American Vanguard Corporation (NYSE:AVD) Q3 2022 Earnings Call dated Nov. 08, 2022.
Corporate Participants:
Timothy J. Donnelly — Chief Administrative Officer
Eric Glenn Wintemute — Chairman & Chief Executive Officer
David T. Johnson — Chief Financial Offer
Ulrich Trogele — Chief Operating Officer & Executive Vice President
Analysts:
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Wayne C. Pinsent — Gabelli Funds — Analyst
Chris Kapsch — Loop Capital Markets — Analyst
Presentation:
Operator
Welcome to the American Vanguard Corporation’s Third Quarter 2012 Financial Results Conference Call and Webcast. [Operator Instructions]
I would now like to turn the conference over to Mr. Tim Donnelly, Chief Administrative Officer. You may begin, Mr. Donnely.
Timothy J. Donnelly — Chief Administrative Officer
Thank you, Rob, and welcome, everyone to American Vanguard’s 2022 third quarter and nine months earnings review. Our speakers today will be Chairman and Chief Executive Officer, Eric Wintemute; our Chief Financial Officer, David Johnson; and to assist in answering questions, our Chief Operating Officer, Bob Trogele is also on hand. Also, by way of housekeeping, the Company is filing its Form 10-Q later today with the SEC, which will provide additional detail on our financial performance that we will be discussing in this call.
Before beginning, let’s just take a moment to go to our Safe Harbor reminder on Slide 2. 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 as 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, I turn the call over to Eric Wintemute. Eric?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Thank you, Tim. And thank all of you for joining us today. Moving to Slide 3, we have listed the agenda for today’s call. But first, I’d like to start off by acknowledging the terrific work of the AMVAC team to take care of our customers, increase prices to manage inflation, safely operating our factories at very high levels and continue to drive our precision agriculture innovations forward.
We have delivered excellent financial results and expect to maintain our momentum in the fourth quarter. Additionally, we repurchased 1.2 million shares of our stock during the third quarter, indicating our confidence in the strength of our business. Simply put, we are managing our business well in challenging times.
Let’s move on to Slide 4 to discuss our top line performance for the first nine months of the year. Generally speaking, continued high commodity prices for corn, soybean and wheat are supporting a strong farm economy. With respect to domestic crop, we’re up 20% year-to-date, led by Dacthal, which is used for weed control on high value crops and our cotton product Bidrin for pest control and Folex our harvest air due to increased cotton acres and favorable weather. We experienced higher sales of AZTEC for the nine-month period despite an inventory shortage during Q3. In addition, we recorded strong sales of our soil fumigant products in spite of the drought conditions in the west, due largely to price increases.
With respect to non-crop, sales were down 11% year-to-date, due primarily to reduced U.S. consumer demand for lawn and garden products. On the positive side, sales to professional applicators rose with more consumers returning to work. We are well positioned with our mosquito adulticide following Hurricane Ian. Also, we are tracking Tropical Storm Nicole, which is expected to make landfall late tomorrow night. While forecasted to have lower winds then Ian, Nicole is predicted to travel at 9 miles per hour, which should result in considerable precipitation in Florida, Georgia and the Carolinas.
Our international business was up 14% year-to-date, led by [Indecipherable], which recorded sales growth of 55% and gross profit of 60%, and Brazil, which grew by 42% due in part to sales of our nematicide counter. Further, net sales in Mexico grew 26% and gross profit grew 22%, with strong sales of our proprietary soil fumigants. Further, our Central American business recorded sales growth at 11%, led by products used on pineapples and bananas. And finally, our Australian business recorded sales up 11% and gross margin improvement from 35% to 39%.
Before revisiting our full-year outlook and and taking the first guidance at ’23, let’s first focus on current conditions as they will have an impact on both short and mid-term performance. As I mentioned earlier, high commodity prices arising from scarcity and global food supply coupled with strong demand are driving a strong farm economy.
Turning to Slide 5, we note the upward trend of corn prices over the past two years. As, you can see, two years ago before the ’21 season, corn was at $4.05 per bushel, one year ago it rose to $5.59 per bushel, and now, it is at $6.80 per bushel. That’s a 68% rise over the past two years. We see a similar trend with soybean prices over the same period. At this time in 2020, soybeans were $10.86 a bushel, one year ago, they rose to $12.05 per bushel, and now, they’re at $14.52 per bushel. This is a 34% increase over two years.
