AMERICAN VANGUARD CORP

Previous wording

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 given that interest rate and inflation affect the debt market; and 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. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in Part II, Item 1A of this Form 10-Q under the heading "Risk Factors," in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Item 3 "Quantitative and Qualitative Disclosures About Market Risk."

Current wording

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; military activity and other geopolitical activity; 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 given that interest rate and inflation affect the debt market; and 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 (“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. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in Part II, Item 1A of this Form 10-Q under the heading "Risk Factors," in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Item 3 "Quantitative and Qualitative Disclosures About Market Risk."

Previous wording

The Company recorded an income tax expense of $124 compared to $387 in the same period of last year. The decrease in the income tax expense compared to the same period last year is primarily attributed to a reduction in the estimated effective tax rate for the full year for primarily the profitable entities with no established valuation allowance. The Company generated a net loss of $4,145 or ($0.14) per share compared to a net loss of $8,462 or ($0.30) per share in the prior year.

Current wording

The Company recorded an income tax expense of $383 compared to $765 in the same period of last year. The decrease in income tax expense compared to the same period last year is primarily attributed to a reduction in the estimated effective tax rate for the full year for primarily the profitable entities with no established valuation allowance. The Company generated a net loss of $9,868 or $(0.34) per share compared to a net loss of $849 or $(0.03) per share in the same quarter of the prior year.

Previous wording

Operating expenses increased by 6% to $36,528 for the three months ended March 31, 2026, as compared to the same period in 2025. The change in operating expenses by department are as follow:

Current wording

The change in operating expenses by department is as follows:

Previous wording

Other general and administrative expenses increased by $1,222 for the three months ended March 31, 2026, as compared to the same period of the prior year. The main drivers were increased accruals for incentive compensation reflecting the Company’s financial performance in comparison to the prior year, and higher audit fees.

Current wording

Other general and administrative expenses decreased during the three months ended June 30, 2026, as compared to the same period of the prior year. The main drivers were reduced wages and salaries and lower expenses related to outside service providers.

Previous wording

Research, product development costs and regulatory expenses decreased by $411 for the three months ended March 31, 2026, as compared to the same period of the prior year. This reduction was driven by lower expenses associated with third party product development studies.

Current wording

Research, product development costs and regulatory expenses increased for the three months ended June 30, 2026, as compared to the same period of the prior year. This increase was driven by higher expenses associated with third-party product development studies.

Previous wording

Product liability expense relates to the Company's Specialty business.

Current wording

Product liability claims relate to the Company's Specialty business.

Previous wording

Asset impairments are related to the decision to discontinue synthesis operations at the Los Angeles manufacturing facility.

Current wording

Asset impairments for the three months ended June 30, 2026, relate to the decision to discontinue synthesis operations at the Los Angeles manufacturing facility. During the three months ended June 30, 2025, the Company made the decision to discontinue selling one small volume product and wrote off the remaining intangible asset book value in the amount of $134.

Previous wording

Interest costs net of capitalized interest were $5,790 in the first three months of 2026, as compared to $3,765 in the same period of 2025. Interest costs are summarized in the following table:

Current wording

Interest costs are summarized in the following table:

Previous wording

Income tax expense was $124 for the three months ended March 31, 2026, as compared to $387 for the three months ended March 31, 2025. The effective income tax rate for the three months ended March 31, 2026 was computed based on the estimated effective tax rate for the full year which is approximately 23.9%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. The company continues to maintain valuation allowances established against the net deferred tax assets of the U.S. and certain international entities, primarily in Brazil, for the three months ended March 31, 2026. During the first three months ended March 31, 2026, several of the Company’s international businesses outside of Brazil were profitable resulting in an income tax expense.

Current wording

Income tax expense was $383 for the three months ended June 30, 2026, as compared to $765 for the three months ended June 30, 2025. The effective income tax rate for the three months ended June 30, 2026, was computed based on the estimated effective tax rate for the full year which is approximately 19%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. The Company continues to maintain valuation allowances established against the net deferred tax assets of the U.S. and certain international entities, primarily in Brazil, for the three months ended June 30, 2026. During the three months ended June 30, 2026, several of the Company’s international businesses outside of Brazil were profitable resulting in an income tax expense.

Previous wording

Our overall net loss for the first three months of 2026 was $4,145 or $0.14 per basic and diluted share, as compared to net loss of $8,462 or $0.30 per basic and diluted share in the first quarter of 2025.

Current wording

Our overall net loss for the three months ended June 30, 2026 was $9,868 or ($0.34) per basic and diluted share, as compared to net loss of $849 or ($0.03) per basic and diluted share in the same quarter of 2025.

Previous wording

Operating expenses increased by approximately 6% but remained flat when expressed as a percentage of net sales at 29.6% compared to 29.8% in the same quarter of the prior year. Within operating expenses, selling expenses were flat, general and administrative expenses increased by approximately 7%, and research, product development and regulatory expenses were down 7%.

