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Conference Calls

Wednesday, Nov 4, 2009

3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 1
Bill Kuser
Welcome everyone to the 3rd quarter 2009 American Vanguard earnings review. Our speakers
today will be Mr. Eric Wintemute, President and CEO of American Vanguard, Mr. Trevor
Thorley, Executive Vice President and COO, and Mr. David Johnson, CFO.
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 managements current
expectations. Such factors can include weather conditions, changes in regulatory policy,
competitive pressures and various other risks as detailed in the Company’s SEC report and
filing. 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 will turn this call over to Eric.
Eric Wintemute
Good Morning.
Thank you for joining us today as we discuss this year’s third quarter results. Hopefully, you
have had the opportunity this morning to review our earnings release.
As we first indicated in our second quarter report to you, the agricultural chemical industry has
experienced a very challenging business environment in recent months. As industry analysts
and other agricultural chemical companies have cited, the residual effects of the U.S. “credit
crisis”, this year’s lower level of agricultural commodity prices, over-supply of some fertilizer &
herbicide products, and unfavorable weather have all played a significant role in dampening
demand in our domestic market.
Despite these challenges, Trevor and his sales team have succeeded in delivering revenue very
close to the level achieved in last year’s third quarter. During this call, Trevor will discuss his
view of today’s difficult marketplace conditions and more importantly how American Vanguard is
dealing with them.
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 2
Not withstanding our top-line achievement, profit margins this quarter were impacted by three key
factors causing our net income to fall significantly below last year’s 3rd quarter.

  • First, demand for our Dibrom® mosquito adulticide was nearly 70% lower than the prior year – as less hurricane-related precipitation in the Gulf Coast region produced considerably less pest pressure.
  • Second, sales of our leading fungicide product (containing the active ingredient PCNB) were about 35% lower that last year’s 3rd quarter, because of temporarily reduced demand in one international market.
  • Third, as we told you in our second quarter report, in order to synchronize production output with reduced demand, we have scaled-back our manufacturing operations to avoid building excess inventories. As you know, when chemical plants are run at lower utilization rates, variable costs are reduced, but fixed costs remain.

As a result of these three factors, you will see that our gross profit margin for this quarter is
significantly below normal. When comparing this year’s quarter to last, it is relevant to note:

  • The Dibrom component is weather related - and is a particularly difficult comparison to last year’s near-record sales.
  • The PCNB component is considered a temporary aberration - associated with ‘overstocking” by one customer who procured enough material to last through a second season of fungicide applications.
  • The manufacturing fixed cost absorption factor is a significant, systemic issue that we are working hard to alleviate thru additional thru-put and operating cost reductions. In fact, we are presently engaged in a thorough assessment of our manufacturing assets to determine what changes we need to make to achieve better operating and financial results.

