10-Q 1 a76845e10-q.htm FORM 10-Q QUARTER ENDED SEPTEMBER 30, 2001

American Vanguard Corporation Form 10-Q 09/30/2001

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
[    ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM      TO
	Commission file number 0-6354

AMERICAN VANGUARD CORPORATION
(Exact name of registrant as specified in its charter)

Delaware		95-2588080
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

4695 MacArthur Court, Newport Beach, California		92660
(Address of principal executive offices)		(Zip Code)

(949) 260-1200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [   ] No [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.10 Par Value — 2,864,524 shares as of November 7, 2001.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Consolidated Statements of Operations

Consolidated Balance Sheets

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

PART II. OTHER INFORMATION

SIGNATURES

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AMERICAN VANGUARD CORPORATION

INDEX

					Page Number
PART I — FINANCIAL INFORMATION
	Item 1.
			Financial Statements
			Consolidated Statements of Operations for the three and nine months ended September 30, 2001 and 2000			1
			Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000			2
			Consolidated Statements of Cash Flows for the nine months ended September 30, 2001 and 2000			4
			Notes to Consolidated Financial Statements			6
	Item 2.
			Management’s Discussion and Analysis of Financial Condition and Results of Operations			9
PART II — OTHER INFORMATION						16
SIGNATURE PAGE						17

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations

(Unaudited)

			For the three months								For the nine months
			ended September 30								ended September 30
			2001				2000				2001				2000
Net sales			$	24,655,500			$	21,421,800			$	59,427,700			$	51,011,400
Cost of sales				13,239,700				12,552,100				32,963,300				27,852,700
	Gross profit			11,415,800				8,869,700				26,464,400				23,158,700
Settlement income				—				—				(296,400	)			—
Gain on sale of emission credits				—				—				(465,500	)			—
Operating expenses				8,649,400				6,790,400				21,141,800				18,921,700
	Operating income			2,766,400				2,079,300				6,084,500				4,237,000
Interest expense				300,800				390,400				1,262,800				1,272,300
Interest income				(8,600	)			(6,300	)			(13,400	)			(8,600	)
	Income before income tax expense			2,474,200				1,695,200				4,835,100				2,973,300
Income tax expense				989,700				678,100				1,934,000				1,189,300
	Net income		$	1,484,500			$	1,017,100			$	2,901,100			$	1,784,000
Earnings per common share			$	.52			$	.34			$	1.01			$	.60
Earnings per common share — assuming dilution			$	.51			$	.34			$	.99			$	.60
Weighted average shares outstanding (note 4)				2,871,453				2,962,233				2,869,716				2,967,091
Weighted average shares outstanding — assuming dilution (notes 4 & 5)				2,938,523				2,981,467				2,932,820				2,986,508

See notes to consolidated financial statements.

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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES

Consolidated Balance Sheets

				September 30,				Dec. 31,
				2001				2000
				(Unaudited)				(Note)
Assets (note 8)
Current assets:
	Cash			$	684,800			$	361,000
Receivables:
	Trade				13,510,700				21,323,400
	Other				171,400				1,526,300
					13,682,100				22,849,700
Inventories (note 2)					25,585,200				21,202,800
Prepaid expenses					1,299,500				764,200
Deferred tax asset					568,800				568,800
		Total current assets			41,820,400				45,746,500
Property, plant and equipment, net (note 3)					10,402,000				9,012,800
Land held for development					210,800				210,800
Intangible assets					10,024,900				10,657,100
Other assets					405,500				463,700
				$	62,863,600			$	66,090,900

(Continued)

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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES

Consolidated Balance Sheets

			September 30,				Dec. 31,
			2001				2000
			(Unaudited)				(Note)
Liabilities and Stockholders’ Equity
Current liabilities:
Current installments of long-term debt			$	3,140,500			$	3,575,400
Accounts payable				7,118,700				6,913,600
Accrued expenses and other payables				8,139,100				4,985,300
Income taxes payable				—				1,149,500
	Total current liabilities			18,398,300				16,623,800
Note payable to bank (note 6)				10,000,000				15,800,000
Long-term debt, excluding current installments				1,738,600				2,847,300
Other long-term liabilities				98,600				117,700
Deferred income taxes				1,414,500				1,414,500
	Total liabilities			31,650,000				36,803,300
Stockholders’ Equity:
Preferred stock, $.10 par value per share; authorized 400,000 shares; none issued				—				—
Common stock, $.10 par value per share, authorized 10,000,000 shares; issued and outstanding 3,119,006 shares at September 30, 2001 and 2,827,039 shares at December 31, 2000 (note 4)				311,900				282,700
Additional paid-in capital (note 4)				9,310,900				5,906,600
Retained earnings (note 4)				23,433,400				24,354,600
				33,056,200				30,543,900
Less treasury stock at cost 254,482 shares at September 30, 2001 and 183,285 shares at December 31, 2000				1,842,600				1,256,300
	Total stockholders’ equity			31,213,600				29,287,600
			$	62,863,600			$	66,090,900

Note: The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date.

