American Vanguard Corp (AVD) 2018 Q1 法說會逐字稿

Greetings, and welcome to the American Vanguard Corporation's First Quarter 2018 Conference Call and Webcast. (Operator Instructions) As a reminder, this conference is being recorded.

It is my now pleasure to introduce your host, Bill Kuser, Director of Investor Relations. Thank you, Mr. Kuser, you may begin.

Well, thank you very much, Doug, and welcome everyone to American Vanguard's First Quarter 2018 Earnings Review. Our speakers today will be Mr. Eric Wintemute, the Chairman and CEO of the company; Mr. David Johnson, the company's Chief Financial Officer; and also assisting with our questions, our Chief Operating Officer, Mr. Bob Trogele. This afternoon's American Vanguard -- this afternoon, I should say, American Vanguard has filed its Form 10-Q with the SEC. Providing additional details, the results will be discussed in this call.

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 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. Such information will not necessarily be updated by the company.

With that said, we turn it over to Eric Wintemute.

Thank you, Bill. Hello, everyone, and welcome to our first quarter earnings call. As always, thank you for your continued interest in American Vanguard.

We're off to a strong start in 2018. As you have read in our earnings release, first quarter sales were up $34 million or 47% over the first quarter of 2017, and net income was up 35% compared to the same period. $29 million of the increase in net sales arose from 4 significant acquisitions that we completed largely in the second half of 2017. These include AgriCenter; OHP; 3 domestic products Parazone, Equus and Abba that came to us via a FTC-mandated divestment and, to a lesser, a slate of products in Mexico that came to us through a government-ordered divestment.

Given the significance of our newly acquired businesses to our quarterly financial performance, I believe it's important to make 3 points. First, we had forecast that these acquisitions would generate annual sales in excess of $100 million. During the last 7 months of 2017, when we were still completing the acquisitions, these assets generated $30 million in sales. Now in our first quarter, we've nearly matched that amount. We are well on our way towards meeting or exceeding the annual target. I hasten to add that as we continue to integrate and grow these businesses, we expect to attain greater efficiencies and improved sales over the course of time.

Second, we were able to purchase these assets at a reasonable cost and without diminishing our ability to make further acquisitions. In fact, despite completing these 4 deals, our borrowing capacity has actually improved year-over-year. We're at $125 million at the end of Q1 2018 versus $119 million at the end of Q1 2017.

In the aftermath of industry consolidation, we continue to see post-merger divestments. In short, we're in a better position to pursue new opportunities today than we were before we made the acquisitions in 2017.

Third, I wanted to take some time to give you additional color on these new businesses. Oftentimes, we move so quickly from one initiative to the next that we fail to give some matters the attention they deserve.

Let us start with AgriCenter. Headquartered in Costa Rica, AgriCenter is a regional distribution company that serves Central America, selling not only into Costa Rica, but also Honduras, Nicaragua, Panama and the Caribbean.

Over the course of the past 15 years, it has grown to become one of the largest distributors in the region. AgriCenter markets over 100 products under its own brands into pineapples, citrus, rice and bananas to customers like Dole, Tico Frut and Del Monte. As a side note, the AgriCenter and our Bromacil product line, which we acquired in 2014, we are becoming a major player in the pineapple market, so please eat more pineapples.

In addition, AgriCenter offers a complete line of micronutrient formulations under the name Greenplants. As a mark of distinction among distributors, AgriCenter operates its own research center known as Life, which tailors solutions from -- for growers, thereby bringing technology into the field and, at the same time, fostering long-term relationships throughout the region.

With 115 persons in 6 countries, we have the necessary feet on the ground to ensure that our customer service will be second to none. We intend not only to expand our presence in LatAm, including El Salvador, Guatemala and Ecuador, but also to export AgriCenter's innovative products, particularly micronutrients and biologicals into other regions.

In addition to AgriCenter, we are now operating OHP, which is the largest domestic ag chem distributor within the greenhouse and nursery space. OHP provides a full-service turnkey solution by which ag chem companies can effectively address and penetrate this market.

Unlike many markets, greenhouses require complex management practices as growers may have up to 8 crop cycles per year. OHP works with greenhouse growers to develop a program approach towards managing crop inputs.

Nearly, all of OHP's 55 products are sold under their own brands and include insecticides, fungicides, herbicides and plant growth regulators. Within greenhouses, OHP products are commonly used on tropical plants, perennials, many varieties of flowers, herbs and, increasingly, vegetables. Nursery applications include trees, shrubs and woody plants.

