adjustment
Accretion of discounted liabilities
Payments on existing obligations
Foreign exchange effect
Obligations under acquisition agreements at December 31, 2020
Purchase price adjustment
Fair value adjustment
Accretion of discounted liabilities
Payments on existing obligations
Foreign exchange effect
Obligations under acquisition agreements at December 31, 2021 $
Amounts of contingent consideration recognized in the consolidated balance sheets:
Amount
3,866
1,312
(3,866 )
28
(96 )
1,244
2,044
250
16
(1,227 )
141
2,468
(955 )
758
(8 )
(1,301 )
(176 )
786
Short-term
Long-term
Total contingent consideration
(11) Commitments
December 31,
2021
December 31,
2020
$
$
786 $
-
786 $
1,004
1,464
2,468
We enter into various obligations in the ordinary course of business, generally of a short-term nature. Those that are binding
primarily relate to purchase commitments for inventory and orders submitted for equipment for our production plants as well as
service agreements.
(12) Research and Development
Research and development expenses which are included in operating expenses were $10,354, $8,757 and $8,906 for the years
ended December 31, 2021, 2020 and 2019, respectively.
62
(13) Equity Plan Awards
Under the Company’s Equity Incentive Plan of 1993, as amended (“the Plan”), all employees are eligible to receive non-
assignable and non-transferable restricted stock, options to purchase common stock, and other forms of equity. As of December 31,
2021, the number of securities remaining available for future issuance under the Plan is 870,345.
The below tables illustrate the Company’s stock-based compensation, unamortized stock-based compensation, and remaining
weighted average period for the years ended December 31, 2021, 2020 and 2019. This projected expense will change if any stock
options and restricted stock are granted or cancelled prior to the respective reporting periods, or if there are any changes required to be
made for estimated forfeitures.
December 31, 2021
Restricted Stock
Unrestricted Stock
Performance-Based Restricted Stock
Total
December 31, 2020
Restricted Stock
Unrestricted Stock
Performance-Based Restricted Stock
Total
December 31, 2019
Restricted Stock
Unrestricted Stock
Performance-Based Restricted Stock
Total
Stock-Based
Compensation
Unamortized
Stock-Based
Compensation
Remaining
Weighted
Average
Period (years)
$
$
$
$
$
$
5,682 $
421
777
6,880 $
3,166 $
461
2,934
6,561 $
3,655 $
411
3,094
7,160 $
6,804
187
2,888
9,879
6,954
183
3,352
10,489
5,512
205
2,835
8,552
1.8
0.4
1.8
1.9
0.4
1.9
1.3
0.4
1.9
The Company also granted stock options in past periods. All outstanding stock options are fully vested and exercisable and no
expense was recorded during the years ended December 31, 2021, 2020 and 2019.
Restricted and Unrestricted Stock
A summary of nonvested restricted and unrestricted stock is presented below:
Nonvested shares at January 1st
Granted
Vested
Forfeited
Nonvested shares at December 31st
December 31, 2021
December 31, 2020
Weighted
Average
Grant
Date Fair
Value
Weighted
Average
Grant
Date Fair
Value
Number
of Shares
16.64
20.00
19.23
17.11
17.04
719,845 $
393,180
(255,835 )
(36,566 )
820,624 $
17.67
14.39
15.86
18.34
16.64
Number
of Shares
820,624 $
295,619
(244,651 )
(54,302 )
817,290 $
63
Performance-Based Restricted Stock
A summary of nonvested performance-based stock is presented below:
Nonvested shares at January 1st
Granted
Additional granted based on performance achievement
Vested
Forfeited
Nonvested shares at December 31st
December 31, 2021
December 31, 2020
Weighted
Average
Grant
Date Fair
Value
Weighted
Average
Grant
Date Fair
Value
Number
of Shares
16.26
20.03
20.53
19.78
16.89
16.43
345,432 $
160,706
76,445
(184,785 )
(6,027 )
391,771 $
16.92
14.29
16.56
15.87
17.52
16.26
Number
of Shares
391,771 $
102,043
71,180
(175,087 )
(10,846 )
379,061 $
Performance Based Restricted Stock Granted in 2021— During the year ended December 31, 2021, the Company issued a total
of 102,043 performance-based shares to employees. The shares granted during 2021 have an average fair value of $20.03. The fair
value was determined by using the publicly traded share price as of the market close on the date of grant and Monte Carlo valuation
method. The Company will recognize as expense the value of the performance-based shares over the required service period from
grant date. The shares will cliff vest on April 16, 2024, with a measurement period commencing January 1, 2021, and ending
December 31, 2023. Eighty percent of these performance-based shares are based upon the financial performance of the Company,
specifically, an earnings before interest and tax (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30%. The remaining
20% of performance-based shares are based upon AVD stock price appreciation over the same performance measurement period. The
EBIT and net sales goals measure the relative growth of the Company’s EBIT and net sales for the performance measurement period,
as compared to the median growth of EBIT and net sales for an identified peer group. The stockholder return goal measures the
relative growth of the fair market value of the Company’s stock price over the performance measurement period, as compared to that
of the Russell 2000 Index and the median fair market value of the common stock of the comparator companies, identified in the
Company’s 2020 Proxy Statement. All parts of these awards vest in three years but are subject to reduction to a minimum (or even
zero) for recording less than the targeted performance and to increase to a maximum of 200% for achieving in excess of the targeted
performance.
