What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-30 compared with 2021-04-30 · 88 added, 57 removed, 194 unchanged (43% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto contained elsewhere in this Form 10-Q, as well as the MD&A section included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 19, 2021 (the “2020 Form 10-K”).

The following discussion and analysis of the Company’s financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto contained in this Form 10-Q, as well as the MD&A section included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on February 19, 2021 (the “2020 Form 10-K”).

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors that can affect our performance in both the near- and long-term, including those set forth in, and incorporated by reference in Item 1A of Part II of this Form 10-Q as such factors may be revised or supplemented in subsequent filings with the SEC, as well as those discussed in the section entitled “Note Regarding Forward-Looking Statements” below.

Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors that can affect our performance in both the near- and long-term, including those incorporated by reference in Item 1A of Part II of this Form 10-Q as such factors may be revised or supplemented in subsequent filings with the SEC, as well as those discussed in the section entitled “Note Regarding Forward-Looking Statements” below.

Note Regarding Forward-Looking Statements

5 unchanged sentences

and globally, including the impact of the coronavirus (COVID-19) pandemic and any resurgences;

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

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;

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

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 and related vaccination rates;

the severity and transmissibility 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;

3 unchanged sentences

the ability of our customers to pay for our products;

and any closures of our and our customers’ offices and facilities;

any closures of our and our customers’ offices and facilities;

risks associated with increased phishing, compromised business emails and other cybersecurity attacks and disruptions to our technology infrastructure;

1 unchanged sentence

risks associated with our indebtedness including compliance with financial and restrictive covenants, and our ability to access capital on reasonable terms, at a reasonable cost, or at all, due to economic conditions resulting from COVID-19 or otherwise;

the impact of scheduled turnarounds and significant unplanned downtime and interruptions of production or logistics operations as a result of mechanical issues or other unanticipated events such as fires, severe weather conditions, natural disasters and pandemics including the COVID-19 pandemic;

price fluctuations, cost increases and supply of raw materials;

13 unchanged sentences

disruptions in transportation and logistics;

our inability to achieve some or all of the anticipated benefits of our spin-off including uncertainty regarding qualification for expected tax treatment;

potential for uncertainty regarding qualification for tax treatment of our spin-off;

fluctuations in our stock price;

13 unchanged sentences

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.

Our Hopewell manufacturing facility is one of the world’s largest single-site producers of caprolactam as of June 30, 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.

3 unchanged sentences

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.

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 June 30, 2021.

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

4 unchanged sentences

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

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 average commodity 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.

5 unchanged sentences

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.

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 as compared to other fertilizers.

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.

North America ammonium sulfate prices are typically strongest during second quarter fertilizer application and then typically decline seasonally with new season fill in the third quarter.

North America

ammonium sulfate prices are typically strongest during second quarter fertilizer application and then typically decline seasonally with new season fill in the third quarter.

Due to the ammonium sulfate fertilizer sales cycle, we occasionally build up higher inventory balances because our production is continuous and not tied to seasonal demand for fertilizers.

8 unchanged sentences

In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a global pandemic with numerous countries around the world declaring national emergencies, including the United States.

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.

Since early 2020, COVID-19 has continued to spread, with most countries and territories worldwide having confirmed cases, and with certain jurisdictions experiencing resurgences, including as a result of variant strains.

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.

2 unchanged sentences

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.

Starting in the second half of 2020, and through the second 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 vaccination rates, 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.

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Sales $ 437,682 $ 233,022 $ 814,065 $ 535,735

2 unchanged sentences

Three Months Ended

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%).

June 30, 2021 Six Months Ended

June 30, 2021

Volume 32.1% 19.0%

Price 55.7% 33.0%

Sales increased in the three months ended June 30, 2021 compared to the prior year period by $204.7 million (approximately 88%) due primarily to higher formula-based pass-through pricing (approximately 31%) as a result of net cost increases in benzene and propylene (inputs to cumene which is a key feedstock to our products), favorable market-based pricing (approximately 25%) and higher sales volume (approximately 32%) reflecting strength across all product lines.

Sales increased in t he six months ended June 30, 2021 co mpared to the prior year period by $278.3 million (approximately 52%) due primarily to higher formula-based pass-through pricing (approximately 20%) as a result of net cost increases in benzene and propylene, favorable market-based pricing (approximately 13%) and higher sales volume (approximately 19%) reflecting strength across all product lines.

Costs of Goods Sold

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Costs of goods sold $ 356,884 $ 198,739 $ 674,783 $ 470,746

1 unchanged sentence

Gross Margin percentage 18.5% 14.7% 17.1% 12.1%

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%).

Costs of goods sold increased in the three months ended June 30, 2021 compared to the prior year period by $158.1 million (approximately 80% ) due primarily to increased prices of raw materials (approximately 52%) and higher sales volumes as discussed above (approximately 26%).

