AMERICAN VANGUARD CORP
For the period ended Jun 30, 2024. Filed Aug 9, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 9, 2024
AVD$0.96+1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-09.
0000950170-24-057108
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-09.
0000950170-24-094865
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 45 previous paragraphs and 79 current paragraphs.
11 unchanged; 18 reworded; 45 added; 16 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 4 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (45)
Current report
Persistently low commodity prices coupled with high input costs and interest rates continue to place pressure on the global agricultural economy. 2024 will mark the second year of declining profitability for farm income, with government reports estimating farmer's income to be down more than 40% from the cyclical high of 2022. The just-in-time procurement approach that arose within the Company’s distribution channel in early 2023, impacted by high interest rates, has continued throughout the first half of 2024. It will take some time to work through the accumulated channel inventories (of both the Company’s and competitors’ products), and the timing of any meaningful adjustments to interest rates remains uncertain.
Current report
Against this backdrop, overall sales for the second quarter of 2024 declined by 3% compared to the second quarter of 2023. From a regional perspective, our domestic sales decreased by 2% and our international sales decreased by 5%. Just-in-time purchasing by some of our largest customers continues to drag sales performance, with flat performance across our insecticide product line. Our herbicide sales decreased by 30% compared to the year ago period in the face of generic pressure from non-specific herbicide products in multiple regions.
Current report
Inflationary pressures led to a higher cost of goods, which increased by about 1%, as compared to the same quarter of 2023. As a result of these factors, gross margins for the business decreased to 29% of net sales, as compared to 32% in the same period of 2023.
Current report
Operating expenses increased by 20% compared to the first quarter of 2023. Substantially all of this increase can be attributed to non-recurring charges of approximately $9,310 related to the transformation of the business.
Current report
Interest expense increased, based upon increased average borrowings and elevated interest rates. The Company’s borrowed debt rose in light of higher inventory levels and reduced sales, which yielded lower cash proceeds. Seasonally, working capital levels decrease in the latter half of the year.
Current report
The Company recorded an income tax benefit of $1,553, as compared to an income tax expense of $1,541 in the same period of last year.
Current report
These factors yielded a net loss of $11,721, or $(0.42) per share, compared to a loss of $1,053, or $(0.04) per share, in the prior year quarter. Without one-time nonrecurring charges of $9,310, the adjusted net loss would be $2,411 or $(0.09) per share. Further details on our financial performance are set forth below.
Current report
Quarter Ended June 30, 2024 and 2023:
Current report
Ourdomestic crop business recorded net sales during the second quarter of 2024 that were 7% lower than those of the second quarter of 2023 ($52,289 as compared to $56,212). Our customers continue to focus on controlling inventory levels, as carrying costs for working capital remain elevated in the current interest rate environment.
Current report
The domestic granular insecticide category was up 3% compared to the same period of the prior year, led by Thimet (with sales driven by demand from peanut and sugar cane growers) partially offset by reduced sales of Aztec (due to conservative, off-season procurement practices by the distribution channel) and soil fumigants (in light of potato pricing trends).
Current report
Ourdomestic non-crop business posted a 13% increase in net sales in the second quarter 2024, as compared to the same period in the prior year ($19,011 in 2024 v. $16,878 in 2023). Sales of biologicals increased by 34%, as compared to the same period in 2023, driven by BotaniGard® and Mycotrol. Pest strip sales are also an area of strength for the company with sales up 22% compared to the year ago period. These sales were partially offset by lower Dibrom® mosquito adulticide sales, primarily related to a shift in timing of procurement by vector control regions.
Current report
Net sales of ourinternational businesses declined by about 5% during the period ($56,909 in 2024 as compared to $59,700 in 2023). Herbicides sales had the largest negative impact on the quarter and were down 27% compared to the prior year, which are still feeling the effect of low-cost, generic alternatives. Regionally, Central America improved, yet it is still too early to determine if the supply of Asian low-cost generics has peaked. Brazil also showed improvement during the quarter, benefiting from less pressure from generics. Australia sales weakened, largely based upon currency.
Current report
On aconsolidated basis, gross profit for the second quarter of 2024 decreased by 12% ($37,763 in 2024 as compared to $42,909 in 2023). The overall gross margin percentage ended at 29% in the second quarter of 2024, as compared to 32% in the second quarter of the prior year.
Current report
Other general and administrative expenses decreased by $249 for the three months ended June 30, 2024, as compared to the same period of 2023, primarily driven by reductions in costs associated with stock compensation, travel, and potential credit losses.