Performance Based Restricted Stock Granted in 2020— During the year ended December 31, 2020, the Company issued a total
of 160,706 performance-based shares to employees. The shares granted during 2020 have an average fair value of $14.29. The fair
value was determined by using the publicly traded share price as of the market close on the date of grant and Monte Carlo valuation
method. The Company will recognize as expense the value of the performance-based shares over the required service period from
grant date. The shares will cliff vest on May 13, 2023, with a measurement period commencing October 1, 2020, and ending March
31, 2023. Eighty percent of these performance-based shares are based upon the financial performance of the Company, specifically, an
earnings before interest and tax (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30%. The remaining 20% of
performance-based shares are based upon AVD stock price appreciation over the same performance measurement period. The EBIT
and net sales goals measure the relative growth of the Company’s EBIT and net sales for the performance measurement period, as
compared to the median growth of EBIT and net sales for an identified peer group. The stockholder return goal measures the relative
growth of the fair market value of the Company’s stock price over the performance measurement period, as compared to that of the
Russell 2000 Index and the median fair market value of the common stock of the comparator companies, identified in the Company’s
2020 Proxy Statement. All parts of these awards vest in three years but are subject to reduction to a minimum (or even zero) for
recording less than the targeted performance and to increase to a maximum of 200% for achieving in excess of the targeted
performance.
64
Performance Based Restricted Stock Granted in 2019— During the year ended December 31, 2019, the Company issued a total
of 137,557 performance-based shares to employees. The shares granted during 2019 have an average fair value of $16.96. The fair
value was determined by using the publicly traded share price as of the market close on the date of grant and Monte Carlo Valuation
method. The Company will recognize as expense the value of the performance-based shares over the required service period from
grant date. The shares will cliff vest on March 28, 2022, with a measurement period commencing January 1, 2019, and ending
December 31, 2021. Eighty percent of these performance-based shares are based upon the financial performance of the Company,
specifically, an earnings before income taxes (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30%. The remaining
20% of performance-based shares are based upon AVD stock price appreciation over the same performance measurement period. The
EBIT and net sales goals measure the relative growth of the Company’s EBIT and net sales for the performance measurement period,
as compared to the median growth of EBIT and net sales for an identified peer group. The stockholder return goal measures the
relative growth of the fair market value of the Company’s stock price over the performance measurement period, as compared to that
of the Russell 2000 Index and the median fair market value of the common stock of the comparator companies, identified in the
Company’s 2018 Proxy Statement. All parts of these awards vest in three years but are subject to reduction to a minimum (or even
zero) for recording less than the targeted performance and to increase to a maximum of 200% for achieving in excess of the targeted
performance.
In 2021, the Company assessed the likelihood of achieving the performance measures based on peer group information currently
available for the performance-based shares granted in 2019. Based on the performance thus far, the Company has concluded that it is
likely that the performance measure based on EBIT will not be met and net sales will be met at 200% of targeted performance and
have recorded the related additional expense in 2021. The performance shares based on market price are expected to be met at 27% of
targeted performance. The effect of market conditions for performance shares based on market are included in the grant date fair value
valuation and no additional expenses were recognized in 2021.