The addition of OHP has served to increase our domestic non-crop business by about 40%, and with the addition of 18 highly skilled employees, gives us the infrastructure necessary to grow the non-crop business to our targeted level of $100 million.

In addition to these 2 distribution companies, we've acquired a number of product lines, both domestically and in Mexico, through divestments that were required as conjunction with industry mergers.

In U.S., we're selling Parazone, a herbicide used on multiple-grow crops, particularly corn, soybeans and cotton as a tool for managing glyphosate-resistant weeds; Equus, a fungicide primarily on peanuts and cotton, which are 2 crops in which we have much experience; and Abba, a biological insecticide used primarily on nut crops, such as almonds, but also on citrus and cotton.

Knowing that there would be supply constraints for these 3 products, we planned for the 2018 season by taking measures to find multiple sources and, thereby, to ensure continuous and ample supply.

In Mexico, we are selling the popular Bravo line of fungicide products, which are used largely on vegetables, bananas and other fruits as well as Gesapax and Krismat, which are herbicides used primarily in sugarcane production. The addition of these products has served to expand our portfolio and to obtain greater market access into the Southern region of Mexico.

As I mentioned at the start of my remarks, the strong sales performance from our newly acquired products was in addition to growth of our traditional business.

During the quarter, our base business recorded a 6% improvement in net sales as compared to the first quarter of 2017. This is comparable to the industry average for the quarter.

Looking back over the past 3 years, however, much of our industry has been in something of a down cycle. By contrast, we have been consistently growing our base business by mid-single digits during that time.

In short, you can see from our quarterly results that we continue to maintain an upward trajectory for our traditional business, and that should not be overlooked.

Growth of our base business was driven by multiple factors. We experienced strong demand for our soil fumigates, large [indiscernible] potatoes, and this has been a stable market for us for many years.

In addition, we increased sales of our Dibrom mosquito adulticide as vector-controlled districts ordered product to replenish inventories that have been depleted during the 2017 hurricane season. Also, sales of granular soil insecticides such as Aztec for corn, Counter for corn and sugar beets, and Thimet for peanuts and sugarcane were up. We also enjoyed improved sales of our Impact herbicide during the period. I'm pleased that our corn product brands continue to retain their value in one of the most competitive markets in the United States. Further, Mocap and Nemacur, which are broad-spectrum insecticides, posted gain in our international markets.

Not all products and segments were up during the quarter. For example, Baygon sales declined with weather-related planting delays, and the base international business declined due in part to distribution changes for Aztec in Korea and competing technology to Nemacur in both Southern Europe and Mexico. However, these decreases were more than offset by the gains, and by virtue of our diversification, we're able to continue our trend of positive growth.

Before turning to David for his analysis on our financial performance, I wanted to mention a few structural changes within the organization. As of May 1, Peter Eilers, who had served as our VP of Business Development and Marketing, was promoted to the position of Managing Director of AMVAC Netherlands BV, as Ad De Jong, who has run our international business for the past 5 years, transitions into retirement at the end of 2018.

In light of Peter's promotion, [John Pontier], who has served in positions of increasing responsibility at DuPont for over 30 years, has assumed the role of VP of Business Development and Marketing.

In addition, Scott Hendrix, who has been VP of U.S. Crop for the past 3 years, has been promoted to Senior VP of U.S. Crop and Application Technology. In his new role, he will be assuming additional responsibilities overseeing not only Canadian sales, but also SIMPAS commercialization.

With that, I turn to David for his comments. David?

Thank you, Eric. Good afternoon, everybody. As Bill mentioned, we filed our Form 10-Q for the 3 months ended March 31, 2018, just a few moments ago. Everything I'm covering here is included in more detail in that document.

With regard to the financial results, as Eric just detailed, the company's sales for the first quarter of 2018 increased by 47% to $104 million as compared to sales of $71 million this time last year. Included in this improvement, our newly acquired businesses generated a 41% increase, while our pre-existing products portfolio also had a strong performance and grew by 6%.

Our international sales continued to grow in importance and represented 33% of net sales in the first quarter as compared to 26% this time last year. Our tax rate ended the quarter at 26%, which compared with 28.5% for the same period of the prior year. And overall, net income for the quarter increased by 53% to $4.7 million or $0.16 per share as compared to $3.5 million or $0.12 per share this time last year.

