What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-06 compared with 2021-10-29 · 134 added, 248 removed, 309 unchanged (55% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Sales $ 479,073 $ 376,383

3 unchanged sentences

Interest expense, net 563 1,544

Other non-operating expense (income), net 331 ( 334 ) 349 216

Other non-operating (income) expense, net ( 603 ) 230

Total costs, expenses and other 396,816 338,981

Income (loss) before taxes 57,689 ( 1,672 ) 153,039 24,270

Income tax expense (benefit) 13,747 ( 980 ) 36,835 4,957

Net income (loss) $ 43,942 $ ( 692 ) $ 116,204 $ 19,313

Earnings (loss) per common share

Income before taxes 82,257 37,402

Income tax expense 19,184 9,271

Net income $ 63,073 $ 28,131

Earnings per common share

Basic $ 2.24 $ 1.00

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income (loss) $ 43,942 $ ( 692 ) $ 116,204 $ 19,313

Net income $ 63,073 $ 28,131

Foreign exchange translation adjustment 57 ( 70 )

6 unchanged sentences

(Dollars in thousands, except share and per share amounts)

September 30,

2022 December 31,

3 unchanged sentences

Inventories – net 163,396 149,570

Taxes receivable 337 12,289

Other current assets 6,220 6,097

3 unchanged sentences

Goodwill 57,863 17,592

Intangible assets 48,948 17,980

Other assets 22,497 22,402

3 unchanged sentences

Accrued liabilities 40,203 49,712

Income taxes payable 27,656 9,723

Operating lease liabilities – short-term 36,435 36,127

11 unchanged sentences

200,000,000 shares authorized;

31,738,648 shares issued and 28,124,446 outstanding at September 30, 2021;

31,900,305 shares issued and 28,103,293 outstanding at March 31, 2022;

31,755,430 shares issued and 28,139,954 outstanding at December 31, 2021

Preferred stock, par value $ 0.01 ;

50,000,000 shares authorized and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020

Treasury stock at par ( 3,614,202 shares at September 30, 2021;

50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2022 and December 31, 2021

Treasury stock at par ( 3,797,012 shares at March 31, 2022;

3,615,476 shares at December 31, 2021)

9 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

9 unchanged sentences

Inventories ( 1,889 ) 38,986

Taxes receivable 11,952 ( 11,760 )

Accounts payable ( 8,029 ) ( 13,781 )

Income taxes payable 17,933 —

Accrued liabilities ( 11,718 ) 912

10 unchanged sentences

Payments of line of credit ( 63,500 ) ( 83,000 )

Payment of line of credit facility fees — ( 425 )

Principal payments of finance leases ( 237 ) ( 199 )

Dividend payments ( 3,517 ) —

Purchase of treasury stock ( 7,012 ) ( 443 )

26 unchanged sentences

Stock-based compensation — — 3,374 — — — 3,374

Balance at March 31, 2021 31,660,339 317 186,652 303,374 ( 36 ) ( 15,719 ) 474,588

Net Income — — — 44,131 — — 44,131

Comprehensive income

Foreign exchange translation adjustments — — — — — 65 65

Cash-flow hedges — — — — — 402 402

Pension obligation adjustments — — — — — — —

Other comprehensive income (loss), net of tax — — — — — 467 467

Issuance of common stock 72,450 — 45 — — — 45

Purchase of treasury stock ( 4,919 shares)

— — ( 146 ) — — — ( 146 )

Stock-based compensation — — 3,744 — — — 3,744

Balance at June 30, 2021 31,732,789 317 190,295 347,505 ( 36 ) ( 15,252 ) 522,829

Net Income — — — 43,942 — — 43,942

Comprehensive income

Foreign exchange translation adjustments — — — — — ( 15 ) ( 15 )

Cash-flow hedges — — — — — 415 415

Pension obligation adjustments — — — — — — —

Other comprehensive income (loss), net of tax — — — — — 400 400

Issuance of common stock 5,859 — 156 — — — 156

Purchase of treasury stock ( 0 shares)

