U.S. Markets close in 4 hrs 30 mins

Edited Transcript of AVD earnings conference call or presentation 11-Mar-19 8:30pm GMT

Q4 2018 American Vanguard Corp Earnings Call

NEWPORT BEACH Apr 3, 2019 (Thomson StreetEvents) -- Edited Transcript of American Vanguard Corp earnings conference call or presentation Monday, March 11, 2019 at 8:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* David T. Johnson

American Vanguard Corporation - CFO

* Eric G. Wintemute

American Vanguard Corporation - Chairman & CEO

* Ulrich G. Trogele

American Vanguard Corporation - COO & Executive VP of AMVAC Chemical Corporation

* William A. Kuser

American Vanguard Corporation - Director of IR & Corporate Communications

================================================================================

Conference Call Participants

================================================================================

* James Michael Sheehan

SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst

* Joseph George Reagor

ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

William A. Kuser, American Vanguard Corporation - Director of IR & Corporate Communications [2]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [3]

--------------------------------------------------------------------------------

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've 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 due to 2 factors: strong manufacturing activity and a reduction in operating expenses as a percent of net sales. This is the strongest annual performance for manufacturing in our history, and I thank my operations team for it.

A discussion of manufacturing in this sector would not be complete without reference to what has been happening in China. While our reliance on China sources is well below the industry average, we are not immune to the supply chain disruptions from that country. At present, our primary point of exposure is with respect to our Bromacil product line. We're working feverishly to ensure that we have sufficient supply to meet global demand.

With respect to operating expenses, both David and I have reported that we have been committed across all departments to set conservative OpEx budgets, account for changes and, wherever possible, reduce operating expenses within region -- within reason. Year-over-year, as a percent of sales, OpEx has dropped from 34% to 32%. From my point of view, we should be able to show further improvement in this area as we grow due to the effect of economies of scale.

Before turning the presentation over to David, I would also like to cover our recent conference in Costa Rica as well as our strategy session with our Board of Directors. After David's remarks, I'll return with a technology update, including SIMPAS, Envance and biologicals. I will then close with comments for our 2019 outlook.

For American Vanguard, the LatAm region is ripe for growth. Our acquisition of Agricenter in 2017 provided us with market access through a well-established business to Costa Rica, Nicaragua, Panama, Guatemala, Honduras and Dominican Republic. Since then, we closed the acquisition, Agrovant and Defensive, in Brazil, which marks our first meaningful entry into the largest crop protection market in the world. Agrovant is a marketing and formulation business in São Paulo province with 35 employees and annual sales of about $20 million, largely in the high-value fruit and vegetable market.

In light of these acquisitions, we recently held a global conference in Costa Rica, which was attended by 40 key personnel from multiple functions throughout our global businesses. Its purpose was to take stock of what we have now, to identify opportunities for cross-selling products among these regions, to achieve greater efficiencies and procurement and, generally, to capture synergies across our operations. At the conclusion of the conference, participants focused on 33 priorities for enhancing our global business, the top 3 of which were rolling out SIMPAS technology into the regions, developing our biologicals and nutrients across the businesses and expanding Envance essential oil products into new territories. The creativity and energy of our team gives me even greater confidence in the prospects for our future global expansion.

Similarly, this past week, our senior management met with our Board of Directors to define a 5-year strategy for American Vanguard. In times such as these when change is the norm within our industry, we believe that it's important to revisit our strategy with greater frequency. Let me give you a preview of that strategic plan.

We aspire to be a technology company with an international footprint that generates solid financial results through both a diverse portfolio of products and innovative solutions. We expect that our growth will come largely from those markets in which we are relatively new entrants such as Brazil and Central America where the availability -- available market is significant. Further, and as I will report in greater detail in our Annual Shareholders' Meeting, we intend to give our investors a 5-year target for growth and performance. As we report on each period, we will update listeners on how we are doing vis-à-vis the long-term plan, including target revenues for SIMPAS.

Let us now turn from our strategy to other matters of interest to shareholders. As you will note from our 10-K, we purchased shares during the fourth quarter and subsequently continued the program through January 28. All told, we repurchased about $10 million worth of AVD stock in the open market. The program served to reduce intraday share price volatility. Over the course of the last month, our share price has risen above $17 per share, which was the upper limit under the repurchase program, and remained at or above that level.

Over the past month, our share price has increased by 12%. While issuers are limited in their ability to repurchase their own shares, we believe that our stock and our enterprise are worthy of our support, particularly when, as here, we are can carry on a program without compromising our working capital needs or future prospects. Further, the program has enabled us to recover some of the share creep that had occurred over the past few years in connection with equity awards. Finally, this program has had the effect of conferring a dividend upon shareholders by reducing the number of shares upon which our EPS is based.

At this point, let us turn to an update on financial performance for the quarter and the year. David?

--------------------------------------------------------------------------------

David T. Johnson, American Vanguard Corporation - CFO [4]

--------------------------------------------------------------------------------

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 costs 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 to $8.4 million or $0.28 per share last year. Fourth quarter 2017 earnings per share were impacted by a onetime tax benefit of $3.4 million associated with the Tax Cuts and Jobs Act, which added $0.11 per share to net income for that quarter. Without this impact, Q4 2017 earnings per share would have been $0.17 per share as compared to $0.25 per share in the fourth quarter of 2018.