Higher commodity prices tend to drive procurement activity for both crop inputs and planting and harvesting equipment. However, procurement trends by distribution channel appear to be evening out over the course of 2022, which began at a torrid pace in the first quarter and returned to greater normalcy over the second and third quarters. Despite this level of investment at farm gate channel inventories for AMVAC’s products are at low levels and our distribution partners our bullish on the prospects for the 2023’s planting season.
Let me show you a Slide 6, which will further highlight this point. As you see here, we’re experiencing very high profits in the State of Iowa and this is a calculation of of revenues cost and profitability tracking back to 1970. At the high point in 2012, we are currently about $200 an acre better than that which was our previous best year. That translates into about $2.5 billion above 2012 and nearly $7 billion in profits for Iowa corn growers again illustrating why, I think, our team is very bullish on the U.S. farm economy.
It’s nevertheless useful to consider other factors in forecasting in the market. Inflation becomes a significant driver in global economy and is affecting all industries. As you can see on Slide 7, the Fed has been raising interest rates aggressively over the past seven months. Because the Fed took comparatively early action to raise those rates, the dollar had enjoyed a favorable exchange rate against many currencies. However, many other countries followed suit, and we are seeing certain currencies regain lost ground against the dollar. With a strong dollar and high commodity prices to-date, the farm economy has been able to withstand inflation, largely through price increases.
At American Vanguard, we are enjoying the second straight year of strong demand for which we have been able to build and sell sufficient inventory at improved margins. Having six North American factories as depicted on Slide 8, we have been able to make in-season adjustments to manage fluctuating demand. These manufacturing assets have been essential in our ability to operate with autonomy. Further, while the supply chain has not fully returned to the stable state of three years ago, we have seen a drop in freight prices and the availability of both shipping containers and vessels are improvement.
However, some raw materials that originate in countries affected by pandemic restrictions or geopolitical considerations, for example phosphorus, are affecting the availability and price of some of our key intermediate products. We are taking all available measures to ensure that we can order and receive our necessary inputs in time to meet demand, but I can tell you that this is as much an art, as it is a science.
In short, the upcycle for the agricultural sector that began in 2021 is expected to continue through ’23. Geopolitical activity is lifting commodity prices, giving growers additive incentive to procure both crop inputs and equipment. Further, our positioning of products in the distribution channel should enable us to maintain strong brand value. Thus, while there may be a countervailing factors such as inflation, record low water levels in the Mississippi river and potential questions in the supply chain, we believe that we’re poised to continue our strong performance. In short-term, we are targeting 2022 full performance to be unchanged from our prior call.
So let’s turn to Slide 9. This is our ’22 performance target scorecard. You’ve seen this before, and over the last nine months, we have seen our revenue growth at 13%, gross margins at 41%, operating expenses at 32%, interest, 23% below ’21, however, we are expecting with interest slides that we just showed, to have higher interest costs in Q4. Tax rate for the nine months at 30%, we’re expecting that to tick down 3% to 3% to 27% or 28% at the end of the year. Debt-to-EBITDA, we’re currently at 1.9. We are expecting that to decrease for the end of the year from any further acquisitions. We have, I should say, between stock repurchase and dividends, spent about $35 million so far this year. Net income is up 71% for the year, and EBITDA is up 30%.
So with that, David, I’ll turn this over to you, for financial analysis.
David T. Johnson — Chief Financial Offer
Thank you, Eric. Let’s move on Slide 11, please. Moving to Slide 11, with regard to our sales performance for the third quarter of 2022, the company’s net sales increased by 3.4% to $152 million as compared to a $147 million last year. Within that overall improvement, our U.S. sales were comparable to the prior year and our international sales increased by 9%. International sales accounted for 42% of total sales versus 40% last year.
Turning to Slide 12, with regard to gross profit performance our U.S. Crop business recorded a 14% increase in absolute gross profit. On the sales, it increased by 4%. This performance was largely the result of focusing on improving gross profit on lower margin products by timely implementation of price increases to cover inflation for both higher cost of goods, increased inbound and outbound freight and interest expense.
Overall, our crop margins improved from 45% to 50%. Our non-crop sales absolute gross margin reduced by 1% on sales that were down approximately 12%. The Company was successful in implementing price increases aimed at improving gross profits, particularly on comparatively lower margin products in order to recover, raw materials, logistics costs across a range of products. With regard to our third quarter international sales, we saw sales increased by 9% and an associated 1% improvement in absolute gross margins. The international business has contended with significant cost pressure as a result of strong U.S. dollar impact on cost of goods. We’ve been effective at implementing price increases where possible given global competitive conditions.