— — — — — — —

Stock-based compensation — — 2,499 — — — 2,499

Dividends — — 313 ( 3,830 ) — — ( 3,517 )

Balance at September 30, 2021 31,738,648 $ 317 $ 192,950 $ 387,932 $ ( 36 ) $ ( 14,852 ) $ 566,311

ADVANSIX INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in thousands)

Balance at March 31, 2022 31,900,305 $ 319 $ 193,321 $ 470,759 $ ( 38 ) $ ( 5,970 ) $ 658,391

Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Equity

12 unchanged sentences

Balance at March 31, 2021 31,660,339 $ 317 $ 186,652 $ 303,374 $ ( 36 ) $ ( 15,719 ) $ 474,588

Net Income — — — 11,429 — — 11,429

Comprehensive income

Foreign exchange translation adjustments — — — — — — —

Cash-flow hedges — — — — — ( 73 ) ( 73 )

Pension obligation adjustments — — — — — — —

Other comprehensive income (loss), net of tax — — — — — ( 73 ) ( 73 )

Issuance of common stock 44,517 — — — — — —

Purchase of treasury stock ( 10,361 shares)

— — ( 107 ) — — — ( 107 )

Stock-based compensation — — 1,702 — — — 1,702

Balance at June 30, 2020 31,622,910 316 182,753 249,171 ( 36 ) ( 11,417 ) 420,787

Net loss — — — ( 692 ) — — ( 692 )

Comprehensive income

Foreign exchange translation adjustments — — — — — ( 10 ) ( 10 )

Cash-flow hedges — — — — — 346 346

Pension obligation adjustments — — — — — — —

Other comprehensive income (loss), net of tax — — — — — 336 336

Issuance of common stock — — — — — — —

Purchase of treasury stock ( 0 shares)

— — — — — — —

Stock-based compensation — — 603 — — — 603

Balance at September 30, 2020 31,622,910 $ 316 $ 183,356 $ 248,479 $ ( 36 ) $ ( 11,081 ) $ 421,034

See accompanying notes to Condensed Consolidated Financial Statements.

5 unchanged sentences

AdvanSix Inc.

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

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

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

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

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

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, 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.

Since early 2020, the novel coronavirus (COVID-19) has continued to spread, with confirmed cases worldwide, and with certain jurisdictions experiencing resurgences, including as a result of variant strains.

The pandemic and related containment measures, such as travel bans and restrictions, shelter in place orders and business shutdowns, 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.

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.

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

Starting in the second half of 2020, and through the first quarter of 2022, 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.

5 unchanged sentences

GAAP for complete financial statements.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of September 30, 2021, and its results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of March 31, 2022, and its results of operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021.

The year-end Condensed Consolidated Balance Sheet data were derived from audited financial statements but does not include all disclosures required by U.S.

3 unchanged sentences

Certain prior period amounts have been reclassified for consistency with the current period presentation.

It is our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes.

Historically, the effects of this practice were generally not significant to reported results for any quarter and only

ADVANSIX INC.

1 unchanged sentence

(Dollars in thousands, except share and per share amounts and as otherwise noted)

Historically, the effects of this practice were generally not significant to reported results for any quarter and only existed within a reporting year.

existed within a reporting year.

In the event that differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, we will provide the appropriate disclosures.

Our actual closing dates for the three and nine months ended September 30, 2021 and 2020 wer e October 2, 2021 and September 26, 2020, respe ctively.

Liabilities to creditors to whom we have issued checks that remained outstanding at September 30, 2021 and December 31, 2020 aggregated to $ 2.3 million and $ 7.2 million, respectively, and were included in Cash and cash equivalents and Accounts payable in the Condensed Consolidated Balance Sheets.

