AMERICAN VANGUARD CORP

Notes to the Condensed Consol idated Financial Statements

1. Summary of Significant Accounting Policies— The accompanying unaudited condensed consolidated financial statements of American Vanguard Corporation and Subsidiaries (“AVD” or “the Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of consolidating adjustments, eliminations, and normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The condensed consolidated financial statements and related notes do not include all information and footnotes required by US GAAP for annual reports. This quarterly report should be read in conjunction with the consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2025.

Transformation— Transformation expenses on the condensed consolidated statements of operations relate to the Company’s digital and structural transformation project and activities associated with manufacturing optimization. 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 and structural improvements, as well as pricing and go-to-market strategies. The manufacturing optimization is focused on the Company’s US based manufacturing footprint. It includes reduction of activities at the Company's Los Angeles facility, including the discontinuation of synthesis processes on that site and building upon the strengths and capabilities of the Axis manufacturing site. Transformation expenses primarily include costs for consulting services, costs in connection with the staffing and execution of the Company’s transfor mation initiatives, and costs associated with the reduction in force of certain personnel and other costs related to discontinuing certain activities at the Los Angeles plant. The Los Angeles plant reorganization is expected to be completed by December 31, 2026. For the three and six months ended June 30, 2026, the plant reorganization expenses amounted to $682 and $3,115, respectively. The three months ended June 30, 2026 included wages of $682 associated with cleaning up the Los Angeles plant and the transfer of production. The six months ended June 30, 2026 included severance costs of $932, wages associated with cleaning up the Los Angeles plant and the transfer of production of $682, waste disposal costs of $390, and miscellaneous other costs of $1,111. No such plant reorganization costs were incurred during the three and six months ended June 30, 2025. The Company also impaired certain assets at its Los Angeles plant that became idle due to the reorganization. For the three and six months ended June 30, 2026, the related costs were $284 and $943, respectively. The related impairment charges are included in asset impairments on the condensed consolidated statements of operations. There were no such charges for the three and six months ended June 30, 2025.

Recent Adopted Accounting Guidance—In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, “Financial Instruments - Credit Losses,” which simplifies the application of the current expected credit loss model by providing a practical expedient and accounting policy election permitting entities to assume that conditions as of the balance sheet date remain unchanged over the life of the asset when measuring credit losses on current accounts receivable and current contract assets. The Company's adoption of this standard on January 1, 2026, had no impact on its disclosures and no material impact on its results of operations, cash flows and financial condition.

Recent Issued Accounting Guidance—In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses", and in January 2025, the FASB issued ASU No. 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date". ASU 2024-03 requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. For public business entities, ASU 2024-03, as clarified by ASU 2025-01, is effective for the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements.

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable to, or not expected to have a significant impact upon, its condensed consolidated financial statements.

Reclassification—Certain amounts in the accompanying condensed consolidated statements of operations and cash flows have been reclassified to conform to the current period financial statements. These reclassifications have not changed the results of operations or cash flows of the prior period.

2. Revenue Recognition—The Company recognizes revenue from the sale of its products, which include crop and Specialty products. The Company sells its products to customers, which include distributors, retailers, and growers. Substantially all revenue is recognized at a point in time. The Company has one reportable segment. Selective enterprise information of sales disaggregated by category and geographic region is as follows:

Net sales are reported within the country or region in which the ultimate sale is made to the customer. As of October 1, 2025, the Company implemented a new organizational structure, as part of its business transformation actions, and now sells and recognizes direct business-to-business sales to certain foreign customers in its US Crop business. The associated sales are reported as U.S. Crop net sales for the three and six months ended June 30, 2026. For the three and six months ended June 30, 2025, these sales were included in International net sales and amounted to $7,126 and $10,693, respectively. These prior period amounts have not been restated and are provided for comparability purposes only.

The Company sometimes receives payments from its customers in advance of goods and services being provided in return for early cash incentive programs. These payments are included in customer prepayments on the condensed consolidated balance sheets. Revenue recognized for the three and six months ended June 30, 2026, that was included in customer prepayments at the beginning of 2026, was $13,696 and $32,353, respectively. The Company expects to recognize all its remaining customer prepayments as revenue in fiscal 2026.