Moving — the graph on Slide 13 shows the impact of the factory performance on consolidated gross margin. You can see that in the third quarter of 2021, factory costs amounted to 1.2% of sales. Our performance this year was stronger, though they were both excellent factory activity periods.
On Slide 14, we show operating expenses for the quarter that increased by $1.7 million compared to last year. Our expenses were 33% of sales for both the third quarter of 2022 and 2021. We are seeing cost increase as the business is returning more and more to face to face meetings with counterparties and the concomitant travel expenses. Further, we spent more on advertising and marketing, and in Brazil where we had a very strong quarter, we incurred higher third-party agent commission expenses. And finally, we spent more on a range of administrative export costs. As an offset, freight expense was lower primarily as a result of lower volumes associated with our U.S. sales of our METAM product line.
As you will see on Slide 15, our third quarter 2022 operating income was 26% higher than the level reported for the same period of 2021. We recorded slightly higher interest expense on lower average debt in the third quarter of 2022 as compared to last year. There are two factors. First, we have generated cash from operations during the last 12 months while continuing to develop our precision application systems, managed working capital in the face of both inflation and strong growth, invested in our manufacturing assets, paid dividends and executed on the biggest stock repurchase program in the company’s history. Offsetting these factors, we are seeing the impact of rising interest rates.
From a tax perspective our effective income tax rate increased to 30.5% this quarter compared to 20.7% for the third quarter of 2021. The increase was primarily driven by the mix of jurisdictions of our domestic and international businesses where our taxable profits were generated and one-time international tax benefits in the third quarter of 2021 that did not reoccur in 2022. All these factors came together to generate $6.7 million in net income as compared to $5.5 million last year, a quarter-over-quarter increase of 23%.
On Slide 16, you can see that for the first nine months of 2022, our sales were up 13%, and gross margins in absolute terms are up 18%. Both our U.S. and international businesses have contributed to this exciting performance. Operating expenses increased primarily as a result of the proxy contest expense, the growth of sales affecting freight costs, increased regulatory and registration cost as our international business grew strongly, increased accruals for short-term incentive compensation reflecting improved business performance and increased accruals associated with contingent consideration related to our Australian business that was acquired at the end of 2020.
Overall operating costs which include outbound freight and warehousing, were up 9% as compared compared to net sales which increased 13%. Operating costs improved to 32% of net sales in the first nine months of 2022 as compared to 33% in the prior year. Interest expense has reduced by 23% and the tax rate increased from 27.4% in 2021 to 30.2% in 2022, mainly due to jurisdictions where taxable profits were generated. Overall, net income has increased by 71% for the first nine months of the year.
Now, I want to turn my attention to the balance sheet and the Company’s focus on capital allocation. Slide 17 shows the Company’s capital allocation model that drives many of our actions. We focus on managing debt under our credit facility agreement with a group of banks that we’ve worked with for many years. We aim at an average level of debt to bank adjusted EBITDA between 1 to 2.5 times. The higher end of the range is generally driven by the impact of acquisitions. The credit facility allows us to manage through the strong annual cycle with working capital that expands during the first six to nine months and reduces at the end of the year. In addition, we have grown through acquisition and depend on availability under the line to fund such acquisitions. This has worked extremely well for the Company over the history of our alliance with with our bankers.
We are focused on paying a sustainable dividend and have historically paid approximately 10% of net income. We have diverged from that record only when faced with extenuating circumstances such as COVID. We have been committed to managing the number of shares outstanding and invested $34 million year-to-date 2022 to repurchase approximately 1.5 million shares. We expect to complete the current accelerated share repurchase arrangement during the fourth quarter of 2022 and we’ll provide final share count at the next conference call.
Investments in the growth of our business is the key to our future success. We are working hard on the development and full commercialization of our SIMPAS ULTIMUS technologies, and recently announced that we have achieved the registration of our proprietary product Counter on soybeans in Brazil. We are also growing our Green Solutions portfolio with, for example, our NewLeaf alliance. And at the same time, we continue to take actions to ensure our factories are safe and efficient and capable of supporting our growing business.
On Slide 18, we show our progression on adjusted EBITDA from $38 million in the 12 months ended September 30, 2015 to $78 million for the 12 months ended September 30, 2022. That is a compound annual growth rate of 11%. It is pleasing to note that we are close to achieving the Company’s all-time high annual EBITDA, which was $79 million in 2020 — in 2012.