When considering our 2018 full year financial performance, the key financial matters remain consistent with last year and the last several quarters. As Eric mentioned -- first, as Eric mentioned, year-to-date sales were up 28% to $454 million as compared to $355 million this time last year. This revenue improvement is largely driven by sales from products and businesses acquired in 2017. Second, we continue to carefully manage our factory activity as we balance recovery of overhead costs with demand and inventory levels. In 2018, while our factory costs were up about 5%, our factory output increased by approximately 30%. As a result, under-absorbed factory costs dropped from 3.6% of net sales in 2017 to 0.4% of net sales in 2018.

Our inventory levels did increase and ended at $160 million. There were a few reasons for the increase. First, we acquired inventory in the fourth quarter associated with 2018 acquisitions. Second, the businesses acquired in 2017 have generally increased inventory levels from somewhat unsustainably low levels at the time various acquisitions took place. We will work on the supply chain over 2019. Third, some inventories were purchased late in the fourth quarter as we managed logistics from China, balancing the threat of tariffs and the associated shortage of freight capacity from that region. Finally, we made the decision to manufacture at a higher level than usual in the final quarter because our 2019 manufacturing plan is tight.

We had previously signaled an inventory target for December 31, 2018, of $146 million. We added approximately $5 million related to acquisitions in the fourth quarter of 2018, and the balance of $9 million is associated with the other factors I just provided. Our target for 2019 is to end the year at approximately $140 million.

Third, gross margin for the year ended at 40% as compared to 42% last year. This change was driven by the impact of the 2017 businesses and product acquisitions that drive strong sales at slightly lower gross margin levels than our preexisting business mix, partly offset by the strong factory performance just described. In addition, our purchasing team continues to deliver a strong performance on raw material sourcing and has held our overall average purchase costs approximately flat, notwithstanding some year-on-year increases for individual raw materials in the marketplace.

Fourth, during 2018, we continued to exercise tight controls over our operating expenses, which were up overall by 19% but reduced when expressed as a percentage of sales from 34% in 2017 to 32% in 2018. In absolute terms, operating expenses increased by $23 million. The newly acquired products and businesses accounted for approximately $21 million, which was offset by the release of acquisition-related accruals for deferred consideration in the amount of $6 million. Other cost increases included some legal expenses and accruals for short-term and long-term incentive compensation. The main message is that we are working to manage operating expenses as a percentage of sales so that this key ratio improves each year, demonstrating that we are driving operating leverage improvements as the scale of the business expands.

Fifth, our effective tax rate increased from 18% in 2017 to 27% in 2018. The driving factor in this increase is the effect of the onetime $3.4 million benefit from the Tax Cuts and Jobs Act I discussed earlier. Furthermore, in the second quarter of 2018, we recorded an expense in the amount of $1.1 million as we finalize our calculations related to the transition tax. Absent these 2 adjustments, our effective rate in 2017 would have been 32% and 24% in 2018. Looking forward to 2019, our rate will be affected by the balance of profit earned by domestic or international jurisdiction, and we are presently expecting to achieve a tax rate in the range of 24% to 26%.

Looking at the bottom line, in 2018, our pretax income improved by 35%. Net income improved by 19%, again, impacted by the onetime tax adjustments just discussed, and ended at $24.2 million or $0.81 per share in 2018 as compared to $20.3 million or $0.68 per share last year.

Finally, with regard to the balance sheet management and liquidity, we continue to work carefully to manage our cash resources. And notwithstanding quarter-to-quarter changes, we are focused on driving the business to maintain a low leverage position.

During 2018, we considered a number of acquisition opportunities and utilized our credit facility to make 4 acquisitions in the second half of the year. Along with borrowings associated with the 2017 acquisitions, this resulted in borrowings totaling $97 million at December 31, 2018, as compared to $78 million this time last year. At both balance sheet dates, our leverage is flat at 1.6x EBITDA. Year-over-year, EBITDA improved by 25% to end at $61 million for 2018 as compared to $49 million in 2017. We are seeing many opportunities to grow our business and are utilizing our credit line to make selective acquisitions as they occur.

In summary, when looking at the year just closed, we see that sales have grown strongly. We have delivered on factory performance improvements. And notwithstanding the impact of strong sales growth at lower margins, we have slightly improved our consolidated gross margin performance. Our operating expenses improved when expressed as a percentage of sales, and both our operating income and net income improved strongly.

Finally, we have again had a very exciting year and closed on 4 acquisitions that we expect will power the company's growth rate in 2019 and beyond.

With that, I will hand back to Eric.

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [5]

--------------------------------------------------------------------------------

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 an 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 website for more details. These products are being marketed in retail channels for consumer use. With this technology, which is safe for pets and children, we are poised to expand into other markets such as agriculture and turf and ornamental. As I noted earlier, our teams in the Americas are keen to bring Envance technology into those regions as a complement to their biological product offerings.