Current report
Legal reserves are contingencies related to certain labor and employment matters.
Current report
Interest costs net of capitalized interest were $3,917 and $3,211 during the three-month period ended June 30, 2024 and 2023, respectively. Interest costs are summarized in the following table:
Current report
The Company’s average overall debt for the three-month period ended June 30, 2024 was $214,107, as compared to $152,750 for the same period of the prior year. Our borrowings increased primarily as a result of higher inventory levels. As can be seen from the table, the effective bank interest rate on our revolving line of credit was 7.5% and 7.1% for the three-month periods ended June 30, 2024 and 2023, respectively.
Current report
We generated a loss before provision for income taxes of $13,274 and income $488 for the three months ended June 30, 2024 and 2023, respectively. Our net loss (after income taxes) for the three-month period ended June 30, 2024, was $11,721 or ($0.42) per basic and diluted share, as compared to $1,053 or ($.04) per basic and diluted share in the same quarter of 2023.
Current report
Six Months Ended June 30, 2024 and 2023:
Current report
Overview of the Company’s Performance
Current report
Commodity prices have steadily trended lower in the first half of 2024, including corn and soybean prices, that have shown steady weakness since the beginning of the year. Wheat prices experienced a period of exuberance during the spring, but the downturn recommenced in June, and wheat prices finished the second quarter lower than where they started the year. Already elevated inventory levels, coupled with a strong dollar and the expectation of a strong crop this season have led most agricultural commodities to finish the second quarter at the lowest price levels of the year. With this backdrop, procurement practices remain conservative. In an effort to control working capital levels and the associated carrying costs, the distribution channel for crop products remains tight. Despite this market dynamic, the Company’s net sales improved, and gross profit was in line with the first six months of 2023.
Current report
On a consolidated basis, with domestic sales up 5% and international sales broadly in-line with the same period of last year, overall net sales increased by 3% ($263,352 in 2024 as compared to $257,674 in 2023) despite strong generic competition in certain products across several regions. Cost of sales increased by 4% on an absolute basis, driven by raw material price inflation and sales mix, partially offset by improved factory performance during the first half of 2024, as compared to the first half of 2023. These factors, taken together, yielded a gross profit that was in line with the same period of 2023 ($80,192 as compared to $81,444) and gross margin percentage slightly declined to 31% from 32% in the first half of 2023.
Current report
In the first half of 2024, operating expenses increased by approximately 12%, as compared to those of the prior year period. Expenses were higher due to one-time expenses made up of business transformation costs, primarily related to the organizational redesign, standardized systems implementation and severance expenses for the former CEO.
Current report
Interest expense increased significantly during the period due to increased working capital primarily driven by higher inventories. This has resulted in higher average borrowings, coupled with higher interest rates, resulting in significantly higher interest expense. The Company's income tax benefit during the six months ended June 30, 2024 was $69, as compared to an expense of $1,181 during the six months ended June 30, 2023.
Current report
The Company recorded a net loss of $10,169 or ($.36) per basic and diluted share, as compared to net income of $865 or $0.03 per basic and diluted share in the first half of the prior year. Without one-time nonrecurring charges of $10,462, the adjusted net income would be $293 or $0.01 per share. Details on our financial performance are set forth below.
Current report
RESULTS OF OPERATIONS
Current report
Six months ended June 30, 2024, and 2023
Current report
Ourdomestic crop business recorded net sales that were 1% above those of first half of 2023 ($119,542 as compared to $118,105 in 2023). Herbicide sales were up 13% for the first half of the year, with the first quarter being particularly strong. Granular soil insecticides were up 2% in the first half of the year, led by Thimet sales, partially offset by lower Aztec sales.
Current report
Ourdomestic non-crop business recorded a 20% increase in net sales for the first half of the year (to $36,787 from $30,759). Biologicals continue to be an area of strength in the non-crop segment, with BotaniGard® and Mycotrol® gaining market share in the pest control area focused on aphids, thrips and whiteflies. Through the first half of the year, Naled sales were up 5%. The season’s first storm, Beryl, came at the beginning of the storm season, slightly altering buying patterns for this mosquito adulticide.
Current report
Net sales of ourinternational businesses were broadly comparable during the first half of 2024, as compared to the same period of the 2023 ($107,023 versus $108,810 in 2023). Central American sales increased by 5% during the first half of the year, driven by strong granular soil insecticide sales. Brazilian sales were up by 24% as the company appears to be gaining market share, while Asian Pacific sales were down nearly 2% due to a strong US Dollar, and Canadian sales were also down 2%. Herbicides sales were the offset to strength in some of the regions with first half sales off 12% as compared to the same period of the prior year as generic, non-specific herbicides continue to drag profitability in that product market.