Current wording

Operating expenses increased by approximately 1% and, when expressed as a percentage of net sales, increased to 30% compared to 29% during the same period a year ago. Within operating expenses, selling expenses were down 3%, general and administrative expenses decreased by approximately 1%, and research, product development and regulatory expenses were up 2%.

Previous wording

Interest expense rose by about $2,025 due to increased borrowing, primarily driven by the new loan agreements, and increased interest rates from the revolving line of credit that was retired, and by the two term loans that replaced it on March 13, 2026.

Current wording

Interest expense, net increased by about $6,705 due to increased borrowing, driven by the two term loans, put in place on March 13, 2026, and increased effective interest rates compared to the revolving line of credit that was refinanced.

Previous wording

Ourdomestic crop business recorded net sales during the first quarter of 2026 that were 17% higher than those of the first quarter of 2025 ($67,028 vs. $57,176 in the prior year), due largely to strong improvements in industry demand, and in particular for the Company’s herbicides (Impact and First Rate), Aztec granular soil insecticide, and Bidrin cotton insecticide. We experienced steady sales of soil fumigants and many other products, which were partially offset by lower sales of cotton defoliant, Folex, due to a seasonal shift in orders. All in all, performance across the US Crop portfolio saw strong improvements, as compared to the same period of 2025.

Current wording

Ourdomestic crop business recorded net sales during the first half of 2026 that were 5% higher than those of the first half of 2025, due to improved industry demand for the Company’s Impact herbicide, Counter nematicide, Smartchoice granular soil insecticide and soil fumigants. The performance included direct business-to-business sales from the US Crop business to certain foreign customers (as part of our organization restructuring). These increases were partially offset by lower sales of cotton defoliant, Folex, and cotton insecticide, Bidrin, due to a seasonal shift in orders. All in all, performance across the US Crop portfolio saw strong improvements, as compared to the same period of 2025.

Previous wording

Net sales of ourinternational businesses decreased by 7% during the period. The business experienced lower sales in Brazil relative to the same period of the prior year, primarily due to the first quarter of 2025 benefiting from the delayed delivery of goods from the final quarter of 2024 into the first quarter of 2025, and lower sales through the Agrinos business in India. These trends were partially offset by improved sales in Central America, led by its launch of Mocap in Ecuador for use on bananas, as well as in Mexico, by higher sales of non-crop vegetation control products and more normalized channel inventories.

Current wording

Net sales of ourinternational businesses decreased by 13% during the first half of 2026 compared to the first half of 2025. The business experienced lower sales in Brazil relative to the same period of the prior year, primarily due to the delayed delivery of goods from the final quarter of 2024 into the first quarter of 2025 (which delay did not repeat in 2026). Further, certain direct business-to-business sales are now managed by the US crop business as part of our drive for improved operational efficiency. In addition, our Agrinos business in India experienced lower sales. Drier weather in Central America slowed sales (for example, Counter, Aztec and Impact as well as various third-party products) late in the six-month period, which was partially offset by improved sales in Ecuador, arising from the Company’s launch of Mocap for use on bananas, as well as in Mexico, by higher sales of non-crop vegetation control products and more normalized channel inventories.

Previous wording

On aconsolidated basis, gross profit for the first quarter of 2026 improved by 27% ($38,417 vs. $30,191 in the prior year). Increased sales volume of higher-margin domestic products contributed to the increase. This performance, along with a continued strong factory efficiency, resulted in gross margin for the quarter of 31%, as compared to 26% for the same period of the prior year.

Current wording

On aconsolidated basis, gross profit for the first six months of 2026 improved by 3%, as compared to the same period of the prior year. Increased sales volume of higher-margin domestic products contributed to the increase. This performance, along with a continued strong factory efficiency, resulted in gross margin for the first half of 2026 of 30%, as compared to 29% during the same period of the prior year.

Previous wording

Selling expenses were approximately flat to slightly down (1%) for the three months ended March 31, 2026, as compared with the same period of the prior year. This included slightly lower wages and salaries and travel expenses, offset by slightly higher spending on advertising and promotions.

Current wording

Selling expenses decreased during the six months ended June 30, 2026, as compared to the same period of the prior year. This decrease was primarily associated with lower wages, salaries and travel expenses, partially offset by slightly higher spending on advertising and promotions.

Previous wording

Amortization declined slightly during the first three months of 2026, as compared to the same period of the prior year as a result of the retirement of fully written down assets in the prior year.

Current wording

Amortization declined slightly during the six months ended June 30, 2026, as compared to the same period of the prior year, as a result of the retirement of fully written down assets in the prior year.