See notes to consolidated financial statements.

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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For The Nine Months Ended September 30, 2001 and 2000

(Unaudited)

						2001				2000
Increase (decrease) in cash
Cash flows from operating activities:
	Net income					$	2,901,100			$	1,784,000
	Adjustments to reconcile net income to net cash used in operating activities:
			Depreciation and amortization				1,532,600				2,400,100
			Changes in assets and liabilities associated with operations:
				Decrease (increase) in receivables			9,167,600				(2,719,600	)
				Increase in inventories			(4,382,400	)			(4,420,000	)
				Increase in prepaid expenses			(535,300	)			(84,800	)
				Increase in accounts payable			205,100				4,577,400
				Increase in other payables and accrued expenses			1,813,300				(785,300	)
				Net cash provided by operating activities			10,702,000				751,800
Cash flows from investing activities:
	Capital expenditures						(2,245,800	)			(477,000	)
	Net decrease (increase) in other noncurrent assets						14,400				(28,900	)
				Net cash used in investing activities			(2,231,400	)			(505,900	)

(Continued)

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AMERICAN VANGUARD CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For The Nine Months Ended September 30, 2001 and 2000

(Unaudited)

				2001				2000
Increase in cash
Cash flows from financing activities:
	Net additions (repayments) under line of credit agreement			$	(5,800,000	)		$	1,800,000
	Reductions in long-term debt				(1,543,600	)			(1,408,200	)
	Exercise of stock options				70,200				31,400
	Purchase of treasury stock				(586,300	)			(71,500	)
	Payment of cash dividends				(287,100	)			(319,700	)
		Net cash provided by (used in) financing activities			(8,146,800	)			32,000
		Net increase in cash			323,800				277,900
Cash at beginning of year					361,000				550,200
Cash as of September 30				$	684,800			$	828,100

Supplemental schedule of non-cash investing and financial activities:

On September 18, 2001, the Company announced that the Board of Directors declared a cash dividend of $.06 per share. The dividend was paid October 19, 2001 to stockholders of record as of the close of business on October 5, 2001. The Company recorded a liability and a reduction of retained earnings for $171,900 as of September 30, 2001.

On September 12, 2000, the Company announced that the Board of Directors declared a cash dividend of $.05 per share ($.045 per share after giving effect for a 10% stock dividend distributed on April 13, 2001). The dividend was paid October 20, 2000 to stockholders of record as of the close of business on October 6, 2000. The Company recorded a liability and reduction of retained earnings of $134,600 as of September 30, 2000.

During the nine months ended September 30, 2000, the Company completed the acquisition of two established product lines from two large chemical manufacturers. In connection with these acquisitions, the Company recorded intangible assets in the amount of $1,450,000 in consideration of its debt obligation in the same amount.

See notes to consolidated financial statements.

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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Unaudited)

1.		The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation, have been included. Operating results for the three and nine-month periods ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.
2.		Inventories — The components of inventories consist of the following:

		Sept. 30, 2001				December 31, 2000
Finished products		$	20,272,700			$	17,358,300
Raw materials			5,312,500				3,844,500
		$	25,585,200			$	21,202,800

3. Property, plant and equipment at September 30, 2001 and December 31, 2000, consists of the following:

		Sept. 30,				December 31,
		2001				2000
Land		$	2,441,400			$	2,441,400
Buildings and improvements			4,714,300				4,952,000
Machinery and equipment			24,240,600				23,938,100
Office furniture and fixtures			2,586,800				2,599,800
Automotive equipment			182,800				136,900
Construction in progress			2,208,100				284,100
			36,374,000				34,352,300
Less accumulated depreciation			25,972,000				25,339,500
		$	10,402,000			$	9,012,800

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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

