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 1A., Risk factors and Item 7A., Quantitative and Qualitative Disclosures about Market Risk, in the Company's Annual Report on Form 10-K for the year ended December 31, 2008.

RESULTS OF OPERATIONS

Quarter Ended March 31 (columnar numbers in thousands):



                                       2009       2008     Change
                     Net sales:
                     Crop            $ 36,105   $ 35,111   $   994
                     Non-crop           8,532      5,823     2,709

                                     $ 44,637   $ 40,934   $ 3,703

                     Gross profit:
                     Crop            $ 15,367   $ 15,447   $   (80 )
                     Non-crop           3,189      2,289       900

                                     $ 18,556   $ 17,736   $   820

Despite reports of industry-wide sluggish demand, net sales for the first three months of 2009 at $44,637 were 9% higher than net sales for the same period of 2008 of $40,934. During the first quarter of the year our sales performance has been closely in line with our target. Our Granular Soil Insecticides have started the year ahead of the same period of 2008, partly as a result of delayed sales from the final quarter of 2008 as a result of key raw material availability. In addition, we believe that growers are increasingly seeing the benefit of applying corn soil insecticides in addition to traits. Our insecticide products and our growth regulator products also started strongly with sales ahead of the same period of 2008 and ahead of our internal targets. Our herbicides and fungicides were ahead of our internal targets but did not reach levels achieved in 2008. This is mainly due to timing and relates to stocking decisions by the distribution channel. Our Fumigant product line started the year slightly down compared to both last year and target, mainly driven by a late cold snap in some of our key markets delaying application decisions. Our international sales were down compared to the prior year mainly driven by slower sales of one specific product sold in Canada and management decisions to hold tight on credit terms on two key international customers. Overall international sales are down approx 20% compared to the same period of 2008. Finally, our sales included some increased tolling activity at our Axis facility as compared to last year.

Cost of sales for the quarter ended March 31, 2009, ended at $26,081 or 58% of sales compared to $23,198 or 57% of sales for the same period of 2008. Our factory costs increased, particularly related to some specific waste handling costs on the start up of a new product. These costs are expected to continue into the second quarter but at a lower level. Furthermore, gross profit as a percentage of sales is being diluted by tolling activities which benefit plant utilization but drive low gross profit levels. Adjusting for tolling, our gross profit expressed as a percentage of sales , would have been in line with the level achieved in 2008. Gross profit ended the period at $18,556 or 42% of sales for the period ended March 31, 2009, as compared to $17,736 or 43% of sales for the same period of 2008.

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

Operating expenses increased by $2,617 to $16,563 as compared to last year's expense of $13,946. The differences in operating expenses by department are as follows:

                                                       2009       2008     Change
      Selling                                        $  5,306   $  4,804   $   502
      General and administrative                        5,834      3,818     2,016
      Research, product development and regulatory      2,611      1,839       772
      Freight, delivery and warehousing                 2,812      3,485      (673 )

                                                     $ 16,563   $ 13,946   $ 2,617

• Selling expenses increased by $502 to end at $5,306 for the three months ended March 31, 2009, as compared to the same period of 2008. We had stronger sales in the quarter compared to the same period of last year including increased levels of promotional and stewardship expenses which were up $827. Advertising costs were down by $243 largely as a result of timing on major annual campaigns. Field support for our proprietary delivery systems and other outside consulting services included some one time costs last year and accordingly, costs were down this year by $250

• General and administrative expenses increased by $2,016 to end at $5,834 for the three months ended March 31, 2009 as compared to the same period of 2008. This increase was driven primarily by costs associated with acquisition activity in the amount of approximately $1,500. In accordance with U.S. GAAP, as of January 1, 2009, advisor and diligence costs of the kind the Company has incurred, must be expensed in the period. At this point, the subject acquisition has not been completed and activities on this, and other potential opportunities, are on-going. Other costs remained relatively in line with prior year.

• Research, product development costs and regulatory expenses increased by $772 to $2,611 for the three months ending March 31, 2009, as compared to the same period of 2008. The main driver relates to our product defense activities which were up $394 compared to the same period in 2008. Furthermore, our license and registration costs are higher as a result of expanded product portfolio and as a result of timing.

• Freight, delivery and warehousing costs for the three months ended March 31, 2009 were $2,812 or 6.4% of sales, representing a reduction of $673 as compared to the same period in 2008, during which such costs were $3,485 or 8.5% of sales. Costs were lower because we had lower sales of our bulk products, better performance on inventory distribution in the supply chain and some savings related to improved planning of urgent shipments.

Interest costs net of capitalized interest, were $865 in the first three months of 2009 as compared to $965 in the same period of 2008. Interest costs are summarized in the following table:

Average Indebtedness and Interest expense

                                                 Q1 2009                                  Q1 2008
                                   Average     Interest       Interest      Average      Interest       Interest
                                     Debt       Expense         Rate          Debt       Expense          Rate
Term Loan                          $ 51,989    $     661           5.2 %    $ 55,989    $      769           5.5 %
Real Estate                           2,141           14           2.7 %       2,305            33           5.8 %
Working Capital Revolver             36,656          211           2.3 %      17,423           213           4.9 %

Average                              90,786          886           4.0 %      75,717         1,015           5.4 %

Other notes payable                   3,675                                       75
Capitalized Interest                                 (21 )                                     (50 )

Adjusted Average indebtedness      $ 94,461    $     865           3.7 %    $ 75,792    $      965           5.1 %

The Company's average overall debt for the three months ended March 31, 2009 was $94,461 as compared to $75,792 for the three months ended March 31, 2008. The Company increased the revolver debt, during the last six months of 2008, to support a major capital investment in a Metam facility at our Axis plant and increased inventory levels as we have prepared for the 2009 season. Our results have been favorably impacted by movement in the LIBOR rate during 2008 and continuing during the first three month period in 2009. As can be seen from the table above, our effective interest rate during the period was 3.7% as compared to 5.1% for 2008. As also shown in the table, the Company had $21 in capitalized interest expense adjustments in 2009 compared to $50 for the same period of 2008.

Income tax expense has reduced by $663 to end at $429 for the three months ended March 31, 2009 as compared to $1,092 for the comparable period in 2008, while our effective tax rate has improved marginally to 38% compared to 39% for those respective periods. The lower tax rate reflects the impact of our domestic manufacturing and greater costs incurred in R&D activities during the year.

Overall our net income for the first three months of 2009 is down at $699 or $.03 per share compared to $1,733 and $.06 per chare for the same period of 2008. As noted above, we have engaged in very significant costs associated with a major potential acquisition. These costs impacted our results by approximately $1,500 or $.03. These costs are not being incurred at the same rate at the start of the second quarter of 2009.

LIQUIDITY AND CAPITAL RESOURCES

The Company used $32,457 of cash in operating activities during the three months ended March 31, 2009. This compared to utilizing $31,358 in the same period of last year. Net income of $699, non-cash depreciation and amortization of $3,375 and stock based compensation expense of $238 provided a net cash inflow $4,312 compared to $4,730 for the same period last year.

The main drivers for the reduction in cash generated from operational activities is mainly associated with our seasonal cycle. At the early part of the year we see inventory levels increase as we respond to the start of the various growing seasons across the United States and in our international markets. In addition, we have seen an increase in our receivables as of March 31, 2009. The increase is broadly in line with last year, however, we are pleased to report that despite sales up 9% compared to the same period of 2008, our trade receivables are $520 lower than last year. Our approach has resulted in taking some difficult decisions regarding supplying product to two key international customers. The decision has resulted in some reduced sales but was necessary to maintain the quality of our overall receivables position.

In line with our seasonal cycles and consistent with the same period of 2008, our inventories increased by $21,901 during the first three months of 2009 ending at $112,527. This compared with an increase of $26,829 during the same period of 2008. There are several important drivers contributing to our high inventory levels. We are increasingly sourcing raw materials globally driving longer lead times and higher safety stocks. In addition, we have taken inventory purchasing opportunities, both domestically and internationally, during the first quarter of 2009 when we have seen attractive prices. Finally, we have relatively long positions in a couple of our product lines. These specific products are subject to close review and we believe that we have actions in place to deal with these positions in the next six to twelve months.

The Company used $945 in investing activities during the three months ended March 2009. The business is focused on achieving a lower level of capital spending this year after making some heavy investments last year.

