AMERICAN VANGUARD CORP (Form: 10-Q, Received: 05/17/2004 14:54:48)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number 0-6354

AMERICAN VANGUARD CORPORATION


Delaware		95-2588080
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

4695 MacArthur Court, Newport Beach, California		92660
(Address of principal executive offices)		(Zip Code)

(949) 260-1200

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.10 Par Value — 8,964,263 shares as of May 12, 2004.

AMERICAN VANGUARD CORPORATION

INDEX


			Page Number
PART I – FINANCIAL INFORMATION

	Item 1.

Financial Statements .

		Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003	1

		Consolidated Balance Sheets as of March 31 2004 and December 31, 2003	2

		Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003	4

		Notes to Consolidated Financial Statements	6

	Item 2.

		Management’s Discussion and Analysis of Financial Condition and Results of Operations	10

	Item 3.

		Quantitative and Qualitative Disclosure About Market Risk	15

	Item 4.

		Controls and Procedures	15

PART II – OTHER INFORMATION			15

SIGNATURES			17

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share amounts)

(Unaudited)


	For the three months ended March 31
	2004			2003
Net sales	$	34,219		$	27,342
Cost of sales		19,029			15,974

Gross profit		15,190			11,368
Operating expenses		11,281			9,291

Operating Income		3,909			2,077
Interest expense		314			267
Interest income		(1	)		(8	)
Interest capitalized		(15	)		(142	)

Income before income taxes		3,611			1,960
Income taxes		1,408			736

Net income	$	2,203		$	1,224

Earnings per common share	$	.25		$	14

Earnings per common share – assuming dilution	$	23		$	.13

Weighted average shares outstanding (note 4)		8,963			8,739

Weighted average shares outstanding – assuming dilution (note 4)		9,519			9,134

See notes to consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

ASSETS (note 8)


	March 31, 2004		Dec. 31, 2003
	(Unaudited)		(Note)
Current assets:
Cash	$	871	$	887
Receivables:
Trade		47,058		27,803
Other		523		394

		47,581		28,197

Inventories		38,099		33,389
Prepaid expenses		841		1,057
Deferred tax asset		140		140

Total current assets		87,532		63,670
Property, plant and equipment, net (note 2)		24,676		21,677
Land held for development		211		211
Intangible assets		20,087		20,307
Other assets		1,449		869

	$	133,955	$	106,734

(Continued)

See notes to consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

LIABILITIES AND STOCKHOLDERS’ EQUITY


	March 31, 2004			Dec. 31, 2003
	(Unaudited)			(Note)
Current liabilities:
Current installments of long-term debt	$	4,406		$	6,374
Accounts payable		21,379			13,030
Accrued program costs		10,352			6,763
Accrued expenses and other payables		2,925			3,778
Dividend payable		716			—
Accrued royalty obligations		492			1,521
Income taxes payable		1,146			580

Total current liabilities		41,416			32,046
Other long-term debt, excluding current installments		8,554			7,942
Note payable to bank		30,000			14,200
Deferred income taxes		2,212			2,212

Total liabilities		82,182			56,400

Stockholders’ Equity:
Preferred stock, $.10 par value per share; authorized 400,000 shares; none issued		—			—
Common stock, $.10 par value per share, authorized 10,000,000 shares; issued 9,796,512 shares at March 31, 2004 and 9,764,415 shares at December 31, 2003		979			976
Additional paid-in capital		9,956			9,933
Accumulated other comprehensive income		(97	)		(207	)
Retained earnings		43,563			42,076

		54,401			52,778
Less treasury stock at cost 832,249 shares at March 31, 2004 and 824,881 shares at December 31, 2003		(2,628	)		(2,444	)

Total stockholders’ equity		51,773			50,334

	$	133,955		$	106,734

Note: The balance sheet at December 31, 2003 has been derived from the audited financial statements at that date.

See notes to consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

For The Three Months Ended March 31, 2004 and 2003

(Unaudited)


Increase (decrease) in cash	2004			2003
Cash flows from operating activities:
Net income	$	2,203		$	1,224
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		1,067			761
Changes in assets and liabilities associated with operations:
Increase in receivables		(19,385	)		(14,911	)
Increase in inventories		(4,710	)		(3,241	)
Decrease in prepaid expenses and other current assets		216			347
Increase (decrease) in accounts payable		8,349			6,971
Increase in other payables and accrued expenses		2,273			914

Net cash used in operating activities		(9,987	)		(7,935	)

Cash flows from investing activities:
Capital expenditures		(3,846	)		(2,323	)
Additions to intangible assets		—			(3,314	)
Net decrease (increase) in other noncurrent assets		(580	)		26

Net cash used in investing activities		(4,426	)		(5,611	)

(Continued)

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(In thousands)

For The Three Months Ended March 31, 2004 and 2003

(Unaudited)


Increase (decrease) in cash	2004			2003
Cash flows from financing activities:
Net borrowings under line of credit agreement	$	15,800		$	10,500
Proceeds from issuance of long-term debt		1,288			—
Principal payments on long-term debt		(2,644	)		(18	)
Exercise of common stock options		27			116
Purchase of treasury stock		(184	)		—

Net cash provided by financing activities		14,287			10,598

Net decrease in cash		(126	)		(2,948	)
Cash at beginning of year		887			3,275
Effect of exchange rate changes on cash		110			17

Cash as of March 31	$	871		$	344

Supplemental schedule of non-cash investing and financial activities:

On March 16, 2004, the Company announced that the Board of Directors declared a 3 for 2 stock split and a cash dividend of $.12 per share ($.08 as adjusted for the 3 for 2 stock split). Both dividends will be distributed on April 16, 2004 to stockholders of record at the close of business on March 26, 2004. The cash dividend will be paid on the number of shares outstanding prior to the 3 for 2 stock split. Stockholders entitled to fractional shares resulting from the stock split will receive cash in lieu of such fractional share based on the closing price of the Company’s stock on March 26, 2004. Cash dividends to be paid April 16, 2004, will total approximately $716,000.

See notes to consolidated financial statements.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Columnar numbers in thousands except for share data)

(Unaudited)

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation, have been included. Operating results for the three months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

2.	Property, plant and equipment at March 31, 2004 and December 31, 2003 consists of the following:


	March 31, 2004		December 31, 2003
Land	$	2,441	$	2,441
Buildings and improvements		4,906		4,903
Machinery and equipment		41,018		39,273
Office furniture, fixtures and equipment		2,975		2,882
Automotive equipment		124		124
Construction in progress		3,803		1,798

		55,267		51,421
Less accumulated depreciation		30,591		29,744

	$	24,676	$	21,677

3.	Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. The components of inventories consist of the following:


	March 31, 2004		December 31, 2003
Finished products	$	34,819	$	30,159
Raw materials		3,280		3,230

	$	38,099	$	33,389

Note Payable to Bank – In May 2002, the Company entered into a new fully-secured long-term credit agreement which included a $35,000,000 revolving line of credit with two banks. On March 23, 2004, the credit agreement was amended to increase the credit limit under the revolving line of credit to $45,000,000. The borrowings under the credit agreement bear interest at the prime (4.00% as of March 31, 2004) rate (“Referenced Loans”), or at the Company’s option, at a fixed rate if interest offered by the bank (“Fixed Loans”) for terms of one, two, three, six, nine or twelve months. Interest on the referenced loans is payable quarterly, in arrears, on the last day of each March, June, September, and December, and on the maturity date of such loan, in the amount of interest then accrued but unpaid. The revolving line of credit matures on May 31, 2005.

