Greetings, and welcome to the American Vanguard Corporation Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Bill Kuser, Director of Investor Relations. Thank you. Please begin.

Well, thank you, Roya, and welcome everyone to American Vanguard's Fourth Quarter and Full Year 2018 Earnings Review. Our speakers today will be Mr. Eric Wintemute, the Chairman and CEO of American Vanguard; Mr. David Johnson, the company's Chief Financial Officer; and also assisting in answering your questions, Mr. Bob Trogele, the company's Chief Operating Officer. American Vanguard will file our Form 10-K with the SEC tomorrow. That document provides additional detail to the results that we will be discussing this afternoon. Before beginning, let's take a moment for our usual cautionary reminder. 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 the 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. With that said, we turn the call over to Eric Wintemute.

Thank you, Bill. Hello, everyone, and welcome to our fourth quarter and full year earnings call. As always, thank you for your continued interest in American Vanguard. I'm pleased to report strong year-over-year results at both the top and bottom lines. As you will note from our press release, net sales were up 28%, while net income increased 19%. The story is better than that, however. As David will explain during his remarks, 2017 net income included a onetime tax benefit under the Tax Cuts and Job -- New Jobs Act of about $3.4 million or $0.11 per share. If we focus above tax charges on our statements of operations, our operating income for 2018 actually rose by 46% compared to that of 2017. We also managed to maintain our annual gross margin at 40%. Let me take a moment to delve into how we managed this result and what it means. Let's start at the top line. Our increase in net sales to $454 million in 2018 from $355 million in 2017 was driven largely by the businesses we acquired in 2017. That's OHP, AgriCenter and domestic and Mexican product lines that were spun off from industry mergers. In 2018, our first full year of integrating these businesses, I want to recognize the many team members who worked so hard to achieve these results. With acquisitions, the real work begins after closing. As I said on prior occasions, establishing market access in LatAm is essential part of our long-term growth strategy, and we're off to a good start. Turning to profitability. I will note that discounting the effect of the Tax Act, about 1/3 of the gain was driven from our existing businesses and the balance from our newly acquired assets. We were able to achieve these gains largely…

Thank you, Eric. Good afternoon, everybody. As Bill mentioned, we will be filing our Form 10-K for the 12 months ended December 31, 2018, tomorrow. Everything I'm going to cover here in brief is included in more detail in that document. Further, we have added our usual high-level sales information to the financial tables attached to the earnings release to assist you in your early review of our performance. With regard to the financial results for the fourth quarter of 2018, the company's sales increased by 13% to $131 million as compared to $116 million last year. Our fourth quarter gross margin improved to 40% as compared to 39% last year. This was driven by a strong manufacturing performance, offset by increased sales from the Central American business, which drive lower margins than our preexisting business. Along with the 13% increase in sales just mentioned, our operating expenses increased by 14%. This resulted in operating cost expressed as a percentage of sales remaining approximately flat quarter-to-quarter at 32%. We managed our interest expense well. However, we did incur a charge of $1.4 million related to the settlement of a derivative instrument, a forward cover contract. This should be considered as a onetime nonrecurring cost that related to cash management associated with the Brazilian acquisition completed in January 2019. Offsetting this expense, we recorded onetime gains in the quarter, approximately the same amount, associated with the quarterly reassessment of the fair value of deferred consideration on the 2017 acquisitions and an adjustment in the fair value of an equity method investment. Operating income improved by 34% to end at $11.4 million as compared to $8.5 million in the fourth quarter of the prior year. Net income in the quarter ended at $7.4 million or $0.25 per share in 2018 as compared…

Thank you, David. Our next area of discussion is technology. We begin with SIMPAS, our precision agriculture technology, which will enable the grower to apply multiple inputs, both granular and liquid, at varying rates, in multiple rows as per [ agronomous ] prescription. As I've reported in past calls, we are in the cusp of commercializing this technology. In the first year of field testing, we demonstrated that the units, including the meters, functioned as planned. In the second year, we demonstrated that one could apply inputs prescriptively, that is that we could place varying defined amounts of material in various parts of the field. This year, we'll be demonstrating that multiple products can be applied concurrently with accuracy in the same field. The development of SIMPAS has many layers. While we are testing granular product for efficacy and safety, both internally and externally, we are beta testing liquid application. With each year of field trials, we gather data to show that yield benefit of SIMPAS. At the same time, we are building test units in greater numbers, cartridges for various inputs and even a bulk filling station, which will serve as the model for product distribution. Further, we have begun testing our systems with other input suppliers and continue working with Trimble on the development of a universal interface. Our team is on track for a soft launch in 2020, followed by a hard launch in 2021. By 2023, we expect to make synchronization available. This will give growers unprecedented flexibility to choose enhanced seed treatment at time of plant. Moving next to Envance. I am pleased to see the continued successful commercialization of the Zevo product line by Procter & Gamble, which is our development partner in essential oil technology. I encourage you to go to P&G's Zevo…

[Operator Instructions] Our first question comes from the line of Joseph Reagor with Roth Capital Partners.

