AMERICAN VANGUARD CORP

Current report

PFAS lawsuits and legislation continue to spread among many states. Over the course of the past few years, many states have introduced or passed legislation limiting the use of products or packaging containing PFAS (per- and polyfluoroalkyl substances). Further, litigation relating to PFAS has grown dramatically. The definition of what compounds are contained within the ambit of “PFAS” varies from state to state. While the Company does not sell products that contain PFAS, there is no guarantee that the Company or its products will not be brought either into legal actions or within the scope of legislation.

Current report

Tariffs continue to cause disruption within the Company’s markets. Over the past year there has been a great deal of activity involving the raising and lowering of tariffs by the current U.S presidential administration. This activity, which has included both sudden announcements of new tariffs and complete reversals within short periods of time, has created an atmosphere of uncertainty within the agricultural economy and affected both international markets for domestic crops and the cost of crop inputs for domestic growers. In spite of the recent Supreme Court decision finding that some set of these tariffs was unconstitutional, there is no guarantee that the pattern of declaring, raising and/or reducing tariffs will not continue for the remainder of the term of the U.S. presidential administration or beyond. This activity has had and may continue to have an adverse effect upon the Company’s financial performance.

Current report

Use of Artificial Intelligence could lead to the disclosure of sensitive information. At present, the Company’s use of AI is limited to self-contained tools that assist, for example, in contract administration. While the Company does not depend upon AI tools linked to large language databases, there is a trend for users of publicly-available AI tools (including the Company’s employees) to rely upon them for everyday functions (e.g., writing correspondence, making statistical and mathematical computations and doing research). The use of such tools in connection with Company business could lead to the uncontrolled disclosure of business-sensitive information being transmitted to AI companies. Such disclosure could have an adverse effect upon the Company’s financial performance.

Current report

Credit and Other Risks

Current report

The Company’s new debt structure limits its liquidity, requires defined, minimum levels of financial performance and includes significant interest expense, and the Company may not be able to refinance on terms favorable to the Company or execute on business opportunities that may otherwise be advantageous to the Company.

Current report

The Company refinanced its debt structure in March 2026, replacing the existing revolving credit agreement with both a first lien, term loan of $225,000 from lenders led by Centerbridge Partners, L.P. (with an initial interest rate of SOFR + 8.25), and a second lien, term loan of $60,000 from lenders led by Bank of Montreal. The first lien, term loan includes financial covenants and liquidity minimums over its term. In the event of further market decline or other factors, there is no guarantee that the Company will record financial performance sufficient to cover the interest and principal payments under this debt structure, to meet the performance covenants or otherwise to generate the liquidity that is necessary to meet the Company’s working capital needs. Failure to meet any or all of these requirements could have a material adverse effect upon the Company. There is also no guarantee that the Company will continue to generate earnings necessary to ensure that it has sufficient borrowing capacity to finance ongoing operations or to execute on business opportunities that may otherwise be advantageous to the Company. Furthermore, there is no guarantee that the Company will be able to obtain capital on equal or better terms than it has under the current debt structure.

Previous report

Additionally, changes in the regulatory environment could adversely impact our ability to continue producing and/or selling certain products in our domestic and foreign markets or could increase the cost of doing so. We are sensitive to regulatory risk given the need to obtain and maintain pesticide registrations in every country in which we sell our products. Moreover, we are required to comply with protocols or applicable regulatory requirements of biological products. Protocols and regulations may change, or regulatory agencies may determine that a biological product is not approvable. There is a risk that future regulatory requirements may lead to delays in development of biologicals or limit growth from biologicals. Many countries require re-registration of pesticides to meet new and more challenging requirements; while we defend our products vigorously, these re-registration processes may result in significant additional data costs, reduced number of permitted product uses, or potential product cancellation. Compliance with changing laws and regulations may involve significant costs or capital expenditures or require changes in business practice that could result in reduced profitability. 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 use of many of its products in the face of such regulatory challenges.

Previous report

USEPA has issued a proposed final decision (“PFD”) to cancel PCNB. In mid-2022, the USEPA issued a “proposed final decision” to cancel the fungicide PCNB, which is registered by the Company for use on golf courses and potatoes, among other uses. Under this mandate, the Company must meet a truncated schedule for defending this product, all of which is posted on a public docket. The Company has submitted proposed mitigation measures, and discussion with the program office continues. There is no guarantee that the Company will succeed in persuading USEPA not to cancel the PCNB registration.

Previous report

In addition, we import raw materials and finished goods from countries outside of the United States, including but not limited to China. Our import operations are subject to complex customs laws, regulations, tax requirements, forced labor laws and trade regulations, such as tariffs set by governments, either through mutual agreements or bilateral actions. Tariffs on goods imported into the U.S., particularly goods from China, Mexico and/or Canada, have increased the cost of the goods we purchase. Additional tariffs and protectionist duties could be imposed by the U.S. with relatively short notice to us. These governmental actions could have, and any similar future actions may have, an adverse effect on our business, financial condition and results of operations. The overall effect of these risks is that our costs may increase or we may experience supply disruptions, which in turn may result in lower profitability if we are unable to offset such increases through higher prices, and/or that we may suffer a decline in sales if our customers do not accept price increases.

Previous report

The distribution and sale of the Company’s products are subject to 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 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.

Previous report

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, climate change could disrupt our operations by causing loss of human life, impacting the availability and cost of materials needed for manufacturing, causing physical damage and partial or complete closure of our manufacturing sites or distribution centers, temporary or long-term disruption in the manufacturing and supply of products and services and disruption in our ability to deliver products and services to customers. In addition, these events and disruptions could increase insurance and other operating costs, including impacting our decisions regarding construction of new facilities to select areas less prone to climate change risks and natural disasters, which could result in indirect financial risks passed through the supply chain or other price modifications to our products and services.

