What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-18 compared with 2021-02-19 · 166 added, 232 removed, 968 unchanged (29% of the section changed)

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

To the Board of Directors and Stockholders of AdvanSix Inc.

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinions

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(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment

As described in Note 2 to the consolidated financial statements, the Company’s goodwill balance was $15 million as of December 31, 2020.

Goodwill is subject to impairment testing annually as of March 31, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable.

Management first assesses qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test.

Potential impairment is identified by comparing the fair value of a reporting unit to the carrying value, including goodwill.

In the first quarter of 2020, the Company concluded that due to the negative effects of the COVID-19 pandemic on revenue and profitability, a triggering event existed for the Company’s reporting unit as of March 31, 2020, and therefore performed a quantitative assessment.

Fair value for the reporting unit was determined based on a combination of the discounted future cash flow model (income approach) and the application of current market multiples for comparable publicly-traded companies (market approach).

Under the income approach, the fair value of the reporting unit is estimated based on the discounted present value of the projected future cash flows.

Management’s cash flow projections for the reporting unit included significant judgments and assumptions, including revenue growth rate, EBITDA margin, and WACC rate.

Under the market approach, management uses selected financial information of publicly-traded companies that compare to the reporting unit to derive a market-based multiple.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are (i) the significant judgment by management when determining the fair value of the reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rate, EBITDA margin, and WACC rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Revenue Recognition - Transfer of Control

As described in Notes 2 and 3 to the consolidated financial statements, the Company recorded $1,685 million in sales for the year ended December 31, 2021.

Sales of the Company’s products to customers are made under a purchase order, and in certain cases in accordance with the terms of a master services agreement.

A performance obligation is created when a customer submits a purchase order for a specific product at a specified price.

Management considers the performance obligation satisfied at the point in time when control of the product is transferred to the customer, which is indicated by shipment of the product and transfer of title and risk of loss to the customer.

Transfer of control to the customer occurs through various modes of shipment, including trucks, railcars, and vessels, and follows a variety of commercially acceptable shipping or destination point terms pursuant to the arrangement with the customer.

The principal considerations for our determination that performing procedures relating to revenue recognition – transfer of control is a critical audit matter are the high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence relating to the determination of the point in time when control of the product was transferred to the customer and thus revenue was recognized.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the reporting unit.

These procedures also included, among others (i) testing management’s process for determining the fair value of the reporting unit;

(ii) evaluating the appropriateness of the income and market approaches;

(iii) testing the completeness and accuracy of underlying data used in the income and market approaches;

and (iv) evaluating the significant assumptions used by management related to the revenue growth rate, EBITDA margin, and WACC rate.

Evaluating management’s assumptions related to the revenue growth rate and EBITDA margin involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of (i) the Company’s income and market approaches and (ii) the WACC rate assumption.

These procedures included testing the effectiveness of controls relating to the Company’s revenue recognition process, including controls over the point in time when control of the product was transferred to the customer.

These procedures also included, among others (i) evaluating, on a sample basis, management’s determination of the point in time when control of the product was transferred to the customer based on contractual terms in customer arrangements and the impact of this determination on the timing of revenue recognition;

(ii) testing, on a sample basis, the point in time when control of the product was transferred to the customer by obtaining supporting purchase orders and shipping documents;

and (iii) testing the completeness and accuracy of data provided by management.

/s/ PricewaterhouseCoopers LLP

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Interest expense, net 5,023 7,792 5,454

Other non-operating expense (income), net 53 1,295 3

Other non-operating expense, net 998 53 1,295

Total costs, expenses and other 1,499,509 1,102,884 1,244,045

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Net income $ 139,791 $ 46,077 $ 41,347

Adjustments to reconcile net income to net cash (used for) provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 65,340 60,832 56,826

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Restructuring charges — — 11,020

Changes in assets and liabilities:

Changes in assets and liabilities, net of business acquisitions:

Accounts and other receivables ( 53,772 ) ( 18,990 ) 54,383

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Expenditures for property, plant and equipment ( 56,811 ) ( 82,918 ) ( 150,322 )

Acquisition of business ( 9,523 ) — —

Other investing activities ( 1,228 ) ( 1,185 ) ( 2,803 )

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Cash flows from financing activities:

Payments of long-term debt — — ( 266,625 )

Borrowings from line of credit 176,000 364,000 419,250

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Principal payments of finance leases ( 735 ) ( 710 ) ( 4,839 )

Dividend payments ( 3,518 ) — —

Purchase of treasury stock ( 652 ) ( 1,055 ) ( 62,196 )

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Pension obligation adjustments — — — — — ( 6,295 ) ( 6,295 )

Total comprehensive income (loss), net of tax — — — ( 410 ) — 6,572 6,162

Other comprehensive income (loss), net of tax — — — — — ( 6,977 ) ( 6,977 )

Issuance of common stock 868,183 8 9 — — — 17

Acquisition of treasury stock ( 1,210,714 shares)

Acquisition of treasury shares ( 2,298,407 shares)

— ( 62,173 ) — ( 23 ) — ( 62,196 )

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Stock-based compensation — — 11,299 — — — 11,299

Dividends — — — ( 3,518 ) — — ( 3,518 )

Balance at December 31, 2021 31,755,430 $ 318 $ 195,931 $ 411,516 $ ( 36 ) $ ( 6,539 ) $ 601,190

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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.

