What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-04-30 compared with 2020-10-30 · 90 added, 218 removed, 161 unchanged (66% of the section changed)

11 unchanged sentences

the scope and duration of the pandemic and pace of recovery;

the timing of the development and distribution of an effective vaccine or treatment for COVID-19;

the timing of the distribution and the efficacy of vaccines or treatments for COVID-19 that are currently available or may be available in the future;

the severity of newly identified strains of COVID-19;

governmental, business and individuals’ actions in response to the pandemic, including our business continuity and cash optimization plans that have been, and may in the future be, implemented;

26 unchanged sentences

and changes in laws or regulations applicable to our business.

Forward-looking statements are not guarantees of future performance and actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of risks, uncertainties and other factors including those noted above and those detailed in Item 1A of Part I and elsewhere in our 2019 Form 10-K, Item 1A of Part II in our Quarterly Reports on Form 10-Q filed on May 1, 2020 and July 31, 2020, Item 1A of Part II in this Quarterly Report on Form 10-Q, and subsequent reports filed with the SEC.

Forward-looking statements are not guarantees of future performance and actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of risks, uncertainties and other factors including those noted above and those detailed in Item 1A of Part I and elsewhere in our 2020 Form 10-K, and subsequent reports filed with the SEC.

All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

1 unchanged sentence

Business Overview

We produce and sell caprolactam as a commodity product and produce and sell our Nylon 6 resin as both a commoditized and differentiated resin product.

Our results of operations are primarily driven by production volume and the spread between the sales prices of our products and the costs of the underlying raw materials built into market-based and value-based pricing models.

AdvanSix plays a critical role in global supply chains, innovating and delivering essential products for our customers in a wide variety of end markets and applications that touch people’s lives, such as building and construction, fertilizers, plastics, solvents, packaging, paints, coatings, adhesives and electronics.

Our reliable and sustainable supply of quality products emerges from the vertically integrated value chain of our three U.S.-based manufacturing facilities.

AdvanSix strives to deliver best-in-class customer experiences and differentiated products in the industries of nylon solutions, chemical intermediates, and plant nutrients, guided by our core values of Safety, Integrity, Accountability and Respect.

Our four key product lines are as follows:

• Nylon – We sell our Nylon 6 resin globally, primarily under the Aegis® brand name.

Nylon 6, is a polymer resin which is a synthetic material used by our customers to produce fibers, filaments, engineered plastics and films that, in turn, are used in such end-products as carpets, automotive and electric components, sports apparel, food packaging and other industrial applications.

In addition, our Nylon 6 resin is used to produce nylon films which we sell to our customers primarily under the Capran® brand name.

• Caprolactam – Caprolactam is the key monomer used in the production of Nylon 6 resin.

We internally polymerize caprolactam into Aegis® Nylon 6 Resins, and we also market and sell the caprolactam that is not consumed internally to customers who use it to manufacture polymer resins to produce nylon fibers, films and other nylon products.

Our Hopewell manufacturing facility is one of the world’s largest single-site producers of caprolactam as of March 31, 2021.

• Chemical Intermediates – We manufacture, market and sell a number of other chemical products that are derived from the chemical processes within our integrated supply chain.

Most significant is acetone which is used by our customers in the production of adhesives, paints, coatings, solvents, herbicides and engineered plastic resins.

Other intermediate chemicals that we manufacture, market and sell include phenol, alpha-methylstyrene (“AMS”), cyclohexanone, oximes (methyl ethyl ketoxime, acetaldehyde oxime and 2-pentanone oxime), cyclohexanol, sulfuric acid, ammonia and carbon dioxide.

• Ammonium Sulfate – Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key plant nutrients.

Ammonium sulfate fertilizer is derived from the integrated operations at the Hopewell manufacturing facility.

Because of our Hopewell facility’s size, scale and technology design, we are the world’s largest single-site producer of ammonium sulfate fertilizer as of March 31, 2021.

We market and sell ammonium sulfate primarily to North American and South American distributors, farm cooperatives and retailers to fertilize crops.

Global demand for Nylon 6 resin spans a variety of end-uses such as textiles, engineered plastics, industrial filament, food and industrial films, and carpet.

The market growth typically tracks global GDP growth over the long-term but varies by end-use.

Generally, prices for Nylon 6 resin and caprolactam reflect supply and demand in the marketplace as well as the value of the basic raw materials used in the production of caprolactam, consisting primarily of benzene and, depending on the manufacturing process utilized, natural gas and sulfur.

The global prices for nylon resin typically track a spread over the price of caprolactam, which in turn tracks as a spread over benzene because the key feedstock materials for caprolactam, phenol or cyclohexane, are derived from benzene.

This price spread has historically experienced cyclicality as a result of global changes in supply and demand.

Generally, Nylon 6 resin prices track the cyclicality of caprolactam prices, although prices set above the spread are achievable when nylon resin manufacturers, like AdvanSix, formulate and produce differentiated nylon resin products.

Nylon 6 resin prices track the cyclicality of caprolactam prices, although prices set above the spread are achievable when nylon resin manufacturers, like AdvanSix, formulate and produce differentiated nylon resin products.

Our differentiated Nylon 6 products are typically valued at a higher level than commodity resin products.

2 unchanged sentences

Additionally, one of our strategies is to continue developing higher-value, differentiated Nylon 6 products, such as our wire and cable and co-polymer offerings, in current and new customer applications.

Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key crop nutrients.

Global prices for ammonium sulfate fertilizer are influenced by several factors including the price of urea, which is the most widely used source of nitrogen-based fertilizer in the world.

Other global factors driving ammonium sulfate fertilizer demand are general agriculture trends, including the price of crops.

Other global factors driving ammonium sulfate fertilizer demand are general agriculture trends, including planted acres and the price of crops.

Our ammonium sulfate product is positioned with the added value proposition of sulfur nutrition to increase yields of key crops.

In addition, due to its nutrient density, the typical ammonium sulfate product delivers pound for pound the most readily available sulfur and nitrogen to crops than other fertilizers.