Previous report

The highly competitive nature of our markets could adversely affect our ability to maintain or grow revenues. Increased generic presence in agricultural chemical markets has been driven by the number of significant product patents and product data protections that have expired in the last decade, and this trend is expected to continue. Also, there are changing competitive dynamics in the agrochemical industry as some of our competitors have consolidated, resulting in them having greater scale and diversity, as well as market reach. These competitive differences may not be overcome and may erode our business. Agriculture in many countries is changing and new technologies (e.g., precision pest prediction or application, data management) continue to emerge. At this time, the scope and potential impact of these technologies are largely unknown but could have the potential to disrupt our business.

Previous report

Transformation/Credit and Other Risks

Previous report

We have identified material weaknesses in our internal control over financial reporting, which has led to a conclusion that our internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2024. If we are unable to remediate the material weaknesses, discover additional weaknesses, or are unable to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting, our results of operations, stock price and investor confidence in our Company could be adversely affected.

Previous report

Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and report on the effectiveness of their internal control over financial reporting as of the end of each fiscal year. In addition to the Company’s evaluation, our independent registered public accounting firm provides an opinion regarding the effectiveness of our internal control over financial reporting. As disclosed in more detail in Part II, Item 9A, “Controls and Procedures” below, we identified material weaknesses as of December 31, 2024, in our internal control over financial reporting. In particular, we have identified issues in principles associated with the control environment, control activities and risk assessment components of the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”). Specifically, a) within the Company’s Australian component (AgNova), the Company identified that the individuals performing control activities within the component were not sufficiently trained or adequately supervised, and lacked appropriate reporting lines and accountability; b) due to insufficient resources to facilitate a timely financial close process, the Company identified that there was a material weakness in the operation of internal controls over financial reporting specific to the controls being performed timely and further, within AgNova, the Company did not have sufficient segregation of duties in place; c) the Company identified that it did not design and implement an effective risk assessment and specifically, did not identify and assess changes to the business that could significantly impact the system of internal control; and d) the Company identified a deficiency that constituted a material weakness related to the review of customer agreements related to the accrued program costs and customer prepayments balances; specifically, the Company did not perform a sufficiently precise review in order to appropriately consider all agreed-upon terms with customers in its determination of the accrued program costs and customer prepayments balances. Management concluded that these issues constitute material weaknesses relating to the Company’s internal control over financial reporting (control environment, control activities and risk assessment).

Previous report

Internal controls related to our financial reporting systems are important to accurately reflect our financial position and results of operations in our financial reports. If, as a result of the ineffectiveness of our internal controls, we cannot provide reliable financial statements, our business decision processes may be adversely affected, our business and results of operations could be harmed, investors could lose confidence in our reported financial information, and our ability to obtain additional financing, or additional financing on favorable terms, could be adversely affected.

Previous report

Management has taken action to begin remediating the identified material weaknesses; however, we cannot be certain when remediation will be fully completed, or if our remediation efforts will be successful. Additional information regarding the initial remediation efforts is disclosed in more detail in Part II, Item 9A, “Controls and Procedures” below. In addition, we could in the future identify additional internal control deficiencies that could rise to the level of a significant deficiency or material weakness or uncover material errors in financial reporting. During the course of our evaluation, we may identify areas requiring improvement and may be required to design additional enhanced processes and controls to address issues identified through this review. In addition, there can be no assurance that such remediation efforts will be successful, that our internal control over financial reporting will be effective as a result of these efforts or that any such future significant deficiencies identified may not be material weaknesses that would be required to be reported in future periods. In addition, we cannot provide assurance that our independent registered public accounting firm will be able to attest that such internal controls are effective when they are required to do so.

Previous report

If we fail to fully remediate the control deficiencies that contributed to the identified material weaknesses and maintain effective disclosure controls and procedures or internal control over financial reporting, our ability to accurately record, process, and report financial information and, consequently, our ability to prepare financial statements within required time periods, could be adversely affected. Failure to maintain effective internal controls could result in a failure to comply with SEC rules and regulations, stock exchange listing requirements, and the covenants under our debt agreements, subject us to litigation, investigations or enforcement actions, negatively affect investor confidence in our financial statements, and adversely impact our stock price and ability to access capital markets. The defense of any such claims, investigations or enforcement actions could cause the diversion of the Company’s attention and resources and could cause us to incur significant legal and other expenses even if the matters are resolved in our favor.

Previous report

The Company’s transformation initiatives may not generate the full benefit of targeted efficiencies. During the final quarter of 2023 and full year 2024, the Company has invested in activities intended to transform both its digital platform (including business processes) and its business structures (ranging from organizational change to procurement) in the interest of achieving greater efficiencies, improving operating leverage and achieving greater market penetration. While the Company continues to pursue these initiatives and is taking all available measures to ensure success, there is no guarantee that these measures will yield the targeted results that the Company, working with its business consultants, has identified, or that the return on these initiatives will exceed the investment.

Previous report

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. Furthermore, there is no guarantee that the Company will be able to obtain capital on equal or better terms than it enjoys under the current facility. Should that be the case, the higher the cost of capital in a new credit structure, the greater will be the potential adverse effect upon the Company’s financial performance.

Previous report

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 adverse effect on the Company’s financial performance in future reporting periods.

Previous report

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 natural oil technology and biorationals, as part of its growth strategy. 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 markets 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.

Previous report

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.