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.

Since early 2020, COVID-19 has continued to spread, with confirmed cases worldwide, 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.

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, volatility in demand, production and sales across most industries, volatility within global financial markets, inflationary pressures in commodity pricing and an increasingly dynamic workforce environment.

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

The Company’s 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 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 had experienced an improvement in demand to approximately pre-COVID-19 levels.

During the fourth quarter of 2020, the Company experienced even greater demand than in the previous quarter whereby demand and volume exceeded pre-COVID-19 levels overall as compared to 2019.

With states, regions and countries in various phases of re-opening, we expect demand to continue to gradually improve through 2021, although there is no assurance demand recovery will continue 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.

The Company continues to consider the impact of COVID-19 on the estimates and assumptions used for the financial statements.

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.

Starting in the second half of 2020, and through the end 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.

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.

Basis of Presentation

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Cash flows of such derivative financial instruments are classified consistent with the underlying hedged item.

For derivative

instruments that are designated and qualify as a net investment hedge, the derivative’s gain or loss is reported as a component of Other comprehensive income (loss) and recorded in Accumulated other comprehensive income (loss).

For derivative instruments that are designated and qualify as a net investment hedge, the derivative’s gain or loss is reported as a component of Other comprehensive income (loss) and recorded in Accumulated other comprehensive income (loss).

The gain or loss will be subsequently reclassified into net earnings when the hedged net investment is either sold or substantially liquidated.

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Instead, each customer agreement, the majority of which have a term of at least one year, is typically determined by monthly or quarterly volume estimates.

We may also enter into forward commodity contracts with third parties designated as hedges of anticipated purchases of several commodities.

We may also enter into forward commodity contracts with third parties designated as hedges of anticipated purchases of several

Forward commodity contracts are marked-to-market, with the resulting gains and losses recognized in earnings, in the same category as the items being hedged, when the hedged transaction is recognized.

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The Company also evaluates the estimated useful lives of long-lived assets if circumstances warrant and revises such estimates based on current events.

Goodwill – The Company had goodwill of $ 15.0 million as of December 31, 2020 and 2019.

Goodwill – The Company had goodwill of $ 17.6 million and $ 15.0 million as of December 31, 2021 and 2020, respectively.

Goodwill is subject to impairment testing annually as of March 31, or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable.

Management first assesses qualitative factors as described in ASC 350 to determine whether it is necessary to perform the quantitative goodwill impairment test.

Potential impairment is identified by comparing the fair value of a reporting unit to the carrying value, including goodwill.

In the first quarter 2020, the Company concluded that, due to the negative effects of the COVID-19 pandemic on revenue and profitability, a triggering event existed for the Company's reporting unit as of March 31, 2020.

Under the income approach, the fair value of the reporting unit is estimated based on the discounted present value of the projected future cash flows.

Management's cash flow projections for the reporting unit included significant judgements and assumptions, including revenue growth rate, EBITDA margin and WACC rate.

Under the market approach, management uses selected financial information of publicly-traded companies that compare to the reporting unit to derive a market-based multiple.

The Company completed its annual goodwill impairment test as of March 31, 2020 and we have concluded that there is no impairment.

The Company completed its annual goodwill impairment test as of March 31, 2021 and, based on the results of the Company's assessment of qualitative factors, it was determined that it was not necessary to perform the quantitative goodwill impairment test.

Revenue Recognition – The Company recognizes revenue upon the transfer of control of goods or services to customers at amounts that reflect the consideration expected to be received.

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Environmental – The Company accrues costs related to environmental matters when it is probable that we have incurred a liability related to a contaminated site and the amount can be reasonably estimated.

Deferred Income and Customer Advances – AdvanSix has an annual pre-buy program for ammonium sulfate that is classified as deferred income and customer advances in the Consolidated Balance Sheets.

Deferred Income and Customer Advances – AdvanSix typically has an annual pre-buy program for ammonium sulfate that is classified as deferred income and customer advances in the Consolidated Balance Sheets.

Customers pay cash in advance to reserve capacity for ammonium sulfate to guarantee product availability during peak planting season.

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Stock-Based Compensation Plans – The principal awards issued under our stock-based compensation plans, which are described in "Note 16.

Stock-Based Compensation Plans" to the Consolidated Financial Statements included in Item 8 of this Form 10-K, are non-qualified stock options, performance share units and restricted stock units.

Stock-Based Compensation Plans" to the Consolidated Financial Statements included in Item 8 of this Form 10-K, are non-qualified stock options, performance stock units and restricted stock units.

The cost for such awards is measured at the grant date based on the fair value of the award.

The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award) and is included in selling, general and administrative expenses.

The value of the portion of the award that is ultimately expected to vest, including the impact of the Company's anticipated performance against certain metrics for performance stock units, is recognized as expense over the requisite service periods (generally the vesting period of the equity award) and is included in selling, general and administrative expenses.