Our first quarter gross margin ended at 39%, which was in line with the guidance we provided last call. This percentage rate includes strong sales of newly acquired products that have comparatively lower average gross margins.

During the quarter, our operating expenses ended at 32% of net sales compared to 35% this time last year. Notwithstanding this favorable comparison, operating expenses increased by 35% on an absolute basis due to several factors. These include the addition of newly acquired products and businesses, the build-out of our international structure, higher short- and long-term incentive compensation costs as a result of our improved financial performance, and continued expansion of our product portfolio.

Finally, we had some changes in volume and mix of domestic sales that resulted in higher freight costs when compared to the same period of the prior year.

Interest expense was elevated in comparison to the same period of the prior -- of last year, driven mainly by the effect of closing acquisitions in late 2017, which raised the average borrowing level. Further, the company increased its working capital levels as we progressed through the 2017, '18 growing seasons.

Overall, interest costs amounted to $837,000 as compared to $298,000 this time last year.

In an effort to further support investors' understanding of the business and its financial performance, in the earnings release, we have reported EBITDA for the period and included a reconciliation statement between net income and EBITDA.

Our EBITDA improved by 27% in the quarter to $13.3 million, whereas net income improved by 35% as I have just described. There are 2 facts that account for the 8 percentage point difference. First, the change in tax rate related to the Tax Cuts and Jobs Act is responsible for 5% of the 8% difference in the quarter-on-quarter growth rates. Second, the company's depreciation expense was broadly flat and caused the balance of the gap.

You may also notice that the financial statements at March 31, 2018, include an adjustment to retained earnings in the amount of $2 million. This beneficial adjustment predominantly relates to the change in revenue recognition rules that occurred on January 1, 2018, and affects all public filers of U.S.A. This does not affect our net income reported for the quarter.

From my perspective, the key financial issues for the first quarter as follows.

First, we continue to follow a disciplined approach to planning our factory activity, balancing overhead recovery with demand forecasts and inventory levels. In the 3 months ended March 31, 2018, our under-absorption factory costs improved by $1.1 million, marking a very strong start for 2018, during which we anticipate improving upon our 2017 manufacturing results.

Second, as I mentioned earlier, gross margin for the quarter was 39% as compared to 43% last year. The change was predicted in our remarks at the last conference call and is primarily driven by the inclusion of new businesses, particularly the distribution businesses. Some of the downward pressure on margins was offset by the strong factory performance.

Third, during the quarter, consistent with our manufacturing plan for 2018, our inventory increased by approximately $20 million.

The increase arises from 2 factors: First, approximately 50% of the increase is associated with building working capital for our newly acquired businesses as they prepare for their respective selling seasons; And second, the balance of the increase is caused by strong demand for our core products that is driving raw material procurement and factory manufacturing output.

Our inventory planning process has been rolled out for the new businesses and initial planning reviews have taken place. We are now forecasting inventory levels between $120 million and $130 million at the end of 2018. This forecast is slightly higher than we indicated at the time of the Q4 conference call and will be subject to review as we work through the year. This target will also be adjusted to reflect any new acquisitions that occur during 2018.

Fourth, our effective tax rate ended the quarter at 26% as compared to 28.5% last year. The improvement in the rate for 2018 arrives -- arises from the change in the U.S. tax code following the implementation of the Tax Cuts and Jobs Act, which we discussed in detail in the last quarter conference call.

Our 2018 rate is based on our forecast for the present year and depends on our assessment of where we expect to make profits this year.

Fifth, with regard to liquidity. At the end of the first quarter, availability under our credit lines stood at $125 million as compared to $120 million this time last year. Indebtedness as of March 31, 2018, was $90 million as compared to $30 million this time last year. The difference is substantially driven by the $82 million borrowed to finance the acquisitions that we completed during the last 7 months of 2017.

In summary, when looking at the start of 2018, we can say we have started strongly, having achieved a significant increase in net sales, recorded gross margins that are in line with our projections, improved factory output and gained some leverage efficiency in our operating costs. We have delivered on the tax rate we predicted when we last spoke to you. This all came together in a 35% improvement in net income and in the context of a continually strong balance sheet.

With that, I will hand back to Eric.

Thank you, David. At this point, I'd like to turn our prospects to our products in the balance of the year, at least in terms of market outlook and general direction. Regarding the second quarter, with planted cotton makers forecasted to be up about 8% this year, we expect to see strong sales of our 2 cotton products Bidrin and Folex. We also see strong demand for our recently acquired herbicide Parazone for burndown applications prior to late spring planting. Likewise, we are seeing strong demand in the peanut market for our newly acquired fungicide, Equus as well as our traditional soil insecticide, Thimet. We are also projecting strong performance in our Mexican operations and Central America driven by AgriCenter supplying the in-season demand for growers of tropical crops like pineapples, citrus and bananas.