5.	Based on similar economic and operational characteristics, the Company’s business is aggregated into one reportable segment. Selective enterprise information is as follows:


	Three Months Ended March 31,
	2004		2003
Net sales:
Crop	$	31,004	$	23,568
Non-crop		3,215		3,774

	$	34,219	$	27,342

On March 16, 2004, the Company announced that the Board of Directors declared a 3 for 2 stock split and a cash dividend of $.12 per share ($.08 as adjusted for the 3 for 2 stock split). Both dividends will be distributed on April 16, 2004 to stockholders of record at the close of business on March 26, 2004. The cash dividend will be paid on the number of shares outstanding prior to the 3 for 2 stock split. Stockholders entitled to fractional shares resulting from the stock split will receive cash in lieu of such fractional share based on the closing price of the Company’s stock on March 26, 2004. Accordingly, all weighted average share and per share amounts have been restated to reflect the stock split.

Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings Per Share (“EPS”) requires dual presentation of basic EPS and diluted EPS on the face of all income statements. Basic EPS is computed as net income divided by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects potential dilution that could occur if securities or other contracts, which, for the Company, consists of options to purchase shares of the Company’s common stock are exercised.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

The	components of basic and diluted earnings per share were as follows:


	Three Months Ended March 31,
	2004		2003
Numerator:
Net income	$	2,203	$	1,224

Denominator:
Weighted averages shares outstanding		8,963		8,739
Assumed exercise of stock options		556		395

		9,519		9,134

Substantially all of the Company’s assets not otherwise specifically pledged as collateral on existing loans and capital leases, are pledged as collateral under the Company’s credit agreement with a bank. As referenced in note 1, for further information, refer to the consolidated financial statements and footnotes thereto (specifically note 3) included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003

9.	Reclassification – Certain items have been reclassified in the prior period consolidated financial statements to conform with the March 31, 2004 presentation.

10.	Total comprehensive income includes, in addition to net income, changes in equity that are excluded from the consolidated statements of operations and are recorded directly into a separate section of stockholders’ equity on the consolidated balance sheets.

Comprehensive income and its components consist of the following (in thousands):


	Three Months Ended March 31,
	2004		2003
Net Income	$	2,203	$	1,224
Foreign currency translation adjustment		110		17

Comprehensive income	$	2,313	$	1,241

11.

Legal Proceedings and Environmental – The Company’s wholly-owned subsidiary, Amvac Chemical Corporation (“AMVAC”) was served with a complaint on April 12, 2004 (suit was filed March 26 2004). The action, which was filed in California Superior Court, Los Angeles, California, is entitled Tellez et al v. Dole Food Company, Inc. et al. The suit named as defendants Dole Food Company, Inc., Dole Fresh Fruit Company, Standard Fruit Company, Standard Fruit and Steamship Company, Dow Chemical Company, Occidental Petroleum Corporation, Occidental Chemical Corporation and AMVAC (American Vanguard was not named). The Complaint alleges that twenty-five plaintiffs incurred personal injuries, which include sterility and other reproductive injuries. The plaintiffs claim exposure from working on banana plantations (in Nicaragua) from dermal contact with 1,2-dibromo-3-chloropropane (“DBCP”), inhalation of vapors, and from drinking water allegedly contaminated with DBCP. AMVAC filed an answer on May 5, 2004. On May 6, 2004, Dow Chemical removed the case from state court to the United States District Court for the Central District of California. It is anticipated that the focus for the next several months will be on the issue of the proper court to hear the case. No discovery has taken place, therefore, it is unknown as to how many of the plaintiffs, if any, claim exposure to AMVAC’s product and whether the plaintiffs’ claims are barred by applicable statutes of limitation. AMVAC intends to vigorously contest this case.

Stock-Based Compensation – SFAS No. 123 “ Accounting for Stock-Based Compensation ”, allows companies to measure compensation cost in connection with employee share option plans using a fair value based method or to continue to use an intrinsic value based method as defined by APB No. 25 Accounting for Stock Issued to Employees , which generally does not result in a compensation cost. The Company accounts for stock-based compensation under APB 25, and does not recognize stock-based compensation expense upon the issuance of its stock options because the option terms are fixed and the exercise price equals the market price of the underlying stock on the grant date. The following table illustrates the effect on net earnings

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

and basic and diluted earnings per share if the Company had recognized compensation expense upon issuance of the options, based on the Black-Scholes option pricing model:


	Three Months Ended March 31,
	2004			2003
Net income, as reported	$	2,203		$	1,224
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(41	)		(20	)

Pro forma	$	2,162		$	1,204

Earnings per common share, as reported	$	.25		$	.14

Pro forma	$	.23		$	.13

Earnings per common share – diluted, as reported	$	.24		$	.14

Pro forma	$	.23		$	.13

13.

Recent Accounting Pronouncements – FASB issued FASB Interpretation No. 45 (“FIN 45”) Guarantor’s Accounting and Disclosure Requirement for Guarantees, Including Indirect Guarantees of Indebtedness of Others . This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The following is a summary of the Company’s agreements that the Company has determined is within the scope of FIN 45.

Under its bylaws, the Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director’s serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has a directors’ and officers’ liability insurance policy that reduces its exposure and enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal and has no liability recorded for these agreements as of March 31, 2004.

The Company enters into indemnification provisions under its agreements with other companies in its ordinary course of business (typically customers). Under these provisions the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities or, in some cases, as a result of the indemnified party’s activities under the agreement. The indemnification provisions may survive the termination of the underlying agreement. In addition, in some cases, the Company has agreed to reimburse employees for certain expenses and to provide salary continuation during short-term disability. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions may be unlimited. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the Company believes the estimated fair value of these provisions is minimal. Accordingly, the Company has no liabilities recorded for these agreements as of March 31, 2004.

In December 2003, the FASB issued Interpretation No. 46 (“FIN 46R”) (revised December 2003), Consolidation Variable Interest Entities , an interpretation of Accounting Research Bulletin No. 51 (“ARB 51”), which addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46 (“FIN 46”), which was issued in January 2003. Before concluding that it is appropriate to apply the ARB 51 voting interest consolidation model to an entity, an enterprise must first determine that the entity is not a variable interest entity (‘VIE”). As of the effective date of FIN 46R, an enterprise must evaluate its involvement with all entities or legal structures created before February 2, 2003, to determine whether consolidation requirements of FIN 46R apply to those entities. There is no grandfathering of existing entities. Public companies must apply either FIN 46 or FIN 46R immediately to entities created after December 15, 2003 and no later than the end of the first reporting period that ends after March 15, 2004 to entities considered to be special purpose entities.