In our second quarter call, we indicated our dedication to making balance sheet improvements
during the second half of 2009. I am pleased to report that we have made considerable progress
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 3
in our efforts to reduce inventories by more than 10%, collect receivables and pay down our bank
revolver by 35%.
In a moment, David will give you a good overview of our financial performance this quarter and
our SEC filing of the 10-Q later today will provide additional details.
We believe that American Vanguard’s long-term prospects are much brighter than current results
would suggest. As we will discuss in today’s call, we are engaged in many actions that we
believe are necessary to expand market penetration, streamline operating costs, deliver better
financial performance and to insure the continuing strength of our balance sheet.
With that preface, I will let David fill you in on the 3rd quarter and year-to-date financial specifics
and then Trevor will focus on some of the actions that we are taking in Sales and Manufacturing,
to strengthen our performance. I will conclude with a docket of important activities that will drive
our business forward over the next two years.
David Johnson
Thank you, Eric. Good morning and good afternoon to everyone.
My comments today will highlight important issues for the Company as we report our financial
results for the 3rd quarter of 2009. As Eric mentioned, we will be filing our 10Q for the quarter
with the SEC later today. That document contains additional detail on the Company’s results of
operations.
Eric has already given you some details related to our performance for the quarter. In summary,
our sales ended at $66.4m, less than 2% below last year. This final result includes for example,
a significant reduction in our proprietary mosquito adulticide product line (Dibrom) offset by
strong sales of our lower margin insecticides and growth regulators. We have seen a
significantly weaker margin performance as a result. Furthermore, we have made some
decisions to protect positions under intense competitive pressure, specifically internationally,
with some aggressive pricing. In addition, we have drilled down hard on manufacturing,
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 4
ensuring that we produce only product that we have a high probability of moving before
12/31/09. This change reflects the particular market conditions we are facing at this time and
inevitably results in significantly under absorbed manufacturing costs at least in the short-term.
The result of all of these dynamics is a gross margin performance of 32% or $21.4m.
We continue to drive on operating expenses which ended at $17.5m compared to $18.1m last
year. We are pleased with our performance in logistics which continues to be significantly
better than last year. Sales & marketing costs are up reflecting a continued determination,
notwithstanding the current market conditions, to support our brands with advertising and
stewardship activities.
Effective interest rates continue to be lower than last year essentially driven by the LIBOR rate.
Our tax rate has reduced again and now is at 32%. Part of this relates to our general financial
performance, but there are also benefits related to amended state tax returns that have been
filed during the period.
The bottom line is that we have recoded net income of $2.1m or 8c a share for the quarter. This
compares with $6m and 22c a share last year.
Year-to-date our sales are 5% below last year at $158.5m compared to $166.5m in the prior
year. This in a year when competitors are suffering similar or greater set backs. Our revenues
were strong in the first quarter, weak in the second and, as detailed above, stronger in Q3,
albeit with a less favorable mix of products.
Our efforts to make progress on inventory has resulted in needing to make difficult decisions
regarding the slow down of manufacturing output. Accordingly, gross profit is tracking year to
date at 36% or $56.3m as compared to 42% last year.
Operating expenses are higher than last year, mainly driven by the high spending on a potential
acquisition reported in Q1. In Q2 & again in Q3, we have been at or lower than last year.
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 5
Interest rates continue to be below last year despite slightly elevated average borrowings. As
noted above, that relates to LIBOR levels. Our tax rate is at 33% year to date. At the bottom line
we have reported $2.8m or 10c year to date as compared $12.1m or 44c last year.
Eric has indicated in his opening remarks, that we have really increased emphasis on balance
sheet items during the last six months. During Q3 we have started to see significant movements
as a result.
Our highest priority item is inventory. At this same time our key customers are also working
diligently to drive down their own inventory, making our task that much more challenging.
At the end of last quarter we were not able to report any improvement, despite knowing that real
procedural changes were taking shape inside the business. At the end of Q3 we have reported
inventory levels of $99.5m compared with $112.4m at the end of June, a drop of $13m. This is
part of a program that is aimed at getting us to levels in the mid $80m’s by the end of the year.
Looking further on, I believe that these new processes will remain in place and that our target
for 2010 is to continue to drive down our inventory. That is not to suggest a continual quarter by
quarter reduction in inventory levels. We will see normal seasonal spikes which are part of
participating in this marketplace.
During the quarter we have achieved a substantial reduction in our revolver credit line which is
down $14.5m or 35% compared to the balance at the end of Q2. At the same time we have
made scheduled term debt payments of more than $1m.
This has been achieved as a result of reducing inventory (down $13m), continued diligent
attention to our receivables and continuing to maintain a tight grip on capital spending. This
quarter we have spent $1.5m and we have spent $3.7m year to date. This compares with
$19.3m last year. That prior year number of course included spending on product line
acquisitions which has not happened this year.
In the short term our Q4 target is to continue to drive down inventory and debt.
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 6
As I have previously mentioned, we spend a lot of time focused on our borrowing positions. We
meet regularly with the bank syndication team. As you would expect, we also spend a lot of
time forecasting the Company’s cash needs and performance against the key covenants. As
detailed in our recent forms 10Q, we have 4 really key covenants which we, as an executive
team, discuss regularly. At 9/30/09 we are fully compliant with all covenants to our loan facility
including these 4 key ones.
During this difficult trading period, we believe we are attending diligently to the business
fundamentals to drive cash and profit from the business and to ensure it is as fit as possible to
take advantage of opportunities that may arise as market conditions improve.
I will now hand back to Eric
Eric Wintemute
Thank you, David.
I will now ask Trevor to add his perspective on industry conditions; on the reorganization of our
Sales & Marketing function; and the efficiency improvements we are undertaking in
Manufacturing.
Trevor Thorley
Thank you, Eric.
Since our last conference call in August, I have continued my very close interaction and dialogue
with Amvac’s key distributors and retailers. It is quite clear that this year growers held back and
reduced their traditional purchase order patterns because of concerns with credit availability and
the prospect of lower crop commodity prices. This very conservative purchasing by end-users
did indeed caused distributor channels to institute very strict inventory replenishment constraints
in order to control their inventory and working capital levels.
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 7
As distributors and retailers have gone through the painful process of working off previously
acquired high-cost stocks of fertilizer and glyphosate herbicide, many have remained unwilling to
restock their inventories to traditional levels. This “shrinkage” of the distributor inventory pipeline
has presented a great challenge to ourselves and our competitors as we all seek to maintain or
expand our business.
As you recall, I have taken direct responsibility for the sales and marketing function with our
regional managers, product managers and heads of international and non-crop businesses
reporting directly to me. Additionally, we have completed some re-staffing of existing positions
and hired a highly qualified National Accounts Manager. This process has gone extremely well
and I am pleased with the spirit and drive that is evident in our recent collective efforts to maintain
sales revenues in the third quarter.
We are continuing to pursue our sales and marketing initiatives with good progress made on
product plan execution, customer relationships, forecasting and inventory management. We will
be finalizing our commercial organization by year-end with a clear focus on customer satisfaction
and a drive for improved business execution in a difficult marketplace.
As Eric pointed out, third quarter sales of Dibrom mosquito insecticide were diminished by
adverse weather condition and our PCNB-based fungicide business was down due to a purchase
pattern anomaly. In most other categories, our sales patterns were equal to or better than the
previous year.