In the second half of 2018, we expect to see demand building for our industry-leading soil fumigate products which are applied after harvest. Solid sales of our products in cotton and peanuts will continue, along with channel replacement for our mosquito control adulticide.

You may have read the Center for Disease Control's recently -- recent report that the incident of insect-borne diseases has increased over threefold since 2004 and that the trend will continue moving upward into this year. As we have often pointed out, our Dibrom is the market-leading, aerial-applied solution for mitigating this threat, as we observed in the FEMA assault on intense mosquito infestation in the wake of Hurricane Harvey in Houston last year. We will also see strong late-summer demand in LatAm for many of AMVAC's traditional products and those of our AgriCenter distribution franchise.

Continuing later into the year, we expect to see strong post-harvest soil fumigate business and pre-plant season procurement of our corn soil insecticides and post-emergent herbicide impact. We also forecast steady demand for Dacthal in fruits and vegetables, and Mocap, and broad-spectrum insecticide used in a number of countries. All in all, the market outlook is positive.

As far as annual metrics are concerned, I'm confident to substantially reiterate that we have outlined in our year-end earnings call. We still expect annual net sales in the range of $450 million to $480 million. Gross margins should be in the high 30s. Operating expenses should be in the neighborhood of $150 million to $160 million, as we continue to invest in our international businesses, defend our product portfolio and bring SIMPAS closer to commercialization. We do expect higher-than-normal legal expenses in the second quarter as we continue to make our case against U.S. EPA for an illegal taking of our PCNB business arising from the stop-sale order of 2010.

We should generate about $50 million in cash from operating activities this year, and with the new tax law, we expect that our effective tax rate will remain in the mid-20s.

Before closing, I would like to give you an update on our SIMPAS precision application system. Prototype testing completed in 2017 has served to validate the operation of the system, including performance of the wireless control system, accuracy of the meters and overall durability. The next phase of this commercialization process involves wider scale, on-field demonstrations involving 6,000 acres on 10 farms in 4 states with 3 of our products: Counter, Aztec HC and SmartChoice HC.

Specifically, we are collaborating with Simplot Grower Solutions to conduct large-scale prescriptive applications in both Colorado and Idaho. These field trials involve the [at] plant application of Counter onto nematode management zones of corn fields. In these demonstrations, we are combining SIMPAS variable-rate application technology with Simplot's SmartFarm prescriptions to enable growers to target crop protection and nutritional products in a precise manner.

The Colorado trials are being conducted on about 1,100 acres of field corn at 6 different farms, while a 1,300-acre trial in Idaho is being conducted on a single farm, with 400 acres being prescriptively applied and 900 acres being planted at a constant rate.

In addition, 3 farms in Illinois and 1 in Iowa are using our equipment for prescriptive applications -- non-prescriptive applications on approximately 4,000 acres of corn, providing further validation of the operational performance of the SIMPAS technology.

Thus far, the SIMPAS system has performed perfectly, and we have heard encouraging comments from academia, Simplot and growers. In fact, one grower was quoted as saying, "Farmers don't have a 401(k) plan. The land is their 401(k) plan." He went on to add that by applying the products that he needs only where he needs, SIMPAS helps to preserve his valuable asset into his retirement.

Simplot Grower Solutions will be capturing a large amount of data from these trials, which in turn will be used by an objective third-party XSInc to measure the performance of the SIMPAS system after yield information is determined post-harvest.

During the planting season of 2019, we are targeting 100 growers using the SIMPAS system equipped with both granular and liquid meters dispensing multiple products. In 2020, we expect to be in a position to fully commercialize this proprietary technology.

In closing, we are showing that we can build this business both organically and through acquisitions, and at the same time manage costs and working capital while improving plant efficiency. The consistent growth of our base business over the past 3 years compares favorably to industry trends. The fact that we have been able to improve upon that trajectory, with the addition of rationally priced acquisitions, makes the story even better. This has been a case study in how to execute our business plan and invest in the future while remaining poised to expand in a changing market.

Now with that, we'd be happy to answer any questions that you may have. Doug?