Current report
On a consolidated basis, gross profit for the six months of 2024 was flat at $80,181, as compared to $81,444 last year. Gross margin performance in 2024 decreased to 30% from 32% compared to the first half of 2023.
Current report
Operating expenses increased by $8,899 to $83,322 for the six-month period ended June 30, 2024, as compared to the same period in 2023. The changes in operating expenses by department are as follows:
Current report
Selling expenses decreased by $290 to end at $26,281 for the six-month period ended June 30, 2024, as compared to the same period of 2023. The main drivers were increased costs associated with acquisition related additional headcount, offset by lower travel and marketing costs.
Current report
Other general and administrative expenses increased by $3,396 to end at $25,715 for the six-month period ended June 30, 2024, as compared to the same period of 2023. The main drivers were additional audit and tax advisory services, increased other outside services and changes in transactional foreign exchange gains/losses.
Current report
During the six-months ended June 30, 2023, the Company spent $541 in fees associated with Proxy activities. There were no similar expenses during the same six-month period this year.
Current report
Legal reserves are contingencies related to certain labor and employment matters.
Current report
Research, product development costs and regulatory expenses decreased by $3,978 to end at $14,305 for the six-month period ended June 30, 2024, as compared to the same period of 2023. The costs were reduced by a data compensation settlement and by lower spending associated with related to the commercialization of our SIMPAS proprietary delivery systems.
Current report
During the six-month period ended June 30, 2024, the Company recorded an increase in the fair value of our equity investment in Clean Seed in the amount of $513, as compared to a decrease of $77 during the six months ended June 30, 2023. These changes in fair value of our investment directly reflect changes in the stock’s quoted market price.
Current report
Average Indebtedness and Interest expense
Current report
We incurred a loss before provision before income taxes of $10,238 for the six months ended June 30, 2024, as compared to income before taxes of $2,046 for the six months ended June 30, 2023. Our net loss (after income taxes) for the six-month period ended June 30, 2024 was $10,169 or ($0.36) per basic and diluted share, as compared to income of $865 or $0.03 per basic and per diluted share in the same period of 2023. Without one-time, nonrecurring charges of $10,462, the adjusted net income would be $293 or $0.01 per share.
Showing the first 40 of 45 passages. Open the source sections for the rest.
Removed paragraphs (16)
Previous report
The global agriculture market remains stable but is characterized by mixed conditions. A strong United States dollar coupled with high grain inventory stocks has served to suppress commodity prices for both corn and soybeans. At these price levels, however, farming is still a profitable business. That said, while the distribution channel has relaxed its inventory destocking practice from last year, it continues to exercise fiscal restraint in procurement. This is also true within the non-crop markets.
Previous report
Within this context, the Company’s overall financial performance during the quarter was better with respect to net sales and adjusted EBITDA and slightly below net income for the comparable period last year. During the first quarter of 2024 our sales increased by 8%, as compared to the first quarter of 2023. Regionally speaking, domestic sales increased by 12%, while international sales increased by 2%. Improvements along the supply chain allowed sales to normalize for some of the Company’s highest margin herbicides and insecticides. Improved net sales were primarily driven by increased availability of herbicides, an increase in market share in granular soil insecticides and an increase in demand for mosquito control products.
Previous report
Cost of goods sold increased broadly in line with sales and were up 7%, as compared to the same quarter of 2023. This included changes in product mix, relative to the same period of last year and factory performance that was significantly better than the same period of the prior year, with both lower factory costs and slightly increased output, relative to 2023. As a result of these factors, gross margins for the business remained constant at 31%, versus the same period of 2023.
Previous report
Operating expenses increased by 3% versus the first quarter of 2024, due primarily to increased general and administrative and foreign exchange expenses, audit fees, incentive compensation accruals and transformation costs, partially offset by decreased regulatory expenses. While the overall operating expenses increased on an absolute basis, they decreased as a percentage of sales to 27%, as compared to 28% in the same period of the prior year.
Previous report
Interest expense increased, based upon increased average borrowings, driven by elevated interest rates and higher working capital levels as the Company starts its annual cycle that includes starting to build inventory at the start of the year to fuel sales growth planned for the rest of the year. Taxes increased by $1,845 to $1,484 during the quarter, versus the first three months of 2023, during which the company recorded income tax benefits amounting to $361. The first quarter tax result was driven in part by the effect of lower financial performance in Brazil, which requires the Company to record a valuation allowance that results in a higher, consolidated tax rate. The Company generated net income of $1,552 (or $0.06 per share) compared to $1,918 (or $0.07 per share) in the prior year.