AMERICAN VANGUARD CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements, Continued

The adoption of FIN 46R had no effect on the Company’s consolidated financial position, results of operations, or cash flows.

In December 2003, the Securities and Exchange Commission (“SEC”) issued staff accounting bulletin No. 104 (“SAB 104”) “Revenue Recognition,” which codifies, revises and rescinds certain sections of Staff Accounting Bulletin No. 101 “Revenue Recognition,” in order to make this interpretive guidance consistent with current authoritative accounting guidance and SEC rules and regulations. The changes noted in SAB 104 did not have a material effect on the Company’s financial statements.

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS/RISK FACTORS:

The Company, from time-to-time, may discuss forward-looking statements including assumptions concerning the Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to a number of risks, uncertainties and other factors. In connection with the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important factors which, among other things, could cause the actual results and events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions contained in the entire Report. Such factors include, but are not limited to: product demand and market acceptance risks; the effect of economic conditions; weather conditions; changes in regulatory policy; the impact of competitive products and pricing; changes in foreign exchange rates; product development and commercialization difficulties; capacity and supply constraints or difficulties; availability of capital resources general business regulations, including taxes and other risks as detailed from time-to-time in the Company’s reports and filings filed with the U.S. Securities and Exchange Commission. It is not possible to foresee or identify all such factors. For more detailed information, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operation, Risk Factors, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

RESULTS OF OPERATIONS

Quarter Ended March 31 :


	2004		2003		Change
Net sales:
Crop	$	31,004,000	$	23,568,000	$	7,436,000
Non-crop		3,215,000		3,774,000		(559,000	)

	$	34,219,000	$	27,342,000	$	6,877,000

Gross profit:
Crop	$	14,497,000	$	10,079,000	$	4,418,000
Non-crop		693,000		1,289,000		(596,000	)

	$	15,190,000	$	11,368,000	$	3,822,000

The Company reported net income of $2,203,000 or $.23 per diluted share for the first quarter ended March 31, 2004 as compared to net income of $1,224,000 or $.13 per diluted share for the same period in 2003. (Net income per share data have been restated to reflect the effect of a 3 for 2 stock split distributed on April 16, 2004.)

Net sales for the first quarter 2004 increased by 25% to $34,219,000 from $27,342,000 in the first quarter of 2003. The record sales levels were as a result of increased sales (primarily attributable to higher sales volume) of the Company’s product lines used for crop protection. There were no unusual or infrequent events or transactions outside of the ordinary course of business which materially impact net sales.

Gross profits increased $3,822,000 to $15,190,000 for the three months ended March 31, 2004 from $11,368,000 in the first quarter of 2003. Gross profit margins increased to 44% in the quarter ended March 31, 2004 from 42% in the same period in 2003. The improvement in gross profit margins was due to the changes in the sales mix of the Company’s products.

Gross profit margins may not be comparable to those of other companies, since some companies include their distribution network in cost of goods sold and the Company, as well as others, include distribution costs in operating expenses (or other line items other than cost of goods sold).

Operating expenses, which are net of other income and expenses, increased by $1,990,000 to $11,281,000 in the first quarter of 2004 from $9,291,000 in the same period of 2003. Operating expenses as a percentage of sales were 33% in 2004 as compared to 34% in 2003. The differences in operating expenses by specific departmental costs are as follows:

•	Selling expenses increased by $1,210,000 to $5,155,000 in the first quarter of 2004 from $3,945,000 in 2003. The increase was due primarily to increased variable selling expenses that relate to both increased sales levels and the product mix of sales.

•

General and administrative increased by $815,000 to $2,811,000 for the quarter ended March 31, 2004 as compared to $1,996,000 in the same period in 2003. The increase was due to increases in expenses related to the amortization of intangible assets in connection with new asset acquisitions and increased outside professional costs.

•

Research and product development costs and regulatory registration expenses declined by $470,000 to $1,345,000 in the first three months of 2004 from $1,815,000 in the first quarter of 2003. The decline was a result of lower costs incurred to generate scientific data related to the registration and possible new uses of the Company’s products.

•	Freight, delivery and warehousing costs increased $435,000 to $1,970,000 for the first quarter of 2004 as compared to $1,535,000 in the same period of 2003 due to the increased sales levels.

Interest costs before capitalized interest and interest income were $314,000 in the first quarter of 2004 as compared to $267,000 in 2003. The Company capitalized $15,000 of interest costs related to construction in progress during 2004 as compared to $142,000 in 2003. The Company’s higher overall debt level resulted in the increase in interest expense.

Income tax expense increased by $672,000 to $1,408,000 in 2004 as compared to $736,000 in 2003. The Company’s effective tax rate was 39% in 2004 as compared to 37.5% in 2003.

Weather patterns can have an impact on the Company’s operations. Weather conditions influence pest population by impacting gestation cycles for particular pests and the effectiveness of some of the Company’s products, among other factors. The end user of some of the Company’s products may, because of weather patterns, delay or intermittently disrupt field work during the planting season which may result in a reduction of the use of some of the Company’s products. During the first quarter ended March 31, 2004, weather patterns did not have a material adverse effect on the Company’s results of operations.

Because of elements inherent to the Company’s business, such as differing and unpredictable weather patterns, crop growing cycles, changes in product mix of sales, ordering patterns that may vary in timing, and promotional programs, measuring the Company’s performance on a quarterly basis, (gross profit margins on a quarterly basis may vary significantly) even when such comparisons are favorable, is not as meaningful an indicator as full-year comparisons. The primary reason is that the use cycles do not necessarily coincide with financial reporting cycles. Because of the Company’s cost structure, the combination of variable revenue streams, and the changing product mixes, results in varying quarterly levels of profitability.

LIQUIDITY AND CAPITAL RESOURCES

The Company used $9,987,000 in operating activities during the first quarter ended March 31, 2004. Net income of $2,203,000, non-cash depreciation and amortization of $1,067,000, a decrease in prepaid expenses of $216,000 and an increase in trade payables, other payables and accrued expenses of $8,349,000 and $2,273,000, respectively, provided $14,108,000 of cash for operations. Increases in receivables and inventories of $19,385,000 and $4,710,000, respectively used $24,095,000 in of cash for operating activities. The increase in receivables primarily related to sales of the Company’s corn soil insecticides which also carried dated terms which fall due, for the most part, in June 2004. The increase in inventories primarily related to the planned build-up of the Company’s new pyrethroid insecticide as well as the Company’s planned build-up of the Company’s other product lines to meet future sales expectations.

The Company used $4,426,000 in investing activities in the first three months of 2004. It invested $3,846,000 in capital expenditures while other non-current assets increased by $580,000.