Costs of goods sold increased in the six months ended June 30, 2021 compared to the prior year period by $204.0 million (approximately 43%) due primarily to (i) increased prices of raw materials (approximately 28%), (ii) higher sales volumes (approximately 12%) and (iii) an unfavorable non-cash LIFO inventory reserve adjustment (1%).

Gross margin percentage increased by approximately 4% in the three months ended June 30, 2021 compared to the prior year period due primarily to (i) increased sales volume (approximately 3%), (ii) the impact of formula-based pass-through pricing and increased market pricing (approximately 2%) and (iii) the initial collection of insurance proceeds related to the 2019 shut-down of cumene supplier Philadelphia Energy Solutions (approximately 1%), partially offset by higher manufacturing spend to support volume growth (approximately 2%).

Gross margin percentage increased by approximately 5% in the six months ended June 30, 2021 compared to the prior year period due primarily to increased sales volume (approximately 4%) and the impact of formula-based pass-through pricing and increased market pricing (approximately 3%), partially offset by an unfavorable non-cash LIFO inventory reserve adjustment (approximately 1%) and higher manufacturing spend to support volume growth (approximately 1%).

Selling, General and Administrative Expenses

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Selling, general and administrative expenses $ 21,682 $ 17,911 $ 40,990 $ 34,651

Percentage of Sales 5.0% 7.7% 5.0% 6.5%

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.

Selling, general and administrative expenses increased by $3.8 million in the three months ended June 30, 2021 compared to the prior year period due primarily to increased incentive and stock-based compensation costs.

Selling, general and administrative expenses increased by $6.3 million in the six months ended June 30, 2021 compared to the prior period due primarily to increased incentive and stock-based compensation costs and increased IT costs.

Income Tax Expense

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Income tax expense $ 13,817 $ 2,273 $ 23,088 $ 5,938

3 unchanged sentences

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.

The Company’s effective tax rate for the three and six months ended June 30, 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 and the deduction for foreign-derived intangible income.

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

federal statutory rate, due primarily to the impact of changes in the Company's geographical sales mix on state tax and additional research tax credits claimed on the Company's 2019 U.S.

federal income tax return recorded as discrete tax adjustments in the second quarter of 2020.

This decrease was partially offset by tax deficiencies on vesting of equity compensation in the quarter and executive compensation limitations.

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

statutory rate due primarily to tax deficiencies on vesting of equity compensation, executive compensation deduction limitations, and the impact of the CARES Act, partially offset by discrete tax adjustments related to additional research tax credits claimed on the Company’s 2019 U.S.

federal income tax return and the impact of changes in the Company’s geographical sales mix on state tax.

The Company’s effective tax rate for the three months ended June 30, 2021 was higher than the prior year period due primarily to the impact of discrete tax adjustments recorded in the second quarter of 2020, related to changes in the Company's geographical sales mix on state tax and additional research tax credits claimed on the Company's 2019 U.S.

federal income tax return, which decreased the quarterly effective tax rate.

The Company’s effective tax rate for the six months ended June 30, 2021 was higher than the prior year period due primarily to the impact of discrete tax adjustments recorded in the second quarter of 2020 related to changes in the Company's geographical sales mix on state tax and additional research tax credits claimed on the Company's 2019 U.S.

federal income tax return, which decreased the effective tax rate.

These adjustments are partially offset by tax deficiencies on vesting of equity compensation, the impact of the CARES Act recorded in the period ended June 30, 2020 and the anticipated income tax benefit of the deduction for foreign-derived intangible income in the period ended June 30, 2021.

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net income $ 44,131 $ 11,429 $ 72,262 $ 20,005

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.

As a result of the factors described above, Net income was $44.1 million and $72.3 million for the three and six months ended June 30, 2021 as compared to $11.4 million and $20.0 million in the corresponding prior year period.

Non-GAAP Measures

3 unchanged sentences

EBITDA Margin is equal to EBITDA divided by Sales.

The following tables also present each of these measures as further adjusted.

The Company believes these non-GAAP financial measures provide meaningful supplemental information as they are used by the Company’s management to evaluate the Company’s operating performance, enhance a reader’s understanding of the financial performance of the Company, and facilitate a better comparison among fiscal periods and performance relative to its competitors, as the non-GAAP measures exclude items that are not considered core to the Company’s operations.

The following tables may also present each of these measures as further adjusted.

Company, and facilitate a better comparison among fiscal periods and performance relative to its competitors, as the non-GAAP measures exclude items that are not considered core to the Company’s operations.

These non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with U.S.

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net income $ 44,131 $ 11,429 $ 72,262 $ 20,005

16 unchanged sentences

We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities.

On a recurring basis, our primary future cash needs will be centered on operating activities, working capital, and capital expenditures reflecting disciplined capital deployment and following the completion of several high-return growth and cost savings investments.

On a recurring basis, our primary future cash needs will be centered on operating activities, working capital, and capital expenditures reflecting disciplined capital deployment.

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

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 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.

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 second quarter of 2021, the Company had approximately $4.3 million of cash on hand with approximately $229 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 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.

The Second Amendment to the credit facility also provided leverage ratio covenant flexibility through the maturity date of the credit facility.

Capital expenditures are expected to be approximately $65 million to $70 million in 2021 compared to $83 million in 2020, reflecting efficiencies in project execution 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.

Additionally, the Company deferred approximately $6.5 million of social security taxes in 2020 under the CARES Act of 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 cash contributions to the defined benefit pension plan of $1.2 million during the three months ended March 31, 2021.

The Company made cash contributions to the defined benefit pension plan of $4.8 million during the six months ended June 30, 2021 with $1.2 million in the first quarter of 2021 and $3.6 million in the second quarter of 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 $11.0 million to $13.0 million.

5 unchanged sentences

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

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.

As of June 30, 2021, the Company had repurchased 3,614,202 shares of common stock, including 524,440 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $102.3 million at a weighted average market price of $28.31 per share.

As of June 30, 2021, $59.6 million remained available for share repurchases under the current authorization.

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

Credit Agreement

2 unchanged sentences

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 Second Amended and Restated Credit Agreement has a five year term with a scheduled maturity date of February 21, 2023.

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 March 31, 2021.

The Company was in compliance with all related covenants at June 30, 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).

The Company is also required to pay a commitment fee in respect of unused commitments under the credit facility, if any, at a rate ranging from 0.20% to 0.50% per annum depending on the Company’s Consolidated Leverage Ratio.

The initial margin under the Second Amended and Restated Credit Agreement was 1.25% for base rate loans and 2.25% for Eurodollar rate loans and the applicable commitment fee rate was 0.35% per annum.

In addition, the Second Amendment also amended certain administrative provisions associated with the LIBOR Successor Rate (as defined in the Second Amended and Restated Credit Agreement).

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.

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.

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 March 31, 2021 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 June 30, 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.

1 unchanged sentence

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 "Risk Factors" in Item 1A of Part I of the 2020 Form 10-K.

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 June 30, 2021, $229 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 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.

During the six months ended June 30, 2021, we repaid an incremental net amount of $80 million to bring the balance under the Revolving Credit Facility to $195 million as of June 30, 2021.

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

Cash Flow Summary

Three Months Ended

Six Months Ended

Cash provided by (used for):

3 unchanged sentences

Net change in cash and cash equivalents $ (6,355) $ 65,613

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.

Cash provided by operating activities increased by $80.5 million for the six months ended June 30, 2021 versus the prior year period due primarily to a $52.3 million increase in net income, a $20.1 million cash improvement from Taxes receivable (including a $12.3 million cash tax refund received in the first quarter of 2021) and a $21.0 million favorable cash impact from working capital (comprised of Accounts receivables, Inventories, Accounts payable and Deferred income) year-over-year with a $16.9 million unfavorable cash impact from working capital for the six months ended June 30, 2021 compared to a $37.8 million unfavorable cash impact in the prior year period.

These favorable impacts were partially offset by a $15.5 million unfavorable cash impact from Other assets and liabilities driven by a $7.4 million increase in prepaid insurance and decreases in the reserve for uncertain tax positions and pension liability of $3.8 million and $3.5 million, respectively, compared to the prior year period.

Cash used for investing activities decreased by $17.6 million for the six months ended June 30, 2021 versus the prior year period due to lower cash payments for capital expenditures of approximately $27.1 million offset by cash paid for the acquisition of Commonwealth Industrial Services for approximately $9.5 million.

Cash used for financing activities increased by $170.1 million for the six months ended June 30, 2021 versus the prior year period due primarily to net repayments of $80.0 million for the six months ended June 30, 2021 compared to net borrowings of $91.0 million during the prior year period as described above.

Capital Expenditures

2 unchanged sentences

The following table summarizes ongoing and expansion capital expenditures:

Three Months Ended

March 31, 2021

Six Months Ended

June 30, 2021

Capital expenditures in Accounts payable at December 31, 2020

Purchases of property, plant and equipment 22,039

Capital expenditures in Accounts payable at March 31, 2021

Capital expenditures in Accounts payable at June 30, 2021

Cash paid for capital expenditures $ 24,478

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.

For 2021, we expect our total capital expenditures to be approximately $65 million to $70 million compared to $83 million in 2020, reflecting efficiencies in project execution 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 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.

As of June 30, 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