Estimates of future performance are utilized to determine the underlying expense for shares expected to vest.

Forfeitures are estimated at the time of grant to recognize expense for those awards that are expected to vest and are based on our historical forfeiture rates.

Dividend Equivalents – If a dividend is authorized by the Board for stockholders of common stock, holders of unvested RSUs and unvested PSUs will have their accounts credited with dividend equivalents in the form and in an amount equal to the dividend that the holder would have received had the shares underlying the RSUs and PSUs been distributed at the time that such dividend was paid.

Dividend equivalents are subject to the same vesting, forfeiture, performance and payment restrictions as the respective equity award for which it is attributable.

Since the dividend equivalents are forfeitable, there is no impact on the basic earnings per share calculation.

Pension Benefits – We have a defined benefit plan covering certain employees primarily in the U.S.

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We do not expect any significant changes in our unrecognized tax benefits in the next year.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No.

118 ("SAB 118") to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Act.

SAB 118 provides guidance for registrants under three scenarios where the measurement of certain tax items is either complete, can be reasonably estimated or cannot be reasonably estimated.

The Company has completed its evaluation of the 2017 Act and the impacts of those items have been reflected in our Consolidated Financial Statements.

The impacts of those changes are disclosed in “Note 4.

Income Taxes”.

Leases – The Company enters into agreements to lease transportation equipment, storage facilities, office space, dock access and other equipment.

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Early adoption of the amendments in this update is permitted, but no earlier than fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020.

The Company is evaluating the impact that the amendments of this standard would have on the Company's consolidated financial position or results of operations upon adoption.

The Company adopted ASU 2020-06 effective January 1, 2022, which did not have any impact on the Company's consolidated financial position or results of operations upon adoption.

In March 2020, the FASB issued ASU No.

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GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

The Company is evaluating the impact that the amendments of this standard would have on the Company's consolidated financial position or results of operations upon adoption.

The Company adopted ASU 2020-04 effective September 30, 2021, which did not have a material impact on the Company's consolidated financial position or results of operations upon adoption.

On December 18, 2019, the FASB issued ASU No.

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Simplifying the Accounting for Income Taxes.

The ASU removes the exception to the general principles in ASC 740, Income Taxes, associated with the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments and interim-period income tax accounting for year-to-date losses that exceed anticipated losses.

The ASU removes the exception to the general principles in FASB Accounting Standards Codification ("ASC") 740, Income Taxes, associated with the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments and interim-period income tax accounting for year-to-date losses that exceed anticipated losses.

In addition, the ASU improves the application of income tax related guidance and simplifies U.S.

GAAP when accounting for franchise taxes that are partially based on income, transactions with government resulting in a step-up in tax basis goodwill, separate financial statements of legal entities not subject to

tax, and enacted changes in tax laws in interim periods.

Different transition approaches, retrospective, modified retrospective, or prospective, will apply to each income tax simplification provision.

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The Company adopted ASU 2019-12 effective January 1, 2021, which did not have a material impact on the Company’s consolidated financial position or results of operations upon adoption.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

The amendments of ASU No.

2018-13 are effective for companies for fiscal years beginning after December 15, 2019.

The Company adopted ASU 2018-13 effective January 1, 2020, which did not have a material impact on the Company's consolidated financial position or results of operations upon adoption.

In January 2017, the FASB issued ASU No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment, which eliminates step 2, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill, from the goodwill impairment test.

The amendments of ASU No.

2017-04 are effective for companies for fiscal years beginning after December 15, 2019 and requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any.

The Company adopted ASU 2017-04 effective January 1, 2020, which did not have a material impact on the Company's consolidated financial position or results of operations upon adoption.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The amendments of ASU No.

2016-13 are effective for companies for fiscal years beginning after December 15, 2019 and modify existing guidance related to the measurement of credit losses on financial instruments, including trade and loan receivables.

The new guidance requires impairments to be measured based on expected losses over the life of the asset rather than incurred losses.

The Company adopted ASU 2016-13 effective January 1, 2020, using a modified retrospective approach, which did not have a material impact on the Company's consolidated financial position or results of operations upon adoption.

We serve approximately 400 customers annually in more than 50 countries and across a wide variety of industries.

We serve approximately 400 customers annually in approximately 50 countries and across a wide variety of industries.

For 2021, 2020 and 2019, the Company's ten largest customers accounted for approximately 40 %, 43 % and 47 % of total sales, respectively.

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("Shaw"), a significant consumer of caprolactam and Nylon 6 resin.

We sell Nylon 6 resin and caprolactam to Shaw under a long-term agreement.

Sales to Shaw were 14 % of our total sales for the year ended December 31, 2020 and 22 % of our total sales for each of the years ended December 31, 2019 and 2018.

Each of the Company’s product lines represented the following approximate percentage of total sales for 2020, 2019 and 2018:

We sell caprolactam and

Nylon 6 resin to Shaw under a long-term agreement.

Sales to Shaw were 12 % of our total sales for the year ended December 31, 2021, 14 % for the year ended December 31, 2020 and 22 % for the year ended December 31, 2019.