We recently expanded our offering to directly supply packaged ammonium sulfate to customers, primarily in North and South America, and diversified and optimized our offerings to include spray-grade adjuvant to support crop protection, as well as other specialty fertilizers and products for industrial use.

We produce ammonium sulfate fertilizer continuously throughout the year as part of our manufacturing process, but quarterly sales experience seasonality based on the timing and length of the growing seasons in North and South America.

2 unchanged sentences

Sales of most of our other products have generally been subject to minimal, or no, seasonality.

We also manufacture, market and sell a number of chemical intermediate products that are derived from the chemical processes within our integrated supply chain.

Most significant is acetone, which is used by our customers in the production of adhesives, paints, coatings and solvents.

Prices for acetone are influenced by its own supply and demand dynamics but can also be influenced by the underlying move in propylene input costs.

We seek to run our production facilities on a nearly continuous basis for maximum efficiency as several of our intermediate products are key feedstock materials for other products in our integrated manufacturing chain.

7 unchanged sentences

Since early 2020, COVID-19 has continued to spread rapidly, with most countries and territories worldwide having confirmed cases, and with certain jurisdictions experiencing resurgences.

The spread has resulted in authorities implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns.

The pandemic and these

containment measures have had, and are expected to continue to have, a substantial negative impact on businesses around the world and on global, regional and national economies, including disruptions to supply chains, reduced demand and production sales across most industries, declines and volatility within global financial markets, and decreased workforces causing increased unemployment.

The continuously evolving nature of this pandemic and the responses to combat the pandemic, such as governmental restrictions on non-essential business and travel, continue to have a negative impact on the United States and global economies.

While various jurisdictions have ended, or have implemented policies to phase out, these containment measures, increases in new COVID-19 cases have caused certain jurisdictions to re-implement restrictions.

Department of Homeland Security designated our industry as "essential critical infrastructure" during the response to COVID-19 for both public health and safety as well as community well-being.

The Company takes its obligation seriously to produce materials that support the broader population, all while maintaining a prioritized focus on the health and safety of its employees and the communities in which it operates, and assuring the continuity of its business operations.

As a global provider of products that are key inputs for our customers’ processes serving a variety of end-markets, a pandemic presents obstacles that can adversely affect our supply chain effectiveness and efficiencies, our manufacturing operations and customer demand for our products and, ultimately, our financial results.

We believe we are well positioned to respond to and mitigate the potential impacts of the rapidly evolving market dynamics.

In the first quarter of 2020, the Company began executing its business continuity plans with dedicated teams chartered to proactively implement measures to mitigate COVID-19 impacts while continuing to operate all of its manufacturing facilities to meet customer demand.

In response to COVID-19, the Company took many actions to protect its employees, customers, suppliers, shareholders and surrounding communities including, but not limited to:

(i) 100% thermal screening process at all manufacturing facilities and restrictions on non-essential visitors;

(ii) telecommuting across all sites, where possible;

(iii) prohibiting all non-essential domestic and international business travel;

(iv) establishing social distancing while limiting the number of employees in control rooms, labs and in-person meetings;

and (v) maintaining policies and practices consistent with CDC and government guidelines including upgraded personal protective equipment, face coverings at all facilities, and exposure management protocols.

Our telecommuting policies have been designed to allow for continued operation of non-production business-critical functions, including financial reporting systems and internal controls.

The Company has protocols in place at all sites, including on-site medical personnel at manufacturing facilities to actively monitor employees and contractors who report symptoms of or exposure to COVID-19.

In addition, the Company has trained a contingent workforce to operate the plants as part of its business continuity planning.

The Company continued its execution of these measures at all sites through the third quarter of 2020.

We believe our competitive strengths are serving us well during this time including our vertically integrated asset base and global low-cost advantage as well as driving disciplined cost and cash management across the organization with further reductions of capital expenditures and discretionary spending.

During the third quarter of 2020 and moving into the fourth quarter of 2020, the Company continues to support safe and stable operations while serving its customers by adjusting output to changes in mix and demand.

During the third quarter, the Company executed processes and procedures associated with the planned plant turnaround, which was rescheduled from the second quarter 2020, mitigating any potential employee or contractor operational safety risks posed by COVID-19.

From an industry perspective, building and construction demand has improved, particularly in residential applications, however, commercial construction remains soft.

Auto demand has also been improving through the third quarter with the U.S.

and Europe experiencing a slower recovery, in contrast to a faster rebound in China and other Asia markets.

Export demand for textiles out of Asia has been soft, which has also impacted nylon supply and demand conditions, while food packaging demand for nylon remains robust.

Ammonium Sulfate and acetone demand have not been significantly impacted by COVID-19 to date.

Ammonium Sulfate has experienced steady demand through the peak second quarter domestic planting season and into the new season fill, while North American acetone industry supply and demand balance has continued to be favorable following the affirmative final anti-dumping duties and robust demand for isopropyl alcohol (IPA), used for hand sanitizer and other disinfectants, methyl methacrylate (MMA), used for acrylic screens, and other solvents.

As a result of COVID-19, demand reduction for transportation fuels and resultant inventory builds have reduced refinery utilization rates, which the Company continues to monitor as it relates to potential impacts on its supply chain and availability of key raw materials.

The Company’s Condensed Consolidated Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and reported amounts of revenue and expenses during the reporting periods presented.

The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there was a material impact on the Company’s second quarter 2020 results of operations.

In particular, the Company experienced lower demand, particularly in nylon, caprolactam and phenol, resulting in a reduction of plant utilization rates and a decrease in overall sales volume (approximately 19%) in the second quarter of 2020 compared to the prior year period, primarily related to global markets and the economic impact of COVID-19.

During the third quarter of 2020, the Company has experienced an

improvement of demand to approximately pre-COVID-19 levels.

With states, regions and countries in various phases of re-opening, we expect demand to gradually improve through the fourth quarter of 2020, although there is no assurance demand will recover given the potential for increased restrictions imposed by governments due to a surge in infection rates.

We will continue to monitor developments and execute our operational and safety mitigation plans.

The situation surrounding COVID-19 remains fluid and unpredictable, and the potential for a continued material impact on the Company increases the longer the social and economic restrictions which impact the overall level of consumer and business activity in the United States and globally, remain in place or are reinstituted.