Our actual closing dates for the three months ended March 31, 2022 and 2021 wer e April 2, 2022 and April 3, 2021, respe ctively.

Liabilities to creditors to whom we have issued checks that remained outstanding at March 31, 2022 and December 31, 2021 aggregated to $ 2.2 million and $ 4.5 million, respectively, and were included in Cash and cash equivalents and Accounts payable in the Condensed Consolidated Balance Sheets.

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

On February 22, 2019, the Company announced that the Board authorized a share repurchase program of up to an additional $ 75 million of the Company's common stock, which was in addition to the remaining capacity available under the May 2018 share repurchase program.

Repurchases may be made from time to time on the open market, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Repurchases may be made from time to time on the open market in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act.

The size and timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors.

1 unchanged sentence

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.

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

During the period October 1, 2021 through October 22, 2021, no additional shares were repurchased under the currently authorized repurchase program.

During the first quarter of 2022, the Company repurchased 181,536 shares of common stock, including 57,968 shares to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $ 7.0 million at a weighted average market price of $ 38.61 per share.

As of March 31, 2022, the Company had repurchased 3,797,012 shares of common stock, including 583,682 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $ 109.4 million at a weighted average market price of $ 28.81 per share.

As of March 31, 2022, $ 54.8 million remained available for share repurchases under the current authorization.

During the period April 1, 2022 through April 29, 2022, no additional shares were repurchased under the currently authorized repurchase program.

Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”).

ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The amendments of ASU No.

2020-04 are effective for companies as of March 12, 2020 through December 31, 2022.

An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued.

The amendments in this update apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and provide optional expedients and exceptions for applying U.S.

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

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.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

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.

The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption of the amendments in this update is permitted, including

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

adoption in any interim period.

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.

Recent Accounting Pronouncements – The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”).

Any ASUs not currently adopted were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

Revenue Recognition

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

For the three months ended September 30, 2021 and 2020, the Company's ten largest customers accounted for approximately 43 % and 48 % of total sales, respectively.

For the nine months ended September 30, 2021 and 2020, the Company's ten largest customers accounted for approximately 41 % and 43 % of total sales, respectively.

For the three months ended March 31, 2022 and 2021, the Company's ten largest customers accounted for approximately 37 % and 38 % of total sales, respectively.

We typically sell to customers under master service agreements, with primarily one-year terms, or by purchase orders.

2 unchanged sentences

(“Shaw”), a significant consumer of caprolactam and Nylon 6 resin, to whom we sell under a long-term agreement.

For the three months ended September 30, 2021 and 2020, our sales to Shaw were 13 % and 14 %, respectively, of our total sales.

For the nine months ended September 30, 2021 and 2020, our sales to Shaw were 12 % and 13 %, respectively, of our total sales.

The Company's revenue by product line, and related approximate percentage of total sales, for the three and nine months ended September 30, 2021 and 2020 were as follows:

For the three months ended March 31, 2022 and 2021, the Company's sales to Shaw were 9 % and 12 % of our total sales, respectively.

The Company's revenue by product line, and related approximate percentage of total sales, for the three months ended March 31, 2022 and 2021 were as follows:

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Nylon $ 118,609 25 % $ 83,789 22 %

3 unchanged sentences

$ 479,073 100 % $ 376,383 100 %

The Company's revenues by geographic area, and related approximate percentage of total sales, for the three and nine months ended September 30, 2021 and 2020 were as follows:

The Company's revenues by geographic area, and related approximate percentage of total sales, for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

United States $ 403,018 84 % $ 300,672 80 %

3 unchanged sentences

The Company defers revenues when cash payments are received in advance of our performance.

Customer advances relate primarily to sales from the ammonium sulfate business.