During 2021, the Company concluded that the performance measure based on EBIT and net sales for the performance-based
shares granted in 2018, when compared to the peer group, was both met at 200% of targeted performance and all related additional
expenses were recorded as of December 31, 2021. The 2018 performance shares based on market price was met at 43%, however, the
market condition is reflected in the grant date fair value valuation and no additional expenses were recognized. As a result, 71,180
additional shares were earned since the Company achieved performance targets when compared to the peer group.
Stock Options
Under the terms of the Company’s ISOP, under which options to purchase common stock can be issued, all employees are
eligible to receive non-assignable and non-transferable options to purchase shares. The exercise price of any option may not be less
than the fair market value of the shares on the date of grant; provided, however, that the exercise price of any option granted to an
eligible employee owning more than 10% of the outstanding common stock may not be less than 110% of the fair market value of the
shares underlying such option on the date of grant. No options granted may be exercisable more than ten years after the date of grant.
In 2021, 2020 and 2019, no options were granted.
Incentive Stock Option Plans
Activity of the incentive stock option plans:
Balance outstanding, December 31, 2018
Options exercised
Balance outstanding, December 31, 2019
Options exercised
Options forfeited
Balance outstanding, December 31, 2020
Options exercised
Balance outstanding, December 31, 2021
65
Number of
Shares
Weighted
Average
Price Per
Share
384,064 $
(51,241 )
332,823 $
(196,736 )
(13,000 )
123,087 $
(15,051 )
108,036 $
9.10
8.87
9.14
7.79
7.50
11.48
11.41
11.49
Outstanding stock options at December 31, 2021, summarized by exercise price:
Exercise Price Per Share
$11.49
Outstanding Weighted Average
Remaining
Life
(Months)
Exercise
Price
Number of
Shares
108,036
108,036
36 $
$
11.49
11.49
The total intrinsic value of options exercised during 2021, 2020, and 2019 was $119, $1,393, and $393, respectively. Cash
received from stock options exercised during 2021, 2020, and 2019 was $172, $1,533, and $454, respectively.
Performance Incentive Stock Option Plan
Activity of the performance incentive stock option plan:
Balance outstanding, December 31, 2018
Options exercised
Balance outstanding, December 31, 2019
Options exercised
Balance outstanding, December 31, 2021 and 2020
Number of
Shares
140,411 $
(19,629 )
120,782 $
(6,124 )
114,658 $
Weighted
Average
Price Per
Share
11.49
11.49
11.49
11.49
11.49
All the performance incentive stock options outstanding as of December 31, 2021, have an exercise price per share of $11.49
and a remaining life of 36 months.
(14) Accumulated Other Comprehensive Loss
The following table lists the beginning balance, annual activity and ending balance of foreign currency translation adjustment
included as a component of accumulated other comprehensive loss:
Balance, December 31, 2018
Foreign currency translation adjustment, net of tax effects of $802
Balance, December 31, 2019
Foreign currency translation adjustment, net of tax effects of $2,521
Balance, December 31, 2020
Foreign currency translation adjustment, net of tax effects of $76
Balance, December 31, 2021
$
$
(4,507 )
(1,191 )
(5,698 )
(3,624 )
(9,322 )
(4,462 )
(13,784 )
(15) Equity Method Investment
On August 2, 2016, AMVAC BV entered into a joint venture with Huifeng (Hong Kong) Ltd, which is a wholly owned
subsidiary of the Huifeng Group. The resulting entity, Hong Kong JV, was intended to focus on activities such as market access and
technology transfer between the two members. AMVAC BV is a 50% owner of the entity.
On June 27, 2017, both AMVAC BV and Huifeng (Hong Kong) Ltd. made individual capital contributions of $950 to the Hong
Kong JV. As of December 31, 2021, 2020 and 2019, the Company’s ownership position in the Hong Kong JV was 50%. The
Company utilizes the equity method of accounting with respect to this investment.
