Quarterly Report for Quarter Ending MARCH 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Numbers in thousands)

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. Generally, "may," "could," "will," "would," "expect," "believe," "estimate," "anticipate," "intend," "continue" and similar words identify forward-looking statements. Forward-looking statements appearing in this report are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on our current expectations and are subject to risks and uncertainties that can cause 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 given that interest rate and inflation affect the debt market; the impact of, and our ability to, remediate the identified material weaknesses in our internal controls over financial reporting; and 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. Security and Exchange Commission ("SEC"). It is not possible to foresee or identify all such factors. We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this report. You should evaluate all forward-looking statements made in this Form 10-Q in the context of the risks and uncertainties disclosed in Part II, Item 1A of this Form 10-Q under the heading "Risk Factors," in Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Item 3 "Quantitative and Qualitative Disclosures About Market Risk."



The forward-looking statements included in this Form 10-Q are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

Overview of the Company's Performance

A combination of changing, unpredictable and often opposing factors has put the global agricultural market in a static state. While shifting tariffs have created uncertainty as to the strength of export markets, a weak United States dollar and lower corn inventories have relieved pressure and spurred interest in increasing the amount of corn acreage to be planted in 2025. Amidst these conditions, market participants have shown a limited interest in increasing inventories for crop protection products, despite dramatically decreasing inventory levels over the past 24 to 30 months. While distributors will eventually need to increase on-hand inventories to supply their customers' needs, they are currently adopting conservative working capital practices.

Within this context, the Company's overall financial performance during the quarter was weaker than the comparable period last year with net sales down 14% during the quarter. Regionally, domestic and international sales were both down 14%. Much of the variance was due to the voluntarily discontinuance of one of the Company's high margin herbicide products in the second half of 2024. Soil fumigants in the U.S., and Granular Soil Insecticides in the U.S. and Latin America, as well as non-Crop Insecticides performed better than the comparable period last year.

Costs of goods sold decreased 8% as compared to the same quarter of 2024. Volume decline was the primary driver behind the decrease of cost of goods sold. Gross margins declined to 26%, as compared to 33% in the same period of the prior year due to a shift in product offering and increased costs per unit as the result of lower volumes.

Operating expenses were down 5% versus the first quarter of 2024, with selling expenses down significantly, partially offset by increased transformation costs. Expenses for research, product development costs and regulatory expenses declined as a direct result of the decision to terminate the SIMPAS project at the end of 2024. Given the decreased level of sales, operating expenses increased as a percentage of sales to 30%, as compared to 27% in the same period of the prior year.

Interest expense remained approximately flat, based upon increased average borrowings, offset by a reduction in the effective interest rate.

The Company recorded an income tax expense of $387 compared to $1,484 in the same period of last year. The decrease in the income tax expense compared to the same period last year is primarily attributed to losses incurred in the U.S. for the three months ended March 31, 2025, which did not result in a benefit for income tax. The U.S. entities maintain a valuation allowance against their net deferred tax assets which was established during the fourth quarter ended December 31, 2024. The Company generated a net loss of $8,462 (or ($0.30) per share) compared to net income of $1,552 (or $0.06 per share) in the prior year.

RESULTS OF OPERATIONS

Quarter Ended March 31:

Our domestic crop businessrecorded net sales during the first quarter of 2025 that were 15% lower than those of the first quarter of 2024 ($57,176 vs. $67,257 in the prior year). As previously mentioned, virtually all of the weakness in the U.S. Crop business can be attributed to our herbicide business, which was negatively impacted by the absence from the market of one of our herbicide products that the Company voluntarily cancelled last year. On the other hand, despite the overall weakness in agriculture during the first quarter, our portfolio of biological product sales remained flat, as compared to the same period of the prior year. Finally, included in this result, peanut acreage was up year to date, positively impacting Thimet sales, which rose approximately 17% as compared to last year. As a result of demand and commodity pricing, growers are shifting acreage away from cotton this year and towards peanuts.

Our domestic non-crop businessposted a 12% decrease in net sales in the first quarter of 2025, as compared to the same period in the prior year ($15,601 vs. $17,768 in the prior year). In the quarter, while net sales of our fungicides were lower, net sales of biological solutions and granular herbicides improved.

Net sales of our international businessesdecreased by 14% during the period ($43,023 vs. $50,118 in the prior year). The weakness is primarily due to lower herbicide sales in Mexico on lower agave prices, and in our Australian business. The Company is focused on selling more profitable products across our international distribution businesses and is willing to forgo sales of lower margin products in order to maximize margins in the international business. Consequently, average pricing improved in nearly all categories.

On a consolidated basis,gross profit for the first quarter of 2025 decreased by 29% ($30,191 vs. $42,418 in the prior year). Decreased sales volume, elevated inventory costs, and competitive pricing all contributed to the decline. Gross margin for the quarter decreased to 26%, as compared to 31% for the same period ended March 31, 2024.

Operating expenses decreased by 5% to $34,501 for the three months ended March 31, 2025, as compared to the same period in 2024. The change in operating expenses by department are as follows:

Average Indebtedness and Interest expense

Interest costs net of capitalized interest were $3,765 in the first three months of 2025, as compared to $3,693 in the same period of 2024. Interest costs are summarized in the following table:

The Company's average overall debt for the three months ended March 31, 2025 was $183,918, as compared to $176,344 for the three months ended March 31, 2024. Our borrowings in the three months ended March 31, 2025 were higher when compared to the same period of the prior year, mainly as a result of expenses incurred during the balance of 2024 pertaining to transformation and other initiatives. As can be seen from the table above, while our borrowings were higher than this time last year, our effective bank interest rate on our revolving line of credit reduced to 7.7% for the three months ended March 31, 2025, as compared to 8.3% in 2024. This resulted in interest expense that was essentially flat period over period.

