What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-04 compared with 2022-08-05 · 111 added, 69 removed, 418 unchanged (30% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

20 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

8 unchanged sentences

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

September 30,

2022 December 31,

3 unchanged sentences

Inventories – net 158,432 149,570

Taxes receivable 14,930 947

Other current assets 14,399 6,097

23 unchanged sentences

200,000,000 shares authorized;

31,961,956 shares issued and 28,077,693 outstanding at June 30, 2022;

31,962,466 shares issued and 27,715,594 outstanding at September 30, 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 June 30, 2022 and December 31, 2021

Treasury stock at par ( 3,884,263 shares at June 30, 2022;

50,000,000 shares authorized and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021

Treasury stock at par ( 4,246,872 shares at September 30, 2022;

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

5 unchanged sentences

Total liabilities and stockholders' equity $ 1,455,533 $ 1,311,999

ADVANSIX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

See accompanying notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

9 unchanged sentences

Inventories 27 37,885

Taxes receivable ( 13,983 ) 11,952

Accounts payable 43,468 27,047

56 unchanged sentences

Balance at June 30, 2022 31,961,956 320 192,392 532,246 ( 39 ) ( 5,710 ) 719,209

Net Income — — — 10,032 — — 10,032

Comprehensive income

Foreign exchange translation adjustments — — — — — ( 32 ) ( 32 )

Cash-flow hedges — — — — — 57 57

Pension obligation adjustments — — — — — — —

Other comprehensive income (loss), net of tax — — — — — 25 25

Issuance of common stock 510 — 14 — — — 14

Purchase of treasury stock ( 362,609 shares)

— — ( 13,169 ) — ( 3 ) — ( 13,172 )

Stock-based compensation — — 2,220 — — — 2,220

Dividends — — 171 ( 4,222 ) — — ( 4,051 )

Balance at September 30, 2022 31,962,466 $ 320 $ 181,628 $ 538,056 $ ( 42 ) $ ( 5,685 ) $ 714,277

ADVANSIX INC.

26 unchanged sentences

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 — — — ( 3,515 ) — — ( 3,515 )

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

See accompanying notes to Condensed Consolidated Financial Statements.

22 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 June 30, 2022, and its results of operations for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021.

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, 2022, and its results of operations for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 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.

4 unchanged sentences

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 have generally not been significant to reported results for any quarter and only existed within a reporting year.

In the event that differences in actual closing dates are material to year-over-year

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

ADVANSIX INC.

1 unchanged sentence

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

comparisons of quarterly or year-to-date results, we will provide the appropriate disclosures.

Our actual closing dates for the three and six months ended June 30, 2022 and 2021 wer e July 2, 2022 and July 3, 2021, respe ctively.

Liabilities to creditors to whom we have issued checks that remained outstanding at June 30, 2022 and December 31, 2021 aggregated to $ 2.5 million and $ 4.5 million, respectively, and were included in Cash and cash equivalents and Accounts payable in the Condensed Consolidated Balance Sheets.

only 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, 2022 and 2021 were October 1, 2022 and October 2, 2021, respectively.

Liabilities to creditors to whom we have issued checks that remained outstanding at September 30, 2022 and December 31, 2021 aggregated to $ 2.5 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.

4 unchanged sentences

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 June 30, 2022, the Company has repurchased a total of 3,884,263 shares of common stock, including 592,972 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $ 112.8 million at a weighted average market price of $ 29.04 per share.

As of June 30, 2022, $ 51.8 million remained available for share repurchases under the current authorization.

During the period July 1, 2022 through July 29, 2022, the Company repurchased an additional 70,554 shares at a weighted average market price of $ 35.30 per share under the current authorized repurchase program.

As of September 30, 2022, the Company has repurchased a total of 4,246,872 shares of common stock, including 592,976 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $ 125.9 million at a weighted average market price of $ 29.66 per share.

As of September 30, 2022, $ 38.6 million remained available for share repurchases under the current authorization.

During the period October 1, 2022 through October 28, 2022, the Company repurchased an additional 148,700 shares at a weighted average market price of $ 33.36 per share under the current authorized repurchase program.

Recent Accounting Pronouncements

3 unchanged sentences

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

For the three months ended June 30, 2022 and 2021, the Company's ten largest customers accounted for approximately 40 % and 42 % of total sales, respectively.

For the six months ended June 30, 2022 and 2021, the Company's ten largest customers accounted for approximately 38 % and 40 % of total sales, respectively.

For the three months ended September 30, 2022 and 2021, the Company's ten largest customers accounted for approximately 43 % and 43 % of total sales, respectively.

For the nine months ended September 30, 2022 and 2021, the Company's ten largest customers accounted for approximately 39 % and 41 % 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 and six months ended June 30, 2022 and 2021, the Company's sales to Shaw were 10 % and 12 % of our total sales, respectively.

