Welcome to the American Vanguard Corporation Fourth Quarter 2015 Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host Mr. Bill Kuser, Director of Investor Relations. Thank you, Mr. Kuser. You may begin.

Thank you very much, Dareen, and welcome, everyone, to American Vanguard’s fourth quarter and full year 2015 earnings review. Our speakers today will be Mr. Eric Wintemute, the Chairman and CEO of American Vanguard and Mr. David Johnson, the company’s Chief Financial Officer. We also have Mr. Bob Trogele, Chief Operating Officer of AMVAC Chemical available for questions. Before beginning, let’s take a moment to review 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 and such information will not necessarily be updated by the company. With that said, we turn it over to Eric.

Thank you, Bill. Thank you for joining us this afternoon. We appreciate your interest and support for American Vanguard. At this time last year we forecasted the 2015 would be a challenging year for the industry. We find that a high degree of management discipline and focus. That forecast turned out to be true. As you can see from our financial statements despite difficult conditions in an Ag industry we have been able to improve profitability year-over-year. I will be here today comments by providing an overview of market conditions and our sales performance. Next, David will describe the steps we have taken to manage costs and improve the balance sheet, the resulting cash generation has allowed us to purchase new products for our international expansion and reduce our debt considerably. Finally, I will discuss several initiatives that we believe will enhance our future growth and profitability. First some comments on market conditions. Overall, our consolidated sales were about 3% below those of fiscal 2014. As the bulk of our sales come from markets outside of domestic corn I will start by addressing those markets. In the potatoes, sales of our soil fumigants grew again in 2015. This has been a stable source of business for us and remains an essential component of grower success. In our non-crop business Dibrom sales grew and should remain solid as governmental authorities prepare for the possible need to control mosquitoes carrying diseases such as West Nile and the Zika viruses. Our international business was up 5% thanks largely to the acquisition of Nemacur and the [indiscernible] product lines in 2015. We also enjoyed growth in sales of MOCAP internationally. While the domestic corn market was -- within the domestic corn market we experienced soft demand for our corn soil insecticide in 2015 due…

Thank you, Eric. As a general observations over the course of 2015 we have exercised financial discipline in all aspect of our operation. This is prudent in all phases of the business cycle but is especially important in challenging times as a result these efforts we have been able to achieve improved profitability on slightly lower sales. As important and as you will hear in my comments today, we’ve improved our operating performance, net income, balance sheet, working capital position, liquidity and cash flow even while acquiring product lines. From my perspective the financial issues are paramount importance to investors remain consistent with the last several courses. First, factory performance, as you know we’ve discussed this critical part of our operating performance at the end of each quarter of 2015. Understand this is something of a balancing act as we have been working to reduce inventory levels at the same time as we have reduced factory costs. Overall for two 2015 we made significant progress in this area reducing unobserved overheads at the factory from $25 million in 2014 to $19 million in 2015, a 24% year-on-year improvement. This treatment was accomplished through workforce reduction aided by implementation of some automated processes as well as improved factory throughput. As I indicated in earlier calls we purposefully held it down factory outputs in the fourth quarter as we worked to bring down inventory towards the year-end. Our success this year has been due to a lot of careful attention to detail from the team and occurred against the backdrop of the first Ag market. Second, during 2015 we have continued to exercise tight control over our operating expenses. We set a challenge to spend less than 2014 and succeeded. 2015 operating expenses ended at 93% of 2014. This is marginally better…

Thank you, David. Bob if you could put yourself on mute until we get to the question and answer period, we’re getting a little background noise on here and just a clarification I said earlier that increase cotton acre should lead to recovery of corn products sales and then to say recovery of our cotton products sales. Now let me make a few comments about our future. As we mentioned in our last call American Vanguard is continuing it's successful model of product acquisitions, product licensing and technology investment. Last April we announced product acquisitions from contact with issues from DuPont [indiscernible] that are increasing our international business. Last October we consummated a license agreement with BASF for Scepter, [indiscernible] product line that is used both in soya bean and [indiscernible] applications. This morning we announced the dynamic investment which will incorporate biological products into the AMVAC portfolio. Our industry has come to recognize that biological solutions are important complement to chemical and genetically modified defenses in both crop protection and non-crop applications. Accordingly we have become investor in biological products for agriculture or Bi-PA, an outstanding biological development firm with an open innovation platform and a novel business model. Bi-PA functions as a product development engine reaching basic research and end market commercialization by focusing on optimizing formulations and securing regulatory approval. This investment affords American Vanguard a 15% share of Bi-PA's total enterprise valuation, distribution rights in America's for an existing biological fungus control agent and subsequent products. And access to a pipeline of new products and technologies that emerge from Bi-PA's scientific research collaborations. As I commented in today's press release our investment in Bi-PA's product development capabilities reinforces American Vanguard's strategic focus and as far as our commitment to leading edge technology, innovation and expanded international…

[Operator Instructions]. Our first question comes from the line of Jim Sheehan with SunTrust. Please state your question.

