American Vanguard Corporation

Greetings and welcome to American Vanguard Corporation's second quarter 2021 conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Bill Couser, Director of Investor Relations. Please go ahead.

Bill Couser Thank you very much, Brock, and welcome everyone to American Vanguard's second quarter and mid-year earnings review. Our speakers today will be Mr. Eric Wintemute, Chairman and CEO of American Vanguard, Mr. David Johnson, the company's Chief Financial Officer, and to assist with answering your questions, Mr. Bob Tregell, the company's Chief Operating Officer. Before beginning, let's take a moment to review our cautionary reminders. In today's call, the company may discuss forward-looking information. Such information and statements are based on estimates and assumptions by the company's management and are subject to various risks and uncertainties that may cause actual results to differ from management's current expectations. Such factors can include weather conditions, changes in regulatory policy, competitive pressures, and various other risks that are detailed in the company's SEC reports and filings. All forward-looking statements represent the company's best judgment as of the date of this call, and such information will not necessarily be updated by the company.

That said, we turn the call over to Eric. Thank you, Bill, and thank everyone on the phone and webcast for joining us today. I'd like to talk a little bit about the 2021 forecast that we've given and kind of update where we are at the half. So I think in the March forecast outlook, we gave the top six items as an outlook. And then in May, we added that net income would grow at a faster rate than revenue. So what I'd like to do is kind of show where we said we would be and where we wound up for the first half. So with regards to revenue, we said that we would be low double digit increase and at the half now we're looking at a 25% increase in our revenue. We said gross profit margins we were forecasting to be similar to recent years and at the half were were right at the same 39% Operating expenses some increases driven by our growth initiatives And as a percent of sales go up for net As a percent of sales were down 1% interest expense we felt there would be similar to 2020 and But in fact, our interest is down by 30%. Our tax rate, we expect for the year to end up at the mid-20s range. We're actually up 31% versus 23%, but we are still thinking we will wind up as we have some tax benefits that we'll see coming for us in the fourth quarter. Debt to EBITDA ratio, we were saying we're targeting two to two and a half times as we're preparing building inventories for this season. We are at that two and a half times level, but in the second half, we expect to move that down. And short of acquisition, we probably expect to maybe even be below that two number. And then on net income, growing at a faster rate, yeah, actually we're at 86 versus the 25. For those of you that focus on EBITDA, we're now saying that our EBITDA for the year will wind up growing at a faster rate than revenue as well. And for the half, we've got a 29% increase. So at this point, things are rolling along well. We still have our tailwinds. We're looking pretty strong in cotton right now as we hit both our insecticide. Bidrin is doing very well. We've got plant bugs that are out there and active. So we expect a very good year with Bidrin. In addition, particularly with West Texas, hitting, we expect our defoliant Folex will do also very well. Corn soil insecticides look well going into 22, so that will have some sales in this quarter and additionally in fourth quarter and first quarter next year. But we are seeing customers looking to secure product I think as many as one customer was telling us, 300 different products that are on allocation in the United States right now. We're in pretty good position with our six plants here in North America. So I think we're feeling pretty good. We do have some headwinds in inbound freight from the Pacific coming across from Asia. Fortunately, we're not very dependent on that, just maybe tend to 10 to 12% we have come over. But the cost per container has moved from about $3,500 a container up to $20,000 a container. So it's a huge, huge increase. And I counted that generally a freighter coming across has about $73 million of revenue. That now has moved up to $420 million of revenue. So quite a big increase. So far, we've done reasonably well at putting through price increases, and we're working on this every month to put out to the team what cost changes we have with the understanding that we're going to try and recover as best as we can. Okay, so with that, David, I'll turn this over to you.