  • Our granular soil insecticides continued to perform well compared to last year, as we continue to emphasize their relevance as a yield enhancement catalyst in corn. New market survey data received yesterday shows excellent 2009 season on-ground corn market sales gains for our granular soil insecticides, especially in our proprietary SmartBox delivery system.
  • Our herbicides sold well in the quarter as we solidify our market position in post-emergent weed and grass treatments. We have also reviewed our 2009 Impact corn herbicide results and are working on enhanced strategies and tactics for 2010.

3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 8

  • Our growth regulators posted quarterly sales ahead of last year with some of that performance resulting from the timing of shipments in the 3rd quarter vs. 2nd quarter.
  • Our foreign subsidiary sales continue to be an important focus as we manage credit risk and expand our Latin American franchise.

As indicated earlier the purchasing pattern of farmers has changed to a “just-in-time” approach
which can affect the timing of our normal quarterly sales into the distribution channels that serve
growers. Anticipated commodity prices and weather-related influences often determine the
quantity and timing of our sales demand.
For example, we are waiting presently for the inclement mid-west weather at harvest time to
dictate the degree to which corn growers are willing to begin early season purchasing of inputs
for next spring’s plantings. Similarly, such weather plays a factor in the disposition and
application of our Vapam and K-Pam soil fumigants that are applied after harvest to neutralize
soil infestation. If for example, farmers are unable to apply Vapam/K-Pam post-harvest and presoil
freezing then they will need to defer application until next spring after the ground thaws.
Such variability in demand timing is difficult to predict, challenging to manufacture for, and can
cause unexpected fluctuations in our financial results.
As Eric and David have described, a portion of the 3rd quarter’s earnings potential was impacted
by the under-absorption of fixed manufacturing costs caused by intentionally reduced production
output. We continue to believe that our domestic operational capabilities are a valuable asset to
our long-term ability to provide high-quality products to the North American market. Running
factories at reduced operating rates has made it necessary to expand unabsorbed overhead,
resulting in lower growth margin.
To improve on this condition, we must increase the profitable manufacturing throughput of our
facilities and make our processes as efficient as possible. We continue to pursue tollmanufacturing
arrangements to increase the capacity utilization of our factories – and we are
currently evaluating incremental opportunities.
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 9
John Kilmer, our Head of Technology, continues to examine all aspects within the Technology
Group that can improve our process technology, minimize waste generation and optimize
capacity utilization. We are intent on building a strong technical development team – and one
notable recent success is the addition of a very qualified formulation chemist to our operations.
We also are expecting to retain an additional process chemist to drive the analysis and
implementation of new production processes.
We continue to focus on cost reduction opportunities in all functional areas of the Company.
Even though we have always been a lean, efficient, entrepreneurial organization, there is always
room for self-improvement, new approaches and technology-aided solutions. Our recent
success, in the reduction of freight expenses, has come about as the result of a multi-functional
team effort started earlier this year to systematically identify several improvements and
implement the savings. As David mentioned, we managed our overall operating expenses quite
effectively in the 3rd quarter and expect to do so on a continuing basis.
Now back to Eric for his concluding remarks.
Eric Wintemute
Thank you, Trevor.
As we continue to pursue growth in the face of challenging business conditions, we are focused
on a number of key initiatives which we believe will drive our performance over the next couple
of years.
These include:

  • First, maintaining and expanding our industry-leading Metam soil fumigant franchise with its comprehensive geographic coverage and new production capabilities. These factors, combined with our new SmartDrop® application equipment and industry-leading training program make American Vanguard the solid leader in a $100 million domestic market that involves many diverse crops.
  • Second, promoting the adoption of corn yield enhancement through the use of our granular soil insecticides in tandem with genetically modified seeds. As we release the

3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 10
results of our third year of university field trials this December, American Vanguard will
aggressively market our CSI’s as a catalyst for achieving higher corn yields on the 20
million U.S. corn acres that suffer from moderate-to-high soil pest infestation. With the
introduction of our newest product SmartChoice® to Amvac’s existing family of proven
granular CSI’s, we have positioned ourselves as market leaders in this growth segment
with an array of products dispensed through our reliable, safe and efficient SmartBox®
application equipment. If this practice of augmenting trait seed with our complementary
chemical insecticide becomes widespread, demand for our products in this category
could more than double. As Trevor mentioned in the report issued yesterday, this
season’s use of our closed system application CSI product lines were up significantly
from the 2008 year. This is an indication that our initiative is gaining traction.
 Third, expanding the introduction of several new products for use by professional pest management operators. In addition to our Nuvan ProStrips® that provide residual pest deterrence in commercial treatments, we will soon be introducing several new formulations of this product for a variety of applications. Perhaps the greatest potential for our Nuvan® insecticide is in the emerging “BedBug” application. This newly registered use has been receiving rave reviews during recent performance trials, and it will be an important weapon in the effort to control a problem that is rapidly becoming a serious health issue in hotels, hospitals, and dormitories. The domestic market potential for this technology is substantial.

  • Fourth, continuing to acquire and/or license products from other chemical firms that complement our existing market strengths, have growth potential and can be procured at an attractive price. An interesting consequence of the difficulties that our industry currently faces is the re-evaluation of Ag chemical portfolios and the increased likelihood of product divestments or licensing proposals. We are currently examining several such possibilities and will maintain financial discipline in any and all transactions that we undertake.
  • Fifth, introducing AVD-PSI (a potato sprout inhibitor), the first of a series of “new products” that we have been developing ourselves, as an augment to our typical product procurement business model. This unique bio-pesticide is being submitted presently for joint registration in both the U.S. and Canada and represents a $10 million market opportunity that we expect to begin commercially in late 2010.

3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 11

  • Sixth, refining our manufacturing operations to increase capacity utilization, streamline operating costs and maintain the high product quality, workplace safety and environmental compliance that have characterized our operations for many years. As I mentioned earlier, we are presently engaged in a thorough assessment of our manufacturing assets to determine what changes we need to make to achieve better operating and financial results. We will keep you apprised of our progress in this analysis.
  • Seventh, improving all the “basics” that characterize a successful business.
  • Re-staff, re-focus and drive our Sales organization to execute our marketing strategies and be consistently “Customer Focused.”
  • Expand internationally with our own efforts in Latin America and perhaps through collaborative arrangements in other parts of the world.
  • Restrain overhead costs by exercising control over compensation costs, fringe benefit costs, regulatory / registration costs, administration costs and all discretionary expenses.
  • Eight, maintaining a consistent dedication to Balance Sheet integrity through inventory control, working capital discipline, cash generation / management and prudent levels of leverage.

In closing, we should remember that the underlying global demand for nutrition is everincreasing.
The compelling need to satisfy world hunger requires greater agricultural output and
enhancing agricultural productivity! And this is what American Vanguard does with great
expertise!
We expect that conditions in our industry will remain challenging into 2010.
Industry experts assert that demand is steadily increasing, distribution channel inventory levels
are being reduced, and replenishment/resupply will be required beginning in 2010. We intend to
be ready!
The steps that we have outlined here will allow us to continue to compete effectively and expand
our business successfully.
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 12
As has been our tradition for two decades, we will make any necessary adjustments in our
product portfolio, our manufacturing operations, and our talent base, in order to continue the
business success that we have achieved.
We remain very confident in our potential for growth, solid profitability, and improved long-term
enterprise value. We appreciate the support that we have received from our long-term investors
and we are working harder than ever to earn that support.
Thank you and now we would be happy to answer your questions.
Caller Nick Genova (B. Riley & Co.)
<Q – Nick>: Hi guys, I have a few questions. I know you don’t give guidance, but from a high
level prospective, given the shift in purchasing patterns in both the retail and distribution level,
do you think you will actually see some shift of the Vapam business? It is a pretty big contributor
in Q4 could that shift forward into Q1?
<Trevor>: Actually, I keep watching the weather reports for the mid-west and I just got an
update from my regional manager there. It looks like we are going to get sunshine through to
the weekend, so the corn crop harvest is going to be pretty positive for the next few days. I’m
actually watching more in the Dakota’s; we need some more good weather up there for the
Vapam / K-Pam that I was referring to that goes on the potato fields. The verdict is still out. We
are going to see what the weather does in the next 2-3 weeks. Some of that could slip into the
springtime, which is part of the nature of the business there. We are well behind what it has
been the last few years. We are getting the soy beans off in the northern mid-west and then
being able to put fumigant down for the future potato crop. Those are the main things that are
going on. The yield that is coming off on corn is very positive, I like that. The purchases pattern
again, whether they spend some of that money in the 4th quarter or if it rolls over into the first
quarter, the verdict is still out.
<Q – Nick>: Ok, so it sounds like there is still a potential of that, which would put some
pressures on Q4, but from a distribution level, from an inventory perspective, do you guys feel
that they are about as lean as they can get? At some point you can only go so low in this just in
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 13
time inventory system. What is your sense of where the inventory levels are at and how much
lower they can go?
<Trevor>: I think they could go a little bit lower. I hate to say that, but they are really taking it as
they need it. It varies by product line, and if some of the growers get some good cash in by the
end of the year and want to move some of that product that could be a positive, but on the other
side there is still more pressure on it. The cash management in distribution and retail, and the
growers working with their banks is pretty strong.
<Q – Nick>: Ok, and then on that point, kind of switching to growth margins though, looking at
Q4 and beyond. Given that there are still those pressures in the near term, I imagine gross
margins will stay impacted because of the factory overhead absorption issue. First, can you
give us a sense for the growth margin impact in this quarter, how much of that was mix, versus
pricing pressures, versus the factory overhead absorption.
<Eric>: The biggest part of it was the product mix. As I mentioned, Dibrom was the biggest
piece, followed by factory and then PCNB. Fourth quarter usually is a stronger mix for us; we
had some sales in 3rd quarter, particularly in the international, which were not specifically up to
our normal margins. Given that fact, the issues that we dealt with this quarter will probably not
be quite as impactful. I don’t know if we will be able to reach the kind of margins that we had
last year, given the inventory reduction measures that we are taking.
<Q – Nick>: Ok, that’s fair and then looking ahead to 2010 from a margin perspective. Once
the inventory levels are worked through at the distribution level, is there any reason that you
guys can’t get back to your historical 41%, 42%, 43% margins? Is there any permanent pricing
shift that has occurred in the market or are those margin levels still obtainable?
<Trevor>: I’m pleased with our margins on our propriety products. I think the CSI’s will do pretty
good, the metam franchise is very strong, it is just when we get into this mix on one or two of the
products we mentioned for 3rd quarter.
<Eric>: To answer your question, we do believe we will return back to our historic levels.
<Q – Nick>: Ok, final question and then I’ll jump back in queue. On the international business,
did you guys give what the revenue percent of business in Q3 was?
<Eric>: We do not provide that on a quarterly basis.
<Q – Nick>: Ok, thanks.
Jay Harris (Goldsmith & Harris)
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 14
<Q – Jay>: Eric, I wonder if we can get some numbers or percentages from you. For instance,
what percentage of the $90m inventory is related to products that didn’t sell as well as you