Income tax expense was $387 for the three months ended March 31, 2025, as compared to $1,484 for the three-months ended March 31, 2024. The effective income tax rate for the three months ended March 31, 2025 was computed based on the estimated effective tax rate for the full year which is approximately 26.6%, excluding discrete items and entities subject to full valuation allowances against related net deferred tax assets. During the fourth quarter ended December 31, 2024, the Company established a valuation allowance against the U.S. entities net deferred tax assets. The company continues to maintain valuation allowances

established against the net deferred tax assets of certain international entities, primarily in Brazil, for the three months ended March 31, 2025. During the first three months ended March 31, 2025, many of the Company's international businesses outside of Brazil were profitable. For the three months ended March 31, 2025 the Company recorded an income tax expense mainly attributed to a loss before provision for income taxes incurred in the U.S. which did not result in a benefit for income tax. The U.S. entities maintain a valuation allowance against their net deferred tax assets which was established during the fourth quarter ended December 31, 2024.

Our overall net loss for the first three months of 2025 was $8,462 or $0.30 per basic and diluted share, as compared to net income of $1,552 or $0.06 per basic and diluted share in the first quarter of 2024.

LIQUIDITY AND CAPITAL RESOURCES

The Company used cash of $20,576 in operating activities during the three months ended March 31, 2025, as compared to $36,107 during the three months ended March 31, 2024. Included in the $20,576 are net loss of $8,462, plus non-cash depreciation, amortization of intangibles and other assets in the amount of $4,749, provision for bad debts in the amount of $1,056 and other in the amount of $126. Also included are stock-based compensation of $559, a net change in deferred income taxes of $1,348, and net change in foreign currency adjustment of $99. These together provided net cash outflows of $633, as compared to an inflows of $7,881 for the same period of 2024.

During the first three months of 2025, the Company increased net working capital by $18,240, as compared to an increase of $49,996 during the same period of the prior year. Included in this change: inventories increased by $4,721, as compared to an increase of $9,353 for the first quarter of 2024. Customer prepayments decreased by $28,215, as compared to a decrease of $37,037 in the same period of 2024, driven by customer decisions regarding demand, payment timing and our cash incentive programs. Our accounts payable balances increased by $22,966, as compared to an increase of $2,366 in the same period of 2024. Accounts receivable decreased by $6,892, as compared to an increase of $5,579 in the same period of 2024. Prepaid expenses and other assets increased by $856, as compared to an increase of $1,466 in the same period of 2024. Income tax receivable/payable, net increased by $1,885, as compared to a decrease of $1,014 in the prior year. Accrued program costs increased by $837, as compared to an increase of $6,399 in the prior year, as a result of both lower sales and the mix of those sales including products with higher program elements incorporated in pricing. Finally, other payables and accrued expenses decreased by $14,961, as compared to a decrease of $332 in the prior year.

With regard to our program accrual, the increase (as noted above) primarily reflects our level and mix of sales and customers in the first quarter of 2025, as compared to the prior year. The Company accrues programs in line with the growing season upon which specific products are targeted. Typically crop products have a growing season that ends on September 30th of each year. During the first quarter of 2025, the Company made accruals for programs in the amount of $20,091 and made payments in the amount of $19,221. During the first quarter of the prior year, the Company made accruals in the amount of $25,266 and made payments in the amount of $18,999.

Cash used for investing activities was $446 for the three months ended March 31, 2025, as compared to $3,567 for the three months ended March 31, 2024. The Company spent $431 on fixed assets acquisitions primarily focused on continuing to invest in manufacturing infrastructure.

During the three months ended March 31, 2025, financing activities provided $19,801, as compared to $41,382 during the same period of the prior year. Net borrowings under the Credit Agreement amounted to $20,167 in the first quarter of 2025, as compared to $41,800 in the same period of the prior year. Lastly, in exchange for shares of common stock returned by employees, we paid $11 and $14 for tax withholding on stock-based compensation awards during the three months ended March 31, 2025 and 2024, respectively.

The Company has long-term debt as of March 31, 2025 and December 31, 2024 relating to a senior credit facility as summarized in the following table:

It is useful to note that, while classified as long-term debt, funds borrowed by the Company under the Credit Agreement are used for working capital needs on an ongoing basis. The Company has in place a cash sweep mechanism for the domestic business and follows strict controls on repaying outstanding balances promptly in order to minimize the carrying cost of borrowed funds.

As of March 31, 2025, the Company was deemed to be in compliance with its financial covenants. Based on its performance against the most restrictive covenant of the Credit Agreement with its lenders, the Company had the capacity to increase its borrowings by up to $53,717. This compares to an available borrowing capacity of $28,623 as of December 31, 2024.

We believe that anticipated cash flow from operations, existing cash balances and available borrowings under our amended senior credit facility will be sufficient to provide us with liquidity necessary to fund our working capital and cash requirements for the next twelve months.

RECENTLY ISSUED ACCOUNTING GUIDANCE

Please refer to Note 1 in the accompanying Notes to the Condensed Consolidated Financial Statements for recently issued and adopted accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company continually re-assesses the critical accounting policies used in preparing its financial statements. In the Company's Form 10-K filed with the SEC for the year ended December 31, 2024, the Company provided a comprehensive statement of critical accounting policies. These policies have been reviewed in detail as part of the preparation work for this Form 10-Q. After our review of these matters, we have determined that, during the subject reporting period there has been no material change to the critical accounting policies that are listed in the Company's Form 10-K for the year ended December 31, 2024.