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

So on your international sales, they are slowly becoming a bigger piece of the business, but you mentioned some minor issues during the quarter. And -- but despite that, this quarter last year, you were at about 26% international. This quarter, you're around the 33%. Can you give us some additional color as to what drove the incremental international sales despite the minor issues with a couple of spots there?

Yes, I think AgriCenter is the biggest piece of that. And again, we did have increased sales in some of our international products. We mentioned Aztec in Korea. That was just, really, a timing shift from one distributor to another, and there was inventory in channel. So -- and Mexico has picked up some as well.

(Operator Instructions) Our next question comes from the line of James Sheehan with SunTrust Robinson Humphrey.

Could you discuss what you see as the revenue opportunity of SIMPAS for 2020? And also explain how will American Vanguard get paid for use of the equipment?

So the first question gets asked a lot. It was first question last conference call. We will probably be looking at providing some guidance on 2020 maybe this time next year or third quarter. There's a number of variables that we need to figure out before we can start nailing down numbers, the products that are going to be available for the 2020 season, obviously, going through -- what we're going through now and seeing if we've got anything that sets us back time-wise. I think when we get into next year, assuming we've lined up across the board the growers that we have, I think that will give us the level of confidence so we could start projecting. As far as where we would make money on the equipment, so to speak. I think the equipment sales in SmartBox has not been a profit center for us. I think we would look initially, I guess, to Trimble to doing marketing of the equipment. And I think, they would capture the majority of the value on the equipment itself. Our partners like Simplot, who would be writing the prescriptions and working closely with the farmer, I think, would pick up not only sales of product going to the farmer, but also looking at how they can help manage return on investment for the farm itself. The predominance of our income will come from the supply of the chemical going into the system through our smart cartridges that will be sold to the farmer and returned back to be refilled.

Our next question comes from the line of Joseph Reagor with Roth Capital Partners.

Is there any impact for you guys on the soybean front from sanctions -- or tariffs by China on that? Have you seen a decrease in demand for any of your products?

Well, soybean has not been a big crop for us. One, we do have Scepter. Obviously, with SIMPAS, as we start laying those out, we'll have quite a portfolio there. But I don't think that we're anticipating any effect of any substance. Bob, I don't know if you had any thoughts?

Joe, prices are strong. In fact, in parts of the U.S., Illinois and Iowa, specifically, growers this year are planting soybeans ahead of corn, because universities are showing them yield bumps by doing that. Like I said, prices are strong, in regards to the negotiations with China. I mean, Brazil is ramping up, but they can't ramp up the infrastructure in the short term. Doesn't have any major effect on the U.S. growers in the medium term. And then we don't export our entire soybean crop. It's only a certain percentage. We're going to be in soybean, as Eric has stated, with SIMPAS. And one of the reasons we're bullish on that is because it will ramp up in Brazil in our Phase 2 of SIMPAS introduction. So I think we're well positioned.

Okay. And then, on the balance sheet, if I could. Your debt increased a little bit. Is that just the standard situation of -- as your inventory builds at the beginning of the year, you need to draw on your debt a little bit to fund it and then that will reverse as the year goes on?

Yes, that's the plan.

Yes. That's traditional happened.

(Operator Instructions) Our next question comes from the line of Chris Kapsch with Loop Capital Markets.

I had a question about the base business. I think, it was up 6% if you exclude, obviously, the benefit of the acquisitions flowing through. Could -- you talked about some of the products granularly, but can you just talk about just more generally, you -- that 6% is arguably better than the overall market. Do you have a sense for -- is it just the trends in acreage or crop preference that growers are planting this year that's allowing you to do that, or is there any shifts in market share that are benefiting you? Anything like that going on?

I think one of the things that we continue to benefit from is our position that we took starting back in '14 is that we would not try to push product into the channel. We had a fair amount of channel inventory out there, and we've continued to manage that to levels that are -- the levels that distribution feels comfortable with. So replacement in a normal business, and that's why we're saying that our corn products, I think, we were up about 13%?

13%.

13% in the quarter year-over-year. So I think that's -- probably, as big an issue, as anything, is just management of inventory. And I think, the farmers -- I mean, I think people have gotten the sense that the market has bottomed and is starting to show signs to improve. I think farmers are going to start looking at, "Okay, I've got -- as I start to see a little bit better return, maybe I can start going back to some of my more normal-type input approach." Bob, I don't know if you wanted to add to that?

Well, I think the only thing is we are seeing to launch some new products into the signal.

This is -- you talked about just our 6% on our traditional business, not our non -- not our new products.