Previous report
Quarter Ended March 31:
Previous report
Ourdomestic crop business recorded net sales during the first quarter of 2024 that were 9% higher than those of the first quarter of 2023 ($67,257 as compared to $61,876). Overall herbicides sales were up 17% in the quarter versus this time last year. The quarter benefited from sales of the herbicide, Dacthal, which was not available during the comparable quarter in 2023 due to supply chain constraints. On a related note, the Company has meanwhile suspended sales of Dacthal for regulatory reasons (refer to Note 12 to the condensed consolidated financial statements for further details). In foliar insecticides, the Company benefited from increased cotton planting with Dibrom and Bidrin sales up 39%. In granular insecticides, sales were up 9%, with Thimet growing as a result of increased peanut crop acreage, and Index® sales in corn trending higher. These positive developments in granular pesticides were partially offset by Aztec sales which were down 37%, as sales patterns normalized. In comparison, during the same period of the prior year, customers took advantage of readily available inventory of Aztec to restock after an extended period during which that product had not been available. Soil fumigant sales were down 14% due to a shortened application window driven by cool and wet temperatures in the Northwest and a decrease in potato prices.
Previous report
Ourdomestic non-crop business posted a 28% increase in net sales in the first quarter 2024, as compared to the same period in the prior year ($17,768 as compared to $13,899). In this category, Dibrom® and Trumpet mosquito adulticide sales were up 16% based upon predictions for stronger than normal tropical storm activity. Our OHP business was up 10%, buoyed by strong sales of its biorational portfolio and pre-emergent herbicides. Finally, private label pest strip sales were up over 100% compared to the year ago period.
Previous report
Net sales of ourinternational businesses rose by about 2% during the period ($50,118 as compared to $49,110). This group experienced sales growth in foliar and granular insecticides and growth regulators, partially offset by a decrease in soil fumigants, herbicides and fungicides sales. The Company experienced growth in Mexico and the Asia Pacific region, although weak agave prices limited the strength in Mexico and Japanese currency volatility impacted margins for sales in this region. Brazilian sales appear to have stabilized, however Canadian sales were soft, as channel inventory for our products remained high in this jurisdiction.
Previous report
On aconsolidated basis, gross profit for the first quarter of 2024 increased by 10% ($42,418 as compared to $38,537). Increased sales volume, normalization of supply chains and an improved factory performance all contributed to better profitability. Gross margin for the quarter remained stable compared to the year ago period at 31%.
Previous report
General and administrative expenses increased by $4,183 for the three months ended March 31, 2024, as compared to the same period of 2023. The main drivers were changes in transactional foreign exchange gains/losses, increased short-term and long-term incentive compensation accruals, increased reserves for credit losses in Central America, additional audit costs, and investments in both IT and human capital initiatives during the first three months of 2024, as compared to the same period in the prior year.
Previous report
Our overall net income for the first three months of 2024 was $1,552 or $0.06 per basic and diluted share, as compared to $1,918 or $0.07 per basic and diluted share in the first quarter of 2023.
Previous report
During the first three months of 2024, the Company increased net working capital by $49,996, as compared to $52,995 during the same period of the prior year. Included in this change: inventories increased by $9,353, as compared to $33,731 for the first quarter of 2023. Customer prepayments decreased by $37,037, as compared to $22,759 in the same period of 2023, driven by customer decisions regarding demand, payment timing and our cash incentive programs. Our accounts payable balances decreased by $3,951, as compared to an increase of $5,655 in the same period of 2023. Accounts receivable increased by $5,579, as compared to $8,779 in the same period of 2023. Prepaid expenses increased by $1,466, as compared to decreased by $600 in the same period of 2023. Income tax receivable decreased by $1,014, as compared to a increased by $2,965 in the prior year. Accrued programs increased by $6,399, as compared to $10,660 in the prior year, as a result of both higher sales and the mix of those sales including products with higher program elements incorporated in pricing. Finally, other payables and accrued expenses decreased by $332, as compared to $500 in the prior year.
Previous report
Cash used for investing activities was $3,567 for the three months ended March 31, 2024, as compared to $3,308 for the three months ended March 31, 2023. The Company spent $3,565 on fixed assets acquisitions primarily focused on continuing to invest in manufacturing infrastructure. In addition, the Company spent $25 on patents for the Envance technology business.