Financing activities provided $14,287,000 during the first quarter of 2004. Net borrowing under the Company’s fully-secured revolving line of credit increased by $15,800,000. The Company received proceeds from new long-term debt (related to the refinancing of its property located at 2110 Davie Avenue, Commerce, CA) of $1,288,000 and received $27,000 from the issuance of common stock. The Company made payments on its debt of $2,644,000 and purchased treasury stock for $184,000.

In May 2002, the Company entered into a new $45,000,000 fully-secured long-term credit agreement. The Company’s primary bank (the “Bank”) acted as sole administrative agent arranger and syndication agent. The Bank syndicated the new credit facility with another bank. The $45,000,000 credit facility consisted of a senior secured revolving line of credit of $35,000,000 and a $10,000,000

senior secured term loan. On March 23, 2004, the Credit Agreement was amended to increase the revolving credit limit to $45,000,000. The borrowings under the credit agreement bear interest at the prime rate (“Referenced Loans”), or at the Company’s option, a fixed rate of interest offered by the Bank (“Fixed Loans”) for terms of one, two, three, six, nine or twelve months. Interest on the Referenced Loans are payable quarterly, in arrears, on the last day of each March, June, September, and December, and on the maturity date of such loan in the amount of interest then accrued but unpaid. Interest on the Fixed Loans are payable on the last day of the interest period, provided that, with an interest period longer than three months, interest is payable on the last day of each three-month period after the commencement of such interest period. The senior secured revolving line of credit matures on May 31, 2005. The term loan matures on May 31, 2007. The principal payments of the term loan are payable in equal quarterly installments of $625,000 each, on or before the last business day of each February, May, August and November, commencing May 31, 2003 and in one final installment in the amount necessary to repay the remaining outstanding principal balance of the term loan in full on the maturity date. The Company had $15,000,000 of availability under its revolving line of credit as of March 31, 2004.

Management continues to believe, to continue to improve its working capital position and maintain flexibility in financing interim needs, it is prudent to explore all available sources of financing.

RECENT ACCOUNTING PRONOUNCEMENTS

FASB issued FASB Interpretation No. 45 (“FIN 45”) Guarantor’s Accounting and Disclosure Requirement for Guarantees, Including Indirect Guarantees of Indebtedness of Others . This Interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The following is a summary of the Company’s agreements that the Company has determined is within the scope of FIN 45.

Under its bylaws and agreements with its directors, the Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director’s serving in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has a directors’ and officers’ liability insurance policy that reduces its exposure and enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal and has no liability recorded for these agreements as of March 31, 2004.

CRITICAL ACCOUNTING POLICIES

The Company’s accounting policies are more fully described preceding the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. Certain of the Company’s policies require the application of judgment by management in selecting the appropriate assumptions for calculating financial estimates. These judgments are based on historical experience, terms of existing contracts, commonly accepted industry practices and other assumptions that the Company believes are reasonable under the circumstances. These estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results may differ from these estimates under different assumptions or conditions. The Company’s critical accounting polices and estimates include:

Revenue Recognition

Revenue from sales is recognized at the time title and the risks of ownership passes. This is when the customer has made the fixed commitment to purchase the goods, the products are shipped per the customers’ instructions, the sales price is determinable, and collection is reasonably assured.

Programs

Effective January 1, 2002, the Company adopted Emerging Issues Task Force Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor’s Products (“EITF 01-9”). Upon adoption of EITF 01-9, the Company was required to classify certain payments to its customers as a reduction of sales. The Company previously classified certain of these payments as operating expenses in the consolidated statement of income. Additionally, the Company engages in various customer programs. The Company accounts for these programs as operating expenses in accordance with EITF 01-9 as the Company receives an identifiable benefit in exchange for the consideration.

Advertising Expense

The Company expenses advertising costs in the period incurred. Advertising expenses, which include promotional costs, is recognized in operating costs (specifically in selling expenses) in the consolidated statements of income.

Cost of Goods Sold

In addition to normal centers (and related items) of cost of goods sold, the Company includes such cost centers as Health and Safety, Environmental, Maintenance and Quality Control in cost of goods sold.

Other Than Cost of Goods Sold—Operating Expenses

Operating expenses include such cost centers as Selling, General and Administrative, Research and Product Development, Regulatory/Registration, Freight, Delivery and Warehousing in operating expenses.

Freight, Delivery and Warehousing Expense

Freight, delivery and warehousing costs incurred by the Company are reported as operating expenses. All amounts billed to a customer in a sales transaction related to freight, delivery and warehousing are recorded as a reduction in operating expenses. Freight, delivery and warehousing costs were $1,970,000 during the first quarter of 2004 and $1,535,000 for the first quarter of 2003.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method.

Long-lived Assets

The carrying value of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Measurement of the impairment loss is based on the fair value of the asset. Generally, fair value will be determined using valuation techniques such as the present value of expected future cash flows.

Property, Plant and Equipment and Depreciation

Property, plant and equipment includes the cost of land, buildings, machinery and equipment, office furniture and fixtures, automobiles, and construction projects and significant improvements to existing plant and equipment. Interest costs related to significant construction projects may be capitalized at the Company’s weighted average cost of capital. Expenditures for maintenance and minor repairs are expensed as incurred. When property or equipment is sold or otherwise disposed of, the related cost and accumulated depreciation is removed from the respective accounts and the gain or loss realized on disposition is reflected in earnings. All plant and equipment is depreciated using the straight-line method, utilizing estimated useful property lives. Building lives range from 10 to 30 years; machinery and equipment lives range from 3 to 15 years; office furniture and fixture lives range from 3 to 10 years, automobile lives range from 3 to 6 years; construction projects and significant improvements to existing plant and equipment lives range from 3 to 15 years when placed in service.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, have been translated at year end exchange rates and profit and loss accounts have been translated using weighted average yearly exchange rates. Adjustments resulting from translation have been recorded in the equity section of the balance sheet as cumulative translation adjustments in other comprehensive income.

The effect of foreign currency exchange gains and losses on transactions that are denominated in currencies other that the entity’s functional currency are remeasured into the functional currency using the end of the period exchange rates. The effects of remeasurement related to foreign currency transactions are included in current profit and loss accounts.

Fair Value of Financial Instruments

The carrying values of cash, receivables and accounts payable approximate their fair values because of the short maturity of these instruments.

The fair value of the Company’s long-term debt and note payable to bank is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. Such fair value approximates the respective carrying values of the Company’s long-term debt and note payable to bank.

Income Taxes

The Company uses the asset and liability method to account for income taxes, including recognition of deferred tax assets for the anticipated future tax consequences attributable to differences between financial statement amounts and their respective tax bases. Income tax expense is recognized currently for taxes payable. The Company reviews its deferred tax assets for recovery. A valuation allowance is established when the Company believes that it is more likely than not that some portion of its deferred tax assets will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision in the period of change.