The Company has contract assets that relate to royalties earned on certain functional licenses granted for the use of the Company’s intellectual property. At June 30, 2026 and December 31, 2025, the contract assets amounted to $8,250 and are included in other assets on the condensed consolidated balance sheets.

3. Accrued Program Costs— The Company offers various discounts to customers based on the volume purchased within a defined period, other pricing adjustments, some grower volume incentives or other key performance indicator driven payments made to distributors, retailers or growers, usually at the end of a growing season. The Company describes these payments as “Programs.” Programs are a critical part of doing business in both the U.S. crop and Specialty chemicals marketplaces. These discount Programs represent variable consideration. Revenues from sales are recorded at the net sales price, which is the transaction price, less an estimate of variable consideration. Variable consideration includes amounts expected to be paid to its customers using the expected value method. Each quarter management compares individual sale transactions with Programs to determine what, if any, Program liabilities have been incurred. Once this initial calculation is made for the specific quarter, sales and marketing management, along with executive and financial management, review the accumulated Program balance and, for volume driven payments, make assessments of whether or not customers are tracking in a manner that indicates that they will meet the requirements set out in agreed upon terms and conditions attached to each Program. Following this assessment, management adjusts the accumulated accrual to properly reflect the liability at the balance sheet date. Programs are paid out predominantly on an annual basis, usually in the final quarter of the financial year or the first quarter of the following year.

4. Stock-Based Compensation —Under the Company’s Equity Incentive Plan of 1993, as amended (“the Plan”), all employees are eligible to receive non-assignable and non-transferable restricted stock (RSUs), options to purchase common stock, and other forms of equity. During the three months ended June 30, 2026 and 2025, the Company's stock-based compensation expense amounted to$388 and$422, respectively. During the six months ended June 30, 2026 and 2025, the Company's stock-based compensation expense amounted to$574 and$981, respectively.

RSUs

A summary of nonvested RSUs outstanding is presented below:

As of June 30, 2026, the total unrecognized stock-based compensation expense related to RSUs outstanding was $732 and is expected to be recognized over a weighted-average service period of 2.8 years.

Stock Options

Incentive Stock Option Plans -A summary of the incentive stock option activity for the six months ended June 30, 2026 is presented below:

As of June 30, 2026, the total unrecognized stock-based compensa tion expense related to stock options outstanding was $435 and is expected to be recognized over a weighted-average service period of 1.9 years.

5. Income Taxes— 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. Income tax expense was$507 for the six months ended June 30, 2026, as compared to$1,152 for the six months ended June 30, 2025. The effective income tax rate for the three and six months ended June 30, 2026, was computed based on the estimated effective tax rate for the full year. This calculation resulted in an effective tax rate of negative 4.04% for the three months ended June 30, 2026, as compared to negative 908.23% for thethree months ended June 30, 2025. The effective income tax rate was negative 3.76% for the six months ended June 30, 2026, as compared to negative 14.13% for the six months ended June 30, 2025. The increase in the effective income tax rate for the three and six months ended June 30, 2026, compared to the same period in the prior year is primarily attributed to a reduction in the estimated effective tax rate for the full year primarily for the profitable entities with no established valuation allowance. 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 and six months ended June 30, 2026. During the three and six months ended June 30, 2026, several of the Company's international businesses outside of Brazil were profitable, resulting in an income tax expense.

6. Earnings Per Share—The components of basic and diluted earnings per share were as follows:

Due to net losses for the three and six months ended June 30, 2026 and 2025, stock options and other grants were excluded from the computation of diluted net loss per share, as they would be antidilutive.

7. Comprehensive (Loss) Income— Total comprehensive (loss) income includes, in addition to net losses, changes in equity that are excluded from the condensed consolidated statements of operations and are recorded directly into a separate section of stockholders’ equity on the condensed consolidated balance sheets. For the three and six months ended June 30, 2026 and 2025, total comprehensive (loss) income consisted of net losses and foreign currency translation adjustments.