4.		On September 18, 2001, the Company announced that the Board of Directors declared a cash dividend of $.06 per share. The dividend was paid on October 19, 2001 to stockholders of record at the close of business on October 5, 2001. On March 20, 2001, the Company announced that the Board of Directors declared a cash dividend of $.11 per share as well as a 10% stock dividend. Both dividends were distributed on April 13, 2001 to stockholders of record at the close of business on March 30, 2001. The cash dividend was paid on the number of shares outstanding prior to the stock dividend. Stockholders entitled to fractional shares resulting from the stock dividend received cash in lieu of such fractional shares based on $11.89 per share, the closing price of the Company’s stock on March 30, 2001. The Company distributed 282,867 shares of Common Stock in connection with the Common Stock dividend. As a result Common Stock was increased by $28,300, additional paid-in capital was increased by $3,335,000, and retained earnings was decreased by $3,363,300. All stock related data in the consolidated financial statements reflect the stock dividend for all periods presented.
5.		Earnings Per Share (“EPS”)- Basic EPS is computed as net income divided by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects potential dilution that could occur if securities or other contracts, which, for the Company, consists of options to purchase shares of the Company’s common stock, are exercised.
6.		On April 4, 2001, the Company’s bank amended its fully-secured long-term line of credit agreement. The credit availability was temporarily increased from $24,000,000 to $30,000,000 for the period April 4, 2001 through August 1, 2001. On August 1, 2001 the credit availability was automatically reduced back to $24,000,000. (See note 8.)
7.		During the nine months ended September 30, 2001, the Company purchased 48,972 shares of its Common Stock at an average sales price of $11.97 per share for a total of $586,300. These purchases were in accordance with the Company’s buyback program which was announced on November 2, 2000.

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AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

8.		Substantially all of the Company’s assets not otherwise specifically pledged as collateral on existing loans and capital leases, are pledged as collateral under the Company’s credit agreement with a bank. As referenced in note 1, for further information, refer to the consolidated financial statements and footnotes thereto (specifically note 3) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2000.
9.		Reclassification — Certain items have been reclassified in the prior period consolidated financial statements to conform with the September 30, 2001 presentation.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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 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 Company’s business depends on the free flow of products and services through the channels of commerce. Recently, in response to terrorists' activities and threats aimed at the United States, transportation, mail, financial and other services have been slowed or stopped altogether. Further delays or stoppages in transportation, mail, financial or other services could have a material adverse effect on the business, results of operations and financial condition. Furthermore, the Company may experience an increase in operating costs, such as costs for transportation, insurance and security as a result of the activities and potential activities. The Company may also experience delays in receiving payments from payers that have been affected by the terrorist activities and potential activities. The U.S. economy in general is being adversely affected by the terrorist activities and potential activities and any economic downturn could adversely impact results of operations, impair the ability to raise capital or otherwise adversely affect the ability to grow the business.

RESULTS OF OPERATIONS

Quarter Ended September 30:

The Company reported net income of $1,484,500 or $.51 per share (assuming dilution) in the third quarter ended September 30, 2001 as compared to $1,017,100 or $.34 per share for the same period in 2000.

Net sales increased by 15% or $3,233,700 to $24,655,500 for the quarter ended September 30, 2001 from $21,421,800 for the same period in 2000. The increase in sales was a result of increased sales of the Company’s insecticides, herbicides and fungicides product lines which served to more than offset a decline in the Company’s soil fumigants product line.

The gross profit margin for the quarter ended September 30, 2001 increased to 46.3% from 41.4% for the same period in 2000, due primarily to a change in product mix.

Operating expenses, which are net of other income, increased to $8,649,400 for the quarter ended September 30, 2001 as compared

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to $6,790,400 for the same period in 2000. The differences in operating expenses by specific departmental costs are as follows:

•		Selling expenses increased by $659,400 to $3,080,900 for the quarter ended September 30, 2001 from $2,421,500 for the same period in 2000. This increase was due to increases in variable selling expenses that relate to increased sales levels as well as sales mix of the Company’s products, advertising and promotion and increases in payroll and payroll related costs.
•		General and administrative expenses increased by $709,100 to $2,201,400 for the quarter ended September 30, 2001 as compared to $1,492,300 for the same period in 2000. Higher outside professional fees, payroll and payroll related costs (primarily incentive related costs which were recognized in large part in the fourth quarter of the prior year compared to the third quarter of the current year) accounted for the increase.
•		Research and product development costs and regulatory registration expenses increase by $273,300 to $1,502,300 for the quarter ended September 30, 2001 as compared to $1,229,000 for the same period in 2000. The increase was due primarily to an increase in costs incurred to generate scientific data related to the registration and possible new uses of the Company’s products.
•		Freight, delivery, storage and warehousing costs increased $217,200 to $1,864,800 for the quarter ended September 30, 2001 as compared to $1,647,600 for the same period in 2000 due to the increased sales levels.

Interest costs were $300,800 during the quarter ended September 30, 2001 as compared to $390,400 for same period in 2000. The Company’s average overall debt for the quarter ended September 30, 2001 was $19,800,700 as compared to $19,861,500 for the same period in 2000. Lower effective interest rates resulted in the $89,600 decline in interest costs.

Weather patterns can have an impact on the Company’s operations. Weather conditions influence pest population by impacting gestation cycles for particular pests and the effectiveness of some of the Company’s products, among other factors. The end user of some of the Company’s products may, because of weather patterns, delay or intermittently disrupt field work during the planting season which may result in a reduction of the use of some of the Company’s products.

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Because of elements inherent to the Company’s business, such as differing and unpredictable weather patterns, crop growing cycles, changes in product mix of sales, ordering patterns that may vary in timing, and promotional/early order programs, measuring the Company’s performance on a quarterly basis, (gross profit margins on a quarterly basis may vary significantly) even when such comparisons are favorable, is not as meaningful an indicator as full-year comparisons. The primary reason is that the use cycles do not necessarily coincide with financial reporting cycles. Because of the Company’s cost structure, the combination of variable revenue streams, and changing product mixes, results in varying quarterly levels of profitability.

Nine Months Ended September 30:

The Company reported net income of $2,901,100 or $.99 per share (assuming dilution) for the nine months ended September 30, 2001 as compared to $1,784,000 or $.60 per share for the same period in 2000. The $2,901,100 of net income for 2001 includes after tax income of $457,100 or $.16 per diluted share, related to the gain on the sale of emission credits and settlement income. (Refer to disclosure below.)

Net sales increased by 17% or $8,416,300 to $59,427,700 for the nine months ended September 30, 2001 from $51,011,400 for the same period in 2000. The increase in sales was a result of increased sales of the Company’s insecticides, herbicides and fungicides product lines which served to more than offset a decline in the Company’s soil fumigants product line.

The gross profit margin for the nine months ended September 30, 2001 remained virtually unchanged at 44.5% as compared to 45.4% for the same period in 2000.

Operating expenses, which are net of other income, increased to $21,141,800 for the nine months ended September 30, 2001 as compared to $18,921,700 for the same period in 2000. The differences in operating expenses by specific departmental costs are as follows:

• Selling expenses increased by $1,306,300 to $8,541,400 for the nine months ended September 30, 2001 from $7,235,100 for the same period in 2000. This increase was due to increases in variable selling expenses that relate to increased sales levels as well as sales mix of the Company’s products, advertising and promotion and increases in payroll and payroll related costs.

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•		General and administrative expenses increased by $792,000 to $5,028,300 for the nine months ended September 30, 2001 as compared to $4,236,300 for the same period in 2000. Higher outside professional fees, payroll and payroll related costs (primarily incentive related costs which were recognized in large part in the fourth quarter of the prior year compared to the third quarter of the current year) and an increase in the amortization of intangible assets in the connection with the acquisition of a herbicide product line which was acquired in May 2000 accounted for the increase.
•		Research and product development costs and regulatory registration expenses declined by $195,900 to $3,370,000 for the nine months ended September 30, 2001 as compared to $3,565,900 for the same period in 2000. The decrease was due to a decline in costs incurred to generate scientific data related to the registration and possible new uses of the Company’s products.
•		Freight, delivery, storage and warehousing costs increased $317,700 to $4,202,100 for the nine months ended September 30, 2001 as compared to $3,884,400 for the same period in 2000 due to the increased sales levels.

Interest costs were $1,262,800 during the nine months ended September 30, 2001 as compared to $1,272,300 for same period in 2000. The Company’s average overall debt for the nine months ended September 30, 2001 was $24,283,000 as compared to $21,383,000 for the first nine months of 2000. Lower effective interest rates served to more than offset the higher average debt levels and result in a modest decline of $9,500 in interest costs.

In 1986, the Company constructed an incinerator to destroy a waste gas that had been previously discharged to the atmosphere pursuant to an air permit. By reducing this emission, the Company was entitled to transfer a portion of its emission credits to others. The Company recognized in the nine months ended September 30, 2001, a net gain before taxes of $465,500 as a result of the sale of a portion of its credits.

The Company settled negotiations with an insurance carrier related to the recovery of certain costs pertaining to the completed remediation work of a railroad siding which resulted in a net gain before taxes of $208,300 for the nine months ended September 30, 2001. The Company also settled a dispute over data compensation which resulted in a net gain before taxes of $88,100 for the nine months ended September 30, 2001.

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LIQUIDITY AND CAPITAL RESOURCES

Operating activities provided $10,702,000 of cash during the nine months ended September 30, 2001. Net income of $2,901,100, noncash depreciation and amortization of $1,532,600, a decline in receivables of $9,167,600, along with an increase of trade accounts payable, accrued expenses and other payables of $2,018,400, provided $15,619,700 of cash for operations. Increases in inventories and prepaid expenses of $4,382,400 and $535,300, respectively, used $4,917,700 of cash for operating activities.