On Slide 19, you can see that at the end of September 2022, we reported inventories at $192 million as compared to $167 million last year. Inventory management is a significant focus, and this year we have made prudent decisions to hold higher levels of inventory than the past years as we monitor lead times, continuing logistics challenges and the strong Ag cycle demand conditions, procuring inventories earlier than in prior years to secure product for the 2022-’23 growing season. The graph shows inventory expressed as a percentage of trailing 12 months sales. You can see that our long term trend line for this important business metric is good, notwithstanding short term market conditions that have compelled us to make the decisions just discussed.
As you can see on Slide 20 with regard to liquidity, under the terms of the credit facility agreement, the company uses EBITDA — consolidated EBITDA as defined in the agreement to determine the borrowing capacity. Our consolidated bank EBITDA for the trailing four quarters to September 30, 2022 was $77 million as compared to $66 million for the four quarters to September 30, 2021. At September 30, 2022, our debt was at $149 million as compared to $136 million last year. This included the $34 million used to repurchase stock over the last 12 months. Availability has improved notwithstanding the higher closing debt and ended at $121 million as compared to $95 million this time last year.
In summary, on Slide 21, for the first nine months of 2022, sales have increased by 13%. GAAP net income has increased by 71%, adjusted EBITDA has increased by 30%, adjusted EBITDA has also increased from 12% of sales in the first nine months of 2021 to 14% in the first nine months of this year. EPS has improved by 73%. We have acquired 1.5 million shares during 2022 as compared to 300,000 in the same period of the prior year.
With that, I will hand back to Eric.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Thank you, David. Moving on to Slide 2002, which is our three element growth strategy. The core includes the growth of our traditional portfolio, our new product innovation and our M&A activities. Our Green Solutions initiatives consist of a portfolio of more than 120 regional products that we will focus to expand and use globally. In addition, through Envance technology, we’ve begun basic R&D molecular discovery to create new Green Solution pest management products. And with regard to our precision application abations through SIMPAS, we offer the entire industry the ability to prescriptive apply multiple crop inputs simultaneously. We are working diligently to expand our SIMPAS product portfolio to offer growers a wide variety of solutions. Additionally, we are developing multiple applications for ULTIMUS documentation software.
As for Slide 23, with respect to our core products, we are on track to meet our growth targets through 2025. We will accomplish this growth through both internal development and acquisition. For instance, our impact herbicide mixture products which we developed as part of our innovation review process are generating revenue growth, commanding good margins and are enabling us to expand our share of the post emergent herbicide market. With respect to acquisition, the markets remain robust. Year-to-date, we have looked at over 30 potential acquisition targets, of which we are still evaluating 10. As we’ve mentioned in the past, we are selective, strategic and rigorous in ensuring that new products or businesses meet or exceed our acquisition hurdles.
Turning to Green Solutions as you can see on Slide 24, we are poised to achieve our multi-year growth targets. In addition to our portfolio of over 120 biological in green products, we recently announced our alliance with NewLeaf, which has developed a line of soil health products, microbials that produce enzymes which improve a plant’s ability to take up nutrients.
One of the key NewLeaf products called Terrasym appears on Slide 25. Here, we can discuss in brief how Terrasym works. Focus is on the special group of bacteria, PPFM, that can use methanol efficiently as a carbon sourced to survive, thrive and sequester methanol, preferentially over bacteria. As the plant’s roots establish itself, specific microbes start to form a symbiotic relationship with the bacteria. The association between plant and bacteria forms and finally methanol is consumed as a food source by the bacteria to build bacterial population and release plant beneficial molecules and nutrients which enhance the plant’s response.
As we present in Slide 26, Terrasym is especially well suited for use in corn where it serves to enhance root structure and plant health. In fact, we had been tracking the Terrasym technology for some time with that use in mind. Ultimately, we plan to make Terrasym available through our SIMPAS system.
This brings us to Slide 27, the third element of our growth strategy. Presently, we have 81 systems — SIMPAS systems including one in the Ukraine and one in Brazil.
As you can see from Slide 28, we remain on track to meet our multi-year growth targets for SIMPAS. Bear in mind that this is US-only. We are currently testing a SIMPAS unit in Brazil which is the largest Ag market in the world. As we recently announced, we have obtained a new label that permits the use of Counter on soybeans in Brazil. This should double or triple our sales in Brazil of this proprietary nematicide within a short time.