Previous wording

Transformation expenses related to the Company’s digital and structural transformation project and manufacturing footprint optimization amounted to $2,804, as compared to $2,191 in the prior period. The increase was driven by the Los Angeles plant reorganization costs in the amount of $2,433, partially offset by lower consulting and strategic advisory services. The Los Angeles plant reorganization is expected to be completed by December 31, 2026 and is part of the Company's optimization efforts of its manufacturing footprint, reconfiguring the Los Angeles site by ending synthesis operations on that site and building upon strengths and capabilities at its Axis manufacturing site. The cost incurred relate to a reduction in force of certain personnel, material waste disposal and other related expenses. No such costs were incurred during the three months ended March 31, 2025.

Current wording

Transformation costs related to the Company’s digital and structural transformation project and manufacturing footprint optimization increased during the six months ended June 30, 2026, as compared to the same period of the prior year. The Company expects that these costs will decrease. The increase in plant reorganization costs focused primarily on activity in support of the project to transfer production activity from the Los Angeles site to the Axis site. The Los Angeles plant reorganization is expected to be completed by December 31, 2026 and is part of the Company's optimization efforts of its manufacturing footprint, reconfiguring the Los Angeles site by ending synthesis operations on that site and building upon strengths and capabilities at its Axis manufacturing site. The plant reorganization costs incurred relate to a reduction in force of certain personnel, material waste disposal and other related expenses. No such costs were incurred during the six months ended June 30, 2025.

Previous wording

Operating expenses excluding the expenses associated with transformation, asset impairments and product liability claims, a non-GAAP measure which reflects the business focus on managing underling ongoing expenses, ended at $32,984 or 26.7% of net sales. In comparison, operating expenses for the same period of the prior year were $32,310 or 27.9% of net sales. The quarter-over-quarter change was driven by improvements in operating efficiency and continued tight cost controls. The following table shows the different components of transformation expenses for the three months ended March 31, 2026 and 2025, respectively:

Current wording

Operating expenses excluding the expenses associated with transformation, asset impairments and product liability claims, a non-GAAP measure which reflects the business focus on managing underlying ongoing expenses, ended at $66,090 or 28% of net sales. In comparison, operating expenses for the same period of the prior year were $66,736 or 27% of net sales.

Previous wording

The Company’s average overall debt for the three months ended March 31, 2026 was $212,868, as compared to $183,918 for the three months ended March 31, 2025. Our borrowings in the three months ended March 31, 2026 were higher when compared to the same period of the prior year, mainly as a result of the new debt structure put in place on March 13, 2026. That resulted in replacing a previous revolving credit line with a term loan structure that increased debt and placed additional cash on the Company’s balance sheet. Our effective bank interest rate increased as a result of the change in debt structure.

Current wording

The Company’s borrowings during the six months ended June 30, 2026 were higher when compared to the same period of the prior year, mainly as a result of the new debt structure put into place on March 13, 2026. That resulted in the refinancing of a previous revolving credit line with a term loan structure that increased debt and placed additional cash on the Company’s balance sheet. Our effective interest rate increased as a result of the change in debt structure.

Previous wording

The Company used cash of $35,442 in operating activities during the three months ended March 31, 2026, as compared to $20,576 during the three months ended March 31, 2025. Included in the $35,442 are net loss of $4,145, plus non-cash depreciation, amortization of intangibles and other assets in the amount of $4,690, provision for bad debts in the amount of $444, stock compensation in the amount of $186, amortization of deferred loan fees in the amount of $738 and leases in the amount of $115. Also included are a net change in deferred income taxes of $204, change in liabilities for uncertain tax positions or unrecognized tax benefits of $17, and net change in foreign currency adjustment of $28. These together provided net cash inflow of $2,496, as compared to an outflow of $633 for the same period of 2025.

Current wording

The Company used cash of $60,460 in operating activities during the six months ended June 30, 2026, as compared to $39,836 during the six months ended June 30, 2025. Included in the $60,460 are net loss of $14,014, plus non-cash depreciation, amortization of intangibles and other assets in the amount of $9,026, provision for bad debts in the amount of $1,327, stock compensation in the amount of $574, amortization of deferred loan fees in the amount of $1,786 and leases in the amount of $140. Also included are a net change in deferred income taxes of $690, and change in liabilities for uncertain tax positions or unrecognized tax benefits of $50. These together resulted in a cash inflow of $268, as compared to an inflow of $2,575 for the same period of 2025.

