American Vanguard Corporation (AVD) Earnings Call Transcript & Summary

Good day. And welcome to the American Vanguard Corporation Annual Meeting of Stockholders. I would now like to turn the conference over to Eric Wintemute, Chairman. Please go ahead.

Good morning, ladies and gentlemen. I'm Eric Wintemute, Chairman and Chief Executive Officer of American Vanguard Corporation. I'll be the Acting Chairman of today's meeting. It is my pleasure to welcome all of you. It is 11:01 a.m. on June 3, 2020, and in accordance with the notice of the meeting, I will call to order the 51st Annual Meeting of Stockholders. As you know from our proxy materials, this is a virtual stockholders meeting and is accessible only by webcast. For stockholders who are participating on this webcast, please feel free to submit any questions that you may have for me, the Board or our officers using the instruction on the meeting portal. And we'll try to answer at the end of our normal proceedings, which should be in about 20 minutes. With me, by phone today, is our entire Board of Directors. In person, we have our CFO, David Johnson; and our CAO, Tim Donnelly. Tim Donnelly, Secretary of the company, will now report on the mailing of notice of this meeting and the presence of a quorum. Tim?

This meeting is held pursuant to a printed notice mailed on or about April 21, 2020, to each stockholder of record on April 9, 2020, who is entitled to vote. Our proxy distribution agent, Broadridge, has attested to such mailing. Further, a list of stockholders entitled to vote at this meeting has been available at the company for the past 10 days, and is available at the meeting for examination by any stockholder desiring to do so. All documents concerning the call and notice of the meeting will be filed with the records of the meeting. According to our count, immediately prior to the commencement of the meeting, 26,239,704 shares of the company's voting capital stock were present in person or by proxy. This is about 90% of the outstanding voting stock of the company.

Thank you, Tim. Based upon the percentage of the total shares of the company held by holders of record now present at the meeting, either in person or by proxy, a quorum is present. On behalf of the Board of Directors of the company, I would like to express my appreciation to all stockholders who returned their proxies. This meeting is now duly convened for the purposes of transacting business properly before it. I would also like to point out that most of you, who returned proxies, had authorized the persons named in the proxy to vote on all propositions coming before the meeting. While we urge stockholders to allow their proxies to stand, any stockholder may revoke his or her proxy and vote via the webcast connection today. If you wish to vote or to revoke and change your vote, please do so now by following the instructions on your computer. At this point, I would like to turn to the executive presentation. Before I begin, I ask Tim, please provide our standard cautionary reminder regarding forward-looking statements. Tim?

Thanks, Eric. 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, pandemics, changes in regulatory policy, competitive pressures and various other risks as 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. Eric?

Thanks, Tim. There is much going on in the world and in this country. Out of deference to your time, I'll be brief. First, as we have reported to you in our proxy and our last 10-Q, we have had the privilege of being able to work continuously throughout the entire pandemic. This is because we are considered part of the critical infrastructure under 3 of the 16 industrial sectors under the CISA guidelines: food and ag, chemical and public health. Like other essential businesses, we have had to adapt quickly to restrictions, orders and changing conditions. Paramount in this process has been the safety and health of our workforce. I am pleased to report that our workforce is healthy. Further, I would be remiss if I did not thank my team for their willingness to abide by COVID protocols for social distancing and hygiene, their dedication, both remotely and in person, and their unwavering sense of purpose throughout the pandemic. Second, the coronavirus has thrown much uncertainty into many markets, many regions and many sectors. We have been diligent about tracking supply chain issues, border restrictions, transportation and labor considerations. But we are also seeing impacts on commodity pricing with respects not only to corn, but also meat, oil, ethanol and other interrelated considerations. Further, businesses in general are becoming more and more conservative about working capital. Procurement within our distribution channel is increasingly on a just-in-time basis, both in the crop and non-crop sectors. Third, there remain many things that are within our control. In spite of uncertain market conditions, we remain committed towards improving our balance sheet by selling goods, generating cash and reducing inventory. At the same time, we are implementing stringent measures on limiting operating expenses and optimizing factory activity. In other words, we are operating our business with our wide -- eyes open, with discipline and with a sense of mission. Fourth, the present sets the stage for the future. Thus, we cannot limit ourselves operating within the confines of the quarter or the year. We have developed remarkable technologies to help fuel future growth. Our SIMPAS system sits at the cutting edge of precision agriculture and is attracting the support of peers and major distribution businesses. We have developed SIMPAS on our own. And it is the kind of technology that could change the way farmers plant their crops, placing crop inputs as needed, where needed. Similarly, we are introducing and developing new high-margin products, specifically formulations and mixtures that could generate $200 million in net sales at maturity. And we continue to marvel at the overwhelmingly positive consumer acceptance of Zevo pest control products, which are based upon our Envance Technologies' essential oil technology. In summary, I want to assure you that we are doing our best to navigate through changing and often unpredictable conditions. We know the objective to grow and to generate a profit. We know how to meet the objective because we have done it before, and we are confident that our team pulling together will enable us to succeed. And finally, to all of our stockholders, I give you a special thanks for your support. We are giving our best to you. With that, I would like to return to the business at this meeting. The first item of business is the election of 9 directors to serve until the Annual Meeting of Stockholders in 2021. To place in nomination, the names of the slate of directors listed in the proxy statement, I recognize our Lead Director, John Killmer. John?