thought they were going to since the beginning of the year?
<Eric>: We have not done that analysis. I can tell you that we did not move the volume of
Impact that we were hoping to move. Impact, along with Dibrom and PCNB are the three areas
where we exceeded our inventory target. We are taking steps to get our inventory down to the
target levels that David alluded to in the mid $80m for the year end.
<Q – Jay>: I was sort of looking for some insight into what portion of your inventories would
have to be sold next year. Are we talking about 30% or 50% of the inventory in this category?
What is your best guess?
<Eric>: I’m not real clear what you are asking. Are you talking about us reaching an inventory
number at the end of 2010?
<Q – Jay>: No, the question that I first asked. What percentage of the inventories is related to
the products you just outlined? I don’t need it to the nearest integer, but I would like a rough
approximation. Are you talking about 30% of the inventory?
<Eric>: Again, those three are probably the highest levels of inventory and if you are saying with
regard to those three products. As we mentioned the PCNB piece we missed a pretty significant
sale in this year in Canada because they had purchased what turned out to be a two year
supply. With Impact, as Trevor mentioned, we have taken some initiatives to increase our
penetration in the market for 2010. Dibrom is one of those products that, as you know Jay, if the
pressure is there it can happen very quickly in the September early October time frame and the
margin is such that we will maintain inventory for the upside of that.
<Q – Jay>: You obviously had some success this year, versus last year, with the SmartBox
program, particularly on the use of CSI with genetically modified seed. What kind of a
percentage improvement did you see in the usage rate?
<Eric>: Again, we just got this report yesterday and the numbers are pretty big, so it may be
more than we think is probably real. We need a chance to scrub the numbers, but we are
seeing that there are a lot of reduced inventories versus prior years of CSI’s going into this year.
<Q – Jay>: That leads to another question and that is, if you examine the differences between
what the growers have used whether its Impact or CSI and your shipments, could you come up
with numbers that you could share with the owners of the company in terms of the difference in
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 15
your revenues and what they would have been if all the products that would have been shipped
that the growers used?
<Eric>: We have discussed this internally. Part of the problem is that this is survey data and we
have gaps from some key customers who do not report information. It is not a 100% report.
There is certainly a lot more than 50% reporting, so you can get a pretty good indication, but
when you have some results, it is not an exact science. What we do is get information from two
to three sources, compare them, and then go back and talk the customers, which takes a little bit
of time.
<Q – Jay>: If you could do that and include a disclaimer that these are not accurate numbers, I
believe it would be helpful. You indicated in the formal remarks that you had certain cost
reduction objectives. Are there numbers in terms of dollars that you were anticipating taking out
of the business that you could share with us?
<Eric>: We have targets on freight, of bring it down by a million dollars and we are more than
double that. We do have some internal targets and have shared what we are willing to share.
The inventory is a big piece, not as a cost reduction, but as a cash generator and balance sheet
improvement. Specifically, item by item, we are not sharing that information.
<Q – Jay>: It occurs to me that you have not put the aggregates together and that if you had the
aggregates together that would be a good number system as a target to put out. Also in terms
of some of the markets you listed that have opportunities for growth for the company; it would be
very helpful if you could share either the target numbers or the size of the markets. For
instance, we have had conversations before on the size of the bedbug market and leave it up to
the listeners to decide what is a reasonable penetration objective. If you had numbers like that
for corn rootworm insecticide plus GMOC and some of the other target markets that would be
very helpful.
<Eric>: With deference to you we did that Jay, by putting a number behind the metam market.
We could more than double our CSI business and you have a rough idea of where that number
is. With regard to the bedbug market it is a little hard for us to quantify, because it is brand new.
There is no market history and we have a new product going into that market. There are
quarterly conferences on bedbugs throughout the US with the annual once just occurring last
month. The head of that conference shared the results of his studies with our Nuvan Pest Strips
and they were very bullish. We know we are getting a lot of support and that there are a lot of
opportunities, but quantifying it we are cautiously optimistic of what it could be. There will be a
3Q09 Earnings Conf Call Transcript
Dated 11/04/09 PAGE 16
scale up time as we are getting acceptance and begin promoting it more and more throughout
the US pest control industry.
<Q – Jay>: Thank you
Eric Wintemute
Thank you very much everyone for joining us and participating on the call. As usual, we will
keep you updated through the course of the quarter if we have some significant information to
pass on. Otherwise, we look forward to talking to you about our year end results in the first
quarter.
Thank you very much.

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