The Company’s revenue by product line, and related approximate percentage of total sales for 2021, 2020 and 2019 were as follows:

Years Ended December 31,

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$ 1,684,625 100 % $ 1,157,917 100 % $ 1,297,393 100 %

The Company’s revenues by geographic area for 2020, 2019 and 2018 were as follows (in millions):

The Company’s revenues by geographic area, and related approximate percentage of total sales for 2021, 2020 and 2019 were as follows:

Years Ended December 31,

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2021 2020 2019

Income (loss) before taxes

Income before taxes

$ 184,963 $ 54,902 $ 53,231

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21.0 % 21.0 % 21.0 %

2017 Act — % — % ( 1.9 ) %

state income taxes

3.0 % 2.0 % 2.8 %

state income tax rate change 0.8 % — % — %

Energy credit

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Research and other tax credits ( 0.3 ) % ( 2.6 ) % ( 3.0 ) %

Foreign derived intangible income deduction ( 0.9 ) % — % — %

( 0.1 ) % 0.9 % 0.2 %

24.5 % 16.3 % 22.5 %

On December 22, 2017 the U.S.

government passed the Tax Cuts and Jobs Act (the “2017 Act”).

In 2017, the Company reasonably estimated the accounting for the effects of the 2017 Act.

In 2018, under Staff Accounting Bulletin No.

118 (“SAB 118”), we finalized the accounting for the 2017 Act and our financial statements for the year ended December 31, 2018 reflect certain effects of the 2017 Act including a reduction in the corporate tax rate to 21% from 35% and changes made to executive compensation rules.

As a result of the 2017 Act, the Company recorded a reduction in income tax expense of $ 1,651 during the year ended December 31, 2018.

The CARES Act 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 which reflected a net operating loss, on a tax basis, and certain tax credits which were carried back to earlier tax years.

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

We anticipate receiving the refund in the first half of 2021.

Although the carryback claim generates a $ 12.2 million refund, it also results in the loss of prior year permanent tax benefits, the impact of which, is reflected in the above table under "Other, net" above.

The Company's effective income tax rate for 2021 was higher compared to the U.S.

Federal statutory rate of 21% due primarily to state taxes and executive compensation deduction limitations partially offset by research tax credits and the foreign-derived intangible income deduction.

Under a provision included in the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, the Company filed a Federal net operating loss (NOL) carryback claim 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.

Although the carryback claim generated a $ 12.3 million refund, it also resulted in the loss of prior year permanent tax benefits, the impact of which, is reflected in the above table under "Other, net" above.

On March 11, 2021, the American Rescue Plan Act ("ARPA") was signed into law.

The ARPA is aimed at addressing the continuing economic and health impacts of the COVID-19 pandemic.

This legislative relief, along with the previous governmental relief packages, provide for numerous changes to current tax law.

The ARPA did not have a material impact on our financial statements for the year ended December 31, 2021.

The Company's effective income tax rate for 2020 was lower compared to the U.S.

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Federal statutory rate of 21% due primarily to state taxes and executive compensation deduction limitations, partially offset by the vesting of restricted stock units and research tax credits.

The Company's effective income tax rate for 2018 was higher compared to the U.S.

Federal statutory rate of 21% due primarily to state taxes and executive compensation deduction limitations resulting from the 2017 Act, partially offset by income tax benefits associated with the filing of the 2017 U.S.

Federal income tax return and the related completion of the accounting for the impacts of the 2017 Act.

As of December 31, 2021, 2020 and 2019, there were no unrecognized tax benefits recorded by the Company (see below for further information on unrecognized tax benefits).

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The Company is subject to taxation in the United States and various states and foreign jurisdictions.

For tax years 2020, 2019, 2018 and 2017 there are no material examinations by tax authorities;

however, these periods remain open under the statute of limitations and are subject to examination by the tax authorities.

The Company is currently under a federal tax examination for the tax years ended December 31, 2017 through December 31, 2019.

There are no material examinations by state tax authorities;

however, tax years 2017 through 2021 generally remain open under the statute of limitations and are subject to examination by the tax authorities.

We are subject to income taxes in the United States and to a lesser extent several foreign jurisdictions.

Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could impact our effective tax rate and cash flows from operating activities.

The current US administration has released various draft tax reform proposals, as such, we continue to monitor these legislative proposals to evaluate the impact on our business.

Deferred tax assets (liabilities)

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Accruals and Reserves 7,040 4,966

Interest expense limitation — 2,655

Inventory 5,934 4,439

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Operating lease asset ( 32,782 ) ( 27,262 )

Inventory — ( 5,503 )

Other ( 1,542 ) ( 1,417 )

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The federal net operating loss ("NOL") generated as of December 31, 2019 was carried back to previous tax periods under the CARES Act and the amount was fully utilized in the carryback claim.

As of 2020, we also recognized state NOL carryforwards in multiple jurisdictions for $ 1,406 which generally begin to expire in 2032.

The Company has a foreign NOL of $ 25 and $ 70 , respectively, at December 31, 2020 and 2019 which is not subject to expiration.

All 2019 federal tax credits were carried back and utilized in prior periods or expected to be utilized in the current year such that there are no remaining federal tax credit carryforwards.