The Company's revenue by product line, and related approximate percentage of total sales, for the three and six months ended June 30, 2022 and 2021 were as follows:

For the three and nine months ended September 30, 2022, the Company's sales to Shaw were 16 % and 12 % of our total sales, respectively compared to 13 % and 12 % for the same periods in 2021.

The Company's revenue by product line, and related approximate percentage of total sales, for the three and nine months ended September 30, 2022 and 2021 were as follows:

ADVANSIX INC.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

$ 478,769 100 % $ 446,495 100 % $ 1,541,578 100 % $ 1,260,561 100 %

The Company's revenues by geographic area, and related approximate percentage of total sales, for the three and six months ended June 30, 2022 and 2021 were as follows:

The Company's revenues by geographic area, and related approximate percentage of total sales, for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

4 unchanged sentences

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

Below is a roll-forward of Deferred income and customer advances for the six months ended June 30, 2022:

Below is a roll-forward of Deferred income and customer advances for the nine months ended September 30, 2022:

Opening balance January 1, 2022 $ 2,749

1 unchanged sentence

Less amounts recognized in revenues ( 2,694 )

Ending balance June 30, 2022 $ 1,607

The Company expects to recognize as revenue the June 30, 2022 ending balance of Deferred income and customer advances within one year or less.

Ending balance September 30, 2022 $ 2,561

The Company expects to recognize as revenue the September 30, 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 six months ended June 30, 2022 and 2021 were as follows:

The details of the basic and diluted EPS calculations for the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

10 unchanged sentences

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 six months ended June 30, 2022 and 2021 were as follows:

The anti-dilutive common stock equivalents outstanding at the three and nine months ended September 30, 2022 and 2021 were as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Options and stock equivalents 227,144 318,706 156,418 535,299

Dividend activity for the three and six months ended June 30, 2022 and 2021 was as follows:

Dividend activity for the three and nine months ended September 30, 2022 and 2021 was as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

2 unchanged sentences

Accounts and Other Receivables – Net

September 30,

2022 December 31,

4 unchanged sentences

Total accounts and other receivables – net $ 185,901 $ 178,140

September 30,

2022 December 31,

6 unchanged sentences

Total inventories $ 158,432 $ 149,570

Substantially all of the Company’s inventories at June 30, 2022 and December 31, 2021 are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method.

However, approximately 6 % was valued at average cost using the first-in, first-out (“FIFO”) method at June 30, 2022.

The excess of replacement cost over the carrying value of total inventories subject to LIFO was $ 84.1 million and $ 29.4 million at June 30, 2022 and December 31, 2021, respectively.

Substantially all of the Company’s inventories at September 30, 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 September 30, 2022.

The excess of replacement cost over the carrying value of total inventories subject to LIFO was $ 69.9 million and $ 29.4 million at September 30, 2022 and December 31, 2021, respectively.

We determine if an arrangement is a lease at inception.

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

Total lease cost $ 13,496 $ 13,008 $ 37,152 $ 40,072

As of June 30, 2022, we have additional operating and finance leases that have not yet commenced for approximately $ 5.2 million and approximately $ 0.5 million, respectively.

As of September 30, 2022, we have additional operating and finance leases that have not yet commenced for approximately $ 5.5 million and approximately $ 0.5 million, respectively.

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

6 unchanged sentences

Amines 38,600

Balance at June 30, 2022 $ 58,192

Balance at September 30, 2022 $ 56,192

Finite-Lived Intangible Assets

Intangible assets subject to amortization were as follows:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

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

3 unchanged sentences

Total $ 56,371 $ ( 6,367 ) $ 50,004 $ 22,371 $ ( 4,391 ) $ 17,980

For the three months ended June 30, 2022 and June 30, 2021, the Company recorded amortization expense on intangible assets of $ 0.8 million and $ 0.3 million, respectively.

For the six months ended June 30, 2022 and 2021, the Company recorded amortization expense on intangible assets of $ 1.2 million and $ 0.6 million, respectively.

For the three months ended September 30, 2022 and September 30, 2021, the Company recorded amortization expense on intangible assets of $ 0.8 million and $ 0.9 million, respectively.

For the nine months ended September 30, 2022 and 2021, the Company recorded amortization expense on intangible assets of $ 2.0 million and $ 1.4 million, respectively.

Commitments and Contingencies

12 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 $ 20.0 million and $ 13.8 million for the three months ended June 30, 2022 and 2021, respectively, resulting in an effective tax rate of 23.5 % and 23.8 %, respectively.

The provision for income taxes was $ 2.7 million and $ 13.7 million for the three months ended September 30, 2022 and 2021, respectively, resulting in an effective tax rate of 21.4 % and 23.8 %, respectively.