For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity.

For further information regarding the impact COVID-19 could have on our business, financial condition, results of operations and liquidity, see below in the MD&A under “Liquidity and Capital Resources” and Part II, Item 1A - “Risk Factors.”

Credit Agreement

On February 19, 2020, the Company entered into Amendment No.

2 to the Credit Agreement to amend the consolidated leverage ratios in order to provide the Company with additional operating flexibility.

For a discussion of Amendment No.

2 to the Credit Agreement, please refer to "Note 8.

Long-term Debt and Credit Agreement" to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

Anti-Dumping Duty Petitions

On February 19, 2019, the Company announced that it filed anti-dumping duty petitions covering imports of acetone with the International Trade Commission (“ITC”) and U.S.

Department of Commerce ("Commerce").

The petitions allege that dumped acetone imports into the United States from Belgium, Saudi Arabia, Singapore, South Africa, South Korea, and Spain have caused material injury to the domestic industry.

On April 4, 2019, the ITC voted to continue the anti-dumping duty investigations concerning imports of acetone from all such nations other than Saudi Arabia.

During the third quarter of 2019, Commerce announced its preliminary affirmative dumping determination regarding imports from Singapore, Spain, Belgium, South Africa and South Korea.

On October 21, 2019, Commerce published its final affirmative determination of dumping regarding imports from Singapore and Spain, and on December 10, 2019, the ITC issued its final determination of material injury to the industry by reason of imports from Singapore and Spain.

Effective December 20, 2019, Commerce imposed anti-dumping orders and applicable duties on imports of acetone from Singapore and Spain for a five-year period.

On February 13, 2020, Commerce published its final affirmative determination of dumping regarding imports from Belgium, South Africa and South Korea and on March 17, 2020, the ITC issued its final determination of material injury to the industry by reason of imports from Belgium, South Africa and South Korea.

Effective March 31, 2020, Commerce imposed anti-dumping orders and applicable duties on imports of acetone from Belgium, South Africa and South Korea for a five-year period.

The anti-dumping orders are subject to annual administrative review, which may change the applicable level of duties.

On May 26, 2020, LG Chem, Ltd., and LG Chem America, Inc., filed a motion with the U.S.

Court of International Trade contesting the final determination made by Commerce concerning imports from South Korea, and on June 19, 2020, the Company filed a motion to intervene.

The anti-dumping orders applicable to imports from all other sources were not appealed.

2019 Operational Events

On June 24, 2019, the Company announced that it was assessing the potential business impact of the fire that occurred at Philadelphia Energy Solutions' (“PES”) refinery in Philadelphia.

PES was one of multiple suppliers to the Company of cumene, a feedstock material used to produce phenol, acetone and other chemical intermediates.

The PES disruption did not have a material impact on second quarter 2019 financial results.

The Company incurred an approximately $10 million unfavorable impact to pre-tax income in the second half of 2019, including incremental raw material and logistics costs as well as a modest unfavorable impact from fixed cost absorption.

As the PES refinery remains shutdown, the Company submitted a business interruption insurance claim and has realigned its supply chain to ensure the continuity of cumene supply.

The Company anticipates the unfavorable impact to pre-tax income in 2020, associated with its realigned supply chain, to be approximately flat compared to full-year 2019.

On May 2, 2019, the Company approved the closure of its Pottsville, Pennsylvania films plant as part of its broader strategic efforts to improve the Company’s competitive position in providing quality film products and services to its customers.

The Company also announced a strategic alliance with Oben Holdings Group S.A.

(“Oben”), a third-party producer of films for the flexible packaging industry, leveraging the Company's sales channels and Nylon 6 resin supply with Oben's new state-of-the-art manufacturing facility.

The Company ceased operations at the Pottsville, Pennsylvania plant in July 2019.

We recognized a restructuring charge of $12.6 million in the second quarter of 2019 which was reduced to $11 million in the fourth quarter of

2019 and do not expect to incur any additional restructuring charges related to the closure.

See “Note 14.

Restructuring” to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further information.

On March 11, 2019, the Company announced that it declared force majeure on its phenol product line as a result of shortages and delivery delays of its key raw material, cumene.

The Company's cumene deliveries were reduced due to weather related logistics disruptions in the Gulf Coast area and supplier operational constraints.

As a result of this force majeure event, phenol production at the Company's Frankford, Pennsylvania facility and caprolactam production at its Hopewell, Virginia facility were reduced.

The Company incurred an approximately $6.9 million unfavorable impact to pre-tax income in the first quarter of 2019, including the unfavorable impact of fixed cost absorption and incremental logistics costs.

In addition, the Company incurred an approximately $1.4 million unfavorable impact to pre-tax income in the first quarter of 2019 and an approximately $2.3 million unfavorable impact to pre-tax income in the second quarter of 2019 due to lost sales.

The Company is no longer on force majeure with phenol customers.

The spread resulted in authorities implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns.

The pandemic and these containment measures have had a substantial impact on businesses around the world and on global, regional and national economies, including disruptions to supply chains, reduced demand, production and sales across most industries, declines and volatility within global financial markets, and decreased workforces causing increased unemployment.

The continuously evolving nature of this pandemic and the pace of recovery may continue to have an impact on the United States and global economies.

As previously disclosed, the Company experienced a material impact on its second quarter 2020 results of operations associated with lower demand, particularly in nylon, caprolactam and phenol, and a decrease in overall sales volume related to global markets and the economic impact of COVID-19.

During the second half of 2020, and through the first quarter of 2021, demand improved to pre-COVID-19 levels with states, regions and countries in various phases of re-opening and continued administration of vaccines for COVID-19, although there is no assurance demand recovery will continue given the potential for surges in infection rates and newly identified strains of COVID-19.

The Company will continue to monitor developments and execute our operational and safety mitigation plans as previously disclosed.

As the situation surrounding COVID-19 remains fluid and unpredictable, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity.

Results of Operations

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Sales $ 376,383 $ 302,713

2 unchanged sentences

Three Months Ended

September 30, 2020 Nine Months Ended

September 30, 2020

Volume 5.2% (2.3)%

Price (14.4)% (13.5)%

(9.2)% (15.8)%

Sales decreased in the three months ended September 30, 2020 compared to the prior year period by $28.7 million (approximately 9%) due primarily to lower pricing (approximately 14%) driven primarily by (i) lower formula-based pass-through pricing (approximately 13%) following a net decrease in the cost of benzene and propylene (inputs to cumene which is a key feedstock material for our products) and (ii) lower market-based pricing (approximately 1%) in nylon, ammonium sulfate and caprolactam product lines, partially offset by market price increases in chemical intermediates, particularly acetone.

The price decrease was partially offset by higher volume (approximately 5%) due to increases in nylon and ammonium sulfate, partially offset by lower volumes in caprolactam.

Sales decreased in the nine months ended September 30, 2020 compared to the prior year period by $153.1 million (approximately 16%) due primarily to lower sales prices (approximately 14%) d riven primarily by (i) lower formula-based pass-through pricing (approximately 8%) and (ii) lower market-based pricing (approximately 6%) in nylon, ammonium sulfate and caprolactam product lines, partially offset by pricing strength in chemical intermediates, primarily acetone.

Volume decreased by approximately 2% due primarily to decreases in nylon and caprolactam related to global markets and the economic impact of COVID-19.

March 31, 2021

Sales increased in the three months ended March 31, 2021 compared to the prior year period by $73.7 million (approximately 24%) due primarily to (i) higher formula-based pass through pricing (approximately 11%) as a result of net cost increases in benzene and propylene (inputs to Cumene which is a key feedstock to our products), (ii) net favorable market-based pricing (approximately 5%) reflecting strength in chemical intermediates, particularly acetone and (iii) higher sales volume across all product lines led by caprolactam (approximately 8%).

Costs of Goods Sold

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Costs of goods sold $ 317,899 $ 272,008

1 unchanged sentence

Gross Margin percentage 15.5% 10.1%

Costs of goods sold decreased in the three months ended September 30, 2020 compared to the prior year period by $14.4 million (approximately 5%) due primarily to (i) lower prices of raw materials, particularly benzene and propylene (approximately 16%), (ii) decreased costs related to the PES shutdown (approximately 1%) and (iii) reduction in R&D and other expenses (approximately 1%).

This was partially offset by (i) higher volumes as discussed above (approximately 8%) and (ii) higher plant spending (approximately 6%) in the third quarter of 2020 due to the planned plant turnaround.

Costs of goods sold decreased in the nine months ended September 30, 2020 compared to the prior year period by $113.6 million (approximately 13%) due primarily to (i) lower prices of raw materials, particularly benzene and propylene, (approximately 12%) and (ii) lower sales volumes as discussed above (approximately 1%) and (iii) the absence of the restructuring charge from the closure of the Pottsville films plant in 2019 (approximately 1%), which was partially offset by higher plant spending primarily due to the timing of the planned plant turnaround as discussed above (approximately 1%).

Gross margin percentage decreased by approximately 4% in the three months ended September 30, 2020 compared to the prior year period due primarily to the spend and production impact of the planned plant turnaround (approximately 6%) and unfavorable product mix (approximately 3%).

This was partially offset by the net favorable margin impact of lower formula based pass-through pricing (driven by decreased raw material costs) and market pricing impacts (approximately 2%) as well as decreased costs related to the PES shutdown (approximately 1%) and reduction of other expenses (approximately 2%).

Gross margin percentage decreased by approximately 3% in the nine months ended September 30, 2020 compared to the prior year period due to (i) net unfavorable margin impact of market based pricing and formula based pass-through pricing driven by lower raw material pricing (approximately 2%), (ii) net unfavorable impact of lower production and reduced plant costs (approximately 1%) and (iii) the impact of insurance proceeds received in the prior year (approximately 1%), partially offset by the absence of a restructuring charge associated with the closure of our operations in Pottsville (approximately 2%).

Costs of goods sold increased in the three months ended March 31, 2021 compared to the prior year period by $45.9 million (approximately 17%) due primarily to (i) increased prices of raw materials (approximately 11%), (ii) higher sales volumes as discussed above (approximately 3%) and (iii) an unfavorable non-cash LIFO inventory reserve adjustment (approximately 2%).

Gross margin percentage increased by approximately 5% in the three months ended March 31, 2021 compared to the prior year period due primarily to higher market pricing (approximately 4%) driven by chemical intermediates, particularly acetone, and increased sales volume across all product lines (approximately 4%), partially offset by an unfavorable non-cash LIFO inventory reserve adjustment (approximately 2%).

Selling, General and Administrative Expenses

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Selling, general and administrative expenses $ 19,308 $ 16,740

Percent of sales 5.7% 6.2% 6.2% 6.0%

Selling, general and administrative expenses decreased by $3.1 million and $7.9 million in the three and nine months ended September 30, 2020, respectively, compared to the prior period due primarily to decreased legal expenses, stock-based compensation and IT costs and disciplined cost management including lower functional support costs.

Percentage of Sales 5.1% 5.5%

Selling, general and administrative expenses increased by $2.6 million in the three months ended March 31, 2021 compared to the prior year period due primarily to increased incentive and stock-based compensation costs.

Income Tax Expense

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Tax expense $ (980) $ 1,513 $ 4,957 $ 13,617

Income tax expense $ 9,271 $ 3,664

Effective tax rate 24.8% 29.9%

As noted in Note 10.

"Income Taxes" to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Form 10-Q, The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), enacted on March 27, 2020, includes various modifications to current tax law and is intended to provide economic relief in response to the COVID-19 pandemic.

One provision included in the CARES Act allows for a five-year carryback of Federal net operating losses (NOLs) generated in tax years beginning in 2018, 2019 and 2020.

The Company finalized its 2019 U.S.

federal income tax return in July 2020 which reflected a net operating loss, on a tax basis, and certain tax credits which were carried back to earlier years.

This carryback claim generated a refund of previously paid taxes in the amount of $12.2 million which is currently reflected in Taxes receivable.