Below is a roll-forward of Deferred income and customer advances for the nine months ended September 30, 2021:

Below is a roll-forward of Deferred income and customer advances for the three months ended March 31, 2022:

Opening balance January 1, 2022 $ 2,749

1 unchanged sentence

Less amounts recognized in revenues ( 955 )

Ending balance September 30, 2021 $ 3,138

The Company expects to recognize as revenue the September 30, 2021 ending balance of Deferred income and customer advances within one year or less.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

Ending balance March 31, 2022 $ 2,434

The Company expects to recognize as revenue the March 31, 2022 ending balance of Deferred income and customer advances within one year or less.

Earnings Per Share

The computation of basic and diluted earnings per share ("EPS") is based on Net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares, respectively.

The details of the basic and diluted EPS calculations for the three and nine months ended September 30, 2021 and 2020 were as follows:

The details of the basic and diluted EPS calculations for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net income (loss) $ 43,942 $ ( 692 ) $ 116,204 $ 19,313

Net income $ 63,073 $ 28,131

Weighted average common shares outstanding 28,199,871 28,093,764

3 unchanged sentences

EPS – Diluted $ 2.15 $ 0.98

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

Diluted EPS is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the period.

The diluted EPS calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period.

The anti-dilutive common stock equivalents outstanding at the three and nine months ended September 30, 2021 and 2020 were as follows:

The anti-dilutive common stock equivalents outstanding at the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Options and stock equivalents 120,316 861,376

Dividend activity for the three and nine months ended September 30, 2021 and 2020 was as follows:

Dividend activity for the three months ended March 31, 2022 and 2021 was as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Cash dividends declared per share $ 0.125 $ —

1 unchanged sentence

Accounts and Other Receivables – Net

September 30,

2022 December 31,

4 unchanged sentences

Total accounts and other receivables – net $ 223,541 $ 179,087

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

September 30,

2022 December 31,

6 unchanged sentences

Total inventories $ 163,396 $ 149,570

Postretirement Benefit Cost

The components of Net periodic benefit cost of the Company’s pension plan are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Service cost $ 1,954 $ 2,005 $ 5,863 $ 6,016

Interest cost 518 544 1,553 1,631

Expected return on plan assets ( 731 ) ( 524 ) ( 2,193 ) ( 1,573 )

Amortization of actuarial net losses 86 — 259 —

Net periodic benefit cost $ 1,827 $ 2,025 $ 5,482 $ 6,074

The Company made cash contributions to the defined benefit pension plan of $ 17.5 million during the nine months ended September 30, 2021 with $ 1.2 million in the first quarter of 2021, $ 3.6 million in the second quarter of 2021 and $ 12.7 million in the third 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 $ 18 million to $ 23 million.

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

The pension plan assets are invested through a master trust fund.

The strategic asset allocation for the trust fund is selected by the Company's Investment Committee reflecting the results of comprehensive asset and liability modeling.

The Investment Committee establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk.

Substantially all of the Company’s inventories at March 31, 2022 and December 31, 2021 are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method.

However, approximately 9 % was valued at average cost using the first-in, first-out (“FIFO”) method at March 31, 2022.

The excess of replacement cost over the carrying value of total inventories subject to LIFO was $ 72.5 million and $ 29.4 million at March 31, 2022 and December 31, 2021, respectively.

We determine if an arrangement is a lease at inception.

1 unchanged sentence

Finance leases are included in Property, plant and equipment – net, Accounts payable, and Other liabilities in our Condensed Consolidated Balance Sheets.

The components of lease expense were as follows:

ADVANSIX INC.

1 unchanged sentence

(Dollars in thousands, except share and per share amounts and as otherwise noted)

The components of lease expense were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Finance lease cost:

5 unchanged sentences

Total lease cost $ 11,942 $ 13,675

As of September 30, 2021, we have additional operating leases that have not yet commenced for approximately $ 3.7 million.

These leases commence during 2021 with lease terms of up to 5 years.

As of March 31, 2022, we have additional finance leases that have not yet commenced for approximately $ 0.5 million.

These leases will commence during 2022 with lease terms of up to 5 years.