66
On July 7, 2017, the Hong Kong JV purchased the shares of Profeng Australia, Pty Ltd. (“Profeng”), for a total consideration of
$1,900. The purchase consists of Profeng Australia, Pty Ltd Trustee and Profeng Australia Unit Trust. Both Trust and Trustee were
previously owned by Huifeng (via its wholly owned subsidiary Huifeng (Hong Kong) Ltd). For the years ended December 31, 2021,
2020 and 2019, the Company recognized losses of $388 (including an impairment charge of $288), $125, and $209, respectively, as a
result of the Company’s ownership position in the Hong Kong JV. As at December 31, 2021, 2020 and 2019, the carrying value of the
Company’s investment in the Hong Kong JV was $0, $388 and $513, respectively.
(16) Equity Investments
In February 2016, AMVAC BV made an equity investment of $3,283 in Biological Products for Agriculture (“Bi-PA”). Bi-PA
develops biological plant protection products that can be used for the control of pests and disease of agricultural crops. As of
December 31, 2021, 2020 and 2019, the Company’s ownership position in Bi-PA was 15%. Since this investment does not have
readily determinable fair value, the Company has elected to measure the investment at cost less impairment, if any, and to record an
increase or decrease for changes resulting from observable price changes in orderly transactions for the identical or a similar
investment of Bi-PA. The Company periodically reviews the investment for possible impairment. The Company recorded an
impairment in the amount of $399 during the year ended December 31, 2021. There were no impairment or observable price changes
on the investment during the years ended December 31, 2020 and 2019. The investment is recorded within other assets on the
consolidated balance sheets.
On April 1, 2020, AMVAC purchased 6.25 million shares, an ownership of approximately 8%, of common stock of Clean Seed
Capital Group Ltd. (TSX Venture Exchange: “CSX”) for $1,190. The shares are publicly traded, have a readily determinable fair
value, and are considered a Level 1 investment. The fair value of the stock amounted to $1,516 and $1,907 as of December 31, 2021
and 2020, respectively, and the Company recorded a loss of $391 and a gain of $717 for the years ended December 31, 2021 and
2020, respectively. The investment is recorded within other assets on the consolidated balance sheets.
(17) Share Repurchase Programs
On March 8, 2022, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an aggregate
number of up to 1,000,000 shares of its common stock, par value $0.10 per share, in the open market over the succeeding one year at a
price not to exceed $20 per share, subject to limitations and restrictions under applicable securities laws.
On August 30, 2021, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an
aggregate number of 300,000 shares of its common stock, par value $0.10 per share, in the open market over the succeeding six
months. During 2021, the Company purchased 300,000 shares of its common stock for a total of $4,579 at an average price of $15.26
per share.
On November 5, 2018, pursuant to a Board of Directors resolution, the Company announced its intention to repurchase an
aggregate number of shares with a total purchase price not to exceed $20,000 of its common stock, par value $0.10 per share, in the
open market, at a price not to exceed $17 per share, subject to limitations and restrictions under applicable securities laws. The Shares
Repurchase Program expired on March 8, 2019. During 2019, the Company purchased 158,048 shares at an average price of $16.48
per share, for a total of $2,604.
The table below summarizes the number of shares of our common stock that were repurchased during the years ended
December 31, 2021, 2020 and 2019. The shares and respective amount are recorded as treasury shares on the Company’s consolidated
balance sheets.
Month ended
August 31, 2021
September 30, 2021
Total number of shares repurchased
January 31, 2019
Total number of shares repurchased
Total number of
shares purchased
Average price paid
per share
Total amount paid
78,300 $
221,700 $
300,000 $
158,048 $
158,048 $
15.37 $
15.23 $
15.26 $
16.48 $
16.48 $
1,203
3,376
4,579
2,604
2,604
67
(18) Supplemental Cash Flows Information
Supplemental cash flow information:
Cash paid during the year for:
Interest
Income taxes, net
Non-cash transactions:
2021
2020
2019
$
$
3,520 $
5,796 $
5,313 $
3,881 $
7,121
9,276
ROU assets in exchange for lease liabilities
Deferred consideration in connection with business and asset acquisitions $
$
Cash dividends declared and included in accrued expenses
$ 18,521 $
758 $
594 $
6,309 $
2,630 $
592 $
3,580
3,051
582
68
AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
LISTING OF SUBSIDIARIES
Exhibit 21
Subsidiaries of the Company and the jurisdiction in which each company was incorporated are listed below. Unless otherwise
indicated parenthetically, 100% of the voting securities of each subsidiary are owned by the Company. All companies indicated with
an asterisk (*) are subsidiaries of AMVAC. All of the following subsidiaries are included in the Company’s consolidated financial
statements:
AMVAC Chemical Corporation
GemChem, Inc.
2110 Davie Corporation (formerly ABSCO Distributing)
AMVAC Chemical UK Ltd*
AMVAC do Brasil Representácoes Ltda*
Agroservicios Amvac, SA de CV*
Amvac Mexico S. De R.L. De C.V.*
AMVAC de Costa Rica Srl
AVD International LLC*
AMVAC CV
AMVAC Netherlands BV*
Envance Technologies, LLC*
OHP Inc.*
Amvac Colombia SAS
AgriCenter S.A
Tyratech, Inc.
American Vanguard Australia PTY Ltd
Amvac Singapore PTE Ltd
AMVAC do Brazil 3p LTDA
Amvac Canada ULC
Amvac Hong Kong Limited
AgNova Technologies Pty Ltd
Agrinos Biotech (Shanghai) Co., LTD
Agrinos do Brazil Fertilizantes Biologicos LTDA
Agrinos India Private Limited
Agrinos Ukraine LLC
Agrinos Iberia S.L.
Bioderpac SA de CV
69
California
California
California
England
Brazil
Mexico
Mexico
Costa Rica
Delaware
Netherlands
Netherlands
Delaware
California
Columbia
Costa Rica
Delaware
Australia
Singapore
Brazil
Canada
Hong Kong
Australia
China
Brasil
India
Ukraine
Spain
Mexico
Consent of Independent Registered Public Accounting Firm
Exhibit 23
American Vanguard Corporation
Newport Beach, California
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-125813, 333-102381, 333-
76218, and 333-64220) of American Vanguard Corporation of our reports dated March 11, 2022, relating to the consolidated financial
statements and schedule, and the effectiveness of American Vanguard Corporation’s internal control over financial reporting, which
appear in this Form 10-K.
/s/ BDO USA, LLP
Costa Mesa, California
March 11, 2022
70
AMERICAN VANGUARD CORPORATION
CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Eric G. Wintemute, certify that:
1.
2.
3.
4.
I have reviewed this report on Form 10-K of American Vanguard Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the consolidated financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the
periods presented in this report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the Company’s disclosure controls and procedures, and presented in this report our
conclusions about the effectiveness of the disclosures controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the
Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an Annual Report) that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;
and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors:
(a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial
information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting.
Date: March 11, 2022
/s/ Eric G. Wintemute
Eric G. Wintemute
Chief Executive Officer and Chairman of the
Board
71
AMERICAN VANGUARD CORPORATION
CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, David T. Johnson, certify that:
1.
2.
3.
4.
I have reviewed this report on Form 10-K of American Vanguard Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the consolidated financial condition, results of operations and cash flows of the Company as of, and for, the
periods presented in this report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a)
(b)
(c)
(d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
evaluated the effectiveness of the Company’s disclosure controls and procedures, and presented in this report our
conclusions about the effectiveness of the disclosures controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the
Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an Annual Report) that has
materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;
and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of Company’s board of directors:
(a)
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting
which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial
information; and
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the
Company’s internal control over financial reporting.
Date: March 11, 2022
/s/ David T. Johnson
David T. Johnson
Chief Financial Officer and Principal
Accounting Officer
72
AMERICAN VANGUARD CORPORATION
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of American Vanguard Corporation (the “Company”) on Form 10-K for the period ending
December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief
Executive Officer and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906
of the Sarbanes-Oxley Act of 2002 that based on their knowledge (1) the Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly represents, in all material
respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.
/s/ ERIC G. WINTEMUTE
Eric G. Wintemute,
Chief Executive Officer and Chairman of the Board
/s/ DAVID T. JOHNSON
David T. Johnson
Chief Financial Officer and Principal Accounting Officer
March 11, 2022
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or
otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by
Section 906, has been provided to American Vanguard Corporation and will be retained by American Vanguard Corporation and
furnished to the Securities and Exchange Commission or its staff upon request.
The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Form 10-K and
shall not be considered filed as part of the Form 10-K.