8. Inventories — Inventory is stated at the lower of cost or net realizable value. Cost is determined by the average cost method, and includes material, labor, factory overhead and subcontracting services.

Finished products consist of products that are sold to customers in their current form as well as intermediate products that require further formulation to be saleable to customers.

9. Property, Plant and Equipment —Property, plant and equipment at June 30, 2026, and December 31, 2025, consist of the following:

The Company recognized depreciation expenses related to property and equipment of$1,584 and$1,660 for thethree months ended June 30, 2026 and 2025, respectively, and$3,179 and$3,338 for thesix months ended June 30, 2026 and 2025, respectively.

Substantially all of the Company’s assets are pledged as collateral with its lender banks.

10. Leases — The Company has operating leases for certain of its warehouses, manufacturing facilities, offices, cars, railcars and certain equipment. The lease term under such leases includes the non-cancellable period of the lease plus any additional periods covered by either an option to extend (or not terminate) that the Company is reasonably certain to exercise. The Company has leases with a lease term ranging fromone year to approximately 20 years.

The operating lease expense for the three months ended June 30, 2026 and 2025 was$1,742 and$1,873, respectively, and$3,571 and$3,689 for thesix months ended June 30, 2026 and 2025, respectively. Lease expenses related to variable lease payments and short-term leases were immaterial.

Other information related to operating leases were as follows:

The weighted-average remaining lease term and discount rate related to the operating leases as of June 30, 2026 were as follows:

Future minimum lease payments under non-cancellable operating leases as of June 30, 2026, were as follows:

11. Intangibles — The following schedule represents the gross carrying amount and accumulated amortization of intangible assets as of June 30, 2026, and December 31, 2025. Product rights and trademarks are amortized over the lesser of the useful life ranging from 10 to 25 years, or the patent life. Customer lists are amortized over their expected useful lives ofnine toten years. The amortization expense is included in operating expenses on the condensed consolidated statements of operations.

The following schedule represents intangible assets activity for thesix months ended June 30, 2026:

The following schedule represents future amortization charges related to intangible assets:

During the three months ended June 30, 2026 and 2025, amortization expense was$3,030 and$3,049, respectively, and$6,059 and$6,115 during the six months ended June 30, 2026 and 2025, respectively.

12. Debt— The Company had two term loans at June 30, 2026. At December 31, 2025, the Company had a revolving line of credit. The debt is summarized in the following table:

At June 30, 2026, long-term debt is related to the two term loans that were put in place on March 13, 2026, and the balance is presented net of unamortized debt discount and debt issuance costs on the condensed consolidated balance sheets. At December 31, 2025, the Company had a revolving line of credit and the related unamortized debt issuance costs are included in prepaid expenses on the condensed consolidated balance sheets.

On March 13, 2026, AMVAC Chemical Corporation (“AMVAC”), a subsidiary of American Vanguard Corporation (the “Company”), as borrower, and certain affiliates of the Company (including the Company), as guarantors, entered into (i) a Credit and Guaranty Agreement (the “First Lien Term Loan”) with a group of commercial lenders led by Centerbridge Partners, L.P., and Wilmington Trust, National Association as administrative agent; (ii) a Credit and Guaranty Agreement (the “Second Lien Term Loan” and, together with the First Lien Term Loan, the “Term Loans”) with a group of commercial lenders led by BMO Bank N.A., as sole lead arranger and book runner, and BMO Bank N.A. as administrative agent; and (iii) an Intercreditor Agreement (the “Intercreditor Agreement”) by and among Wilmington Trust, National Association, as first lien agent (in such capacity, the “First Lien Agent”), BMO Bank N.A., as second lien agent (in such capacity, the “Second Lien Agent”), and the secured creditors from time to time party thereto. The proceeds of the Term Loans, were used, among other things, to refinance in full and retire existing indebtedness under the Third Amended and Restated Credit Agreement, dated as of August 5, 2021 (the “Prior Credit Agreement”), to pay related fees and expenses, and will also be used for other general corporate and working capital purposes permitted under the Term Loans.

First Lien Term Loan

The First Lien Term Loan is a senior secured term loan facility with a five year term for an aggregate principal amount of $225,000 that matures on March 13, 2031. The First Lien Term Loan contains customary representations and warranties, affirmative and negative covenants and events of default for financings of this type. AMVAC is obligated to pay the principal amount in consecutive quarterly installments commencing as of June 30, 2026, in an amount for each such fiscal quarter equal to 0.25% of the original principal amount. The unpaid principal amount shall be due and payable in full on the maturity date. AMVAC is required to make mandatory prepayments of the First Lien Term Loan in certain circumstances (e.g. the disposition of certain collateralized assets) and is permitted to make voluntary prepayments subject to payment of an applicable prepayment premium during the first 48 months following closing, in each case, in accordance with the terms of the First Lien Term Loan. Interest on the First Lien Term Loan is based on a specified benchmark rate (including, as applicable, a SOFR-based rate) plus an applicable margin initially equal to 8.25% per annum for SOFR loans (or 7.25% per annum for base rate loans), subject to step-downs based on the Company’s consolidated total leverage ratio, or an alternate base rate, as described in the First Lien Term Loan. In addition, a leverage fee of 1.00% per annum, payable in kind, is payable on the outstanding term loans for so long as the Company’s consolidated total leverage ratio exceeds 5.00:1.00.

The Company is also required to maintain a minimum consolidated leverage ratio of the First Lien Term Loan Principal to consolidated EBITDA for the trailing twelve months of 6.70 to 1.00 for the quarters ending March 31, 2026 to December 31, 2026,6.13 to 1.00 for the quarter ending March 31, 2027,5.68 to 1.00 for the quarter ending June 30, 2027,5.23 to 1.00 for the quarter ending September 30, 2027,4.78 to 1.00 for the quarter ending December 31, 2027,4.44 to 1.00 for the quarter ending March 31, 2028,4.19 to 1.00 for the quarter ending June 30, 2028,4.02 to 1.00 for the quarter ending September 30, 2028, and 4.00 to 1.00 for the quarters ending December 31, 2028 and thereafter. AMVAC and the guarantors are also required to maintain minimum unrestricted cash and cash equivalents of $30,000 for the months ending March 31, 2026 to May 31, 2026, $20,000 for the months ending June 30, 2026 to August 31, 2026, $30,000 for the month ending September 30, 2026, $35,000 for the months ending October 31, 2026 to November 30, 2026, $40,000 for the months ending December 31, 2026 to September 30, 2027, $45,000 for the months ending October 31, 2027 to December 31, 2027, and $50,000 for the months ending January 31, 2028 and thereafter.

Second Lien Term Loan

The Second Lien Term Loan is a secured term loan facility with a five-year term for an aggregate principal amount of $60,000 that matures on March 13, 2031. The Second Lien Term Loan contains customary representations and warranties, affirmative and negative covenants and events of default for financings of this type. AMVAC is required to make mandatory prepayments of the Second Lien Term Loan in certain circumstances and is permitted to make voluntary prepayments without premium or penalty, in each case, in accordance with the terms of the Second Lien Term Loan. Interest on the Second Lien Term Loan is based on a specified benchmark rate (including, as applicable, a SOFR-based rate) plus an applicable margin of 2.00% per annum, subject to a SOFR floor of 3.00%, or an alternate base rate, as described in the Second Lien Term Loan.

Pursuant to the terms of the First Lien Term Loan and Second Lien Term Loan, the Company is prevented from paying cash dividends to shareholders.

The weighted average interest rate for the three and six months ended June 30, 2026 was 12.8% and 12.0%, respectively. Total interest expense (including amortization of deferred loan fees) was$9,329 and$4,445 for the three months ended June 30, 2026 and 2025, respectively, and$15,162 and$8,229 for the six months ended June 30, 2026 and 2025, respectively.

As of June 30, 2026, the Company is in compliance with its financial covenants.