This is Matthew Stevenson on for Jim. I’ve quick question on potentially licensing side Dibrom in Latin America, South and Central America. Has there been any update on whether Brazil maybe interested or viable for Dibrom sales especially pertaining to the Zika virus and if so what the time line of that would be?

So there are discussions going on with Brazil with government authorities, as you know the product is not registered in Brazil. We have a complete data package which of course we've been in place for U.S. and the fact that it's registered in U.S. certainly is an advantage. But at present, one of the keys to Dibrom is that there needs to be aerial [ph] applications and we’re in discussions with people that are applying our product in the United States and they are looking to establish that same capability in Brazil and are having those discussions now. And I mentioned also the other area of activity, there are discussions with Puerto Rico as well.

And then on the topic of factory underutilization cost. On the last call you mentioned potentially being down 20% in 2016 versus 2015, you mentioned over the next few years going to about 3% to 4% of sales, does that figure for 2016 still hold?

Well that’s certainly a target that we have but it's sort of generally a function of how product sales grow in 2016. It's lowering our inventory as balance versus factory utilization and we simply approach that we would incentive [ph] that more from generating cash in our -- lowering our inventory and so we’re little more holding back on our factory output. So I think as we look forward and see how we are targeting in meeting our goals and lowering inventory and reaching those level we will do that balance act with our factory production.

Our next question comes from the line of Chris Kapsch with BB&T. Please state your question.

Just a follow-up on the questions on Dibrom, Eric you mentioned in '15 that Dibrom sales were up, so if you could just touch some parameters around the magnitude of the Dibrom business and how much of the growth in '15 was from the situation in South Carolina which I guess occurred in the fourth quarter.

I don't believe we had a big upside in fourth quarter from South Carolina. I mean from sales standpoint there virtually was none and going year-over-year we were non-up dramatically and as a percentage of overall sales just starting to think here we have got -- it's about 5% of our overall business.

And then if you could -- you know the scenario where this product is used to combat mosquito pressure with mosquitoes carrying the Zika virus and if there was emergency authorization if that's what it would be called. Just in terms of the ability to produce the product, would that have -- what would be implications for your this whole conversation about factory absorption and utilization and gross margins in the scenario where you’ve had some upside from in demand from Dibrom?

Well certainly Dibrom is at the higher end of our margins so it would have a positive boast there and of course utilization. We’re currently manufacturing that in our Alabama facility which is where we do have the biggest challenge with utilization so obviously that would bolster there. We made a decision back after 2004, 2005 Katrina, Ivan [ph] to shift production down to Alabama for greater capacity but we could also with demand manufacture that in our Los Angeles facility as well. As far as affecting -- basically we charge about $0.85 an acre for our product and so I think as you look across the volumes I know when those hurricane seasons we had interests was being put by FEMA for treating upto 30 million acres now they never got to that anywhere near that level because we had some weather pattern shifts but that might give you some idea as far as how to do some accounting on.

Okay, and then just a follow-up on the utilization and as it related to your efforts to drawdown inventories in the fourth quarter on this balancing act between inventories and your position rate. Any sense for how much those efforts depress gross margin in fourth quarter and then with the efforts that you mentioned specific efforts to further reduce down inventories, what might be the impact in '16 I guess -- obviously depends on what the overall top line is, but any chance for what the drag might be in gross margin in '16?

So I think Chris, if we were 6.6% in '15 and again we're targeting to get down to the more normal range but that won't happen I don’t believe in '16. We don’t anticipate it been any worse so I think we were kind of put in that 39 average and potentially we will try to as we go through it we will now, from again the inventory balance we moved from essentially a 165 to 132 and so that’s we’re not looking to make that kind of return in 2016. So we’re looking for more than 136 with the new products involved, new acquisitions down to the 125. So that’s third of the drop. And so assuming our sales remain consistent than we probably would let the manufacturing more.