As of December 31, 2020, we have state tax credit carryforwards of approximately $ 105 that begin to expire in 2030.

We believe that the foreign and state NOL carryforwards, tax credit carryforwards and other deferred tax assets are more likely than not to be realized and we have not recorded a valuation allowance against the deferred tax assets.

The 2019 Deferred tax assets and liabilities reflected in the above table have been adjusted to reflect deferred taxes on the gross up of the Operating lease right-of-use assets and the Operating lease liabilities under ASU 2016-02, Leases (Topic 842) implemented on January 1, 2019.

This update had the effect of increasing both the total deferred tax assets and the deferred tax liabilities by $ 32,569 for the year ending December 31, 2019.

These adjustments have no net impact on the net Deferred taxes or on the consolidated financial statements and the Company does not believe they are material to the annual consolidated financial statements.

As a result of the early adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , during the three months ended March 31, 2018, the Company elected to reclassify $ 0.4 million from Accumulated other comprehensive income to Retained earnings.

The reclassification results from the remeasurement of deferred taxes pursuant to the Tax Cuts and Jobs Act related to the Company’s pension plan that was recognized as a component of Income taxes related to continuing operations for the year ended December 31, 2017 which was originally recognized in Other comprehensive income.

The Company elected the optional transition method and recorded the adjustment at the beginning of the period of adoption of ASU 2018-02.

The Company’s current accounting policy related to stranded tax effects in Accumulated other comprehensive income is to review and reclassify on an item by item basis.

As of 2021, we recognized a state NOL carryforward in Illinois for $ 0.7 million which begins to expire in 2028.

The Company fully utilized its foreign NOL as of December 31, 2021.

The Company has no material federal or state tax credit carryforwards remaining as of December 31, 2021.

We believe that the state NOL carryforward, tax credit carryforwards and other deferred tax assets are more likely than not to be realized and we have no t recorded a valuation allowance against the deferred tax assets.

The Company's accounting policy is to record the tax impacts of Global intangible low-taxed income as a period cost.

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Unrecognized tax benefits

The following table sets forth the change in the Company's unrecognized tax benefits (UTBs) for year ended December 31, 2020.

There are no unrecognized tax benefits in 2019 and 2018.

The following table sets forth the change in the Company's unrecognized tax benefits (UTBs) for year ended December 31, 2021 and 2020.

There are no unrecognized tax benefits in 2019.

Unrecognized tax benefits - January 1 $ — $ —

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A portion of this credit which was claimed on the 2019 U.S.

federal income tax return of approximately $ 2.2 million was utilized in the carryback claim under the CARES Act and the remaining is expected to be utilized in 2020.

In the fourth quarter of 2020, based on new information and technical guidance, the Company reassessed its position which resulted in the reversal of the unrecognized tax benefit as reflected in the above table.

federal income tax return of approximately $ 2.2 million was utilized in the carryback claim under the CARES Act and the remaining was utilized in 2020.

In the fourth quarter of 2020, based on a thorough evaluation of new information and applicable technical guidance, the Company reassessed its position which resulted in the reversal of the unrecognized tax benefit as reflected in the above table.

As such, the full amount of the energy credit is reflected in the effective income tax rate reconciliation table above for the year ended December 31, 2020.

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Total $ 136,707 $ 1,341

As of December 31, 2020, we have an additional operating lease that has not yet commenced for $ 17.1 million.

This lease will commence during 2021 with a lease term of 3 years.

As of December 31, 2021, we have additional operating leases that have not yet commenced for $ 3.4 million.

These leases will commence during 2022 with lease terms of up to 7 years.

Long-term Debt and Credit Agreement

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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).

If the Company did not comply with the covenants in the First Amended and Restated Credit Agreement, the lenders could have, subject to customary cure rights, required the immediate payment of all amounts outstanding under the Revolving Credit Facility.

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

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

The Second Amendment amends the consolidated leverage ratio financial covenant of the First Amended and Restated 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.

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 compliant with all financial related covenants at December 31, 2020.

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 is expected to be 0.35 % per annum.

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 had a five-year term with a scheduled maturity date of February 21, 2023.

The Second Amended and Restated Credit Agreement required 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 required 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 did not comply with the covenants in the Second Amended and Restated Credit Agreement, the lenders could, subject to customary cure rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility.

Borrowings under the Second 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 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 was 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.

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 Company had approximately $ 1.0 million of letter of credit agreements outstanding under the Revolving Credit Facility at December 31, 2020.

There was no amount associated with bilateral letters of credit outside of the Revolving Credit Facility.

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

The Second 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, 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 placed limits on how we conduct our business, and in the event of certain defaults, our repayment obligations could be accelerated.

On October 27, 2021, the Company completed a refinancing of its existing senior secured revolving credit facility under the Second Amended and Restated Credit Agreement by entering into a new Credit Agreement (the “Credit Agreement”), among the Company, the lenders party thereto, the swing line lenders party thereto, the letter of credit issuers party thereto and Truist Bank, as administrative agent, which provides for a new senior secured revolving credit facility in an aggregate principal amount of $ 500 million (the “Revolving Credit Facility”).