Also in the realm of technology, we continue to develop our own lines of biologicals. At present, we have 7 biological products in late stages of testing with intended launches in 2020 and '21 and a pipeline of other solutions with varying universities in early-stage development.

In addition, our Agricenter business continues to develop nutrient products through both Greenplants and its research center and is also working with developmental partner, Biotor, to develop tailor-made biological solutions for growers in that region. We will look to import LatAm biological and nutrient solutions into the U.S. and other markets.

From technology, we turn to market expansion and recent activity. In addition to the Agrovant acquisition in Brazil, we recently closed on the acquisition of the Assure II product line from Corteva. Assure II is an herbicide used primarily on soybeans in the U.S. and canola in Canada. As part of transition, we have also obtained an exclusive license from Corteva to apply Assure II to Enlist corn, which is a traded corn upon which it is safe to use Assure II. Corteva plans to launch Enlist corn within the next 2 to 3 years. As Enlist corn comes to market, sales of Assure should benefit significantly. In addition, Assure II gives us entrée into the soybean market within the United States while complementing our herbicide portfolio that is currently led by Impact.

My final topic is the outlook for 2019. The first quarter is shaping up as expected except in 2 areas. First, wet weather is delaying some growers from applying VAPAM in California and the Pacific Northwest. While we can likely make up for lost sales outside of California, we could lose about $1 million in revenue of VAPAM in California.

Second, I spoke earlier about our Bromacil supply. Due to delays in restarting the factory, we're likely to miss about $2 million in new sales into Mexico. Fortunately, the more diverse we become, the less impact an individual product has on our overall performance.

In the coming year, we expect to see solid demand for our products, both domestically and internationally. We forecast net sales to be within the range of $490 million to $510 million based on our current product portfolio. If we're able to make additional product or business acquisitions, we'll adjust that target range appropriately.

We believe that our product mix and manufacturing performance should allow us to deliver profit margins in the 38% to 40% range. With disciplined management of operating expenses, we are targeting $155 million to $165 million, with an OpEx to sales ratio of about 31%. Our tax rate should be between 24% and 26% on average for all jurisdictions.

In closing, I would say that we've taken another important step in the expansion of our business. We entered the year celebrating our 50th anniversary, and I'm excited to see us approaching the $0.5 billion mark in net sales. I'm also pleased with the trajectory that we have established. While maintaining financial and operational discipline in our existing operations, we are reaching into new markets such as Brazil and LatAm that have excellent prospects for growth.

In the course of integrating these businesses, we share business plans and technology road maps. This, in turn, creates an environment of innovation as the collective team sees new opportunities for both existing products and new technology. Further, with a foothold in these new markets, we are better positioned to expand through strategic acquisitions. In short, I am pleased with how well we are performing on this larger platform and look forward to continuing what we've already started.

With that, Roya, we'll turn this over to any questions that the audience has.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from the line of Joseph Reagor with ROTH Capital Partners.

--------------------------------------------------------------------------------

Joseph George Reagor, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2]

--------------------------------------------------------------------------------

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?

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [3]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

David T. Johnson, American Vanguard Corporation - CFO [4]

--------------------------------------------------------------------------------

For each quarterly...

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [5]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Joseph George Reagor, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [7]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

Joseph George Reagor, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [8]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [9]

--------------------------------------------------------------------------------

Yes. You will.

--------------------------------------------------------------------------------

Joseph George Reagor, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [10]

--------------------------------------------------------------------------------

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?

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [11]

--------------------------------------------------------------------------------

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?

--------------------------------------------------------------------------------

Joseph George Reagor, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [12]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [13]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

Operator [14]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

James Michael Sheehan, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [15]

--------------------------------------------------------------------------------

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?

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [16]

--------------------------------------------------------------------------------

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, I think, the effect of what we're trying to do. Bob, I don't know if you've got any thoughts.

--------------------------------------------------------------------------------

Ulrich G. Trogele, American Vanguard Corporation - COO & Executive VP of AMVAC Chemical Corporation [17]

--------------------------------------------------------------------------------

No. I think, right now, we feel that the currency to the dollar is probably favorable. And secondly, we have an operation down there 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.

--------------------------------------------------------------------------------

David T. Johnson, American Vanguard Corporation - CFO [18]

--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------

James Michael Sheehan, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [19]

--------------------------------------------------------------------------------

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?

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [20]

--------------------------------------------------------------------------------

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?

--------------------------------------------------------------------------------

Ulrich G. Trogele, American Vanguard Corporation - COO & Executive VP of AMVAC Chemical Corporation [21]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

James Michael Sheehan, SunTrust Robinson Humphrey, Inc., Research Division - Research Analyst [22]

--------------------------------------------------------------------------------

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?

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [23]

--------------------------------------------------------------------------------

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 [24]

--------------------------------------------------------------------------------

(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.

--------------------------------------------------------------------------------

Eric G. Wintemute, American Vanguard Corporation - Chairman & CEO [25]

--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------

Operator [26]

--------------------------------------------------------------------------------

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