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. These forward-looking statements are based on current expectations and are subject to a number of risks, uncertainties and other factors. In connection with the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important factors which, among other things, could cause the 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; 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. Securities and Exchange Commission (the "SEC"). It is not possible to foresee or identify all such factors. For more detailed information, refer to Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operation, Risk Factors, in the Company's Annual Report on Form 10-K for the year ended December 31, 2007.

RESULTS OF OPERATIONS

Quarter Ended September 30 (columnar numbers in thousands):



                                       2008       2007      Change
                     Net sales:
                     Crop            $ 51,598   $ 49,774   $  1,824
                     Non-crop          16,038      6,867      9,171

                                     $ 67,636   $ 56,641   $ 10,995

                     Gross profit:
                     Crop            $ 21,887   $ 21,216   $    671
                     Non-crop           6,899      2,945      3,954

                                     $ 28,786   $ 24,161   $  4,625

Net sales for the three months ended September 2008 at $67,636,000 were 19.4% higher than sales for the same period in 2007 of $56,641,000. Our insecticide product lines performed very well driven by high demand for our mosquito adulticide product Dibrom ® following the intense hurricane season in the Southeast including significant use for the product for the first time in Texas. This was offset by lower demand for our cotton insecticide, Bidrin ®, driven by reduced cotton acres in the USA. Our performance was also positively impacted by strong sales of our soil fumigant product line and by our PCNB product line, which has been a core product for the Company throughout our history but has been rounded out in the last 12-months with the purchase of the Chemtura Terraclor® and Turfside ® products. Our corn soil insecticide products performed in line with expectations and slightly above last year. The main offset was timing on sales of Impact ® as we did not make available the early purchase program during this quarter that we sponsored in the same period of 2007. This is mainly due to customers managing stock levels. Finally, our international sales continue to develop including the start-up, during the quarter, of our new operation in Costa Rica. Led by soil fumigant products on vegetable crops in Mexico, Central and South America; Thimet® and Counter® on corn and vegetables in Asia; and fungicide products in Canada, our international sales increased strongly, ending 35% higher than the same period of 2007. The Company is supporting our international growth in two ways. We have put in place a USA based team focused on international product line growth and we are establishing subsidiaries with on the ground staff once we can see a clear growth potential for our products.

Sales of new products including Orthene ®, Turfside and Terraclor®, acquired in the last twelve months performed well and contributed approximately 30% to the increased sales compared to the same period of 2007. Margins for this product are similar to our average margin levels.

Cost of sales for the three months ended September 2008 was $38,850,000 or 57.4% of sales. This compared to $32,480,000 or 57.3% of sales for the same period in 2007. Although this represents almost no change period on period, in fact, we continue to see price pressure on key raw materials, particularly those based on petroleum, sulfur and phosphorus where we have seen significant cost increases. The offset has been some long-term purchase commitments, inventory management and some selective

product line selling price increases. In addition, although manufacturing costs have increased period on period, these have been driven by labor costs up 13% including a 14% increase in headcount, depreciation on capital spending up 3% and other costs up 7.4%. Furthermore, the Company has two more manufacturing facilities than in the same period of 2007. Offsetting these cost increases, the Company is working to improve utilization of manufacturing assets by bringing production in-house and some selective toll agreements for 3rd parties where the chemistry involved is a good fit.

Gross profit ended at $28,786,000 or 42.6% of sales compared to $24,161,000 and 42.7% of sales for the same period of 2007.

It should be noted that, when making comparisons with other companies' financial statements, the Company reports distribution costs in operating expenses and not as a part of cost of sales.

Operating expenses increased by $3,966,000 to $18,111,000 as compared to last year's expense of $14,145,000. The differences in operating expenses by department are as follows:

                                                       2008       2007     Change
      Selling                                        $  5,049   $  3,976   $ 1,073
      General and administrative                        4,393      4,445       (52 )
      Research, product development and regulatory      2,504      1,712       792
      Freight, delivery and warehousing                 6,165      4,012     2,153

                                                     $ 18,111   $ 14,145   $ 3,966

• Selling expenses increased by $1,073,000 to $5,049,000 for the three months ended September 2008 compared to the same period last year. The main driver for the increase was costs associated with distributor programs which increased by $614,000. This reflects particularly strong volume sales of certain products with specific distributor incentive programs. Advertising expense increased by $220,000 mainly focused on driving the Company's message on new product lines, proprietary delivery systems and Impact®.

• General and administrative expenses reduced by $52,000 to $4,393,000 when compared to $4,445,000 for the same period of 2007. Although intangible amortization increased by $82,000 as a result of acquisitions of new product lines over the past twelve months, other cost savings serves to more than offset this increase. The main reductions are in legal costs which were down $390,000 benefiting from a negotiated settlement of a long outstanding claim with an insurer in liquidation.

• Research, product development costs and regulatory expenses increased by $792,000 in comparison to the same period of 2007. This includes registration expenses both in the USA and the UK which are up by $460,000; product development costs that increased by $183,000 as compared to the same period of 2007. These costs are elevated as we work through specific product defense issues in the normal course of our business.

• Freight, delivery and warehousing costs increased by $2,153,000 to $6,165,000 or 9.1% of sales. This compares with $4,012,000 or 7.1% of sales in the same period of 2007. There are two factors driving this performance. First, the sales activity level is higher for this three month period ended September 30, 2008 when compared to the same period in 2007. Second, the sales mix included slightly higher sales of large volume products like Metam in the current year, when compared to the same period of 2007. Finally, we incurred elevated costs responding to urgent delivery requirements associated with our DiBrom product.

The Company reported net income of $6,029,000 or $0.22 per diluted share for the three months ended September 30, 2008. This compared to net income of $5,447,000 or $0.20 per diluted share for the same period in 2007. This represents a 11% improvement in net income compared to the same period of 2007.

Interest expense was $1,098,000 in the quarter ended September 30, 2008 compared to $1,105,000 in the same period in 2007. The Company's average overall indebtedness for the quarter ended September 30, 2008 was $81,098,000 and the effective interest rate was 5.4%. This compared to $60,694,000 and an effective interest rate of 7.3% for the same period in 2007. The Company's effective borrowing rates are linked to movements in the LIBOR rate. In the period from September 2007 to September 2008, the three month LIBOR has declined by approximately 2.5% driving the reduction in the effective rate between the two periods. The Company capitalized interest of $63,000 during the quarter ended September 30, 2008. The Company had interest income of $70,000 during the same period of 2007. During the month of October 2008, the LIBOR rate has ranged between a low of 2.85% and a high of 4.59%, demonstrating continued volatility.

Income tax expense increased by $77,000 to end at $3,611,000 for the third quarter of 2008 compared to the same period last year. Our effective tax rate is at 37.5%, which compares with an effective rate of 39.4% for the same period of the prior year. The lower tax rate reflects a catch-up for the nine months ended September 30, 2008 to the forecasted full year tax rate of 38.06%. This is the same process that occurred in the same period of 2007.

Nine Months Ended September 30 (columnar numbers in thousands):



                                      2008        2007       Change
                    Net sales:
                    Crop            $ 130,053   $ 125,368   $  4,685
                    Non-crop           36,425      22,207     14,218

                                    $ 166,478   $ 147,575   $ 18,903

                    Gross profit:
                    Crop            $  55,172   $  54,677   $    495
                    Non-crop           14,962      10,128      4,834

                                    $  70,134   $  64,805   $  5,329

Net sales for the first nine months of 2008 at $166,478,000 were 13% higher than sales for the same period of 2007 of $147,575,000. During the early part of the year weather adversely affected our sales in the corn belt states but has had a strong positive impact in the latter months as the hurricane season drove the demand for our leading mosquito adulticide product Dibrom®. In detail, our soil fumigant products continue to track well ahead of last year, our insecticide product lines are strongly ahead of last year, with our mosquito adulticide product driving that performance. Offsetting these strong positive performances, our corn soil insecticide products improved quarter over quarter but was not enough to bring the nine months sales of 2008 up to the level achieved in same period of 2007. In addition, sales of our Impact® product line are behind last year but we anticipate a stronger final quarter which will improve our overall 2008, though not to the level of 2007. It is important to note, however, that our field information shows that the number of acres treated in the 2008 season exceeded the number treated in the 2007 season. Led by improved sales of our fungicide products globally, Dacthal® globally and Counter on bananas and corn in Latin America, our international sales were up 20% for the nine months to the end of September 2008 as compared to the same period in 2007.

Sales of new products including Orthene, Turfside and Terraclor, acquired in the last twelve months performed well and contributed approximately 63% to the increased sales compared to the same period of 2007. Margins for this product are similar to our average margin levels.

Cost of sales ended at $96,344,000 or 57.9% of sales compared to $82,770,000 or 56.1% of sales for the same period of 2007. The main driver has been significant cost increases of raw materials based on petroleum, sulfur and phosphorus. The offset has been some long term purchase commitments, inventory management and selective selling price increases. In addition, manufacturing costs have also increased as compared to the same period of 2007, driven by labor costs up 7.4% including an 8% increase in headcount, depreciation on capital spending up 10% and other costs down 7%. Furthermore, the Company has acquired two more manufacturing facilities than in the same period of 2007. Offsetting these cost increases, the Company is working to improve utilization of manufacturing assets by bringing production in house and some selective toll agreements for 3rd parties where the chemistry involved is a good fit.

Gross profit ended at $70,134,000 or 42.1% of sales compared to $64,805,000 and 43.9% in the same period of 2007.

It should be noted that, when making comparisons with other companies' financial statements, the Company reports distribution costs in operating expenses and not as a part of cost of sales.

Operating expenses increased by $5,872,000 to end at $47,493,000 compared to last year $41,621,000. This is an increase of 14.1%. The differences in operating expenses by department are as follows:

                                                       2008       2007     Change
      Selling                                        $ 14,765   $ 13,043   $ 1,722
      General and administrative                       12,661     12,850      (189 )
      Research, product development and regulatory      6,338      4,921     1,417
      Freight, delivery and warehousing                13,729     10,807     2,922

                                                     $ 47,493   $ 41,621   $ 5,872

• Selling expenses increased by $1,722,000 to $14,765,000 as compared to $13,043,000 for the same period of 2007. Included in this change, advertising and promotional spending in support of our expanded product line portfolio and our proprietary delivery system increased by $939,000; our expenses associated with field service of our proprietary delivery systems increased by $394,000; finally, we continue to invest in building our infrastructure internationally which is resulted in $479,000 more cost supporting regional sales growth.

• Research, product development costs and regulatory registration expenses increased by $1,417,000 to $6,388,000 as compared to $4,921,000 in the same period of 2007. The main drivers were increased product defence costs in the USA and the UK which are up by $941,000 and product development costs up by $346,000.

• Freight, delivery and warehousing costs increased by $2,922,000 to end at $13,729,000 or 8.2% of sales compared to 7.3% for the same period in 2007. The additional increase of $1,223,000 or 12% is associated with three factors. First, fuel costs increased in the early part of the year; second, we have seen some change in mix with some more sales of our high volume products including metam and PCNB in the last few months; third, we have incurred some higher charges shipping internationally as that part of our business grows and fourth, we have seen some urgent shipments particularly in the last three months ended September 30, 2008 as we responded to urgent demand for products like our mosquito adulticide Dibrom®.

The Company reported net income of $12,104,000 or $0.44 per diluted share for the nine months ended September 30, 2008. This compares with $11,164,000 and $0.41 per diluted share for the same period of 2007. This represents an improvement in net income of 8.4% compared to the same period of 2007.

Interest expense was $3,345,000 in the nine month period ended September 30, 2008 compared to $4,808,000 in the same period in 2007. The Company's average overall debt for the nine months ended September 30, 2008 was $86,005,000 and the effective interest rate was 5.2%. This compares to $84,474,000 and an effective interest rate of 7.6% for the same period in 2007. In comparison to the prior year, three month LIBOR has declined by approximately 2.4% from year to year. The Company earned interest income from investments of $75,000 during the period and capitalized $171,000 of interest related to construction-in-progress during the nine months ended September 30, 2008; this compares to $103,000 interest income and $30,000 capitalized interest for the same period last year. During the month of October 2008, the LIBOR rate has ranged as low as 2.85% and as high as 4.59%, demonstrating continued volatility.

Income tax expense increased by $93,000 to end at $7,438,000 for the first nine moths of 2008 compared to the same period last year. Our effective tax rate is at 38.06%, which compares with an effective rate of 39.7% for the same period of the prior year.

LIQUIDITY AND CAPITAL RESOURCES

The Company generated $52,000 of cash from operating activities during the nine months ended September 30, 2008. This compared to generating $45,559,000 in the same period of last year. Net income of $12,104,000, non-cash depreciation and amortization of $8,711,000, deferred income tax of $774,000 and stock based compensation expense of $554,000 provided a net cash inflow of $22,143,000 compared to $19,072,000 for the same period last year.

The main drivers for the reduction in cash generated from operational activities are first, an increase in inventory levels compared to the same period in 2007. Secondly, our business is growing strongly and sales are up 19% quarter on quarter. Our average trading terms with customers have improved marginally and trade receivables as at September 30, 2008 are approximately $11,000,000 higher than this time last year. Finally, some of our customers elected to pay early in the final quarter of 2007 taking advantage of available early payment discounts. This resulted in high cash inflow to the Company prior to December 31, 2007. This was not the case in the period leading up to December, 31, 2006.

Inventories increased during the first nine months of 2008 ending at $89,247,000 compared to $63,455,000 at the end of December 2007. Of the $25,792,000 increase, $4,178,000 is associated with entirely new products, $7,632,000 on products where our market position has strengthened and we have put in place higher inventories to respond to expected demand, $3,129,000 associated with our manufacturing activities at newly acquired facilities and $599,000 at our international subsidiaries to support strong sales growth. The balance of the increase relates to the progress of the seasons, the weather, our slower than anticipated sales in the corn belt states in the early part of the year and the impact of raw material price increases.

The Company used $19,237,000 in investing activities during the nine months ended September 2008 including $8,892,000 on the acquisition of new product lines and $10,345,000 on the acquisition of fixed assets including the development of our Metam facility in Axis, the updating of our newly acquired facilities at Hannibal, MO and Marsing, ID and on our proprietary delivery systems.

Financing activities provided $19,518,000 during the first nine months of 2008, compared to utilizing $37,614,000 in the same period of the prior year. Net borrowings under the Company's fully-secured revolving line of credit increased during the nine month period ending at $23,000,000. The Company received $1,329,000 from the exercise of stock options and the sale of common stock under its ESPP plan. Furthermore, the Company decided to purchase 34,200 treasury shares at a cost of $408,000. Finally, the Company made a dividend payment of approximately $1,323,000 and payments on its long-term debt of $3,080,000.

The Company has various different loans in place that together constitute the short-term and long-term loan balances shown in the balance sheet as at September 30, 2008 and December 31, 2007. These are summarized in the following table:-

Indebtedness                                  September 30, 2008                 December 31, 2007
$000's                                  Long-term   Short-term   Total    Long-term   Short-term   Total
Term Loan                                  49,000        4,000   53,000      52,000        4,000   56,000
Real estate                                 2,075          106    2,181       2,155          106    2,261
Working Capital Revolver                   23,000           -    23,000          -            -        -
Acquisition related term payments           3,200          550    3,750       2,000           -     2,000

Total Indebtedness                         77,275        4,656   81,931      56,155        4,106   60,261

The Company has four key covenants to its credit facility with its banking syndicate. The covenants are as follows: (1) The Company must maintain its borrowings below a certain consolidated funded debt ratio, (2) The Company must limit its annual spending on the acquisition of fixed asset capital additions,
(3) The Company must maintain a certain consolidated fixed charge coverage ratio, (4) The Company must maintain a certain modified current ratio. As of September 30, 2008 the Company met all the covenants listed above. This was the position as of December 31, 2007. Furthermore, this has been the case at each reporting date since the loan facility was put in place in December 2006.

At September 30, 2008 total indebtedness stood at $81,931,000 as compared to $60,261,000 at December 31, 2007. At September 30, 2008, based on its performance against the covenants listed above, the Company had the capacity to increase its' borrowings by up to $37,354,000 under the credit facility agreement.

The Company is dependent on its banking relationship at all times and particularly in these current volatile times. The Company's main bank is Bank of the West which is a wholly-owned subsidiary of the French bank BNP Paribas. Bank of the West has been the Company's bank for more than 25 years. Bank of the West is syndication manager for the Company's loans and acts as counterparty on the Company derivative transactions. The Company reviews the credit worthiness of its banks on a quarterly basis via both credit agencies and face-to-face meetings with senior management of the Bank(s). Management believes that the Company has an excellent working relationship with Bank of the West and the other financial institutions in the Company's banking syndicate. In addition, the Company has recently had individual discussions with lenders in the Company's banking syndicate who have expressed an appetite to further support the Company in the right circumstances.

RECENTLY ISSUED ACCOUNTING GUIDANCE

On October 10, 2008, FASB issued FSP FAS 157-3. This position paper seeks to clarify the application of FASB 157, Fair Value Measurements, in a market that is not active and provides illustrative examples for determining fair value of a financial asset when the market for that financial asset is not active. This statement is effective on issuance or October 10, 2008. Currently, American Vanguard has no financial assets where there is little or no market activity at the measurement date. Accordingly, we believe that this FSP has no applicability for the Company as at September 30, 2008. We will reconsider the applicability of this statement should our business circumstances change.

On September 12, 2008, FASB issued FSP FAS 133-1. This FSP seeks to clarify the application of FASB 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including embedded credit derivatives. Furthermore, the FSP amends FASB Interpretation No 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requiring additional disclosures related to payment/risk. Finally, this FSP clarifies the effective date of FAS 161, Disclosure about Derivative Instruments and Hedging Activities. Effective for reporting periods (annual or interim) ending after November 15, 2008. We have reviewed the position paper and find that; for FASB 133, we conclude that we do not participate in the market selling any derivatives, for FASB No 45, we have no guarantees related to the debts of others and with regard to the effective date of FASB 161, this statement confirmed our existing understanding. We will reconsider the applicability of this statement should our business circumstances change.

On May 23, 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163, Accounting for Guarantee Insurance Contracts ("SFAS 163"). The new standard is focused on reducing inconsistencies in the recognition and measurement of claim liabilities because of differing views about when a loss has been incurred under FASB Statement No. 5, Accounting for Contingencies. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. Effective for the fiscal year beginning December 15, 2008 and all interim periods within those fiscal years. The Company does not consider that this standard has applicability for American Vanguard. We will reconsider the applicability of this standard should our business circumstances change.

On May 19, 2008, FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS 162"). The new standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles ("GAAP") in the United States (the GAAP hierarchy). The objective of this standard is to ensure that the GAAP hierarchy is clearly directed to the entity because it is the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. Accordingly, the Board concluded that the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing this Statement to . . .