Our next question comes from Tyler Etten with Piper Jaffray. Please state your question.

I guess one of the things I would like to maybe dig into a little bit is the channel inventory situation, is there any kind of expectation of when corn soil insecticide inventories would be more normal? Are we talking maybe two years or maybe next year? We could just feel more normal level and then on herbicide side I'm assuming that that is fine given your comments today and that impacts production could be at a normal level this year if that is the case.

I think impact is in-line with where we expect it to be on a normal going forward basis. It doesn’t mean that from a timing standpoint that people aren't playing a little more closer to timing but again we believe upside for us in 2016, so I think that’s more [indiscernible]. So on the corn soil insecticide, I mean one things we are pleased about is that we had some sales as we mentioned -- high potency products as well as the regular Aztech and yet our year-end channel inventory is below where it was in September. So there has been reasonable movement. I think growers are forcing, we’re not just growers but I would say at this point in time really growers, it's not growers or retailers because any inventory overhang is sitting at distribution and it varies on a product by product basis but they stressed us that they look to bring this to minimum levels, this coming season. So sort of the fact that we’ve added two new skews to this I think the drawdown is getting near completed at this point.

I was wondering if we could -- I was just wondering if you've seen any demand pick-up through the first quarter at all or you expect that it will be closer to the actual avocation [ph] window when you will expect some of those sales to pull through for just generic or both insecticide and herbicide products?

Well on the corn soil, I mean again this is again a corn function, so the rest of the issues stay normal and since I’ve already mentioned impact is in good shape and we're really looking at the corn soil insecticide and we have a program that calls for retail stocking to be at 80%, by 80% of the previous year by March 15th. So that’s when they were hitting and so we expect to see some pretty good activity here in the next two weeks. So at this point it's a little premature we're not I think we're last -- and I think early last week we read about 60% of the total volume for last season. So it's tracking along okay and talking with our customers about other inputs. They are all saying everything is running behind. So our 60% is [Technical Difficulty].

One more, I was wondering if on the North American side do you expect that Dibrom sales could be up this year based on kind of the any orders that have picked up because of the situation we’re in or maybe there is just an expectation that orders to pick up for this on unexpected demand?

It's difficult to quantify. Obviously we’re at the beginning of the seasons there is a lot of buzz about this and when we were on last week and there was a lot of discussion about it. Cindy [ph] our Head of Regulatory and Product development was at the White House last week discussing this issue as you know there is directive of within the White House. There is activity with CDC, we’ve had meetings with Department of Defense and so there is quite a bit of activity next week. [Indiscernible] which is trade association that we belong to are meeting again on 4th both the senate and Congress. It's driving -- you know American Mosquito Conference, it's driving the discussion, I talked with the person who managed that business earlier today and he is up in Sacramento and Again it's driving the discussions there. But at this point it's hard for us to quantify what overall effect there will be. It's scary when you read the article and the article and the discussion and nine pregnancies in Florida that some are between 3 and 5 of those pregnancies that resulted in microcephaly and so -- I don't think there's a clear understanding of how fast this might or could grow. I think the conference in Sacramento they are particularly concerned because the two mosquitoes they are known to carry the virus are growing at fairly high rates in California, so we’re poised to be ready to respond whenever we’re called upon.

Our next question comes from Jay Harris with Axiom Capital Management. Please state your question.

I think that you and you team should be really congratulated at the extraordinary improvement in your balance sheet. I mean it's very conservatively leveraged in one year going from being a what I would call an over leveraged balance sheet. At the beginning of the year looking at the balance sheet you published, what would be your borrowing capability -- how would you measure that going back -- getting in the year?

Assuming on January 1st, 2016?

Yes.

It's at $69 million on the current facility.

And I didn’t read the press release you put out today, did you mention how much cash you’ve committed in this deal you’ve announced today?

We haven't and it's probably going to become available in our next conference call, it will probably be in the Q.

I was a little confused, your tax obligations last year were $2 million but your cash flow indicates you received $3.7 million back in tax benefits. David please explain that.

I'm prepared for that one Jay, so I'm happy to do so next time.

It's on your cash flow statement and in the press release, it says right at the bottom -- 3.7 million. You're P&L statement says you have a tax obligation at $2 million.

It's the difference between what the liability is and what we’ve actually recovered in taxes during the year, so we have still got some taxes that are due for 2015. In 2015 we have accrued $2 million taxes right, but during the year we’ve collected 3.7 million from prior year's taxes.

That doesn't mean you lost money in the U.S. in '15.

No. In 2014 I think we had tax losses.

Do you’ve tax losses in the U.S. going forward?

No we didn’t have a tax loss in the U.S. in '15.

[Operator Instructions]. Our next question is a follow-up from the line of Chris Kapsch with BB&T. Please state your question.

So there is recently some EPA guidelines that came out concerning cotton [indiscernible] and development of resistance and from what my interpretation was, it came short of requiring more adherence to greater refuge acres which presumably would have been positive for demand for conventional soil insecticide, but they did require. They are suggesting more vigilant which could entail, more rotation, more sack trades, more conventional insecticide, I'm just wondering if you interpreted, had a chance to look closely in that and assess what you think the implications would be for demand for insecticides to combat that resistance issue.

Sure. I believe the agency and of course the industry is concerned over development of resistance and are trying to look at ways to manage that resistance on a forward basis. I think most believe that in increased refuge acres would be a benefit but the reality is that’s very difficult to reinforce and just ease of trades kind of offsets the ability or the desire so to speak for greater refuge acres. There's some confusion within -- we've asked recently and haven't gotten clear understanding of what the role EPA has in managing resistance and what they can do and what they can enforce. So as such I think there is a good focus on it, I think they also believe that potentially pushing pyramid traits would preferable over single traits. We’re seeing increased activity for some seed companies to look at offering hybrids without traits that could be part of a process and I think that one of the key factors that EPA was pushing again as you mentioned rotation but this overall integrated test management approach and I think they are looking at a variety of different ways to try to get the trades to continue without a major resistance issue. Does that kind of get your question?

When I sort of try to interpret you know what their suggestions were, it looked as though I mean sure they stress integrated test management and that entails a lot of different ways to, multiple modes of action if you will and one of course one mode of action is [indiscernible] could you really tell us net-net if it looks like based on their concerns about resistance if in fact this was step towards mandating more vigilance on using multiple modes of actions as opposed to the inertia has been while they haven't rotated certainly in the core part of the corn belt where this is an issue of course right, so it seems like there has been resistance to adopt these multiple modes of action. So I'm just wondering if in fact this guideline in fact has some [indiscernible] and is something that could drive incremental demand.

From agencies guideline I don't think that's the message that the agency is pushing. From our position yes we believe we're integral part of an IPM program. It's a different approach from the trades. We've not seen resistance to our portfolio of products in the long history that we've been in the field. We have -- two of those products both Aztech and Smart Choice have multiple chemistry, active ingredients as part of the product. So we think we're very good tool for that management of resistance.

Our next question is a follow-up from the line of Jim Sheehan Matthew from SunTrust.

Just a quick follow-up, what's the near term sales impact from the investment you announced today for the biological price, the IPA?

So Bob is most familiar with Bi-Pa, Bob if you’re available maybe you can -- we’re not giving forecast numbers at this point but maybe you can talk a little bit about Bi-Pa and the direction it's going?

Matt, the Bi-Pa investment is a technology investment for a number of project in Bi-Pa. We'll be starting the registration here in the U.S. shortly using biologic, that will take somewhere between 6 and 12 months. Then we have the -- primary market is California and then we’ve to do biological efficacy in California for 24 months there. So that will mean the first product we will be distributing in the Americas and then we will probably be looking at doing parallel registrations in other countries. As far as Bi-Pa is concerned in Europe it will have sales this year and will be self-funding in 2016.

[Operator Instructions]. Our next question is a follow-up from the line of Jay Harris with Axiom Capital Management. Please state your question.

Eric, how did the early orders go in the December quarter and how has this year started out in January and February relative to let's say for last year?

I think we’re fairly similar to last year, you know obviously in fourth quarter we were up 9%. So I think we had a little strong quarter certainly than last year but again part of this is the managing of the inventory movement. So I think it's -- again as I mentioned it's probably a little early to call where this first quarter is going to wind up but we did have a fair amount of pre-pay money which again we view as people having confidence that they are going to be utilizing our products on a go forward basis. So it's a little vague in my response but that’s probably the best I can do.

Mr. Wintemute, there are no further questions at this time. Would you like to make any closing remarks?

I would just like to say thank you again all of you for attending this call and great questions as always. We're looking forward to I think probably right around May 1st having our next conference call and updating you on a couple of the initiatives that we mentioned here today. So I appreciate it and look forward to talking with you soon. Bye.

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