Goodwill and Other Intangible Assets

The primary identifiable intangible assets of the Company relate to product rights associated with its product acquisitions. The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets. Under the provisions of SFAS No. 142, identifiable intangibles with finite lives are amortized and those with indefinite lives are not amortized. The estimated useful life of an identifiable intangible asset to the Company is based upon a number of factors including the effects of demand, competition, and expected changes in the marketability of the Company’s products. The Company tests identifiable intangible assets for impairment on an annual basis, relying on a number of factors including operating results, business plans and future cash flows. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate elements of property. The impairment test for identifiable intangible assets not subject to

amortization consists of a comparison of the fair value of the intangible asset with its carrying amount. An impairment loss, if any, is recognized for the amount by which the carrying value exceeds the fair value of the asset. As of January 1, 2002, the Company had an immaterial amount of goodwill and amortization related to the goodwill. As such, the adoption of SFAS 142, did not have a material impact on the Company’s financial statements.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There are no material changes from the disclosures in the Company’s Form 10-K filed with the U.S. Securities and Exchange Commission for the year ended December 31, 2003.

Item 4.

CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that the Company’s disclosure controls and procedures are effective in all material respects in ensuring that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no significant changes in the Company’s internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of the previous mentioned evaluation.

There were no changes in the Company’s internal controls over financial reporting that occurred during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

The Company was not required to report any matters or changes for any items of Part II except as disclosed below.

Item 1.

Legal Proceedings

DBCP LAWSUIT

The Company’s wholly-owned subsidiary, Amvac Chemical Corporation (“AMVAC”) was served with a complaint on April 12, 2004 (suit was filed March 26 2004). The action, which was filed in California Superior Court, Los Angeles, California, is entitled Tellez et al v. Dole Food Company, Inc. et al. The suit named as defendants Dole Food Company, Inc., Dole Fresh Fruit Company, Standard Fruit Company, Standard Fruit and Steamship Company, Dow Chemical Company, Occidental Petroleum Corporation, Occidental Chemical Corporation and AMVAC (American Vanguard was not named). The Complaint alleges that twenty-five plaintiffs incurred personal injuries, which include sterility and other reproductive injuries. The plaintiffs claim exposure from working on banana plantations (in Nicaragua) from dermal contact with 1,2-dibromo-3-chloropropane (“DBCP”), inhalation of vapors, and from drinking water allegedly contaminated with DBCP. AMVAC filed an answer on May 5, 2004. On May 6, 2004, Dow Chemical removed the case from state court to the United States District Court for the Central District of California. It is anticipated that the focus for the next several months will be on the issue of the proper court to hear the case. No discovery has taken place, therefore, it is unknown as to how many of the plaintiffs, if any, claim exposure to AMVAC’s product and whether the plaintiffs’ claims are barred by applicable statutes of limitation. AMVAC intends to vigorously contest this case.

OTHER MATTERS

The Company may be, from time to time, involved in other legal proceedings arising in the ordinary course of its business. The results of litigation cannot be predicted with certainty. The Company has and will continue to expend resources and incur expenses in connection with these proceedings. There can be no assurance that the Company will be successful in these proceedings. While the Company continually evaluates insurance levels for product liability, property damage and other potential areas of risk, an adverse determination in one or more of these proceedings could subject the Company to significant liabilities, which could have a material adverse effect on its financial condition and operating results.

Item 6.

Exhibits and Reports on Form 8-K

(a)

Exhibits

Exhibit 10.1 — Amendment to Credit Agreement dated March 23, 2004 between Bank of the West and American Vanguard Corporation, Amvac Chemical Corporation, GemChem, Inc. and 2110 Davie Corporation.

Exhibit 10.2 — Form of Change of Control Severance Agreement, dated effective as of January 1, 2004, between American Vanguard Corporation and its Executive and Senior Officers.

Exhibit 31.1 — Certification of Chief Executive Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

Exhibit 31.2 — Certification of Chief Financial Officer Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002.

Exhibit 32.1 — Certification Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.

(b)

Reports on Form 8-K


Date of the Report: January 22, 2004

Description : On January 22, 2004, American Vanguard issued a press release announcing that Amvac Chemical Corporation (“AMVAC”), a wholly-owned subsidiary of American Vanguard Corporation, entered into an agreement with Syngenta Crop Protection, to supply Force ^® 3G corn soil insecticide for use through AMVAC’s Smartbox ^® system beginning in the 2004 season.


Date of the Report: March 12, 2004

Description : On March 11, 2004, American Vanguard Corporation issued a press release announcing its earnings for the quarter and year ended December 31, 2003. This Form 8-K was furnished under Item 12.


Date of the Report: March 16, 2004

Description : On March 16, 2004, American Vanguard Corporation issued a press release announcing that its Board of Directors declared a cash dividend of $.12 per share and a 3 for 2 stock split to be distributed on April 16, 2004 to shareholders of record as of March 26, 2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	A MERICAN V ANGUARD C ORPORATION

Dated: May 12, 2004	By:	/s/ E RIC G. W INTEMUTE
		Eric G. Wintemute President, Chief Executive Officer and Director

Dated: May 12, 2004	By:	/s/ J AMES A. B ARRY
		James A. Barry Senior Vice President, Chief Financial Officer, Secretary/Treasurer and Director

EXHIBIT 10.1

SECOND AMENDMENT TO CREDIT AGREEMENT

THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made and dated as of the 23 ^rd day of March, 2004 by and among BANK OF THE WEST (“BOW”), as agent (in such capacity, the “Agent”) for the lenders from time to time party to the Credit Agreement referenced below (each a “Lender,” and, collectively, the “Lenders”), the current Lenders under the Credit Agreement, AMVAC CHEMICAL CORPORATION, a California corporation (the “Borrower”), AMERICAN VANGUARD CORPORATION, a Delaware corporation (“American Vanguard”), GEMCHEM, INC., a California corporation (“GemChem”), and 2110 DAVIE CORPORATION, a California corporation (“2110 Davie” and, together with the Borrower, American Vanguard and GemChem, the “Loan Parties”).

RECITALS

A. Pursuant to that certain Credit Agreement dated as of May 8, 2002 by and among the Agent, the Lenders and the Loan Parties (as amended, extended and replaced from time to time, the “Credit Agreement,” and with capitalized terms not otherwise defined herein used with the meanings given such terms in the Credit Agreement), the Lenders agreed to extend credit to the Borrower on the terms and subject to the conditions set forth therein.

B. The Loan Parties have requested that the Lenders modify the Credit Agreement in certain respects and the Lenders have agreed to do so subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:

AGREEMENT

1. Increase in Availability . To reflect the agreement of the Lenders to increase the dollar amount of Revolving Loans available to the company under the Credit Agreement, the definition of “Revolving Credit Limit” set forth in Paragraph 15 of the Credit Agreement is hereby amended to read in its entirety as follows:

“‘Revolving Credit Limit’ shall mean $45,000,000, as such amount may be increased or decreased by written agreement of the Agent, the Lenders and the Borrower.”