Yes. That's on the acquisitions, I'm talking about the new product launches.

No, I know. Oh, okay. So you're -- yes, okay. Got it.

So we have about, what, $8 million in U.S., right, then we're launching our new products. So some of that has started to take traction. We launched some last year also, Chris. So I think that -- with improving customer relationships, that's all benefiting us.

Okay. And then, just you mentioned, the 13% corn. And I think in your formal comments you mentioned that the impact -- corn herbicide was -- sales were strong there. So last year, that was -- that market was characterized by sort of pronounced pricing pressure from one of the players there. Has that subsided? Or what's driving the strong performance in Impact this year?

Well, we made the price adjustment in the third quarter of last year, as you would recall. And Impact has a great name from a safety standpoint and its broad spectrum of grasses and broad leaves. So I think there's a strong, loyal base there. But again, we needed to get our price more in line, and I think we're feeling fairly comfortable about where we are today.

Okay. And if I just could hit on the financial metrics. So you guys made it, I think, abundantly clear that the mix associated with some of the lower-margin products you've acquired, distribution business, in particular, would affect the overall gross margin. But -- so do you have a snapshot of what your core -- your legacy business would have been without the inclusion of that acquisitions? So I think you said 39%, but -- in spite of a better factory performance. So just wondering if -- how that would have looked sans the acquisitions.

I think it calculates it out to be in broadly in line with last year.

Which is 43%.

Yes.

Yes.

43%, okay. Got it. And then, just -- Eric, on the -- when I saw you recently, you had mentioned that the industry's facing some of this difficulty sourcing some raw materials out of China. Just wondering -- it seemed like that was something that might be an advantage for you guys given your production in the U.S. Just wondering how -- any new developments in that -- so that dynamic and how it's affecting things in the marketplace, if it is.

So I don't know that we've seen yet a pickup of our domestically manufactured products that might compete with some China products. I think a number of people having concern, I think, started trying to buy in Qs 3 and Qs 4 of last year. And I think we're just thinking that will flush out here by, I don't know, the middle of third quarter, probably, anything. And so we'll start -- we'll probably -- if there's going to be that effect, we'll probably start seeing that as -- if products -- depending on the product line, as it starts to get tight, and prices move up, that we would maybe see some benefit from that.

Is something that might have influence maybe next year's growing season or the presale going into next year's growing season?

Correct.

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

Regarding the corn insecticides and herbicides, it looks like you weren't affected very much by planting delays, which may, shifted the planting season. Do you think that some demand for your products was pushed out into the second quarter, so that you may have an even better growth rate in the second quarter? Or did the planting delays just not impact your business at all?

Our U.S. crop team has done a great job, particularly corn being our biggest nemesis in 2013, 2014, putting together procurement plans with our distribution. And I think distribution has appreciated that. We're not pushing for a great season, but making sure they have material in hand so that they can orderly make deliveries. With that said, yes, we definitely have seen a slowness in what we call our EDI of product going as the planting season has been delayed, but -- and we haven't seen the effect of that in our actual sales. And we'll see how this quarter unfolds. We continue to sell products into that space on a daily basis.

And Jim, just looking at the recent releases checking the market. The corn growers have caught up. In fact, in some states, they're ahead of last year. So it's a little bit mixed, but we're doing more and more supply chain planning, as Eric says, with our customers and just natural flow. We'll see how the wheat pressure is in the later half of the quarter, and that will determine whether we have a good or very good year with Impact.

Terrific. And can you also discuss how the M&A pipeline is shaping up? What are you planning to do? What are you looking at? Should we expect announcements in the next few quarters, or have you moved away from that focus?

No, we're actively engaged in a wide variety of acquisitions now. We do expect to close on -- or at least 2 before the end of the year. There are -- I think we chartered recently and had more balls in the air with acquisitions than we've ever had at a single time. But I would say a couple of the blockbuster deals that we participated in that we did not wind up with those deals that are -- that you saw in hundreds of millions or billions that went. We don't have any of that structure underway at this moment.

Just to be clear, you're talking about product acquisitions, correct?

Product and company.

(Operator Instructions) There are no further questions in the queue. I'd like to hand the call back to management for closing comments.

Okay. Well, certainly, on behalf of people at American Vanguard, we very much appreciate you taking the time to listen in and ask some very poignant questions, and we look forward to reporting to you in our Q2 report in end of July, early August, maybe. Thank you very much. Bye-bye.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.