Goodwill and Intangible Assets

Intangible assets with finite lives acquired through a business combination are recorded at fair value, less accumulated amortization.

Customer relationships and trade-names are amortized on a straight-line basis over their expected useful lives of 15 to 20 years and 5 years, respectively.

The change in the carrying amount of goodwill was as follows:

Balance at December 31, 2021 $ 17,592

Acquisition of U.S.

Amines 40,271

Balance at March 31, 2022 $ 57,863

Finite-Lived Intangible Assets

Intangible assets subject to amortization were as follows:

March 31, 2022 December 31, 2021

Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value

Customer relationships $ 34,220 $ ( 423 ) $ 33,797 $ 3,920 $ ( 240 ) $ 3,680

Licenses 18,451 ( 4,382 ) 14,069 18,451 ( 4,151 ) 14,300

Trade names 1,100 ( 18 ) 1,082 — — —

Total $ 53,771 $ ( 4,823 ) $ 48,948 $ 22,371 $ ( 4,391 ) $ 17,980

For the three months ended March 31, 2022 and March 31, 2021, the Company recorded amortization expense on intangible assets of $ 0.4 million and $ 0.3 million, respectively.

Commitments and Contingencies

1 unchanged sentence

A liability is recognized for any contingency that is probable of occurrence and reasonably estimable.

The Company continually assesses the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses, based on an analysis of each matter with the assistance of legal counsel and, if applicable, other experts.

The Company continually assesses the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses, based

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

on an analysis of each matter with the assistance of legal counsel and, if applicable, other experts.

Given the uncertainty inherent in such lawsuits, investigations and disputes, the Company does not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters.

4 unchanged sentences

Although we have ongoing environmental remedial obligations at certain of our facilities, in the past three years, the associated remediation costs have not been material, and we do not expect our known remediation costs to have a material adverse effect on the Company's consolidated financial position or results of operations.

The provision for income taxes was $ 13.7 million and $( 1.0 ) million for the three months ended September 30, 2021 and 2020, respectively, resulting in an effective tax rate of 23.8 % and 58.6 %, respectively.

The provision for income taxes was $ 36.8 million and $ 5.0 million for the nine months ended September 30, 2021 and 2020, respectively, resulting in an effective tax rate of 24.1 % and 20.4 %, respectively.

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.

The provision for income taxes was $ 19.2 million and $ 9.3 million for the three months ended March 31, 2022 and 2021, respectively, resulting in an effective tax rate of 23.3 % and 24.8 %, respectively.

The Company’s provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against Income (Loss) before taxes for the period in addition to recording any tax effects of discrete items for the quarter.

The Company’s estimated annual effective tax rate applied against the three and nine months ended September 30, 2021 and 2020 differed from the U.S.

federal statutory rate, due primarily to state taxes and executive compensation deduction limitations

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

which generally increase the tax rate, partially offset by tax credits which generally decrease the tax rate.

Additionally, the deduction for foreign-derived intangible income further decreased the tax rate for the three and nine months ended September 30, 2021.

The Company’s effective tax rate for the nine months ended September 30, 2020 was also further decreased by discrete tax adjustments related to 2019 return-to-provision tax credits and the impact of changes in the Company’s geographical sales mix on state tax.

The Company's effective tax rate of 58.6 % recorded in the third quarter of 2020 was mainly driven by research tax credits and the 2019 state return-to-provision adjustments which increased the effective tax rate by approximately 30 % mainly due to the nominal Loss before taxes recorded in that quarter which resulted in these adjustments having a larger than normal impact on the effective tax rate.

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 three and nine months ended September 30, 2021, and we do not anticipate that it will have a material impact on our financial statements throughout the remainder of 2021.

The Company’s estimated annual effective tax rate applied against the three months ended March 31, 2022 and 2021 differed from the U.S.

federal statutory rate, due primarily to state taxes and executive compensation deduction limitations which generally increase the tax rate, partially offset by tax credits and the foreign-derived intangible income deduction which generally decrease the tax rate.