The provision for income taxes was $41.9 million and $36.8 million for the nine months ended September 30, 2022 and 2021, respectively, resulting in an effective tax rate of 23.2 % and 24.1 %, 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 six months ended June 30, 2022 and 2021 differed from the U.S.

The Company’s estimated annual effective tax rate applied against the three and nine months ended September 30, 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.

1 unchanged sentence

Amines Limited.

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

There was a $ 0.1 million reduction in the net deferred tax liability recorded in the second quarter.

Under purchase accounting rules, during the first and second quarter of 2022, a net deferred tax liability of approximately $ 12.1 million was recorded related to the adjustment of the acquired assets and liabilities to fair value.

In the third quarter, the Company recorded a measurement period adjustment which resulted in a $ 2.0 million reduction to the net deferred tax liability with a corresponding reduction to Goodwill acquired.

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.

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

The current U.S.

administration has released various draft tax reform proposals that, if enacted, would generally increase U.S.

federal income taxes on corporations.

These proposals, if implemented, could have an unfavorable effect on our business, results of operations and financial condition.

As such, we continue to monitor these legislative proposals to evaluate the impact on our business.

On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into law.

This legislation includes significant changes relating to tax, climate change, energy and health care.

Among other provisions, the IRA introduces a book minimum tax assessed on financial statement income of certain large corporations and an excise tax on share repurchases.

The Company does not anticipate these provisions will have a material impact on our results of operations or financial condition, when effective.

The IRA also includes significant extensions, expansions and enhancements related to climate and energy tax credits designed to encourage investment in the adoption and expansion of renewable and alternative energy sources.

The Company is evaluating these provisions of the law.

Fair Value Measurements

1 unchanged sentence

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 June 30, 2022 was a gain of approximately $ 0.4 million and is considered a Level 2 liability.

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

These investments are measured at fair value using the net asset value per share as a practical expedient.

Investments valued using the net asset value method (NAV) (or its equivalent) practical expedient are excluded from the fair value hierarchy disclosure.

The fair value of the interest rate swap at September 30, 2022 was a gain of approximately $ 0.4 million and is considered a Level 2 liability.

ADVANSIX INC.

1 unchanged sentence

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

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

These investments are measured at fair value using the net asset value per share as a practical expedient.

Investments valued using the net asset value method (NAV) (or its equivalent) practical expedient are excluded from the fair value hierarchy disclosure.

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.

14 unchanged sentences

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 June 30, 2022 or December 31, 2021.

The Company did not have any customers with significant concentrations of trade accounts receivable – net at September 30, 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 June 30, 2022 and 2021, we had no financial contracts related to forward commodity agreements.

At September 30, 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.

7 unchanged sentences

Asset (Liability) Derivatives

June 30, 2022 December 31, 2021

September 30, 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 1,134

Gain on derivative instruments included in Accumulated other comprehensive loss at June 30, 2022 $ 350

At June 30, 2022, the Company expects to reclassify approximately $ 0.3 million of net gains 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.

Gain on derivative instruments included in Accumulated other comprehensive loss at September 30, 2022 $ 426

At September 30, 2022, the Company expects to reclassify approximately $ 0.4 million of net gains 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 (gains) losses on derivative instruments from AOCI into earnings:

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

8 unchanged sentences

The transaction resulted in the Company acquiring tangible assets and finite-lived intangible assets, comprised of customer relationships (approximately $ 33 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

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

ADVANSIX INC.

1 unchanged sentence

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

was allocated to goodwill.

respectively.

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

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 for the transaction noted above:

Initially Reported as of March 31, 2022 (Preliminary) Measurement Period Adjustment June 30, 2022 (Preliminary)

Initially Reported as of March 31, 2022 (Preliminary) Measurement Period Adjustment September 30, 2022 (Preliminary)

Cash $ 22,887 $ — $ 22,887

17 unchanged sentences

The preliminary amounts presented in the table above pertained to the preliminary purchase price allocation reported in the Company's Form 10-Q for the first quarter ended March 31, 2022.

The measurement period adjustment was primarily associated with the inventory valuation.

The measurement period adjustment was primarily associated with the inventory valuation and a change to the deferred income tax liability.

The Company does not believe that the measurement period adjustment had a material impact on its consolidated statements of operations, balance sheets or cash flows in the prior period previously reported.

2 unchanged sentences

Subsequent Events

As announced on August 5, 2022, the Board declared a quarterly cash dividend of $ 0.145 per share on the Company's common stock, an increase of 16 % over the prior dividend, payable on August 30, 2022 to stockholders of record as of the close of business on August 16, 2022.

As announced on November 4, 2022, the Board declared a quarterly cash dividend of $ 0.145 per share on the Company's common stock, payable on November 29, 2022 to stockholders of record as of the close of business on November 15, 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