Previous report
The Company has long-term debt as of March 31, 2024 and December 31, 2023 relating to a senior credit facility as summarized in the following table:
Previous report
It is useful to note that, while classified as long-term debt, funds borrowed by the Company under the Credit Agreement are used for working capital needs on an ongoing basis. The Company has in place a cash sweep mechanism for the domestic business and follows strict controls on repaying outstanding balances promptly in order to minimize the carrying cost of borrowed funds.
Reworded paragraphs (18)
Previous wording
The Company, from time-to-time, may discuss forward-looking statements including assumptions concerning the Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to a number of risks, uncertainties and other factors. In connection with the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important factors which, among other things, could cause the actual results and events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions contained in the entire Annual Report. Such factors include, but are not limited to: product demand and market acceptance risks; the effect of economic conditions; weather conditions; changes in regulatory policy; the impact of competitive products and pricing; changes in foreign exchange rates; product development and commercialization difficulties; capacity and supply constraints or difficulties; availability of capital resources; general business regulations, including taxes and other risks as detailed from time-to-time in the Company’s reports and filings filed with the U.S. Securities and Exchange Commission (the “SEC”). It is not possible to foresee or identify all such factors. For more detailed information, refer to Item 3, Quantitative and Qualitative Disclosures about Market Risk, and Part II, Item 1A., Risk Factors, in this Quarterly Report on Form 10-Q.
Current wording
The Company, from time-to-time, may discuss forward-looking statements including assumptions concerning the Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to a number of risks, uncertainties and other factors. In connection with the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important factors which, among other things, could cause the actual results and events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions contained in the entire Annual 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; transformation initiatives and related expenses; availability of capital resources; general business regulations, including taxes and other risks as detailed from time-to-time in the Company’s reports and filings filed with the U.S. Securities and Exchange Commission (the “SEC”). It is not possible to foresee or identify all such factors. For more detailed information, refer to Item 3, Quantitative and Qualitative Disclosures about Market Risk, and Part II, Item 1A., Risk Factors, in this Quarterly Report on Form 10-Q.
Previous wording
Operating expenses increased by $1,055 or 3% to $36,327 for the three months ended March 31, 2024, as compared to the same period in 2023. The change in operating expenses by department are as follows:
Current wording
Operating expenses increased by $7,840 to $46,995 for the three-month period ended June 30, 2024, as compared to the same period in 2023. The changes in operating expenses by department are as follows:
Previous wording
Selling expenses decreased by $490 for the three months ended March 31, 2024, as compared with the same period of the prior year. This included reductions in domestic marketing and medical insurance costs, somewhat offset by increased costs associated with our international businesses.
Current wording
Selling expenses increased by $201 for the three months ended June 30, 2024, as compared with the same period of the prior year. This included increased costs associated with employees following a small acquisition in the second half of 2023, offset by lower travel and marketing expenses.
Previous wording
The Company spent $541 in fees associated with its proxy activities during the first three months of the prior year. There were no similar costs in the same period of 2024.
Current wording
During the three-months ended June 30, 2023, the Company spent $541 in fees associated with its proxy activities. There were no similar expenses during the same three-month period this year.
Previous wording
Amortization declined slightly during the first three months of 2024 as compared to the same period of the prior year as the result of completely amortized assets.
Current wording
Amortization declined slightly during the three months ended June 30, 2024, as compared to the same period of the prior year, as the result of completely amortized assets.
Previous wording
Transformation costs related to the Company’s digital and structural transformation project amounted to $1,152. The digital transformation effort is intended to ensure that business process owners have access to current and complete data that has been generated through standardized systems and processes. The structural transformation effort is intended to improve operating leverage by applying business analytics to current operations, structures, products and services and identifying process improvements. The Company hired a Chief Transformation Officer to steer and drive the project. In addition, Kearney Management Consulting is assisting the Company in navigating the project to gain the maximum benefit at the earliest possible time.
Current wording
Transformation costs related to the Company’s digital and structural transformation project amounted to $7,345. The digital transformation effort is intended to ensure that business process owners have access to current and complete data that has been generated through standardized systems and processes. The structural transformation effort is intended to improve operating leverage by applying business analytics to current operations, structures, products and services and identifying process improvements. The Company has engaged a third-party consulting firm to assist it in navigating the project to gain the maximum benefit at the earliest possible time. Severance costs relating to the Company’s former CEO, which were incurred in connection with the staffing and execution of the Company’s transformation initiatives, are included in the transformation costs.