On a relative note, one of the largest growers in Brazil with over 550,000 hectors is coming into the U.S. to observe the prescriptive application of Counter through SIMPAS in this upcoming planting season. In addition, as shown on Slide 28 — 29 Rabo Bank and it’s leading — as a leading lender in the carbon credit market. John Deere Financial and AMVAC have joined together to offer 2.65 financing with harvest terms on new SIMPAS equipment. This alliance should enable us to gain even greater traction and market acceptance of SIMPAS.
And finally on Slide 30, we summarize the financial targets of our three growth pillars, Core, Green Solutions and Precision. I am pleased to say that our entire AMVAC team has both contributed to and embraces our three-year growth targets. As I mentioned at the start of the call, we are performing strongly and consistently in the face of variable conditions. We are well poised to address demand on the Ag upcycle as the Ag up cycle continues into 2023. Further, we are maintaining a strong balance sheet and high borrowing capacity while self investing in innovation and total shareholder return.
With that, we’d like to open up to any questions you may have. Rob?
Questions and Answers:
Operator
Thank you. [Operator Instructions] And our first question is from the line of Gerry Sweeney with ROTH Capital. Please proceed with your questions.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Good afternoon, Eric, David, Bob. Thanks for taking my call.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Yeah, our pleasure.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Just wanted to start at the top. Obviously we saw increasing bullishness on 2023. Just wanted to get your thoughts where we are, where you think we may be in this cycle and how 2023 plays out, maybe a little bit after that since you’ve been through this several times?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Well, of course there is no way of predicting exactly how long upcycles happen but right now, I’m not hearing from any of our customers that they can see a downward move. People — obviously, the more years you go out, the more variables there are. But certainly, I think, 2024 certainly looks very good, ’25, I think, also looks very strong.
Bob, any color you want to add to that?
Ulrich Trogele — Chief Operating Officer & Executive Vice President
Well, I think Gerry, there are of course, challenges on there. We see a strong U.S. Ag commodity through the next cycle meaning till October harvest time. The big factor which is the unknown is really what will the China demand look like for South America and for in North America. That will play out in the first and second quarter. I think one other major issue is where energy price is going to be as the replenishment happens with the U.S. strategic reserves, the Russia conflict. So those are kind of little bit unknowns.
But as Eric stated, we have a strong pipeline of technology, so we feel very confident to grow whether we have those headwinds or not. So, as we penetrate the market more with our technology, I think we’ll be in good shape.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Speaking of technology, that was actually a good segue into my — one of my next questions. You call it core business and new growth, they’re called sort of the old kids, new kids, but when you’re looking at Green Solutions and even, I guess to some degree, SIMPAS and ULTIMUS, but maybe just they’re probably different routes to market but when you look at those two businesses, is there anything you need internally to drive growth. I mean, are you going to leverage the same channel but have some different education with the end users or with distributors, I guess overseas, anything that we can think about or you’re thinking about that could enhance growth or ensure growth, et cetera?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
So it’s a question we’ve been asked before, and it’s a good one. It’s one we think about as well. Here, we are green lighting our team’s interest in whether it’s margin or expense or capital or adding people. So, definitely those two units are being fed, I think, the resources that they’ve asked for. I have looked at John Deere and seen how they’re See & Spray has gathered so much attention and it is — there — I mean it’s really good technology but it is one input and that’s herbicides, that’s not kind of a retirement plan. Those are going through and — so, I guess exposure is one part of it. It’s one of the reasons why we worked with our peers and their products that we’re adding to the portfolio.