We anticipate receiving the refund in the fourth quarter of 2020.

The Company’s effective tax rate for the three months ended September 30, 2020 was higher compared to the U.S.

federal statutory rate primarily due to the Loss before taxes incurred in the third quarter, an increase in 2020 anticipated research tax

credits and 2019 state return-to-provision adjustments recorded in the quarter.

The Company’s effective tax rate for the three months ended September 30, 2019 was lower compared to the U.S.

federal statutory rate, due primarily to additional research tax credits claimed on the Company's 2018 U.S.

federal income tax return, partially offset by state taxes and executive compensation deduction limitations.

The Company’s effective tax rate for the nine months ended September 30, 2020 was lower compared to the U.S.

federal statutory rate due primarily to research tax credits and the impact of changes in the Company’s geographical sales mix on state tax, partially offset by tax deficiencies on vesting of equity compensation, executive compensation deduction limitations, the impact of the CARES Act and state taxes.

The Company’s effective tax rate for the nine months ended September 30, 2019 was higher compared to the U.S.

federal statutory rate due primarily to state taxes and executive compensation deduction limitations offset partially by research tax credits.

The Company’s effective tax rate for the nine months ended September 30, 2020 was lower than the prior year period due primarily to the impact of changes in the Company’s geographical sales mix on state tax partially offset by the impact of the CARES Act.

The Company’s effective tax rate for the three months ended September 30, 2020 was higher than the prior year period primarily due to the Loss before taxes incurred in the quarter which resulted in a higher income tax benefit, and 2019 state return-to-provision adjustments recorded in the quarter.

"Income Taxes", the Company filed a Federal net operating loss (NOL) carryback claim under the CARES Act in July 2020 which generated a refund of previously paid taxes in the amount of $12.3 million.

The refund was received in the first quarter of 2021.

The Company’s effective tax rate for the three months ended March 31, 2021 was higher compared to the U.S.

federal statutory rate, due primarily to state taxes and executive compensation deduction limitations, partially offset by tax credits.

The Company’s effective tax rate for the three months ended March 31, 2020 was higher compared to the U.S.

federal statutory rate, due primarily to state taxes, executive compensation deduction limitations, tax deficiencies on the vesting of equity compensation and the loss of 2018 foreign-derived intangible income tax benefits related to the Federal NOL carryback claim, partially offset by tax credits.

The Company’s effective tax rate for the three months ended March 31, 2021 was lower than the prior year period due primarily to higher tax deficiencies on the vesting of equity compensation in the prior year period and the loss of 2018 foreign derived intangible income tax benefits resulting from the Federal NOL carryback under the CARES Act.

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income (loss) $ (692) $ 7,921 $ 19,313 $ 43,441

As a result of the factors described above, Net income (loss) was $(0.7) million and $19.3 million for the three and nine months ended September 30, 2020 as compared to $7.9 million and $43.4 million in the corresponding prior year period.

Net income $ 28,131 $ 8,576

As a result of the factors described above, Net income was $28.1 million for the three months ended March 31, 2021 as compared to $8.6 million in the corresponding prior year period.

Non-GAAP Measures

12 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income (loss) $ (692) $ 7,921 $ 19,313 $ 43,441

Net income $ 28,131 $ 8,576

Interest expense, net 1,544 1,959

Income tax expense (benefit) (980) 1,513 4,957 13,617

Income tax expense 9,271 3,664

Depreciation and amortization 16,104 14,432

EBITDA (non-GAAP) 55,050 28,631

One-time Pottsville restructuring charges (1)

EBITDA excluding one-time Pottsville restructuring charges (non-GAAP) $ 15,806 $ 24,949 $ 75,158 $ 115,502

Sales $ 376,383 $ 302,713

EBITDA Margin (non-GAAP) 14.6% 9.5%

EBITDA margin excluding one-time Pottsville restructuring charges (non-GAAP) 5.6% 8.0% 9.2% 11.9%

(1) Prior year one-time Pottsville restructuring charges reflect the closure of the Company's Pottsville, Pennsylvania films plant.

See “Note 14.

Restructuring” to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further information.

Liquidity and Capital Resources

(Dollars in thousands, unless otherwise noted)

We believe that cash balances and operating cash flows, together with available capacity under our credit agreement, will provide adequate funds to support our current short-term operating objectives as well as our longer-term strategic plans, subject to the risks and uncertainties outlined below, in our "Note Regarding Forward-Looking Statements" above, and in the risk factors previously disclosed in our 2019 Form 10-K, as updated in Part II, Item 1A below.

Our principal source of liquidity is our cash flow generated from operating activities, which is expected to provide us with the ability to meet the majority of our short-term funding requirements.

Our cash flows are affected by capital requirements and production volume, which may be materially impacted by unanticipated events such as unplanned downtime, material disruptions at our production facilities as well as the prices of our raw materials and general economic and industry trends, as well as customer demand, which in the second quarter, was materially impacted by the circumstances surrounding COVID-19.

Our cash flows are affected by capital requirements and production volume, which may be materially impacted by unanticipated events such as unplanned downtime, material disruptions at our production facilities as well as the prices of our raw materials and general economic and industry trends, as well as customer demand, which in the second quarter of 2020, was materially impacted by the circumstances surrounding COVID-19.

The Company applies a proactive and disciplined approach to working capital management to optimize cash flow and to enable capital allocation options in support of the Company’s strategy.

7 unchanged sentences

While the COVID-19 pandemic has created and continues to create significant volatility in funding markets, we believe that our future cash from operations, together with cash on hand and our access to credit and capital markets, will provide adequate resources to fund our expected operating and financing needs and obligations.

Our ability to fund our capital needs, however, will depend on our ongoing ability to generate cash from operations and access to credit and capital markets, both of which are subject to the risk factors previously disclosed in our 2019 Form 10-K as updated in Part II, Item 1A below, as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.

As of the end of the third quarter of 2020, the Company had approximately $17 million of cash on hand with approximately $111 million of additional capacity available under the revolving credit facility.