The Revolving Credit Facility has a scheduled maturity date of October 27, 2026.

The 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 establish a new class of 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 First Lien Secured Leverage Ratio (as defined in the Credit Agreement) would not be greater than 2.75 to 1.00, in each case, to the extent that any one or more lenders, whether or not currently party to the Credit Agreement, commits to be a lender for such amount or any portion thereof.

Borrowings under the Credit Agreement bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.25 % to 1.25 % or the sum of a Eurodollar rate plus a margin ranging from 1.25 % to 2.25 %, with either such margin varying according to the Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement).

The Company is also required to pay a commitment fee in respect of unused commitments under the Revolving Credit Facility, if any, at a rate ranging from 0.15 % to 0.35 % per annum depending on the Company’s Consolidated Leverage Ratio.

As of October 27, 2021, the applicable margin under the Credit Agreement was 0.375 % for base rate loans and 1.375 % for Eurodollar loans and the applicable commitment fee rate was 0.175 % per annum.

Substantially all tangible and intangible assets of the Company and its domestic subsidiaries are pledged as collateral to secure the obligations under the Credit Agreement.

As of October 27, 2021, the Company borrowed $ 150 million under the Revolving Credit Facility.

Borrowings under the Revolving Credit Facility will be subject to customary borrowing conditions.

The 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.

The Credit Agreement also contains financial covenants that require the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 3.00 to 1.00 and to maintain a Consolidated Leverage Ratio of (i) 4.00 to 1.00 or less for the fiscal quarter ending December 31, 2021, through and including the fiscal quarter ending September 30, 2023 and (ii) 3.75 to 1.00 or less for each fiscal quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in connection with certain acquisitions).

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

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

Postretirement Benefit Obligations

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Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

During the fourth quarter of 2018, the Company acquired a royalty stream which has been treated as an asset acquisition.

The purchase price of the royalty stream for $ 1 million approximated fair value at December 31, 2018 and is considered a Level 3 asset.

The fair value measurement is based on the expected future cash flows and, as there is no reason to believe that the asset is impaired, it is assumed that the valuation remains unchanged at December 31, 2020.

In November 2018 and July 2019, the Company entered into two interest rate swap transactions related to its credit agreement.

In July 2019, the Company entered into an interest rate swap transaction related to its credit agreement.

The fair value of the interest rate swaps at December 31, 2021, 2020 and 2019 was a loss of approximately $ 0.7 million, $ 3.1 million and $ 1.7 million, respectively, and is considered a Level 2 liability.

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At December 31, 2020 and 2019, we had no contracts with notional amounts related to forward commodity agreements.

Interest Rate Risk Management – The Company has entered into two interest rate swap agreements for a total notional amount of $ 100 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings.

These interest rate swaps had a fair value of zero at inception and were effective November 30, 2018 and July 31, 2019 with respective maturity dates of November 30, 2021 and February 21, 2023.

In accordance with FASB Accounting Standards Codification ("ASC") 815, the Company designated the interest rate swaps as cash flow hedges of floating-rate borrowings.

These interest rate swaps convert the Company’s interest rate payments on the first $ 100 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate.

These interest rate swaps involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the interest rate swap without an exchange of the underlying principal amount.

At December 31, 2021 and 2020, we had zero contracts with notional amounts related to forward commodity agreements.

Interest Rate Risk Management – As of December 31, 2021, the company had one interest rate swap agreement outstanding for a total notional amount of $ 50 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings.

The interest rate swap had a fair value of zero at inception and was effective July 31, 2019 with a maturity date of February 21, 2023.

The interest rate swap has been designated as a cash flow hedge and converts the Company's interest rate payments on the first $ 50 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate.

As a result of this interest rate swap, interest payments on approximately 37 % of our borrowings, as of December 31, 2021, have been swapped from floating rate to fixed rate for the life of the swap, without an exchange of the underlying principal amount.

Liability Derivatives

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December 31, 2021

Loss on derivative instruments included in Accumulated other comprehensive income at December 31, 2019 $ ( 1,718 )

Loss on derivative instruments included in Accumulated other comprehensive loss at December 31, 2020 $ ( 3,063 )

Fair value adjustment 2,355

Loss on derivative instruments included in Accumulated other comprehensive income at December 31, 2020 $ ( 3,063 )

Loss on derivative instruments included in Accumulated other comprehensive loss at December 31, 2021 $ ( 708 )

At December 31, 2021, the Company expects to reclassify approximately $ 0.6 million of net losses on derivative instruments from Accumulated other comprehensive income ("AOCI") to earnings during the next 12 months due to the payment of variable interest associated with the floating rate debt with the remainder recognized in future periods through the expiration date.

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comprehensive income (loss)

— — 2,240 2,240

Income tax expense (benefit)

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The par value of the shares repurchased is applied to Treasury stock and the excess of the purchase price over par value is applied to Additional paid in capital.

During 2020, the Company had repurchased 84,791 shares of common stock to cover the tax withholding obligations in connection with the vesting awards, for an aggregate of $ 1.1 million at a weighted average market price of $ 12.44 per share.