The Company used $2,231,400 in investing activities during the nine months ended September 30, 2001. It invested $2,245,800 in capital expenditures while other noncurrent assets declined by $14,400.

The Company used $8,146,800 in financing activities during the first nine months of 2001. The Company’s net borrowings under its fully-secured revolving line of credit declined by $5,800,000. The Company made payments on its long-term debt of $1,543,600, purchased 48,972 shares of treasury stock for $586,300, paid $287,100 in cash dividends and received $70,200 in payment for the exercise of stock options.

In May 2001, the Company announced that Amvac Chemical Corporation, a wholly-owned subsidiary of the Company, completed the acquisition of a manufacturing facility from E.I. Du Pont de Nemours and Company (“DuPont”). The facility, termed the “C-Unit” is one of three such units located on DuPont’s five hundred and ten acre complex in Axis, Alabama. The C-Unit acquisition consisted of a long-term ground lease of twenty-five acres and the purchase of all improvements thereon. The C-Unit is a multipurpose plant designed primarily to manufacture pyrethroids and organophosphates, including Fortress®, a corn soil insecticide that the Company purchased from DuPont in 2000. The acquisition of the C-Unit significantly increased the Company’s capacity while also providing flexibility and geographic diversity. Management believes, as the Company looks to acquire additional product lines, the C-Unit will allow the Company to produce compounds that could not be manufactured at the Company’s Los Angeles (Commerce, California) facility and will further complement the Company’s toll manufacturing capabilities. The Company began the commissioning phase of the C-Unit during the third quarter of 2001 and it is anticipated that this phase will be completed sometime during the first six months of 2002. The Company intends to focus its efforts, in addition to acquiring new product lines and expanding the use of its current products, on discussions with companies that in this time of consolidation

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in the Company’s industry, may be interested in utilizing the Company’s toll manufacturing capabilities in the C-Unit.

In April 2001, the Company’s bank amended its fully-secured long-term line of credit agreement. The credit availability was temporarily increased from $24,000,000 to $30,000,000 for the period April 4, 2001 through August 1, 2001. On August 1, 2001 the credit limit was automatically amended to $24,000,000. The Company is presently in discussions with its bank to restructure its current debt which will include the expansion of its credit availability.

Management continues to believe, to finance its planned manufacturing capacity (the C-Unit), to continue to improve its working capital position, and maintain flexibility in financing interim needs, it is prudent to explore alternate sources of financing.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that the Company recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that the Company reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141.

SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires the

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Company to complete a transitional goodwill impairment test six months from the date of adoption. The Company is also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142.

The Company’s previous business combinations were accounted for using the purchase method. As of September 30, 2001, the net carrying amount of goodwill and other intangible assets is $10,024,900. Amortization expense during the nine-month period ended September 30, 2001 was $632,200. Currently, the Company is assessing but has not yet determined how the adoption of SFAS 141 and SFAS 142 will impact its financial position and results of operations.

SFAS 143, Accounting for Asset Retirement Obligations, was issued in June 2001 and is effective for fiscal years beginning after June 15, 2002. SFAS 143 requires that any legal obligation related to the retirement of long-lived assets be quantified and recorded as a liability with the associated asset retirement cost capitalized on the balance sheet in the period it is incurred when a reasonable estimate of the fair value of the liability can be made.

SFAS 144, Accounting for the Impairment of Disposal of Long-Lived Assets, was issued in August 2001 and is effective for fiscal years beginning after December 15, 2001. SFAS 144 provides a single, comprehensive accounting model for impairment and disposal of long-lived assets and discontinued operations.

SFAS 143 and SFAS 144 will be adopted on their effective dates, and adoption is not expected to result in any material effects on the Corporation's financial statements.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There are no material changes from the disclosures in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission for the year ended December 31, 2000.

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PART II. OTHER INFORMATION

The Company was not required to report any matters or changes for any items of Part II except as disclosed below.

Item 6. Exhibits and Reports on Form 8-K

(b) The Company did not file any reports on Form 8-K during the three months ended September 30, 2001

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AMERICAN VANGUARD CORPORATION
Dated: November 7, 2001	By:	/s/ Eric G. Wintemute
		Eric G. Wintemute President, Chief Executive Officer and Director

Dated: November 7, 2001	By:	/s/ J. A. Barry
		J. A. Barry Senior Vice President, Chief Financial Officer, Secretary/Treasurer and Director

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