Previous wording

During the first three months of 2026, the Company increased net working capital by $91,550, as compared to an increase of $18,240 during the same period of the prior year. The biggest driver of the increase was the restructuring of the Company’s debt which resulted in a cash increase of $68,766 (as part of working capital). In addition, accounts receivable increased by $19,088, as compared to a decrease by $6,892 in the same period of 2025. This change resulted from receiving lower customer prepayments at the end of 2025. Inventories reduced by $1,530, as compared to an increase of $4,721 for the first quarter of 2025. Customer prepayments decreased by $18,656, as compared to a decrease of $28,215 in the same period of 2025, driven by lower prepayments from customers during December 2025. Accrued program costs decreased by $6,170, as compared to an increase of $837 in the prior year, as a result of timing of customers purchases, program simplification, and the mix of sales. Our accounts payable balances increased by $2,871, as compared to an increase of $22,966 in the same period of 2025. Prepaid expenses and other assets increased by $877, as compared to an increase of $856 in the same period of 2025. Income tax receivable/payable, net increased by $385 as compared to an increase of $1,885 in the prior year. Finally, other payables and accrued expenses increased by $2,067, as compared to a decrease of $14,961 in the prior year.

Current wording

During the six months ended June 30, 2026, the Company increased net working capital by $129,494, as compared to an increase of $21,381 during the same period of the prior year. The biggest driver of the increase was the restructuring of the Company’s debt which resulted in a cash inflow of $68,766 which is included in the change in working capital. In addition, accounts receivable increased by $16,225, as compared to an increase by $3,293 in the same period of 2025. This change resulted from receiving lower customer prepayments at the end of 2025. Inventories increased by $4,280, as compared to an increase of $9,785 during the same period of 2025. Customer prepayments decreased by $32,353, as compared to a decrease of $46,187 in the same period of 2025, driven by lower prepayments from customers during December 2025. Accrued program costs decreased by $3,967, as compared to an increase of $10,267 in the prior year, as a result of timing of customers purchases, program simplification, and the mix of sales. Our accounts payable balances decreased by $459, as compared to an increase of $24,547 in the same period of 2025. Prepaid expenses and other assets increased by $339, as compared to an increase of $1,863 in the same period of 2025. Income tax receivable/payable, net changed by $2,506 as compared to $1,024 in the prior year. Finally, other payables and accrued expenses decreased by $5,611, as compared to a decrease of $15,073 in the prior year.

Previous wording

With regard to our program accrual, the decrease (as noted above) primarily reflects our initiatives to simplify customer programs and as a result of the level and mix of sales and customers in the first quarter of 2026, 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 2026, the Company made accruals for programs in the amount of $13,655 and made payments in the amount of $19,783. During the first quarter of the prior year, the Company made accruals in the amount of $20,091 and made payments in the amount of $19,221.

Current wording

With regard to our program accrual, the decrease (as noted above) primarily reflects our initiatives to simplify customer programs, and as a result of the level and mix of sales and customers in the first half of 2026, 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 half of 2026, the Company made accruals for programs in the amount of $24,309 and made payments in the amount of $28,230. During the first half of the prior year, the Company made accruals in the amount of $41,451 and payments in the amount of $31,032.

Previous wording

Cash used for investing activities was $973 for the three months ended March 31, 2026, as compared to $446 for the three months ended March 31, 2025. The Company spent $971 on fixed assets acquisitions primarily focused on continuing to invest in manufacturing infrastructure.

Current wording

Cash used for investing activities was $2,419 for the six months ended June 30, 2026, as compared to $1,057 for the six months ended June 30, 2025. The Company spent $2,322 on fixed assets purchases primarily focused on its manufacturing infrastructure.

Previous wording

During the three months ended March 31, 2026, financing activities provided $95,010, as compared to $19,801 during the same period of the prior year. Net borrowings under the Company's debt structure amounted to $111,000 in the first quarter of 2026, as compared to $20,167 in the same period of the prior year. As previously noted, this was driven by the retirement of the pre-existing revolving line of credit and replacement by two term loans. The Company made payments in the amount of $16,234 relating to loan fees. Lastly, in exchange for shares of common stock returned by employees, we paid $19 and $11 for tax withholding on stock-based compensation awards during the three months ended March 31, 2026 and 2025, respectively.

Current wording

During the six months ended June 30, 2026, financing activities provided $94,371, as compared to $41,479 during the same period of the prior year. Net borrowings under the Company's debt structure amounted to $110,437 in the first half of 2026, as compared to $42,169 in the same period of the prior year. As previously noted, this was driven by the retirement of the pre-existing revolving line of credit and replacement by two term loans. The Company made payments in the amount of $16,234 relating to loan fees. Lastly, in exchange for shares of common stock returned by employees, we paid $95 and $142 for tax withholdings on stock-based compensation awards during the six months ended June 30, 2026 and 2025, respectively.

Previous wording

The Company has both short-term and long-term debt as of March 31, 2026 and long-term debt as of December 31, 2025. As of March 31, 2026 our debt structure includes two term loans. As of December 31, 2025, our debt structure included a senior credit facility. The debt structure are summarized in the following table:

Current wording

As of June 30, 2026 our debt structure includes two term loans. As of December 31, 2025, our debt structure included a senior credit facility. The debt structure are summarized in the following table: