Greetings, ladies and gentlemen, and welcome to the American Vanguard Fourth Quarter 2020 and Full Year Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. I will now turn the conference over to our first speaker, Bill Kuser, Director of Investor Relations. Thank you, you may begin.

Well, thank you very much, Diego, and welcome everyone to American Vanguard's fourth quarter and full year 2020 earnings review. Today's presentation includes a number of PowerPoint slides, and two, very informative videos. For those of you who may be on the phone in audio-only, if you would wish to see these materials during the presentation, you can access by going to our corporate website www.american-vanguard.com, at which time you would simply click on the clearly marked webcast section and connect with this visual content. These materials, following the presentation, will be posted to our website, and available for your future reference.

Thank you, Bill. Good afternoon, everyone. First, let me start by thanking our entire workforce for dedicating themselves to high performance during the global pandemic. 2020 was a year that was fraught with changing demands and conditions, and our people weathered the storm admirably. We met our critical objective of keeping the workplace safe and healthy for our employees with virtually no work-related transmission. This, in turn, enabled us to operate continuously, and to serve our customers reliably in all regions. Second, I would like to thank all of you as stakeholders for your continued support of American Vanguard. As you will have seen in today's earnings release, despite a slight decline in our top line, our net income increased by 12% during the period. By comparison, the Top 5 public companies in our sector were on average, flat on both the top and bottom line. While David will be giving you more detail on this and other aspects of our financial performance, I would like to cover a few highlights. Over the course of 2020, we committed to improving our balance sheet and I'm pleased to report that we succeeded in doing so. We generated a nine-fold increase in cash from operations versus the prior year due, in part, from inventory and factory management, controlled operating expenses, and record high customer early pay participation. This, in turn, enabled us to pay down debt and improve borrowing capacity. We are able to make these improvements while, at the same time, concluding two key strategic acquisitions; AgNova, for market access in Australia, and Agrinos, a green solutions company. Further, we defined an environmental, social and governance platform, which includes extremely promising products and technology solutions.

Thank you, Eric. With regard to our public filing, we plan to file our Form 10-K for 2020 within the next few days. As we have noted in previous calls, the Company is fortunate to participate in industries that are considered part of critical infrastructure in all countries, in which we operate. As a result, throughout 2020, our customers and suppliers, and our employees and operations have all continued more or less without disruption during the pandemic. Having said that, the pandemic has impacted us in a few ways including, first, at the start of the year, we experienced a significant devaluation in a few key currencies, specifically, the Brazilian real, the Mexican peso, and the Australian dollar. That negative currency effect has started to somewhat reverse as we reached the end of 2020. Second, the pandemic prevented us from many of our normal infield activities, including face-to-face meetings with distributors, retailers or growers, or activities such as product development and defense. On the other hand, as you will see in our financial statements, the same restrictions and foreign exchange rate movements have caused us to spend less on operating expenses, including travel. With regard to our financial performance for the fourth quarter of 2020, the Company's net sales increased by 8% to $141 million, as compared to sales of $131 million, this time last year. Within that overall improvement, our US sales were up 4% to $85 million, and our international sales increased by 15% to $56 million. International sales accounted for 39% of total sales, as compared to 37% of total sales, this time last year. The main factor -- factors driving our sales performance are as follows. In our US crop market, sales increased by approximately 19% as a result of strong sales of products sold into the Midwest row crop market such as, our SmartBox, Counter, and Aztec brands, as growers reacted to increased blood pressure and on to increased commodity pricing for soybeans and corn. Sales for our domestic non-crop market declined about 45% as a result of lower sales of our deep Dibrom products into vector control districts, primarily as customers worked to address slightly elevated channel inventory levels. Finally, our international sales grew by 15%. Approximately half of the improvement is associated with new sales related to the two businesses acquired at the start of the quarter. The balance of the increase relates to strong sales of our bromacil herbicide, which has a much improved supply position this year and Counter sold into Mexico.

Thank you, David. As you may recall from our earnings call in November last year, I began to turn our attention to our strategic direction and long-term prospects. In the course of my comments, I described our three platforms for growth, namely, our core business, our green solutions platform, and our precision application technology, led by SIMPAS and Ultimus. I also gave you a view into how much we think these platforms will grow over the next three years to five years. Today, I would like to revisit these platforms with a particular focus on how our green solutions and precision application technology, both provide unique and compelling environmental -- what I'll call, ESG, environmental, social and governance solutions, and position us to grow our business at a faster rate than through conventional AgChem offerings. Let's start with a quick update on our core business. As I mentioned earlier, in Q4 we closed on the acquisition of AgNova, an Australian-based company, headquartered in Melbourne that sources, develops and distributes specialty crop protection and protection solutions for the agriculture, horticulture and non-crop markets. The addition of AgNova, improves our market access in the region, including with respect to SIMPAS, Agrinos, and green plant solutions, and gives us greater critical mass in an important territory. Furthermore, AgNova offers product lines that we can readily market in other regions.

Thank you. At this time, we will be conducting our question-and-answer session. Our first question comes from Gerry Sweeney with ROTH Capital. Please state your question.

Hi, good afternoon, gentlemen. Thanks for taking my call. Little newer to the story I've been working with Bill, but just curious on the revenue guidance that you gave low double-digit revenue growth for this fiscal '21. Is there any chance you give a little bit of granularity to maybe where some segments are going to come into play with that projection? Then secondarily, does that include any potential acquisitions? How do they -- how does that factor in? Thanks.

Yes. So thanks, Gerry. Welcome to -- as I appreciate ROTH for years. So yes, I guess across our businesses, I think we see the business units, OHP, Envance, AgriCenter, Australia and Brazil, and, of course, bolstered by Agrinos as well, so we see upside certainly there. I think we're also seeing a pretty healthy increase in our herbicide area, particularly around our impact molecule as we've added combination products there that we think will do well in the marketplace. Our Dibrom, we had some bringing down of inventories that we see that kind of rebounding back. Similar with our two cotton products, Folex and Bidrin in the US, we see a rebound. There was particularly low yield this year. And then with bromacil, again, demand seems to just keep continuing. Certainly, in Mexico for the galva market, but also in Japan for kind of home right away and other right away business. So that's kind of in general. But -- we'll see corn certainly increase. I mentioned cotton. Soybeans, that's another growth area for us. We have several herbicides that we'll be marketing into that sector for this year. So that's kind of the update.

Got it. And I -- question about SIMPAS, and I apologize -- of course, this is the right environment or, but after seeing the video and reading about it, I mean the video also put into a little bit better perspective. But I just couldn't help, but notice at the end is it powered by Trimble, which I understand how that comes into play, but also notice that the equipment was that, green and yellow who may be a large ag company. How do you go to market with some of the equipment? Do you have to partner with some of the agricultural companies or distributors? I was just curious as to what the process is to get some more systems out into the market?

Right. So with SmartBox, we did all of the sales ourself. We inherited that from DuPont back in 2000. We have sold as many as 1,200 systems in a given year. But we -- it's direct sales to the farmers. With SIMPAS, we have aligned ourselves with Trimble. So Trimble's dealers will be handling the distribution of it. And as you mentioned, you've got John Deere there and there's other videos with him. We're basically able to go, what we call with any color tractor. The option is very simple. And so Trimble will handle the actual sales to the farmer and servicing because, again, this will be something we believe a lot bigger than what we've done with SmartBox.

Perfect, got it. And then final question coming up. This question has come up quite a bit and just -- I'm actually getting appliances across the board. Inflationary pressures, are you seeing anything? Do you have ability to manage that, if such arise? I mean, I do see freight in the presentation, and I know that's been an area that I think that's been popping up recently. So, thank you.

Yes. Hi, this is Bob. Yes, we're keeping an eye on that. We're not that -- in our own portfolio, we're not that oil dependent. We have our own factories. We've had inventories in place as David described. So I think in the short term, for our own portfolio, not too much. In other parts of the world where we buy from third parties, we are seeing that they're starting to raise prices, and we'll pass those on where we can.

Yes. I mean we have expense -- I mean, I think it was back in 2012 was really year that prices in our industry has started and we're really gaining our control. And there was so many products coming into '13 that were on allocation. And so we did see some pretty major hikes at that time. So we've got to conditioned our people that I mean, there is -- everybody would like to just put out of a price going into the season and maintain that through the whole year. But we can't -- I mean we have -- I mean even if you take the tariff situation you go from 5% to 35% drop of a hat. You've got to be able to put that through. So I think our customers are conditioned to that. I mean I think the currency swings are a little bit more difficult to do, and particularly as we get down into Brazil, we're seeing such changes that there, but it is top of mind for us.

Got it. Yes, that's very helpful and I appreciate taking my call, especially they may be a little bit newer or rehashing but thanks a lot.

Thank you.

Thank you. Our next question comes from Chris Kapsch with Loop Capital Markets. Please state your question.

Hey, good afternoon. Apologies, I joined this call late owing to some other obligations I had. But -- so I may have -- I missed most of your formal commentary. But I did have a question about the industry, and curious if you're seeing any effects in your business. But there was a one major agchem company talked about disruption, inability to supply their customers because of tolling being disrupted by COVID. You guys manufacture, I believe, most of your own and blend most of your own materials. So I'm guessing that it's not something that impacting you, but conversely was there something that somehow may translate into a commercial opportunity for you to the extent that other suppliers may have been struggling in sourcing product during going into this growing season?

I think...

I would say within regards to the United States, certainly, I think there was better expectations in '19 and '20 that occurred, and there was a lot of inventory of products that were brought over from China to try to beat the duties. And so with the market is not strong, I think there has been some lagging inventories there. From raw material wise, we have had some tightness here and there, where we have shipments -- we live close to Long Beach Harbor. I go down there, and last time I went down, I counted over 100 freighters that were stacked up in that harbor. And so we do have raw materials for our PCNB herbs, our fungicide that we've just started manufacturing again, that are sitting on a container there that we're waiting for. But I would say overall, we've been in a better position, as you might -- as you kind of alluded to than others, and a good portion of our raws do come from United States, and so we're able to service our manufacturing facilities okay, so.

So, and then some of your -- in certain product lines you compete with alternative sources out of Europe, and the euro has been relatively strong, call it, I don't know, in the last seven months. So -- is that -- has that affected that or just the overall a more favorable environment with stronger commodity prices, is that affected the pricing dynamic at all? Is there any cover there for you to for pricing entitlement, or is it as competitive as ever? Any changes in the competitive dynamic from a pricing standpoint for your core products?

Well, I've certainly seen chemical companies, not specifically in the ag side, but signaling price increases. And particularly, a company over in Germany that they encompassed really -- it seems like every day, I'm seeing them announcing new price increases, which certainly is favorable. But with oil going up, we do have some methanol linked products going into our soil fumigant. But we're watching it closely. And as I mentioned to Gerry, with -- it's top of mind, and we have continual meetings on it. And just to make sure that the whole team is linked together.

Okay. And then, I know you've guys have diversified away from corn judiciously, and you have some growth innovation platforms that are starting to get traction. That's great. But there -- you still have this core franchise of soil-applied insecticides that it could benefit in this environment. And I'm just curious if there is -- you guys brought up there is the trade reg talk about the corn rootworm resistance resurfacing again, because of the absence of rotation. So just wondering if that -- if you're, I don't know, if you'd comment on this early, but you're seeing that in your order patterns if -- or there any times from growers that their -- given the strong pricing backdrop that their intent on using that protection this year as they grow corn in the Corn Belt?

Yes. I mean there are -- I mean, it seems like kind of each day we see whether it's nematodes or corn rootworm, nutrition, particularly focus towards the corn and soybean market. So there's certainly a lot of awareness out there more than I've seen really since 2013. So we've got nice potential upside certainly in corn and as I also mentioned soybeans. So, Bob, do you want anything to add?

Yes, Chris, I think we're going to have a good -- assuming weather plays, I think we're going to have a solid and maybe up in -- have plant insecticide control. We see two margins emerging, but this is more of a 2022 factor. One, the soil health market looks like it's going to expand at about a 12% to 15% clip. As the Biden administration incentivizes that, you'll see that grow rapidly. We're well positioned as Eric had said on the call with our SIMPAS systems to take advantage of that in conjunction with the portfolio from Agrinos. We're doing all the testing this year in our product line and other companies' products lines, looks very positive. Then the second effect, which is just announced by Mexico is that they will not allow any GMO corn and they're also planning glyphosate. And of course, they have been traditionally the Number 1 export market for corn out of the United States. That would then result in US growers going back to conventional traditional corn and, of course, that's positive for us in our product lines. But that's at '22.

Right. Does that -- when would that come into effect for Mexico? Sorry, I did miss the…

Well, that will be 2022, right.

Okay.

Right. Because then -- so right now, for example, if you're growing traditional corn for non-GMO, you're getting over $6 a contract, right? So, it's about $0.40, $0.50 higher than GMO corn. So it's attractive. And the cost of actually producing it is about the same. So you're -- its bottom line.

Yes, that got interesting. So, at this time, I'll let somebody else take the question. I'll circle back, if there's time.

Okay. Thank you, Chris.

Thank you. We have a question from Mr. Chris Kapsch, Loop Capital Markets. Please go ahead.

Hey, so the follow-up was -- so let's just say, a year from now we're looking back at 2021, so relative to the setup that you guys envision currently what sort of, I don't know, Top 2 or 3 things, positive or negative, you think that could be a positive surprise as the 2020 for 2021. We're all trying to forget 2020, trust me. 2021 into or some things that could end up being a source of negative surprise?

Well, as we, from the top side, I think I mentioned, we're looking at -- I think our impact in Dibrom, normalcy in corn and Folex and Bidrin. Our continued supply line for bromacil looks good now. But there is always the chance that we do get interruptions in starting up our PCNB facility. We've had different transmitters and barrels that haven't worked right. So we're running behind there. But we're only planning on running that at about 60% of capacity anyway. So we'll catch up, but -- some sales right now. But it's not a huge number. So I don't know, I mean, you brought up the concept of inflation, super hyperinflation that certainly could happen. But I think we're more poised for it. The exchange rate certainly could be significant, or could go either way, plus or minus. But I think as far as our assets, our utilization, right now things look pretty good.

That's great. Thank you so much.

There are no further questions at this time. I'll turn it back to management for closing remarks. Thank you.

Okay. Well, thank you very much. For those of you that didn't get to watch all the pretty pictures and videos that were on the phone, it will be posted on our website, and you can go through and re-live the experience. And look forward to updating you, not all out on from now, I mean we're -- maybe a month and a half away, something like that, yes.

Two months.

Two months, yes. So anyway, we'll be in touch soon. And I will note that we have -- I think some of you probably noticed as well that we've traded well over the last -- this last month in highs that we haven't had in like 2.5 years. So happy to be back on the right track. And with that, thank you very much. Bye.

Thank you. This conclude today's conference. You may disconnect at this time. Thank you all for your participation.