Financing activities provided $33,615 during the three months ending March 2009, compared to $40,986 in the same period of the prior year. Net borrowings under the Company's fully-secured revolving line of credit increased by $34,500 during the period, ending at $59,000. The Company received $291 from the exercise of stock options and the sale of common stock under its ESPP plan.

The Company has various different loans in place that together constitute the short-term and long-term loan balances shown in the balance sheet at March 31, 2009 and December 31, 2008. These are summarized in the following table:

Indebtedness                               March 31, 2009                            December 31, 2008
$000's                         Long-term      Short-term       Total       Long-term      Short-term      Total
Term Loan                      $   46,000    $      5,000    $  51,000    $    48,000    $      4,000    $ 52,000
Real estate                         2,022             106        2,128          2,048             106       2,154
Working Capital Revolver           59,000               -       59,000         24,500               -      24,500
Other notes payable                 1,200           2,400        3,600          1,200           2,550       3,750

Total Indebtedness             $  108,222    $      7,506    $ 115,728    $    75,748    $      6,656    $ 82,404

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 March 31, 2009 the Company met all the covenants listed above. This was the position as of December 31, 2008. Furthermore, this has been the case at each reporting date since the loan facility was put in place in December 2006.

At March 31, 2009 total indebtedness was $115,728 as compared to $82,404 at December 31, 2008. At March 31, 2009, based on its performance against the covenants listed above, the Company had the capacity to increase its' borrowings by up to $3,386 under the credit facility agreement.

RECENTLY ISSUED ACCOUNTING GUIDANCE

On April 9, 2009, the Financial Accounting Standards Board ("FASB") issued FAS 107-1. This position paper amends FASB statement No. 107 "Disclosures about Fair Value of Financial Instruments". At the same time the FASB issued APB 28-1, which amends APB Opinion No. 28 "Interim Financial Reporting". Both of these position papers are focused on increasing disclosures related to the fair value of financial instruments for interim reporting periods of publicly traded companies. In the 10-Q for the third quarter of 2008, American Vanguard increased its disclosure related to such Financial Instruments and continued that depth of disclosure in its 10-K statement for the year ended December 31, 2008. We will continue to fully disclose full details of the fair value of our financial instruments in our future published summarized financial information.

On April 9, 2009, FASB issued FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that are not Orderly". This is additional clarification and advice on Statement No. 157 which was issued in September 2006. American Vanguard operates in the Chemical Industry. As such an important factor in our business relates to the ownership or usage rights related to intellectual property (Intangible Assets). At each quarter end we assess the fair value of our holdings. This FSP takes effect for reporting periods ending on or after January 15, 2009. We have assessed our assets and liabilities and do not believe that any fall into the scope of this statements. We will continue to regularly assess our portfolio and will make the necessary adjustments and disclosures when we conclude that one or more of our assets fall within the scope of this statement.

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 March 31, 2009. 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 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 achieve that result. The Company is currently evaluating the effect SFAS No 162 will have on its published financial statements. The pronouncement is effective sixty days following the SEC's approval of PCAOB amendment to AU Section 411 - The Meaning of "Present fairly in conformity with GAAP".

In March 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"). The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The new standard also improves transparency about the location and amounts of derivative instruments in an entity's financial statements; how derivative instruments and related hedged items are accounted for under SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities ("SFAS No. 133"); and how derivative instruments and related hedged items affect its financial position, financial performance, and cash flows. The Company has reviewed the standard and believes its current reporting meets the requirements of the standard.

In December 2007, FASB issued SFAS No. 141 (Revised) Business Combinations ("SFAS 141 (R)"). The provisions of this statement are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning after December 15, 2008. Earlier application is not permitted. SFAS 141 (R) replaces SFAS 141 and provides new guidance for valuing assets and liabilities acquired in a business combination. We will adopt SFAS 141 (R) in fiscal year beginning January 1, 2009.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company continually re-assesses the critical accounting policies used in preparing its financial statements for inclusion in the American Vanguard published financial statements. In the Company's statement 10-K for the financial year ended December 31, 2008, the Company provided a comprehensive statement of critical accounting policies. These policies have been reviewed in detail as part of the preparation work for this 10-Q statement. All the policies listed in the Company's Form 10-K for the year ended December 31, 2008 remain valid and is hereby incorporated by reference.