2. Modification of Commitment Schedule . To reflect the pro rata increase in the dollar amount of the Maximum Commitment of each of the current Lenders under the Credit Agreement, Schedule 2 to the Credit Agreement (Commitment Schedule) is hereby replaced with Replacement Schedule 2 attached hereto and incorporated herein by this reference.

3. Temporary Modification of Financial Covenant Calculation . To reflect the agreement of the parties to modify the methodology of the calculation of the Modified Current Ratio for the fiscal quarters ending March 31, 2004 and June 30, 2004, the definition of the term “Modified Current Ratio” set forth in Paragraph 15 of the Credit Agreement is hereby amended to read in its entirety as follows:

“‘ Modified Current Ratio ’ shall mean, as of any date for American Vanguard and its Subsidiaries on a consolidated basis, the ratio of (1) trading accounts receivable and inventory to (2) the aggregate amount of the outstanding Revolving Loans, unpaid L/C Drawings, and Outstanding

Letters of Credit; provided, however, that in calculating the Modified Current Ratio for the fiscal quarters ending March 31, 2004 and June 30, 2004, the “amount of the outstanding Revolving Loans” shall be deemed reduced by the lesser of (a) the actual dollar amount of outstanding Revolving Loans and (b) $10,000,000.00.”

4. Modification of Pricing Grid . To reflect the agreement of the parties to modify certain pricing provisions applicable to the credit facility evidenced by the Credit Agreement, Schedule 3 to the Credit Agreement (Pricing Grid) is hereby replaced with Replacement Schedule 3 attached hereto and incorporated herein by this reference.

5. Reaffirmation of Loan Documents . Each of the Loan Parties hereby confirms and agrees that (i) the execution and delivery by the Loan Parties of this Amendment and the documents, instruments and agreements referred to herein shall not in any manner or to any extent be deemed to amend, impair, invalidate or otherwise affect any of the Obligations or any other obligations of the Loan Parties under the Loan Documents or the rights of the Agent or the Lenders under the Credit Agreement or any other Loan Document (including, without limitation, the Guaranties) or any other document or instrument made or given by any Loan Party in connection therewith and (ii) the “Obligations” shall include all obligations of the Borrower under the Credit Agreement as amended hereby.

6. Amendment Effective Date . This Amendment shall be effective, as of the day and year first above written, on the date that there shall have been delivered to the Agent each of the following:

(a) A copy of this Amendment duly executed by all parties required as signatories hereto;

(b) Such corporate and other authorizing documentation and other documents, instruments and agreements as the Agent may require; and

(c) For distribution by the Agent to the Lenders in accordance with their respective Percentage Shares, a non-refundable amendment fee in the amount of $37,500.00.

7. No Other Amendment . Except as expressly amended hereby, the Credit Agreement and other Loan Documents shall remain in full force and effect as written.

8. Counterparts . This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

9. Representations and Warranties . Each of the Loan Parties hereby represents and warrants to the Agent and the Lenders as follows:

(a) Each of the Loan Parties has the power and authority and the legal right to execute, deliver and perform this Amendment and have taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment. This Amendment has been duly executed and delivered on behalf of each of the Loan Parties and constitutes the legal, valid and binding obligation of such Persons, enforceable against such Persons in accordance with its terms.

(b) Both prior to and after giving effect to this Amendment: (1) the representations and warranties of the Loan Parties contained in the Loan Document are accurate and complete in all respects, and (2) there has not occurred a Potential Default or an Event of Default.

*****************************************

[Signature Pages Following]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first above written.


A MVAC C HEMICAL C ORPORATION , a California corporation

By:		/s/ J AMES A. B ARRY
Name:		James A. Barry
Title:		Sr. V.P., Chief Financial Officer

A MERICAN V ANGUARD C ORPORATION , a Delaware corporation

By:		/s/ J AMES A. B ARRY
Name:		James A. Barry
Title:		Sr. V.P., Chief Financial Officer

G EMCHEM , I NC ., a California corporation

By:		/s/ J AMES A. B ARRY
Name:		James A. Barry
Title:		Sr. V.P., Chief Financial Officer

2110 D AVIE C ORPORATION , a California corporation

By:		/s/ J AMES A. B ARRY
Name:		James A. Barry
Title:		Sr. V.P., Chief Financial Officer


B ANK OF THE W EST , as Agent

By:		/s/ T ED A. D UNN
Name:		Ted A. Dunn
Title:		Vice President

B ANK OF THE W EST , as a Lender

By:		/s/ V.T IMIRAOS
Name:		Vicente L. Timiraos
Title:		SVP & Deputy Manager


F IRST B ANK (d/b/a F IRST B ANK & T RUST ) as a Lender

By:		/s/ R ICHARD F EIN
Name:		Richard Fein
Title:		Vice President

REPLACEMENT SCHEDULE 2

COMMITMENT SCHEDULE

(As of March 23, 2004)

Revolving Credit Limit: $45,000,00

Aggregate Credit Limit: $52,500,000 ¹


Lender	Maximum Commitment: Revolving Credit Limit		Maximum Commitment: Term Loan Limit		Percentage Share
Bank of the West	$	25,000,000.00	$	4,166,666.67	55.55555555556	%

First Bank	$	20,000,000.00	$	3,333,333.33	44.4444444444	%

¹	Sum of Revolving Credit Limit and outstanding principal balance of the Term Loan at March 19, 2004.

REPLACEMENT SCHEDULE 3

PRICING GRID


Leverage Ratio (as reflected on most recently delivered Compliance Certificate)	Commitment Fee Percentage		LIBOR Spread				Reference Rate Spread
	Commitment Fee Percentage		Term Loan		Revolving Loans and Letters of Credit		Term Loan		Revolving Loans
³ 2.50:1.00	0.30	%	2.50	%	2.75	%	0.50	%	0.75	%

³ 2.00:1.00 but < 2.50:1.00	0.25	%	2.25	%	2.50	%	0.25	%	0.50	%

³ 1.50:1.00 but< 2.00:1.00	0.20	%	2.00	%	2.25	%	0.0	%	0.25	%

< 1.50:1.00	0.15	%	1.75	%	2.00	%	0.0	%	0.25	%

EXHIBIT 10.2

CHANGE OF CONTROL SEVERANCE AGREEMENT

This CHANGE OF CONTROL SEVERANCE AGREEMENT (this “Agreement”), effective as of January 1, 2004 (the “Effective Date”), is entered into by and between American Vanguard Corporation, a Delaware corporation (“American Vanguard”), and (the “Executive”). Capitalized terms used but not defined in the context of this Agreement are defined in Section 8.

WHEREAS, the Executive provides valuable services as an employee of American Vanguard or one of its subsidiaries (as applicable, the “Company”); and

WHEREAS, the Company wishes to provide security to the Executive to induce the Executive to continue to provide services to the Company.