In February 2022, the Company acquired the stock of U.S.

Under purchase accounting rules, a net deferred tax liability of approximately $ 12.2 million was recorded in the quarter related to the adjustment of the acquired assets and liabilities to fair value.

See Note 13 "Acquisitions" for further details.

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

7 unchanged sentences

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.

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

The fair value of the interest rate swaps at September 30, 2021 was a loss of approximately $ 1.3 million and is considered a Level 2 liability.

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

The fair value of the interest rate swap at March 31, 2022 was a loss of approximately $ 0.04 million and is considered a Level 2 liability.

The pension plan assets are invested in collective investment trust funds.

2 unchanged sentences

The Company’s Condensed Consolidated Balance Sheets also include Cash and cash equivalents, Accounts receivable and Accounts payable all of which are recorded at amounts which approximate fair value.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

The Company also has assets that are required to be recorded at fair value on a non-recurring basis.

4 unchanged sentences

The specific credit and market, commodity price and interest rate risks to which the Company is exposed in connection with its ongoing business operations are described below.

This discussion includes an explanation of the hedging instrument, interest rate swap agreements, used to manage the Company’s interest rate risk associated with a fixed and floating-rate borrowing.

This discussion includes an explanation of the hedging instrument and interest rate swap agreement, used to manage the Company’s interest rate risk associated with a fixed and floating-rate borrowing.

For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in Other comprehensive income.

3 unchanged sentences

The Company’s counterparties in derivative transactions are substantial investment and commercial banks with significant experience using such derivative instruments.

The Company monitors the impact of market risk on the fair value and cash flows of its derivative and other financial instruments considering

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

reasonably possible changes in commodity prices, interest rates and foreign currency exchange rates and restricts the use of derivative financial instruments to hedging activities.

The Company monitors the impact of market risk on the fair value and cash flows of its derivative and other financial instruments considering reasonably possible changes in commodity prices, interest rates and foreign currency exchange rates and restricts the use of derivative financial instruments to hedging activities.

The Company continually monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business.

The terms and conditions of credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer.

The Company did not have any customers with significant concentrations of trade accounts receivable – net at September 30, 2021 or December 31, 2020.

The Company did not have any customers with significant concentrations of trade accounts receivable – net at March 31, 2022 or December 31, 2021.

Allowance for doubtful accounts is calculated based upon the Company's estimate of expected credit losses over the life of exposure based upon both historical information as well as future expected losses.

4 unchanged sentences

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.

At September 30, 2021 and 2020, we had no financial contracts 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 ASC 815, the Company designated the interest rate swaps as cash flow hedges of floating-rate borrowings.

The 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 March 31, 2022 and 2021, we had no financial contracts related to forward commodity agreements.

Interest Rate Risk Management – The Company has entered into one interest rate swap agreement 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.

In accordance with ASC 815, the Company designated the interest rate swap as a cash flow hedge of floating-rate borrowings.

The interest rate swap 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.

The interest rate swap involves 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.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

Liability Derivatives

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value

3 unchanged sentences

The following table summarizes adjustments related to cash flow hedge included in Cash-flow hedges, in the Condensed Consolidated Statements of Comprehensive Income:

September 30,

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

Fair value adjustment 664

Loss on derivative instruments included in Accumulated other comprehensive loss at September 30, 2021 $ ( 1,332 )

At September 30, 2021, the Company expects to reclassify approximately $ 1.0 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.

Loss on derivative instruments included in Accumulated other comprehensive loss at March 31, 2022 $ ( 44 )

At March 31, 2022, the Company expects to reclassify approximately $ 0.04 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.

The following table summarizes the reclassification of net losses on derivative instruments from AOCI into earnings:

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

Amount of Loss Recognized in Earnings

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Interest Rate Contracts $ 12 $ 557

Total Derivatives $ 12 $ 557

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 February 2022, the Company acquired U.S.