13. Legal Proceedings — The Company records a liability on its condensed consolidated financial statements for loss contingencies when a loss is known or considered probable, and the amount can be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. The Company recognizes legal expenses in connection with loss contingencies as incurred. Except as otherwise described below, there have been no material changes in previously reported litigation matters since the filing of the Company's Form 10-K for the period ended December 31, 2025, or the filing of the Company's Form 10-Q for the period ended March 31, 2026:

Chavez & Marquinez. Two cases were filed independently in 2012 in Louisiana and Delaware involving claims on behalf of banana workers for personal injury allegedly arising from exposure to DBCP in the late 1970’s. Through several years of law and motion practice, the number of plaintiffs in the actions has been reduced from about 2,750 to 290, all of whom are banana workers from Costa Rica, Ecuador, Guatemala and Panama, and both cases have been consolidated before the United States District Court for the District of Delaware (USDC DE No. 1:12-CV-00695 & 00697). Discovery commenced in 2018 and has largely concluded. Further, the court has segregated plaintiffs into several small groups (including eight trials groups of ~20 Ecuadoreans in total) for trial. The first group of Ecuadorean plaintiffs was to go to trial in Q4, 2026; however, in June 2026, the court granted AMVAC’s motion for summary judgment on the ground that “there is no evidence that any of the plaintiffs say that they had exposure to AMVAC’s product.” To the Company’s knowledge, none of the plaintiffs has produced any evidence to the contrary. The Company does not believe that a loss is probable or reasonably estimable and has not recorded a loss contingency for these matters.

Region 9, Notice of Violation re: FPAS. On November 25, 2024, EPA Region IX issued to American Vanguard Chemical Corporation a letter requesting that AMVAC show cause why a civil penalty should not be assessed with respect to allegations that, from 2020 through 2023, AMVAC violated Section 12(a)(2)(N) of FIFRA by exporting 18 unregistered pesticides to foreign purchasers in 14 countries without submitting to EPA a Foreign Purchaser Acknowledgement Statement (“FPAS”) from each foreign purchaser to EPA, as required by 40 C.F.R. § 168.75(c). After negotiation over several months, the parties agreed to a settlement amount. Accordingly, effective June 29, 2026, EPA and the Company entered into a consent agreement and final order (“CAFO”) pursuant to which the Company paid $542 K in full settlement of the claims raised by Region IX. Thus, the matter has been concluded.

14. Accumulated Other Comprehensive Loss — The following table lists the beginning balance, activity and ending balance of foreign currency translation adjustment included as a component of accumulated other comprehensive loss:

15. Fair Value of Financial Instruments —The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. This accounting standard establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:

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Level 1 – Quoted prices in active markets for identical assets or liabilities.

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Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximates fair value because of the relatively short maturity of such instruments. The carrying amount of the Company’s borrowings, which are considered Level 2 liabilities, approximates fair value as they bear interest at a variable rate at current market rates.

16. Supplemental Cash Flow Information:

The Company maintains cash balances that exceed federally insured limits with a number of financial institutions. Cash includes legally restricted deposits held as compensating balances against the credit limit of one of the Company's credit cards.

17. Segment Reporting —The Company operates as asingle operating segment, which is the business of developing, manufacturing and distributing chemical, biological and biorational products for agricultural, commercial and consumer uses. The Company synthesizes and formulates chemicals and ferments and extracts microbial products for crops, turf, ornamental plants, and human and animal health protection.

The Company’s Chief Operating Decision Maker ("CODM") is the Chief Executive Officer, who manages the Company’s operations based on consolidated financial information for purposes of evaluating financial performance and allocating resources. The financial information reviewed by the CODM includes revenue by product line and region, and key expense categories that are regularly provided for the consolidated company. The accounting policies of the Company’s single operating segment are the same as those described in the summary of significant accounting policies. Although there are other measures of operating performance used by the CODM, the Company concluded that consolidated operating (loss) income is the measure required to be disclosed as the segment measure of profit or loss. Operating (loss) income is utilized to evaluate to monitor budget versus actual results in order to gain more depth and understanding of the factors driving the business. When evaluating the Company’s financial performance, the following table sets forth significant expense categories regularly provided to the CODM:

Asset categories provided to the CODM are consistent with those reported on the condensed consolidated balance sheet.