NOW THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained the value of which is hereby acknowledged, the Executive and the Company agree as follows:

1. Company Obligation . Subject to the limitations of this Agreement, if, during the Change of Control Period, the Company shall terminate the Executive’s employment or the Executive shall terminate his employment with the Company for Good Reason (either a “Termination”), the Company shall: (a) pay to the Executive in a single sum within thirty (30) days after the Termination an amount equal to two (2) times the Executive’s Compensation; (b) continue to pay Medical and Hospital Benefits for a period of twenty-four (24) consecutive months beginning with the date of Termination; (c) provide executive level outplacement assistance benefits; and (d) accelerate all of the Executive’s options or rights to acquire securities of the Company that are outstanding immediately prior to the date of a Change of Control, whether or not then exercisable, so that they automatically become immediately exercisable in full thereafter. If the Executive’s employment is terminated with the Company during the Change of Control Period for any reason, excluding a termination for Good Reason, or if the Company shall terminate the Executive’s employment due to Cause, death or the Executive’s disability which renders the Executive unable to perform the essential functions of the position, this Agreement shall terminate without any obligation of the Company to the Executive hereunder. If the Executive is offered employment by a successor to the Company or its business or assets or by its Affiliate or a successor to such Affiliate or its business or assets on terms and conditions that are reasonably comparable to the Executive’s terms and conditions of employment with the Company (including this Agreement), the Company shall not have an obligation hereunder to the Executive. If any payment under this Agreement, either alone or together with any other payment, benefit or transfer of property which the Executive receives or has a right to receive from the Company or its Affiliate (the “Total Payments”), would constitute a nondeductible “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, amended (the “Code”)) or nondeductible “employee remuneration” under Section 162(m) of the Code, such payment under this Agreement

shall be reduced to the largest amount as will result in no portion of the payment under this Agreement being such a nondeductible payment under the Code. The Company agrees to undertake such reasonable efforts as it may determine in its sole discretion to prevent any payment under this Agreement from constituting a nondeductible payment, provided the Company is not obligated to incur additional cost in order to make a payment nondeductible. The determination of any reduction under the preceding sentences shall be made by the Company in good faith, and such determination shall be binding on the Executive. The reduction provided by the fifth sentence of this Section 1 shall apply only if, after reduction for any applicable federal excise tax imposed by Section 4999 of the Code and federal income tax imposed by the Code, the total payment accruing to the Executive would be less than the amount of the Total Payments as reduced under said fifth sentence and after reduction for federal income taxes.

2. Executive Obligation . As condition of the Company’s performance of its obligations under Section 1, the Executive shall execute and deliver to the Company a written agreement, in form and substance reasonably satisfactory to the Company, releasing the Company and its representatives, agents and advisors from all past, then-current and future claims and liabilities, whether known or unknown, that the Executive may have.

3. Other Benefits . Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any other plan, program, policy, practice, contract or agreement of or with the Company or its Affiliate for which the Executive is a party or may qualify (collectively, the “Other Benefits”), nor shall anything in this Agreement limit or otherwise affect the rights of the Company or the Executive under any Other Benefits. Any amounts payable or rights or benefits furnished to the Executive under any Other Benefits existing at or subsequent to the Termination shall be payable in accordance with the terms of such Other Benefits and without regard to this Agreement, except as explicitly modified by this Agreement; provided, however, that to the extent the amounts payable or rights or benefits furnished to the Executive under such Other Benefits exceed or are more favorable to the Executive than this Agreement, such Other Benefits shall govern and control. Amounts payable or in respect of this Agreement shall not be taken into account with respect to any other employee benefit plan or arrangement.

4. Mitigation . The Executive shall not be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under this Agreement, and the amounts payable under this Agreement shall not be reduced whether or not the Executive obtains other employment. The Company’s obligation to make the payment provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.

5. Successors .

(a) This Agreement is personal to the Executive and shall not be assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives, including the Executive’s executor, trustee or administrator.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement.

6. Resolution of Disputes . Any dispute related to the interpretation or enforcement of this Agreement shall be enforceable only by arbitration in Orange County, California (or such other metropolitan area to which the Company’s principal executive officers may be relocated if such relocation does not result in Good Reason for the Executive to terminate employment), in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall be selected by the Company, the second of whom shall be selected by the Executive and the third of whom shall be selected by the other two arbitrators. In the absence of the American Arbitration Association, or if for any reason arbitration under the arbitration rules of the American Arbitration Association cannot be initiated, or if one of the parties fails or refuses to select an arbitrator, or if the arbitrators selected by the Company and the Executive cannot agree on the selection of the third arbitrator within seven days after such time as the Company and the Executive have each been notified of the selection of the other’s arbitrator, the necessary arbitrator or arbitrators shall be selected by the presiding judge of the court of general jurisdiction in the metropolitan area where arbitration under this Section would otherwise have been conducted. The arbitrators shall award to the Executive his reasonable legal fees and expenses in connection with any arbitration proceeding hereunder if (i) the arbitration is commenced by the Company and the Company has no reasonable basis for initiating such proceeding, or (ii) the arbitration is commenced by the Executive and the Executive prevails on the Executive’s claim in the arbitration proceeding. The arbitrators shall award to the Company its legal fees and expenses incurred in connection with any arbitration proceeding hereunder if the arbitration proceeding is commenced by the Executive, and the Executive has no reasonable basis for initiating such proceeding. The parties agree that the arbitration panel shall construe this Section 6 to determine whether either party is entitled to recover its cost and fees hereunder. Any award entered by the arbitrators shall be formal, binding and nonappealable and judgment may be entered thereon by any party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable.

7. Miscellaneous .

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The headings or captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:


		If to the Executive :




		If to the Company :

		American Vanguard Corporation
		4695 MacArthur Court, Suite 1250
		Newport Beach, California 92660
		Attention: Chairperson of the Compensation Committee

		With a copy to :

		McDermott, Will & Emery
		18191 Von Karman Avenue, Suite 400
		Irvine, California 92612
		Attention: John B. Miles

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee.

(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(e) The Executive and the Company acknowledge that, except and only as may otherwise be provided under any other written agreement between the

Executive and the Company, if any, the employment of the Executive by the Company is ‘at will” and, may be terminated by either the Executive or the Company at any time. Moreover, if subsequent to the Change of Control Period, the Executive’s employment with the Company terminates, then the Executive shall have no rights under this Agreement.

(f) This Agreement constitutes the entire agreement between the parties hereto and contains all the agreements between such parties with respect to the subject matter hereof. This Agreement supersedes all other agreements, oral or in writing, between the parties hereto with respect to the subject matter hereof.

8. Defined Terms . For purposes of this Agreement, the following whenever used in the capitalized form shall have the meaning set forth below unless the context clearly indicates otherwise.

(a) “Affiliate” means, with respect to any person, any individual, corporation, partnership, association, joint-stock company, trust, unincorporated association or other entity (other than such person) that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with that person.