Amines"), a leading North American producer of alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals for an estimated purchase price of approximately $ 98 million, net of cash acquired.

Amines employs approximately 50 people in the United States at manufacturing facilities in Bucks, AL and Portsmouth, VA.

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

The Company used its best estimates and assumptions for items including, but not limited to, corporate name recognition, strong, long-lasting customer relationships and potential revenue growth from existing customers 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 finite-lived intangible assets, comprised of customer relationships (approximately $ 30 million) and trademarks (approximately $ 1 million) which reflect the value of the benefit derived from incremental revenue and related cash flows as a direct result of the customer relationships and name brand.

These intangible assets are being amortized on a straight-line basis over their estimated useful lives of 20 years and 5 years, respectively.

The residual amount of the purchase price in excess of the value of the tangible and definite-lived intangible assets

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

was allocated to goodwill.

Factors considered when identifying goodwill included, but are not limited to, a complementary business model and formula pricing mechanisms with a business that is adjacent to our ammonium sulfate adjuvant and solvent businesses, the enhancement of the Company’s value chain through internal supply of products and raw materials, a new unique platform in the agrochemicals space as well as a number of opportunities to support further penetration into high-value applications.

Amines acquisition was not significant to our Condensed Consolidated Financial Statements, therefore, pro forma and post-acquisition results of operations have not been presented.

The preliminary measurements of fair value set forth herein are subject to change and such changes could be material.

The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date.

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.

("CIS") 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.

1 unchanged sentence

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 nine months ended September 30, 2020.

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.

1 unchanged sentence

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.

Although the Company believes the measurements of fair value set forth herein to be substantially complete, they are subject to change within one year from the acquisition date.

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

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

Nine months ended September 30, 2021

The following table summarizes the allocation of the purchase price consideration as of the acquisition date for the transactions noted above:

Amines (February 2022 - Preliminary) CIS

(January 2021)

Cash $ 22,887 $ —

Accounts receivable 15,117 858

Inventories 11,937 712

Other current assets 1,876 —

Property, plant and equipment 13,600 1,875

Intangible assets 31,400 3,920

Accounts payable and accrued liabilities ( 429 )

Accounts payable ( 1,487 ) ( 429 )

Accrued liabilities ( 2,760 ) —

Deferred income taxes ( 12,243 ) —

Net tangible and intangible assets 80,327 6,936

1 unchanged sentence

Total purchase price $ 120,598 $ 9,523

Cash paid to date $ 9,523

Due to seller —

Total purchase price $ 120,598 $ 9,523

Cash acquired ( 22,887 ) —

Total purchase price, net of cash received 97,711 9,523

Estimated working capital adjustment due from seller 878 —

Net cash paid $ 98,589 $ 9,523

Goodwill deductible for tax purposes $ — $ 2,587

Subsequent Events

Credit Agreement

On October 27, 2021, the Company completed a refinancing of its existing senior secured revolving credit facility under that certain Credit Agreement, dated as of September 30, 2016, among the Company, the guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent (as amended by Amendment No.

1 on February 21, 2018 and Amendment No.

2 on February 19, 2020), 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 0.250 % to 1.25 % or the sum of a LIBOR 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 is 0.375 % for base rate loans and 1.375 % for LIBOR loans and the applicable commitment fee rate is 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 has borrowed $ 150 million under the Revolving Credit Facility.

The Company expects to use the Revolving Credit Facility to meet any ongoing cash needs in excess of internally generated or available cash flows and to issue letters of credit in the ordinary course of its business.

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

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share and per share amounts and as otherwise noted)

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.

As announced on May 6, 2022, the Board declared a quarterly cash dividend of $ 0.125 per share on the Company's common stock, payable on May 31, 2022 to stockholders of record as of the close of business on May 17, 2022.

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 1. Financial Statements