Mr. Chairman, I hereby nominate for election as directors of the company to serve for the terms expiring on the date of the annual meeting of the company in 2021 or until their respective successors are duly elected and qualified those individuals identified as nominees for director on Pages 4 through 6 of the company's proxy. Once again, they are Scott D. Baskin, Lawrence S. Clark, Debra F. Edwards, Morton D. Erlich, Emer Gunter, Alfred F. Ingulli, John L. Killmer, Eric G. Wintemute and Esmail Zirakparvar.

Thank you. You've heard the motion. Is there a second?

I second the motion.

Okay. I declare the nominations closed. As a matter of housekeeping, after voting has been completed on all matters on the agenda, ballots will be counted. The next matter being submitted to stockholders for action is the ratification of the appointment of the company's Audit Committee -- by the company's Audit Committee of BDO USA LLP as the company's independent registered public accounting firm for the year ending December 31, 2020. I would like to call on Mort Erlich, Chairman of the Audit Committee, for the recommendation of the Audit Committee in this regard. Mort?

Mr. Chairman, the Audit Committee was assigned the responsibility of appointing the company's independent registered public accounting firm. In its deliberations this year, the committee has worked closely and regularly with BDO, has had the opportunity to evaluate their work and found it to be of high consistent quality. I move for the ratification of the appointment of BDO USA LLP to audit the financial statements of the company and its subsidiaries for the year ending December 31, 2020.

Thank you. You've heard the motion. Is there a second?

I second the motion.

Okay. Then let us move to the next item on the agenda. The next matter being submitted to stockholders for action is an advisory vote to approve the overall executive compensation policies and procedures of the company as described in the company's proxy statement. I would like to call upon Larry Clark, Chair of our Compensation Committee, for the recommendation of that committee on this matter. Larry?

On behalf of the Compensation Committee, I move for advisory approval of the overall executive compensation policies and procedures as set forth in the proxy.

Thank you. You've heard the motion. Is there a second?

I second the motion.

Then let us move to the next item on the agenda. The next matter being submitted to stockholders is the frequency of the vote on our pay-for-performance ballot measure. I would like to call upon Mr. Clark again for the recommendation of the Compensation Committee with respect to this matter. Larry?

On behalf of the Compensation Committee, I move that the frequency of the vote on our pay-for-performance ballot measure be every year.

You've heard the motion. Is there a second?

I second the motion.

Okay. Then let us move to the next item of business on our agenda. At this point, your opportunity to vote has now concluded, and I call upon Tim Donnelly to report on the results of the balloting. Tim?

Thanks, Eric. The ballots have been counted. As to the first proposal regarding election to the Board of Directors, for terms expiring on the date of the Annual Stockholders Meeting in 2021, the 9 nominees named in the proxy statement received more votes for election than against election. As to proposals number 2, 3 and 4, all of those proposals received the affirmative vote of a majority of the shares of common stock present and entitled to vote. Eric?

Thank you. I hereby declare that all 9 nominees for director, named in the proxy, have been duly elected to serve on the Board of Directors of the company through the 2021 Annual Stockholders Meeting. Second, the appointment of BDO USA LLP to serve as independent registered public accounting firm of the company and its subsidiaries for the year ending December 31, 2020, has been duly ratified. Third, our executive compensation policies and procedures as set forth in the proxy are approved by our stockholders. And last, the Say-on-Pay disclosure shall be included in our proxy every year. At this point, we will attempt to answer any questions that participants have posed during this meeting. Are there any questions? Seeing none, there being no other business properly before us, this concludes the 2020 Annual Stockholders Meeting. I would again like to express my sincere appreciation to the stockholders and for their support of the company. This meeting is hereby adjourned. Thank you.