Previous wording
Research, product development costs and regulatory expenses decreased by $3,164 for the three months ended March 31, 2024, as compared to the same period of 2023. The main drivers for the reduction were lower regulatory expenses, and lower costs associated with our SIMPAS product development activities.
Current wording
Research, product development costs and regulatory expenses decreased by $815 for the three months ended June 30, 2024, as compared to the same period of 2023. The main drivers were reductions in costs associated with regulatory and product development studies, and with the commercialization of our SIMPAS delivery system.
Previous wording
On April 1, 2020, the Company made a strategic investment in Clean Seed Inc. (“Clean Seed”), in the amount of $1,190. The investment is carried at fair value and is included in other assets on the Company’s condensed consolidated balance sheets. The Company recorded a gain of $638 during the three months ended March 31, 2024 and a loss of $22 during the same period of the prior year. The gain and loss reflect changes in fair value of the investment in Clean Seed during those periods, and are included in change in fair value of equity instruments on the Company’s condensed consolidated financial statements.
Current wording
On April 1, 2020, the Company made a strategic investment in Clean Seed Inc., in the amount of $1,190. The Company recorded negative fair value adjustments in the amount of $125 and $55 during the three months ended June 30, 2024 and 2023, respectively.
Previous wording
Interest costs net of capitalized interest were $3,693 in the first three months of 2024, as compared to $1,686 in the same period of 2023. Interest costs are summarized in the following table:
Current wording
Interest costs net of capitalized interest were $7,610 in the first six-month period of 2024, as compared to $4,898 in the same period of 2023. Interest costs are summarized in the following table:
Previous wording
The Company’s average overall debt for the three months ended March 31, 2024 was $176,344, as compared to $107,986 for the three months ended March 31, 2023. Our borrowings in the three months ended March 31, 2024 were higher when compared to the same period of the prior year, mainly as a result of increased working capital. This is normal for the Company’s annual cycle which includes building inventory at the start of the calendar year to support sales activities during the rest of the year. As can be seen from the table above, our effective bank interest rate on our revolving line of credit was 8.3% for the three months ended March 31, 2024, as compared to 6.8% in 2023.
Current wording
The Company’s average overall debt for the six-month period ended June 30, 2024, was $195,375, as compared to $123,248 for the same period of the prior year. Our borrowings increased as a result of higher inventory levels. As can be seen from the table above, our effective bank interest rate on our revolving line of credit was 7.9% for the six months ended June 30, 2024, as compared to 6.9% in 2023.
Previous wording
Income tax expense was $1,484 for the three months ended March 31, 2024, as compared to an income tax benefit of $361 for the three-months ended March 31, 2023. The effective income tax rate for the three months ended March 31, 2024 was computed based on the estimated effective tax rate for the full year which is approximately 28%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. During the first three months of 2024, the majority of the Company’s businesses generated taxable profits. On a consolidated basis, these taxable profits were partially offset by the performance of the Company’s subsidiaries in Brazil which incurred losses. These losses did not result in any tax benefits as the Brazilian subsidiaries maintain full valuation allowances against their net deferred tax assets. As a result, the Company’s overall effective tax rate for the first quarter was 48.9%. During the first three months of the prior year, the Company’s effective tax rate was impacted by the same matters as during the first three months in 2024. However, the Company benefited from a one-time remeasurement benefit of certain U.S. federal and state deferred taxes related to partnership arrangements associated with regulatory activities. These factors resulted in an overall negative effective tax rate of 23.2% and a tax benefit for the period of $361.
Current wording
Income tax benefit was $69 for the six months ended June 30, 2024, as compared to an income tax expense of $1,181 for the six-months ended June 30, 2023. The effective income tax rate for the six months ended June 30, 2024, was computed based on the estimated effective tax rate for the full year which is approximately 39%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. The Company’s subsidiaries in Brazil incurred losses during the period. These losses did not result in any tax benefits as the Brazilian subsidiaries maintain full valuation allowances against their net deferred tax assets. With the inclusion of discrete items and entities subject to full valuation allowances against related net deferred tax assets, the Company’s overall effective tax rate for the six months ended June 30, 2024 was 0.7%. During the six months ended June 30, 2024, the Company gained a tax benefit from transformation costs incurred as part of evaluating the current business structure and beginning to develop options for alternative, more efficient, operating structures and the result was a decrease in the effective tax rate.
Previous wording
The Company used cash of $42,424 in operating activities during the three months ended March 31, 2024, as compared to $41,452 during the three months ended March 31, 2023. Included in the $42,424 are net income of $1,552, plus non-cash depreciation, amortization of intangibles and other assets and discounted future liabilities, in the amount of $5,630, provision for bad debts in the amount of $700 and other in the amount of $5. Also included are stock-based compensation of $2,005, an increase in deferred income taxes of $1,025, and net change in foreign currency adjustment of $373. These together provided net cash inflows of $7,881, as compared to $10,367 for the same period of 2023.
Current wording
The Company’s operating activities utilized net cash of $56,452 during the six-month period ended June 30, 2024, as compared to $96,602 during the six months ended June 30, 2023. Included in the $56,452 are net loss of $10,169, plus non-cash depreciation, amortization of intangibles and other assets and discounted future liabilities, in the amount of $11,093, and provision for bad debts in the amount of $883, change in deferred income taxes of $276 and changes in liabilities for uncertain tax positions or unrecognized tax benefits of $71. Also included are stock-based compensation of $2,752, change in fair value of an equity investment of $513, and net foreign currency adjustments of $376. These together provided net cash inflows of $3,932, as compared to $15,670 for the same period of 2023.
Previous wording
With regard to our program accrual, the increase (as noted above) primarily reflects our level and mix of sales and customers in the first quarter of 2023, as compared to the prior year. The Company accrues programs in line with the growing season upon which specific products are targeted. Typically crop products have a growing season that ends on September 30 thof each year. During the first quarter of 2022, the Company made accruals for programs in the amount of $25,266 and made payments in the amount of $18,999. During the first quarter of the prior year, the Company made accruals in the amount of $23,669 and made payments in the amount of $13,033.
Current wording
Accrued program costs are recorded in line with the growing season upon which specific products are targeted. Typically crop products have a growing season that ends on September 30 thof each year. During the first six months of 2024, the Company made accruals for programs in the amount of $44,633 and payments in the amount of $26,615, resulting in a net increase in accrued program costs of $18,018. During the first six months of the prior year, the Company made accruals in the amount of $44,714 and made payments in the amount of $25,124, resulting in a net increase of accrued program costs of $19,607. The accruals for programs in the first six months of 2024 remains flat, as compared to prior year.
Previous wording
During the three months ended March 31, 2024, financing activities provided $47,685, as compared to $43,777 during the same period of the prior year. Net borrowings under the Credit Agreement amounted to $48,117 in the first quarter of 2024, as compared to $44,700 in the same period of the prior year. The Company paid dividends to stockholders amounting to $834 during the three months ended March 31, 2024, as compared to $851 in the same period of 2023. The Company received $18 for the exercise of stock options in the prior year, as compared to none in the current period. Lastly, in exchange for shares of common stock returned by employees, we paid $14 and $13 for tax withholding on stock-based compensation awards during the three months ended March 31, 2024 and 2023, respectively.
Current wording
During the six months ended June 30, 2024, financing activities provided $70,285, as compared to $98,086 during the same period of the prior year. Net borrowings under the Credit Agreement amounted to $72,354 during the six-month period ended June 30, 2023, as compared to $108,450 in the same period of the prior year. The Company paid dividends to stockholders amounting to $1,670 during the six months ended June 30, 2024, as compared to $1,702 in the same period of 2023. During the six-month period ended June 30, 2023, the Company paid $7,226 for the repurchase of 408,201 shares of its common stock. The Company did not repurchase shares during the six-month period ending June 30, 2024. The Company received $430 for the issuance of ESPP shares and exercise of stock options for the six months ended June 30, 2024, as compared to $512 for the same period in prior year. Lastly, in exchange for shares of common stock returned by employees, the Company paid $829 and $1,948 for tax withholding on stock-based compensation awards during the six months ended June 30, 2024 and 2023, respectively.
Previous wording
As of March 31, 2024, the Company was deemed to be in compliance with its financial covenants. Based on its performance against the most restrictive covenant of the Credit Agreement with its lenders, the Company had the capacity to increase its borrowings by up to $84,953. This compares to an available borrowing capacity of $115,002 as of December 31, 2023.
Current wording
At June 30, 2024, 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 $21,245, compared to $115,002 as of December 31, 2023.
Previous wording
Please refer to Note 13 in the accompanying Notes to the Condensed Consolidated Financial Statements for recently issued and adopted accounting standards.
Current wording
Please refer to Note 13 in the accompanying notes to the condensed consolidated financial statements for recently issued accounting standards.