(b) “Annual Bonus” means the gross, annual bonus payable to the Executive for the fiscal year of the Company ending immediately preceding the Effective Date, but annualized in the event the Executive was not employed for the entire fiscal year with respect to which such bonus was paid.

(c) “Cause” shall means termination because of (1) an act of fraud, embezzlement or theft in connection with the Employee’s duties or in the course of the Employee’s employment, (2) unreasonable neglect or refusal by the Employee to perform his/her duties (other than any such failure resulting from the Employee’s incapacity due to disability), (3) the engaging by the Employee in willful, reckless, or grossly negligent misconduct which is or may be materially injurious to the Company, or (4) the Employee’s conviction of or plea of guilty or nolo contendere to a felony.

(d) “Change of Control” means, and be deemed to have occurred, on the date of the first to occur of any of the following:

(A) upon the vote of the shareholders of the Company (or its Affiliate) approving a merger or consolidation in which the Company’s (or its Affiliate) shareholders immediately prior to the effective time of the merger or consolidation will beneficially own immediately after the effective time of the merger or consolidation securities of the surviving or new corporation having less than 50% of the “voting power” of the surviving or new corporation, including “voting power” exercisable on a contingent or deferred basis as well as immediately exercisable “voting power”;

(B) upon the consummation of a sale, lease, exchange or other transfer or disposition by the Company (or its Affiliate) of all or substantially all of the assets of the Company (or its Affiliate) on a consolidated basis, provided, however, that the mortgage, pledge or hypothecation of all or substantially all of the assets of the Company (or its Affiliate) on a consolidated basis, in connection with a bona fide financing shall not constitute a Change of Control; or

(C) when any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the Securities Exchange Act as in effect on date hereof), directly or indirectly of more than fifty percent (50%) of the common stock of the Company (or its Affiliate).

(e) “Change of Control Period” means the continuous period commencing on the Effective Date and ending on the fifth anniversary of the Effective Date.

(f) “Compensation” means the gross, annual base salary, but excluding the Annual Bonus, paid by the Company (including amounts accrued but not paid) to the Executive in accordance with the generally applied payroll practices of the Company for the completed fiscal year of the Company immediately preceding the Effective Date. Compensation, for purposes of applying the two (2) multiplier in Section 1 of this Agreement, does not include any accrued balances in any other compensation program the Executive participates in. For purposes of this Agreement, any amounts due the Executive under any compensation plan other than base salary, shall be paid out in accordance with the provisions of the specific plan governing those said programs.

(g) “Good Reason” shall mean the occurrence of any of the following events unless, (i) such event occurs with the Executive’s express prior written consent, (ii) the event is an isolated, insubstantial or inadvertent action or failure to act which was not in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive, (iii) the event occurs in connection with the termination of the Executive’s employment for Cause, disability or death or (iv) the event occurs in connection with the Executive’s voluntary Termination of employment or other than due to the occurrence of one of the following events:

(A) the assignment to the Executive of any duties which are inconsistent with, or are a diminution of, the Executive’s positions, duty, title, office, responsibility and status with the Company, including without limitation, any diminution of the Executive’s position or responsibility in the decision or management processes of the Company, or any removal of the Executive from, or any failure to reelect the Executive to, any of such positions;

(B) a reduction in the Executive’s rate of base salary as in effect on a Change of Control or as the same may be increased from time to time during the term of this Agreement, other than a reduction which is a reduction generally applicable to all senior officers or executives of the Company and its Affiliates, including, without limitation, the Company’s Affiliates and successors after a Change of Control;

(C) any failure either to continue in effect any material benefit or incentive plan or arrangement (including, without limitation, a plan meeting the applicable provisions of Section 401(a) of the Code, group life insurance plan, medical, dental, accident and disability plans) in which the Executive is participating or eligible to participate on the date of a Change of Control or to substitute and continue other plans providing the Executive with substantially similar benefits (all of the foregoing is hereinafter referred to as “Benefit Plans”), or the taking of any action which would substantially and adversely affect the Executive’s participation in or materially reduce the Executive’s benefits or compensation under any such Benefit Plan or deprive the Executive of any material fringe benefit enjoyed by the Executive on the date of a Change of Control;

(D) a relocation of more than 50 miles from the location of the principal executive offices of the Company, or the relocation of the Executive’s principal place of employment for the Company of more than 50 miles, to any place other than the location at which the Executive performed his duties on the date of a Change of Control; or

(E) any failure by any successor or assignee of the Company to continue this Agreement in full force and effect.

If the Executive does not notify the Company and incurs the Termination within 120 days of the date the Executive knew or should have reasonably known of the event giving rise to Good Reason, the Executive shall be deemed to have waived the Executive’s right to a Termination based upon such event or the continuing effect or occurrence of such event.

(h) “Medical and Hospital Benefits” mean the medical and hospital benefits that would have been offered to the Executive and the Executive’s family members if the Executive’s employment had not terminated based on the same terms and conditions applicable to non-terminated similarly situated executives of the Company or its successor and their family members. Notwithstanding anything contained herein to the contrary, (A) any Medical and Hospital Benefits offered in accordance with this Agreement run simultaneously with any rights to health coverage continuation available to the Executive and the Executive’s family under applicable law and this Agreement shall constitute notice to the Executive and the Executive’s eligible family members of any right to elect health continuation coverage under the provisions of Section 4980B of the Code, Section 601 et. al. of the Employee Retirement Income

Security Act of 1974, as amended, (to the extent applicable) following the expiration of the Medical and Hospital Benefits coverage period under this Agreement; and (B) if the Executive or any of the Executive’s family members are covered under a group health plan of another employer, nothing in this Agreement shall obligate a plan maintained by the Company to pay benefits on a primary basis with respect to such person.

IN WITNESS WHEREOF, the parties have executed this Change of Control and Severance Agreement on the date first written above.


A MERICAN V ANGUARD C ORPORATION a Delaware corporation

By:
Its:

E XECUTIVE

Exhibit 31.1

AMERICAN VANGUARD CORPORATION

CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric G. Wintemute, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of American Vanguard Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.	The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.	The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.


Date:	May 12, 2004	/s/ E RIC G. W INTEMUTE
		Eric G. Wintemute
		Chief Executive Officer

Exhibit 31.2

AMERICAN VANGUARD CORPORATION

CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Barry, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of American Vanguard Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.	The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and we have:

(a)

(b)

(c)

5.	The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.


Date:	May 12, 2004	/s/ J AMES A. B ARRY
		James A. Barry
		Chief Financial Officer

Exhibit 32.1

AMERICAN VANGUARD CORPORATION

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of American Vanguard Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002 that, based on their knowledge: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods covered in the Report.

/s/ E RIC G. W INTEMUTE

Eric G. Wintemute,

Chief Executive Officer

/s/ J AMES A. B ARRY

James A. Barry,

Chief Financial Officer

May 12, 2004

This certification set forth above is being furnished as an exhibit solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Form 10-Q or as a separate document of the Company or the certifying officers.

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