During 2021, the Company had repurchased 21,564 shares of common stock to cover the tax withholding obligations in connection with the vesting awards, for an aggregate of $ 651,875 at a weighted average market price of $ 30.23 per share.

The purchase of shares reduces the weighted average number of shares outstanding in the basic and diluted earnings per share calculations.

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and its Affiliates, as Amended and Restated, which was approved by stockholders of the Company at the Annual Meeting of Stockholders held on June 23, 2020 (the “Equity Plan”).

result, no further grants will be made under the Original Plan.

The Equity Plan provides for the grant of stock options, stock appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards and non-share-based awards.

As a result, no further grants will be made under the Original Plan.

The Equity Plan provides for the grant of stock options, stock

appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards and non-share-based awards.

The maximum aggregate number of shares of our common stock that may be issued under all stock-based awards granted under the Equity Plan is 2,937,209 , subject to adjustment in accordance with the terms of the Equity Plan.

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Under the terms of the Equity Plan, there were approximately 1,400,000 shares of AdvanSix common stock available for future grants of full-value awards at December 31, 2021.

Restricted Stock Units – The Company granted RSUs to key management employees and directors that generally vest over periods ranging from 1 to 3 years.

Upon vesting, the RSUs entitle the holder to receive one share of AdvanSix common stock for each RSU at time of vesting and are payable in AdvanSix common stock upon vesting.

Restricted Stock Units – The Company may grant RSUs to key management employees and directors that generally vest over periods ranging from 1 to 3 years.

In the event cash dividends are paid to shareholders of common stock, dividend equivalents accrue on all unvested RSUs.

Dividend equivalents are subject to the same termination and vesting terms as the underlying RSU.

Upon vesting, the RSUs and related dividend equivalents entitle the holder to receive one share of AdvanSix common stock for each RSU and dividend equivalent at time of vesting and are payable in AdvanSix common stock upon vesting.

The fair value of all stock-settled RSUs is based upon the market price of the underlying common stock as of the grant date.

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As of December 31, 2021, there was $ 1.0 million of unrecognized stock-based compensation expense related to stock options that is expected to be recognized over a weighted average period of approximately 0.9 years.

Performance Stock Units – The Company has issued PSUs to key senior management employees which, upon vesting, convert one-for-one to AdvanSix common stock.

The actual number of shares an employee receives for each PSU depends on the Company’s performance against cumulative Earnings Per Share and average annual Return on Investment goals over three -year performance and vesting periods.

Performance Stock Units – The Company may issue PSUs to key senior management employees which, upon vesting, convert one-for-one to AdvanSix common stock.

In the event cash dividends are paid to shareholders of common stock, dividend equivalents will accrue on all unvested PSUs.

Dividend equivalents are subject to the same termination, vesting and performance terms as the underlying PSU award.

The actual number of shares an employee receives for each PSU and related dividend equivalent depends on the Company’s performance against certain metrics, including cumulative Earnings Per Share and average annual Return on Investment goals over three -year performance and vesting periods.

Commencing with the 2021 awards, a market-based factor has the potential to increase or decrease the performance award by 10 %.

This metric is calculated based upon how the Company's Total Shareholder Return compares to that of its peer group over the vesting period.

Each grantee is granted a target level of PSUs and may earn between 0 % and 200 % of the target level depending on the Company’s performance against the financial goals.

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Granted 248 13.99

Vested ( 91 ) 26.66

Forfeited ( 40 ) 35.72

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Non-vested at December 31, 2021 404 $ 20.04

The fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date.

The fair value of the PSUs is principally based on the fair market value of the Company’s stock at the grant date.

The number of underlying shares to be issued will be based on actual performance achievement over the performance period.

The accrual of compensation costs is based on our estimate of the probable expected value of the award.

The fair value of each PSU grant is amortized monthly into compensation expense on a straight-line basis over a vesting period of 36 months.

The accrual of compensation costs is based on our estimate of the final expected value of the award and is adjusted as required for the performance-based condition.

Changes in expected probable value are recorded as compensation expense on a catch-up basis in the month in which the change is identified.

Any remaining balance is amortized monthly into compensation expense on a straight-line basis over the remaining vesting period.

The Company assumes that forfeitures will be minimal, and estimates forfeitures at time of issuance, which results in a reduction in compensation expense.

As the payout of PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs.

The Company currently does not pay dividends.

The Company initiated a dividend during the fourth quarter of 2021.

As of December 31, 2021, there was approximately $ 6.2 million of total unrecognized compensation cost related to non-vested PSUs granted under the Equity Plan which is expected to be recognized over a weighted-average period of 1.5 years.

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Future income tax benefit recognized $ 667 $ 327 $ 271

Unaudited Selected Quarterly Financial Data

The following tables show selected unaudited quarterly results of operations for 2020 and 2019.

The quarterly data has been prepared on the same basis as the audited annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair statement of our results of operations for these periods.