So, I would say probably the — it’s just getting our message out. We’ve been handicapped some through the COVID where we could not meet in-person with people, but that activity has stepped up dramatically, and I think that’s why we’re pretty bullish on what we can accomplish both and in those two, both in Green Solutions and SIMPAS, which again, each quarter, I go through with the team and say all right, any adjustments up or down? And right now, everybody feels confident with those targets which again, if we achieve those over the next three years, it’s — I think we’re going to have a lot more notoriety out there.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Got it. Switching gears. I think you mentioned maybe 10 potential acquisitions or that’s sort of the funnel. I’m not sure exactly what you said on that front, but market’s strong, there’s this shift focus, obviously of your core business, but then you maybe even a shift in focus or more attention to the greener solution. Some of those businesses are probably getting much more attention. I imagine multiples and prices are going up. How do you look at prices, biologicals, long lead, long runway type growth business that you can acquire but maybe more expensive than what you paid historically?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Yeah, I mean, I think that’s where we’re we’re being fairly prudent. Paying 12 to 15 times, and of course a lot of the biological companies are are not profitable. And so the acquisitions we’ve made with Agrinos, obviously, we paid well under just the assets.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Yeah.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Licensing or during distribution part alliances with really great companies like NewLeaf. It’s a good good ability for them to not have to invest in building a market access platform with a lot of overhead, and can benefit from the structure that we’ve got set up there. So those types of arrangements enable us to grow meaningfully in this space without us having to put up a multiple, like what you were talking about.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Got it. And of those 10 acquisitions, are they more core, more Green Solutions, how — what does that look like, I guess, the funnel?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Yeah. I mean it’s across the space, Bob. I mean there are — as you mentioned, our Green Solutions companies that are looking to cash out on the enhanced view of what Green Solutions can offer and a potential growth, we see some some what we would consider more core products that are available that can be kind of bolt-ons that makes sense for us. So, again overall, there’s plenty of opportunities, and, I guess from our standpoint, we want to make sure we’ve got adequate resources to develop our two initiatives to defend our existing products, but also look opportunistically at these acquisitions. And again, some of what we see, we’re kind of on a exclusive basis on those types of deals that we’ve done several over the last few years, generally are more accretive to us upfront.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Got it. One more question then I’ll jump back in queue. I think sales up 13%, do you know how much this is maybe volume versus price?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Yes. I think that was — so last fall, I think we were looking at, it was more 50-50. And I think we’re now 85…
David T. Johnson — Chief Financial Offer
80-20.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
80-20, okay. 80% price and 20%. We had some really hefty increases that we put in place for the third quarter that kind of drove, particularly our soil fumigants was a big part of that. We had significant increase in that, and it’s a big product for our third and fourth quarter.
Gerard J. Sweeney — ROTH Capital Partners, LLC. — Analyst
Okay, perfect. I appreciate it. Thank you.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Sure.
Operator
Thank you. [Operator Instructions] The next question is from the line of Wayne Johnson with Gabelli Funds. Please proceed. With your question.
Wayne C. Pinsent — Gabelli Funds — Analyst
Hi, thanks for taking my call — my question. So just on — back to that 80% price, 20% volume, can you just — was that for the year-to-date? And just looking at the quarter like a lot of comparisons with the quarter versus — you put out the quarter today and then a lot of talk about year-to-date numbers. Can you just discuss sort of pricing, what you’re getting through now, volumes and how it’s looking in the quarter and sort of the seasonality of your business, if you could just go over that?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Yeah, so, I think your question was — I’m sorry, I didn’t quite understand. So, the first piece is about the 80-20, that’s for the year, and I think that was your first question. Again, can you remind me what your second question was?
Wayne C. Pinsent — Gabelli Funds — Analyst
Yeah, if you could go over sort of what the pricing and volume was in the quarter. And then, third question, I guess, is if you could just discuss the seasonality because we’re talking a lot year-to-date on the call and just looking at the quarterly number, if you could discuss the seasonality of your business too.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
85% was pricing in the quarter. And so from the seasonality, again our soil fumigants business VAPAM, K-PAM Pam are our biggest products, and what we’re seeing is the market grow outside of the United States and U.S. were probably about 10 million gallons, in that range. But we’ve got about 2.5 million gallons now they’ve grown into Mexico, Australia, Central America and those markets are growing strongly for us.
As I mentioned, we had drought conditions in U.S. and some up in the Pacific Northwest, so volume overall was down in the U.S. but up internationally. So they kind of cancel each other out. And then — but as I said, we had significant increases in costs going into the quarter, and there were pretty hefty price increases. So that’s probably what drove the most.
We also had — I mentioned our cotton — two products. Both of those had high cost increases and they had substantial 25% type price increases. And that led, obviously, to, I think, some — it’s skewing more towards towards price rather than volume.
Wayne C. Pinsent — Gabelli Funds — Analyst
All right. Thanks. And then just in addition to that, looking forward, you guys mentioned farmer economics are in great shape going into 2023. How much pricing do you think you can push through in the fourth quarter and into 2023, and how do you think that’s shaping up?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
So far we’re not having price pushback, which is good. We’ve made good progress in ’21. I think we’re kind of ahead of our peers on that regard. I think they’ve caught up in ’22. We’ve got — for the U.S. season we’ve put through price increases in the September timeframe that looks fine going forward. Internationally, we’ve had delayed increase results in Mexico. And that is now kicked into place and they’ve increased their prices. Similarly, in Central America, they were they were not quite as far behind Mexico and Brazil as well. Australia, they’ve been able to — and most of the products have been able to put through price increases, but it has been a little slower internationally than domestically, but I think right now we feel pretty good about where our margins are going to be based on the cost increases that we’ve had.