Previous wording
Goodwill—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 value 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 determinations require considerable judgment and are sensitive to inherent uncertainties and changes in estimates and assumptions regarding revenue growth rates, gross margins, expenses, capital expenditures, working capital requirements, tax rates, terminal growth rates, discount rates, and synergies available to market participants. As of October 1, 2023, the Company conducted its most recent annual impairment test by quantitatively testing goodwill assigned to its domestic and international reporting units. Based on the results of the quantitative test, the Company concluded that the fair value of both the domestic and international reporting units exceed their respective carrying value. The fair value of the domestic and international reporting units exceeded the carrying value by 18% and 9%, respectively. The carrying value of both reporting units is mainly sensitive to discount rates, the projected net sales growth rates, gross margin improvements, and terminal growth rates. Negative deviations from the Company’s projections and assumptions used in its quantitative impairment test may result in an impairment. As of March 31, 2024, goodwill related to the domestic and international reporting units amounted to $9,132 and $41,337, respectively.
Current wording
Goodwill—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 value 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 determinations require considerable judgment and are sensitive to inherent uncertainties and changes in estimates and assumptions regarding revenue growth rates, gross margins, expenses, capital expenditures, working capital requirements, tax rates, terminal growth rates, discount rates, and synergies available to market participants. As of October 1, 2023, the Company conducted its annual impairment test by quantitatively testing goodwill assigned to its domestic and international reporting units. Based on the results of the quantitative test, the Company concluded that the fair value of both the domestic and international reporting units exceed their respective carrying value by 18% and 9%, respectively.
Previous wording
On April 9, 2024, out of an abundance of caution, the Company voluntarily suspended sales of Dacthal pending review and potential approval of a significantly narrower label submitted to the USEPA. The outcome of USEPA's review is uncertain at present (refer to Note 12 to the condensed consolidated financial statements for further details). Should the Company not be able to resume sales of Dacthal, the Company’s current assessment is that the fair value of the domestic reporting unit would be negatively impacted, but not to the extent that would result in an impairment of the domestic reporting unit goodwill. The potential loss of Dacthal sales does not have any impact on the fair value of the international reporting unit.
Current wording
On April 9, 2024, out of an abundance of caution, the Company voluntarily suspended sales of Dacthal pending review and potential approval of a significantly narrower label submitted to the USEPA (refer to Note 12 to the condensed consolidated financial statements for further details). The Company performed an interim test for goodwill impairment in April 2024, conservatively excluding all Dacthal sales from its projected net sales. Based on the results of this quantitative test, the Company concluded that the fair value of both the domestic and international reporting units still exceed their respective carrying value by 11% and 6%, respectively.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Three Months Ended June 30, 2024 and 2023:
Current report — wording carried from elsewhere
Income tax benefit was $1,553. The effective income tax rate for the three months ended June 30, 2024, was computed based on the estimated effective tax rate for the full year which is approximately 39%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. The Company’s subsidiaries in Brazil incurred losses during the period. These losses did not result in any tax benefits as the Brazilian subsidiaries maintain full valuation allowances against their net deferred tax assets. With the inclusion of discrete items and entities subject to full valuation allowances against related net deferred tax assets, the Company’s overall effective tax rate for the second quarter was 11.7%. During the three months ended June 30, 2024, the Company gained a tax benefit from transformation costs incurred as part of evaluating the current business structure, which resulted in a decrease in the effective tax rate.
Current report — wording carried from elsewhere
Amortization declined slightly during the six months ended June 30, 2024, as compared to the same period of the prior year, as the result of completely amortized assets.
Current report — wording carried from elsewhere
Transformation costs related to the Company’s digital and structural transformation project amounted to $10,462. The digital transformation effort is intended to ensure that business process owners have access to current and complete data that has been generated through standardized systems and processes. The structural transformation effort is intended to improve operating leverage by applying business analytics to current operations, structures, products and services and identifying process improvements. The Company has engaged a third-party consulting firm to assist it in navigating the project to gain the maximum benefit at the earliest possible time. Severance costs relating to the Company’s former CEO, which were incurred in connection with the staffing and execution of the Company’s transformation initiatives, are included in the transformation costs.
Current report — wording carried from elsewhere
The carrying value of both reporting units is mainly sensitive to discount rates, the projected net sales growth rates, gross margin improvements, and terminal growth rates. Negative deviations from the Company’s projections and assumptions used in its quantitative impairment test may result in an impairment. As of June 30, 2024, goodwill related to the domestic and international reporting units amounted to $9,132 and $39,746, respectively.