September 30,

December 31, Year Ended

Net Sales $ 302,713 $ 233,022 $ 281,910 $ 340,272 $ 1,157,917

Gross Profit 30,705 34,283 16,152 52,608 133,748

Net Income 8,576 11,429 ( 692 ) 26,764 46,077

Earnings per share – basic (1) 0.31 0.41 ( 0.02 ) 0.95 1.64

Earnings per share – diluted (1) 0.31 0.41 ( 0.02 ) 0.94 1.64

September 30,

December 31, Year Ended

Net Sales $ 314,895 $ 345,215 $ 310,633 $ 326,650 $ 1,297,393

Gross Profit 48,015 42,087 30,510 14,860 135,472

Net Income 20,174 15,346 7,921 ( 2,094 ) 41,347

Earnings per share – basic (1) 0.70 0.54 0.29 ( 0.08 ) 1.47

Earnings per share – diluted (1) 0.68 0.53 0.28 ( 0.08 ) 1.43

(1) Total for the full year may differ from the sum of the individual quarters due to the requirement to use weighted average shares each quarter which may fluctuate with share repurchases and share issuances.

Restructuring

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 Holding Group S.A.

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

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

Restructuring costs consist of long-lived asset impairments, facility exit costs, employee separations and inventory write-downs.

Facility exit costs include demolition, equipment relocation, contract terminations and project management costs.

These costs are included in Cost of goods sold in the Consolidated Statements of Operations.

The Company recorded a restructuring charge of $ 12.6 million in the second quarter of 2019 which was reduced to $ 11.0 million in the fourth quarter of 2019.

As of December 31, 2020, all related restructuring liabilities have been paid.

Restructuring costs for the year ended December 31, 2020 were as follows:

Years Ended December 31,

Write-off of equipment and facility $ — $ 7,164

Facility exit costs — 1,326

Employee separations — 1,491

Inventory write-downs — 1,039

Total restructuring charges

The following table summarizes the components of restructuring activities and the remaining balances of accrued restructuring charges as of December 31, 2020:

Employee Separation Benefits Facility Exit Costs Total

Accrual balance at December 31, 2018 $ — $ — —

Charges 1,491 1,326 2,817

Cash payments ( 1,364 ) ( 916 ) ( 2,280 )

Accrual balance at December 31, 2019 $ 127 $ 410 $ 537

Charges — — —

Cash payments ( 127 ) ( 410 ) ( 537 )

Accrual balance at December 31, 2020

We actively target potential acquisitions that build on our competitive advantage and core capabilities and create opportunities for broader expansion, value chain integration, portfolio diversification, increased exposure to attractive end markets and the potential for long-term value creation.

In January 2021, the Company acquired certain assets associated with ammonium sulfate packaging, warehousing and logistics services in Virginia from Commonwealth Industrial Services, Inc.

for approximately $ 9.5 million.

This acquisition enables the Company to expand its product offerings by directly supplying packaged ammonium sulfate to customers, primarily in North and South America.

It diversifies and optimizes our product offerings to include spray-grade adjuvant to support crop protection and products for industrial use.

The Company also expects the addition of packaging and warehousing capabilities to bolster logistics and operational efficiency across its Richmond, Virginia area plants.

The Company did not make any acquisitions during the three or twelve months ended December 31, 2020 or 2019.

In accordance with ASC 805, this transaction has been accounted for as a business combination.

The Company used its best estimates and assumptions to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that was available as of the acquisition date.

The transaction resulted in the Company acquiring tangible assets and a finite-lived intangible asset, comprised of customer relationships which reflects the value of the benefit derived from incremental revenue and related cash flows as a direct result of the customer relationships.

This intangible asset is being amortized on a straight-line basis over its estimated useful life of 15 years.

The residual amount of the purchase price in excess of the value of the tangible and definite-lived intangible assets was allocated to goodwill.

Pro forma financial information related to the acquisition has not been included as the impact on the Company's consolidated results of operations was below the reporting thresholds of the significance test.

The following table summarizes the allocation of the purchase price consideration as of the acquisition date:

Twelve months ended December 31, 2021

Accounts receivable $ 858

Inventories 712

Property, plant and equipment 1,875

Intangible assets 3,920

Accounts payable and accrued liabilities ( 429 )

Net tangible and intangible assets 6,936

Goodwill 2,587

Total purchase price $ 9,523

Cash paid to date $ 9,523

Due to seller —

Total purchase price $ 9,523

Goodwill deductible for tax purposes $ 2,587

Subsequent Events

In January 2021, the Company acquired certain assets associated with ammonium sulfate packaging, warehousing and logistics services in Virginia for approximately $ 9.5 million, net of assumed liabilities of approximately $ 0.4 million.

The acquisition builds on the Company's expertise in ammonium sulfate and sulfate nutrition and enables its ability to directly supply packaged ammonium sulfate to customers, while bolstering logistics and operational efficiency for the Virginia sites.

As announced on February 18, 2022, the Board declared a quarterly cash dividend of $ 0.125 per share on the Company's common stock, payable on March 15, 2022 to stockholders of record as of the close of business on March 1, 2022.

On February 18, 2022, the Company announced the signing of a definitive agreement to acquire U.S.

Amines, Ltd., a leading North American producer of alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals, for an estimated net purchase price of approximately $ 100 million.

The transaction is expected to close in the first quarter of 2022, subject to customary closing conditions.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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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-K

Item 8. Financial Statements and Supplementary Data