Given the uncertain environment in light of the COVID-19 pandemic, the Company maintained higher cash balances as a precautionary measure in the second quarter of 2020 for its working capital needs and other general corporate purposes.

Cash balances were reduced in the third quarter of 2020 in order to decrease debt levels and minimize interest cost.

Our ability to fund our capital needs, however, will depend on our ongoing ability to generate cash from operations and access to credit and capital markets, both of which are subject to the risk factors previously disclosed in our 2020 Form 10-K, as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.

As of the end of the first quarter of 2021, the Company had approximately $14 million of cash on hand with approximately $178 million of additional capacity available under the revolving credit facility.

The Company’s Consolidated Leverage Ratio financial covenant of its credit facility allows it to net up to $75 million of cash with debt.

The Second Amendment to the credit facility also provides leverage ratio covenant flexibility in 2020.

In response to the current environment, the Company has taken certain actions to improve liquidity and optimize cash flow in 2020.

Capital expenditures are expected to be approximately $85 million in 2020, which represents a decrease of approximately $65 million versus 2019, as we continue to assess opportunities to maximize free cash flow by deferring, or reducing, non-critical repair and maintenance capital expenditures in light of current and anticipated economic conditions.

The Company is also driving disciplined cost management across the organization including all discretionary spending.

As a result of its actions, the Company is targeting an approximately $20 to $25 million full-year cost reduction versus the prior year.

The CARES Act is intended to provide economic relief resulting from the COVID-19 pandemic and includes, but is not limited to provisions for taxes, employment related costs, deferral of pension funding obligations and options for liquidity.

While we continue to evaluate the impact and benefits of the CARES Act, the Company anticipates approximately $12 million of cash tax savings in 2020 and an approximately $6 million cash benefit in 2020 from the deferral of social security taxes.

For social security taxes that have been deferred, 50% will be due by December 31, 2021 with the remainder due by December 31, 2022.

The Second Amendment to the credit facility also provided leverage ratio covenant flexibility through 2021.

Capital expenditures are expected to be approximately $70 million to $80 million in 2021 compared to $83 million in 2020, reflecting disciplined capital deployment and following the completion of several high-return growth and cost savings investments.

As noted in Note 10.

"Income Taxes," the Company filed a Federal net operating loss (NOL) carryback claim under the CARES Act in July 2020 which generated a refund of previously paid taxes in the amount of $12.3 million received in the first quarter of 2021.

Additionally, the Company deferred approximately $6.5 million of social security taxes in 2020 under the CARES Act in which 50% is due by December 31, 2021 and the remainder is due by December 31, 2022.

We assumed from Honeywell all health, safety and environmental (“HSE”) liabilities and compliance obligations related to the past and future operations of our current business, as well as all HSE liabilities associated with our three current manufacturing locations and the other locations used in our current operations including any cleanup or other liabilities related to any contamination that may have occurred at such locations in the past.

2 unchanged sentences

We expect that our primary cash requirements for the remainder of 2021 will be to fund costs associated with ongoing operations, capital expenditures, and amounts related to other contractual obligations.

The Company made contributions to the defined benefit pension plan of $1.7 million during the nine months ended September 30, 2020 with $1.7 million in the first quarter of 2020 and no contributions in the second or third quarter of 2020.

The Company made an additional cash contribution of $6.4 million in the fourth quarter of 2020 for a total of $8.1 million for the full year of 2020.

The Company does not anticipate making any further contributions for the remainder of 2020 but anticipates making additional contributions in future years sufficient to satisfy pension funding requirements in those periods.

The Company made cash contributions to the defined benefit pension plan of $1.2 million during the three months ended March 31, 2021.

The Company currently plans to make pension plan contributions during 2021 sufficient to satisfy funding requirements under the AdvanSix Retirement Earnings Plan in an aggregate amount of approximately $9.0 million to $11.0 million.

We anticipate making additional contributions in future years sufficient to satisfy pension funding requirements in those periods.

On May 4, 2018, the Company announced that its Board of Directors (the “Board”) authorized a share repurchase program of up to $75 million of the Company’s common stock.

3 unchanged sentences

The repurchase program has no expiration date and may be modified, suspended or discontinued at any time.

As of September 30, 2020, the Company had repurchased 3,592,639 shares of common stock including 502,877 shares withheld to cover tax withholding obligations in connection with the vesting of equity awards, for an aggregate of $101.7 million at a weighted average market price of $28.31 per share.

As of September 30, 2020, $59.6 million remained available for repurchase under the currently authorized repurchase program.

During the third quarter and the period from October 1, 2020 through October 23, 2020, no additional shares were repurchased under the currently authorized repurchase program.

As of March 31, 2021, the Company had repurchased 3,609,283 shares of common stock, including 519,521 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $102.2 million at a weighted average market price of $28.30 per share.

As of March 31, 2021, $59.6 million remained available for share repurchases under the current authorization.

During the first quarter of 2021 and the period from April 1, 2021 through April 23, 2021, no additional shares were repurchased under the currently authorized repurchase program.

Credit Agreement

On February 21, 2018 (the “First Amendment Date”), the Company entered into Amendment No.

1 (the “First Amendment”) to the Credit Agreement among the Company, the guarantors, the lenders party thereto and Bank of America, N.A., as

administrative agent (the Original Credit Agreement, after giving effect to the First Amendment, the “First Amended and Restated Credit Agreement”).

The credit facilities under the Original Credit Agreement consisted of a senior secured term loan in an aggregate principal amount of $270 million, of which $267 million was outstanding just prior to entering into the First Amendment, and a senior secured revolving credit facility in a principal amount of $155 million.

Pursuant to the First Amendment, (i) the term loan facility under the Original Credit Agreement was terminated and the entire outstanding balance of the term loan facility (the “Term Loan”) thereunder was paid in full and (ii) the maximum aggregate principal amount of the senior secured revolving credit facility (the “Revolving Credit Facility”) was increased to $425 million.

On the First Amendment Date, the Company borrowed $242 million under the Revolving Credit Facility.

The proceeds of such loans, as well as cash on hand, were used to repay the outstanding Term Loan under the Original Credit Agreement.