So first thing, it appears you guys may have reclassified some sales from the other -- including plant growth category to herbicides, fungicides or maybe even into insecticides. Is that something we're going to get like quarterly numbers on to revise those backward looking?

Backward. So in other words, 8,000...

For each quarterly...

For 2018 is what you wanted, Q1, Q2, Q3?

Yes. Yes, exactly. From a modeling standpoint...

Yes. We will. So this was AgriCenter, and then that first period, we had a lot of integration pieces to do. And -- but at this point, yes, we basically had them break down their sales into categories. And we'll do the same thing with Agrovant and Defensive.

Okay. So as we move forward, we'll be able to get the historicals to correct our models.

Yes. You will.

Okay. The other thing being you had a few acquisitions already announced this year. Is there any additional color you guys can give us as to the magnitude of those maybe as a group rather than individually?

Yes. So ASH was actually in December 31, right? Are you talking about acquisitions in '18 or are you talking about the acquisitions in '19?

In '19. There were 2 small things announced right at the beginning of January, and then there's another one where you're applying for bankruptcy approval.

Right, right. So yes, Defensive, Agrovant, yes, I think, again, revenues in that $20 million. On the second one, this is -- it's subject still to approval from the bankruptcy court. We're not purchasing the company. We're purchasing a number of their registrations and the inventory that is associated with them. And I think until we see what happens through the bankruptcy court, I mean, they -- this is also open to others that could come in and make another bid as well. I think it's probably a little premature to give what those numbers are going to be until we get a final ruling from the court.

Our next question comes from the line of Jim Sheehan with SunTrust Robinson Humphrey.

Now that you're in Brazil, could you talk about what you would do to offset the currency volatility there? Or are you planning to do any hedging?

Well, given that our hedge that we did on the purchase price didn't work out well, I don't know that we're going to do much in the way of hedging. I think one that we'll try to work through is working the price in U.S. dollars as to what we're trading in Brazil, and that should help in that regard. So just as in LatAm, a lot of -- even though the currencies may be there, the actual sales are tied to the then price of the currency. So that's kind of like the effect of what we're trying to do. Bob, I don't know if you've got any thoughts.

No. I think, right now, we feel that the currency to the dollar is probably favorable. And secondly, we have an operation down here that's very good at collecting receivables. So we feel comfortable with where we are presently. Now if we grow into segments where there's more volatility, then that might change.

We'll obviously have to reconsider as the business grows.

And in the U.S. market, as it appears, there may be some shifting of acreage from soybeans to corn. Can you talk about how that might affect your business?

Well, generally, that's a good thing for us, but we haven't had a soybean portfolio to work with. But we do have a strong corn portfolio, and inputs into corn are typically a lot bigger than inputs into soybeans. But soybeans are slanted much heavier towards herbicides, and so we had imazaquin, but we've got Ensure now -- Assure. But then assuming we are successful with the acquisitions from the product lines from Willowood, there are quite a few products there that go into soybeans as well. So Bob, any color?

Yes. I would just say too early to tell. The China trade result is still out there, an unknown. And then it really depends on the weather conditions for planting here in the next 4 to 6 weeks. But we're positive that corn will be up, at least for the seed sales that our customers have signaled that they got in the fourth quarter.

And on SIMPAS, could you talk about how your business model will work? How will you actually collect revenues? What are you considering as the sales target in the first 3 years?

So as I mentioned, we will give further color on that at our annual shareholders. We've got numbers that we have put forward in our strategic plan. We're going back and testing more of that. We'll have an idea about how well applications go this year, and then we can start giving some guidance in June. As far as collection of revenue, there's the sale of the product, there's the sale of the equipment, and then there's the prescription and the actual [ new ] specific that the farmer does and what fees he might be involved in with regards to the license to utilize the SIMPAS system. So that kind of gives you the areas of revenue. But as I said, specific numbers, we'll outline that a little bit more in our June time frame.

[Operator Instructions] Thank you. We have no further questions in queue at this time. I'd like to return the floor back over to management for closing remarks.

Thank you, Roya. Again, we really appreciate you taking the time to listen to our call and appreciate the questions that you've asked and look forward to giving you further updates in the near future. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.