Wayne C. Pinsent — Gabelli Funds — Analyst
Okay. Thank you.
Operator
Our next question is from the line of Chris Kapsch with Loop Capital Markets. Please proceed with your question.
Wayne C. Pinsent — Gabelli Funds — Analyst
Yeah, hi, good afternoon. I have some follow-ups on some of the discussion that has already taking place, but just on the pricing dynamic for the industry, one of the — one of your peers, your larger peers that talked about pricing also but juxtaposed against a cost inflation that seems to be moderating at least looking forward into ’23? So I’m just wondering if you see any of that cost inflation moderation happening and how do you think the stickiness of your pricing increases that you’ve had based on cost perch will hang in if in fact a cost inflation moderates over the course of the next, I don’t know, 12 to 18 to 24 months?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
So certainly within our proprietary products, and we’ve got a good portion of the products that we sell, we’re kind of it, certainly with most of the organo-phosphates. And so — we seeing phosphorus costs improving, we are seeing freight — at least inbound freight improving. And so, I think there — we have, I guess your question maybe, if costs improve, are we going to need to trim our increases. And I don’t think so. I mean based upon the farm economy today, I think it’s robust, I think people are making money. We tend not to play in the commodity markets. So we certainly have some products where we’ve got generic competition. And there could some of those products that do fluctuate downward. And — but again, those are areas that we don’t emphasize sales. So, if we’re in a mode where it’s not going to be profitable to our liking, then we just step aside. So. I think — I guess to answer your questions, I think we feel we’re in pretty good shape to maintain our margins.
Chris Kapsch — Loop Capital Markets — Analyst
Great. So if we were to look at granularly at the price increases that you have achieved or push through, would it be sort of across the board in magnitude for all the product lines or is there certain areas where you’re more tactically pushing more price because of either some differentiation or because of some more acute costs associated with that particular product line, or is it just kind of like a blanket price increase?
Eric Glenn Wintemute — Chairman & Chief Executive Officer
I’ll just speak domestically, and I think they were looking at somewhere in the 6% to 20% depending on the products. So there is wide variation. I think a lot of that is driven by cost. So when we — we’ve done we’ve talked about before is that all our marketing managers know issues cost by what we have in inventory, what replacement cost is, what we expect cost to be 90, 180, 270 and 360 days out. So based upon that, I think I think our team has — looks at that in the aspect that they want to make sure they do not have margin deterioration. And so, I think we have seen some price increases and I mentioned with, maybe with our VAPAM product line where we’re going up — maybe cost is going up $200 an acre to fumigate. And people are saying, well, maybe I am not going to apply quite as much. So there has been little sticker shock with that. But that being said, net sales of the product are increasing. Just, it’s more in price than in volumes.
Chris Kapsch — Loop Capital Markets — Analyst
That’s helpful, thanks. And then if — talking about the — it looks like a favorable backdrop and relative bullishness about the agricultural market going into next year. One — you peeled that back a little bit, it looks like early indications are that there’ll be — in North America, there’ll be shift — preference towards corn versus soy, last year was the opposite. So just wondering if based on the channel demand at this stage, if you’re seeing that likely shift to corn acreage or maybe a increase in corn acreage, relatively speaking? Is that manifesting in demand pull for your soil insecticides or is it too early to say? How do you feel about that particular product line into the ’23 season, and do you think that the competitive landscape for your products are same as they’ve been or is it evolving? Thank?
David T. Johnson — Chief Financial Offer
Yeah so with regard to corn, I mean, slide that Bob [Indecipherable] this morning on Iowa, certainly, if I was a corn grower and planting soybeans and I didn’t see the economics of the soybeans but we’ll have that shortly, but the corn profitability obviously looks strong and I would agree with you that people are going to look strongly at corn. That being said, All — I mean if you use corn as the barometer, that just puts pressure on everything else which again increases the cost of the commodity price on those other products as you — other crops as you cut down acreage. So that’s just kind of a feeding cycle that, I think will help keep commodity prices up for some period of time.
So with regard to our products, I mean our corn soil insecticide look strong. We did see a fair amount of corn rootworm damage this year. If commodity prices stay at this high level, people are going to want to protect that corn, the investment and return on investment are strong. So yeah, I think we feel poised well certainly for this year.
And that being aid, on soybeans again, we are building our soybean crop input line as well so that we look to benefit whichever way growers decided to go.
Chris Kapsch — Loop Capital Markets — Analyst
Got it. And if I could just do one follow-up on the intended acquisition in the funnel you might have. Are we more likely to see something extending to Biologics acquisition with those sorts of, I don’t know, Green Solution is the right terminology, is that something along those lines, or something — obviously, Corteva, for example, recently at their Investor Day in Iowa, talked about rationalizing a bunch of products over time to sharpen their portfolios. So would — are those the kind of things you would look at that’s certainly been in play in the past, and so what’s more likely, and what would be the criteria for those different buckets of potential acquisitions? Thank you.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
So I’ll let Bob elaborate, but I’ll just say accretiveness is we’re looking at deals and trying to figure out what are the best acquisition opportunities for us. I’d like to say we’re sometimes agnostic as to the product we are searching for a certain pieces to fill out our portfolio gaps, but we’re not going to pass an opportunity to add to existing strengths. And as you mentioned, our bigger peers, they go through every three to five years and from the sales, and so that’s part of what’s driving this.
And so, Bob maybe some color on just in those 10, how does that break out as far as market access, Green Solutions, more traditional type chemistry. We’ve got kind of a blend, do we not?
Ulrich Trogele — Chief Operating Officer & Executive Vice President
Yeah, it’s fairly balanced Chris and Eric. I think the — we’ve got a couple of small deals, medium sized deals and a couple of large deals. And we’re trying to strengthen all three pillars of our strategy whether it’s Core business, Chemistry, Green Solutions. But I would say it’s probably more focused on those two. We’re not looking for anything in the Precision Ag arena. And as Eric said, we’re looking at being accretive for the shareholder, return on investment, EBITDA growth and also earnings per share. So, we rank them accordingly. And then we look at the complexity, the execution. Acquisition is all about integration and execution, and we do that extremely well, and that’s how we prioritize.
Chris Kapsch — Loop Capital Markets — Analyst
Thanks for that, Bob, and maybe if I could — just one last one. Because you mentioned the balance of the — I don’t know if the partnership is the right word but the financing package for SIMPAS via an alignment with John Deere Finance and this…
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Rabo Bank.
Chris Kapsch — Loop Capital Markets — Analyst
Rabo bank, yeah. So curious, so because obviously, John Deere with its equipment franchise and some focused on even mentioned one other Precision Ag equipment, is there anything to read into their interest in your SIMPAS or is this a completely autonomous arm for John Deere that’s not necessarily working with the equipment side of the business and looking at solutions in the Precision Ag world?
Ulrich Trogele — Chief Operating Officer & Executive Vice President
Yes, I think your word autonomous, the financing arm of John Deere is very autonomous in the equipment side. I mean they do have also internal interactions as far as financing their own equipment, but the John Deere financing works with all major companies. Growers are looking for financing options. This is an option, it’s a competitive option for the SIMPAS line of product but really a alignment with John Deere, if that’s what you’re asking, it’s way too early in the process. I think right now, we’re really focused in on getting as many systems into the hands of farmers. There’s a lot of education there to do. And up till now, we’ve seen excellent results. Like Eric mentioned, we were slowed down one year, maybe even 18 months through the pandemic, but things are picking up very nicely for us. And the results, the economic results for the growers are excellent.
Chris Kapsch — Loop Capital Markets — Analyst
And just on that because I think it was this harvest that you were going to have a bigger sample set, are you gonna be able to kind of share, quantify some of the yield benefit associated with SIMPAS and the return, but I don’t know if it’s too early to share any of that? Thank you guys.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Yeah, it is early. I mean, generally we look at kind of the latter part of November, end of December before we start with yield results. And it kind of — it depends on — when we do studies, it depends on how fast researches sometimes that goes into January before we get the reports. But yeah, we’ll be sharing that as it becomes available.
Chris Kapsch — Loop Capital Markets — Analyst
Thank you.
Operator
[Operator Instructions] At this time, I will turn the floor back to Management for closing remarks.
Eric Glenn Wintemute — Chairman & Chief Executive Officer
Okay. Well, again, I thank all of you for listening in on the call. Great questions from the three of you. Thank you very much. We look forward to reporting our Q4 results and on the next call, we’ll give kind of our outlooks with some targets for ’23.
So with that, thank you very much, and again, I appreciate your time. Bye.
Operator
[Operator Closing Remarks]