The Revolving Credit Facility under the First Amended and Restated Credit Agreement has a 5-year term with a scheduled maturity date of February 21, 2023.

The First Amendment resulted in an increase in the Revolving Credit Facility to replace the Term Loan and provided increased borrowing flexibility and reduced overall borrowing costs with an approximate 50 basis point reduction in the interest rate spread.

The First Amended and Restated Credit Agreement permits the Company to utilize up to $40 million of the Revolving Credit Facility for the issuance of letters of credit and up to $40 million for swing line loans.

The Company has the option to incur incremental term loans and/or increase the amount of the Revolving Credit Facility in an aggregate principal amount for all such incremental term loans and increases of the Revolving Credit Facility of up to the sum of (x) $175 million plus (y) an amount such that the Company’s Consolidated Senior Secured Leverage Ratio (as defined in the First Amended and Restated Credit Agreement) would not be greater than 1.75 to 1.00, in each case, to the extent that any one or more lenders, whether or not currently party to the First Amended and Restated Credit Agreement, commits to be a lender for such amount.

Borrowings under the First Amended and Restated Credit Agreement bore interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.50% to 1.50% or the sum of a Eurodollar rate plus a margin ranging from 1.50% to 2.50%, with either such margin varying according to the Company’s Consolidated Leverage Ratio (as defined in the First Amended and Restated Credit Agreement).

The Company was also required to pay a commitment fee in respect of unused commitments under the Revolving Credit Facility, if any, at a rate ranging from 0.20% to 0.40% per annum depending on the Company’s Consolidated Leverage Ratio.

The initial margin under the First Amended and Restated Credit Agreement was 0.75% for base rate loans and 1.75% for Eurodollar rate loans and the initial commitment fee rate was 0.25% per annum.

The First Amended and Restated Credit Agreement contained customary covenants limiting the ability of the Company and its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets.

The First Amended and Restated Credit Agreement also contained financial covenants that required the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the First Amended and Restated Credit Agreement) of not less than 3.00 to 1.00 and to maintain a Consolidated Leverage Ratio of (i) 3.50 to 1.00 or less for the fiscal quarter ending March 31, 2018, through and including the fiscal quarter ending December 31, 2019, (ii) 3.25 to 1.00 or less for the fiscal quarter ending March 31, 2020, through and including the fiscal quarter ending December 31, 2020, (iii) 3.00 to 1.00 or less for the fiscal quarter ending March 31, 2021, through and including the fiscal quarter ending December 31, 2021, and (iv) 2.75 to 1.00 or less for the fiscal quarter ending March 31, 2022 and each fiscal quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in connection with certain acquisitions).

The Company was in compliance with all related covenants at December 31, 2019.

On February 19, 2020, the Company entered into Amendment No.

2 (the “Second Amendment”) to the First Amended and Restated Credit Agreement (after giving effect to the Second Amendment, the “Second Amended and Restated Credit Agreement”).

The Second Amendment amended the Consolidated Leverage Ratio financial covenant of the Credit Agreement and requires the Company to maintain a Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of (i) 3.50 to 1.00 or less for the fiscal quarter ending March 31, 2020, (ii) 4.50 to 1.00 or less for the fiscal quarter ending June 30, 2020, (iii) 4.25 to 1.00 or less for the fiscal quarter ending September 30, 2020, (iv) 3.50 to 1.00 or less for the fiscal quarter ending December 31, 2020, (v) 3.25 to 1.00 or less for the fiscal quarter ending March 31, 2021 through and including the fiscal quarter ending December 31, 2021, and (vi) 3.00 to 1.00 or less for the fiscal quarter ending March 31, 2022 and each fiscal quarter thereafter (subject to the Company’s option to elect a Consolidated Leverage Ratio increase in connection with certain acquisitions).

The Consolidated Interest Coverage Ratio financial covenant of the First Amended and Restated Credit Agreement was not changed and continues to require the Company to maintain a Consolidated Interest Coverage Ratio (as

defined in the Second Amended and Restated Credit Agreement) of not less than 3.00 to 1.00.

On September 30, 2016, the Company as the borrower, entered into a Credit Agreement with Bank of America, as administrative agent (the "Original Credit Agreement"), which was amended on February 21, 2018 pursuant to Amendment No.

1 to the Original Credit Agreement (the "First Amended and Restated Credit Agreement), and further amended on February 19, 2020 pursuant to, Amendment No.

2 to the First Amended and Restated Credit Agreement (after giving effect to the Second Amendment, the “Second Amended and Restated Credit Agreement”).

The Second Amended and Restated Credit Agreement requires the Company to maintain a Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of (i) 3.50 to 1.00 or less for the fiscal quarter ending March 31, 2020, (ii) 4.50 to 1.00 or less for the fiscal quarter ending June 30, 2020, (iii) 4.25 to 1.00 or less for the fiscal quarter ending September 30, 2020, (iv) 3.50 to 1.00 or less for the fiscal quarter ending December 31, 2020, (v) 3.25 to 1.00 or less for the fiscal quarter ending March 31, 2021 through and including the fiscal quarter ending December 31, 2021, and (vi) 3.00 to 1.00 or less for the fiscal quarter ending March 31, 2022 and each fiscal quarter thereafter (subject to the Company’s option to elect a Consolidated Leverage Ratio increase in connection with certain acquisitions).

The Consolidated Interest Coverage Ratio financial covenant requires the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of not less than 3.00 to 1.00.

If the Company does not comply with the covenants in the Second Amended and Restated Credit Agreement, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility.

The Company was in compliance with all related covenants at September 30, 2020.

The Company was in compliance with all related covenants at March 31, 2021.

Borrowings under the Second Amended and Restated Credit Agreement bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.50% to 2.00% or the sum of a Eurodollar rate plus a margin ranging from 1.50% to 3.00%, with either such margin varying according to the Company’s Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement).

3 unchanged sentences

The obligations under the Second Amended and Restated Credit Agreement are secured by a pledge of assets and liens on substantially all of the assets of AdvanSix.

The Amended and Restated Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets, as well as financial covenants that require the Company to maintain interest coverage and leverage ratios at levels specified in the Amended and Restated Credit Agreement.

The Second Amended and Restated Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter

into transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets, as well as financial covenants that require the Company to maintain interest coverage and leverage ratios at levels specified in the Second Amended and Restated Credit Agreement.

These covenants may limit how we conduct our business, and in the event of certain defaults, our repayment obligations may be accelerated.

We were in compliance with all of our covenants at September 30, 2020 and through the date of the filing of this Quarterly Report on Form 10-Q.

We were in compliance with all of our covenants at March 31, 2021 and through the date of the filing of this Quarterly Report on Form 10-Q.

The situation surrounding COVID-19 remains fluid and unpredictable, and the potential for a material impact on the Company increases the longer the social and economic restrictions remain in place or are reinstituted, which impacts the overall level of consumer and business activity in the United States and globally.

For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity.

For further information regarding risk and the impact COVID-19 could have on our business, financial condition, results of operations and liquidity, including our ability to comply with financial covenants in our credit facility and our access to, and cost of, capital, see Part II, Item 1A.

"Risk Factors."

As of September 30, 2020, $111 million was available for use out of the total of $425 million under the Revolving Credit Facility.

As of March 31, 2021, $178 million was available for use out of the total of $425 million under the Revolving Credit Facility.

As of December 31, 2020, we had a balance of $275 million under the Revolving Credit Facility.

During the first nine months of 2020, we borrowed an incremental net amount of $16 million to bring the balance under the Revolving Credit Facility to $313 million as of September 30, 2020.

Going forward, we expect that Cash provided by operating activities will fund future interest payments on the Company's outstanding indebtedness.

During the three months ended March 31, 2021, we repaid an incremental net amount of $29 million to bring the balance under the Revolving Credit Facility to $246 million as of March 31, 2021.

We expect that Cash provided by operating activities will fund future interest payments on the Company's outstanding indebtedness.

Cash Flow Summary

Nine Months Ended

September 30,

Three Months Ended

Cash provided by (used for):

3 unchanged sentences

Net change in cash and cash equivalents $ 3,518 $ 23,704

Cash provided by operating activities decreased by $36.4 million for the nine months ended September 30, 2020 versus the prior year period due primarily to a $24.1 million decrease in net income, a $18.2 million unfavorable cash impact from working capital (comprised of Accounts receivables, Inventories, Accounts payable and Deferred income) for the nine months

ended September 30, 2020 versus a $9.0 million unfavorable cash impact from working capital in the prior year period and a $11.7 million unfavorable cash impact from taxes receivable.

These decreases were partially offset by an increase in Other assets and liabilities driven by a $3.8 million increase in income tax reserve, a $2.9 million increase in pension liabilities, and a $2.6 million increase in Prepaid expenses as well as a change in the timing of payments for Accrued liabilities of $12.2 million versus the same period in the prior year.

The Pottsville restructuring charge had a net neutral impact on operational cash flow during the nine months ended September 30, 2019.

Cash used for investing activities decreased by $40.1 million for the nine months ended September 30, 2020 versus the prior year period due to a decrease in cash paid for capital expenditures.

Cash provided by financing activities increased by $5.7 million for the nine months ended September 30, 2020 versus the prior year period due primarily to net borrowings of $16.0 million for the nine months ended September 30, 2020 compared to net borrowings of $66.0 million during the prior year period, offset by $1.0 million in cash outflows for share repurchases during the nine months ended September 30, 2020 compared to $53.1 million in cash outflows during the prior year period, both of which are described above.

Cash provided by operating activities increased by $37.4 million for the three months ended March 31, 2021 versus the prior year period due primarily to a $19.6 million increase in net income, a $19.6 million cash improvement from Taxes receivable (including a $12.3 million cash tax refund received in the first quarter of 2021), a $4.8 million favorable cash impact from working capital (comprised of Accounts receivables, Inventories, Accounts payable and Deferred income) year-over-year with a $6.7 million unfavorable cash impact from working capital for the three months ended March 31, 2021 compared to a $11.5 million unfavorable cash impact in the prior year period and a $1.7 million favorable impact from non-cash Depreciation and amortization expense.

These favorable impacts were partially offset by a $9.0 million unfavorable cash impact from Deferred taxes and $2.0 million unfavorable cash impact from Accrued liabilities.

Cash used for investing activities decreased by $10.6 million for the three months ended March 31, 2021 versus the prior year period due to a decrease in cash paid for capital expenditures of approximately $19.9 million offset by cash paid for the acquisition of Commonwealth Industrial Services for approximately $9.5 million.

Cash used for financing activities increased by $68.1 million for the three months ended March 31, 2021 versus the prior year period due primarily to net repayments of $29.0 million for the three months ended March 31, 2021 compared to net borrowings of $40.0 million during the prior year period as described above.

Capital Expenditures

2 unchanged sentences

The following table summarizes ongoing and expansion capital expenditures:

Nine Months Ended

September 30, 2020

Three Months Ended

March 31, 2021

Capital expenditures in Accounts payable at December 31, 2020

Purchases of property, plant and equipment 10,964

Capital expenditures in Accounts payable at September 30, 2020

Capital expenditures in Accounts payable at March 31, 2021

Cash paid for capital expenditures $ 14,177

For 2020, we expect our total capital expenditures to be approximately $85 million, which represents a decrease of approximately $65 million versus 2019 reflecting disciplined capital deployment following the completion of several high-return growth and cost savings investments.

For 2021, we expect our total capital expenditures to be approximately $70 million to $80 million compared to $83 million in 2020 reflecting disciplined capital deployment and following the completion of several high-return growth and cost savings investments.

Capital expenditures are deployed for various ongoing investments and initiatives to improve reliability, yield and quality, expand production capacity and comply with HSE regulations.

6 unchanged sentences

Off-Balance Sheet Arrangements and Contractual Obligations

As of September 30, 2020, the Company did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the Company's 2019 Form 10-K.

As of March 31, 2021, the Company did not have any off-balance sheet arrangements as described in Instruction 8 to Item 303(b) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the Company's 2020 Form 10-K.

The Company has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis