What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-11-04 · 106 added, 214 removed, 315 unchanged (50% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Sales $ 400,544 $ 479,073

19 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income $ 34,954 $ 63,073

7 unchanged sentences

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

September 30,

2023 December 31,

15 unchanged sentences

Accrued liabilities 40,611 48,820

Income taxes payable 24 9,723

Operating lease liabilities – short-term 36,171 37,472

11 unchanged sentences

200,000,000 shares authorized;

31,962,466 shares issued and 27,715,594 outstanding at September 30, 2022;

32,532,842 shares issued and 27,668,715 outstanding at March 31, 2023;

31,977,593 shares issued and 27,446,520 outstanding at December 31, 2022

Preferred stock, par value $ 0.01 ;

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;

50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022

Treasury stock at par ( 4,864,127 shares at March 31, 2023;

4,531,073 shares at December 31, 2022)

5 unchanged sentences

Total liabilities and stockholders' equity $ 1,448,815 $ 1,495,331

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)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

5 unchanged sentences

Stock-based compensation 2,013 3,374

Accretion of deferred financing fees 464 424

Amortization of deferred financing fees 155 155

Changes in assets and liabilities, net of business acquisitions:

3 unchanged sentences

Accounts payable ( 53,388 ) 9,904

Income taxes payable ( 9,699 ) —

Accrued liabilities ( 8,408 ) ( 11,718 )

4 unchanged sentences

Expenditures for property, plant and equipment ( 24,603 ) ( 21,019 )

Acquisition of business ( 97,456 ) ( 9,523 )

Acquisition of businesses — ( 98,589 )

Other investing activities ( 1,003 ) ( 296 )

7 unchanged sentences

Issuance of common stock 622 714

Net cash used for financing activities ( 34,340 ) ( 140,921 )

Net cash (used for) provided by financing activities ( 5,128 ) 74,948

Net change in cash and cash equivalents ( 29,159 ) 4,206

25 unchanged sentences

Balance at March 31, 2023 32,532,842 $ 325 $ 163,831 $ 598,339 $ ( 48 ) $ ( 4,380 ) $ 758,067

Net Income — — — 65,157 — — 65,157

Comprehensive income

Foreign exchange translation adjustments — — — — — ( 35 ) ( 35 )

Cash-flow hedges — — — — — 295 295

Pension obligation adjustments — — — — — — —

Other comprehensive income (loss), net of tax — — — — — 260 260

Issuance of common stock 61,651 1 317 — — — 318

Purchase of treasury stock ( 87,251 shares)

— — ( 3,406 ) — ( 1 ) — ( 3,407 )

Stock-based compensation — — 2,005 — — — 2,005

Dividends — — 155 ( 3,670 ) — — ( 3,515 )

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.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in thousands)

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

11 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

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

See accompanying notes to Condensed Consolidated Financial Statements.

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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, agrochemicals, plastics, solvents, packaging, paints, coatings, adhesives and electronics.

("AdvanSix," the "Company," "we" or "our") is a diversified chemistry company playing 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.

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

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

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, 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 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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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, 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.

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, 2023, and its results of operations for the three months ended March 31, 2023 and 2022 and cash flows for the three months ended March 31, 2023 and 2022.

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

The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year.

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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

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

Our actual closing dates for the three months ended March 31, 2023 and 2022 were April 1, 2023 and April 2, 2022, respectively.

Liabilities to creditors to whom we have issued checks that remained outstanding at March 31, 2023 and December 31, 2022 aggregated to $ 5.2 million and $ 9.0 million, respectively, and were included in Cash and cash equivalents and Accounts payable in the Condensed Consolidated Balance Sheets.

The Company's Board of Directors (the "Board") has authorized share repurchase programs to repurchase shares of the Company's common stock as follows:

Date of Authorization Authorized Amount

Authorized Amount Remaining as of March 31, 2023

May 4, 2018 $ 75.0 $ —

February 22, 2019 75.0 25.2

February 17, 2023 75.0 75.0

Totals $ 225.0 $ 100.2

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

ADVANSIX INC.

1 unchanged sentence

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

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.

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.

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.

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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.

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.

As of March 31, 2023, the Company has repurchased a total of 4,864,127 shares of common stock, including 841,354 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $ 149.6 million at a weighted average market price of $ 30.75 per share.

As of March 31, 2023, $ 100.2 million remained available for share repurchases under the current authorization.

During the period April 1, 2023 through April 28, 2023, the Company repurchased an additional 105,573 shares at a weighted average market price of $ 38.95 per share primarily under the current authorized repurchase program.

Recent Accounting Pronouncements

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.

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 September 2022, the FASB issued ASU No.

2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations.

The amendments in this ASU require that a buyer in a supplier finance program disclose sufficient quantitative and qualitative information about its supplier finance programs to allow a user of the financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude.

On a retrospective basis, for each annual reporting period, an entity should disclose the key terms of the program, including a description of the payment terms, assets pledged as security or other forms of guarantees, the confirmed amount outstanding that remains unpaid, a description of where the obligations are presented in the balance sheet and a roll-forward of those obligations confirmed as well as the amount of obligations subsequently paid.

In each interim reporting period, an entity should disclose the amount of confirmed obligations outstanding.

The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on roll-forward information, which is effective for fiscal years beginning after December 15, 2023.

Early adoption of the amendments in this update is permitted.

The Company adopted ASU 2022-04, effective January 1, 2023, which did not have a material impact on the Company's consolidated financial position or results of operations upon adoption.

Revenue Recognition

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

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 serve approximately 450 customers annually in more than 40 countries across a wide variety of industries.

For the three months ended March 31, 2023 and 2022, the Company's ten largest customers accounted for approximately 37 % of total sales during both periods.

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 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:

For the three months ended March 31, 2023 and 2022, the Company's sales to Shaw were 10 % and 9 % 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, 2023 and 2022 were as follows:

ADVANSIX INC.

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Nylon $ 99,372 25 % $ 118,609 25 %

2 unchanged sentences

Ammonium Sulfate 114,218 28 % 154,769 32 %

$ 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 nine months ended September 30, 2022 and 2021 were as follows:

Total $ 400,544 100 % $ 479,073 100 %

The Company's revenues by geographic area, and related approximate percentage of total sales, for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

United States $ 320,926 80 % $ 403,018 84 %

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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 nine months ended September 30, 2022:

Below is a roll-forward of Deferred income and customer advances for the three months ended March 31, 2023:

Opening balance January 1, 2023 $ 34,430

1 unchanged sentence

Less amounts recognized in revenues ( 14,529 )

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.

Ending balance March 31, 2023 $ 25,672

The Company expects to recognize as revenue the March 31, 2023 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, 2022 and 2021 were as follows:

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 outstanding and diluted weighted average number of common shares outstanding, respectively.

The details of the basic and diluted EPS calculations for the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Net income $ 34,954 $ 63,073

9 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 nine months ended September 30, 2022 and 2021 were as follows:

The anti-dilutive common stock equivalents outstanding at the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Options and stock equivalents 266,644 120,316

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

Dividend activity for the three months ended March 31, 2023 and 2022 was as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Cash dividends declared per share $ 0.145 $ 0.125

1 unchanged sentence

Accounts and Other Receivables – Net

September 30,

2023 December 31,

4 unchanged sentences

Total accounts and other receivables – net $ 161,389 $ 175,429

September 30,

2023 December 31,

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Total inventories $ 224,635 $ 215,502

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.

Substantially all of the Company’s inventories at March 31, 2023 and December 31, 2022 are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method.

However, approximately 5 % was valued at average cost using the first-in, first-out (“FIFO”) method at March 31, 2023.

The excess of replacement cost over the carrying value of total inventories subject to LIFO was $ 77.4 million and $ 58.2 million at March 31, 2023 and December 31, 2022, respectively.

We determine if an arrangement is a lease at inception.

6 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Finance lease cost:

5 unchanged sentences

Total lease cost $ 12,621 $ 11,942

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.

As of March 31, 2023, we have additional operating and finance leases that have not yet commenced for approximately $ 0.2 million and approximately $ 0.3 million, respectively.

These leases will commence during 2023 with lease terms of up to 7 years.

2 unchanged sentences

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 38,600

Balance at September 30, 2022 $ 56,192

There was no change in the carrying amount of goodwill for the three months ended March 31, 2023.

Finite-Lived Intangible Assets

Intangible assets subject to amortization were as follows:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

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

3 unchanged sentences

Total $ 56,371 $ ( 7,891 ) $ 48,480 $ 56,371 $ ( 7,129 ) $ 49,242

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.

For the three months ended March 31, 2023 and March 31, 2022, the Company recorded amortization expense on intangible assets of $ 0.8 million and $ 0.4 million, respectively.

Commitments and Contingencies

The Company is subject to a number of lawsuits, investigations and disputes, some of which may involve substantial amounts claimed, arising out of the conduct of the Company or other third-parties in the normal and ordinary course of business.

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.

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.

Considering the Company’s past experience and existing accruals, the Company does not expect the outcome of these matters, either individually or in the

ADVANSIX INC.

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

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

Considering the Company’s past experience and existing accruals, the Company does not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on the Company’s consolidated financial position or results of operations.

aggregate, to have a material adverse effect on the Company’s consolidated financial position or results of operations.

Potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause the Company to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on the Company’s consolidated results of operations, balance sheet and/or operating cash flows in the periods recognized or paid.

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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 $ 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 nine months ended September 30, 2022 and 2021 differed from the U.S.

The provision for income taxes was $ 9.3 million and $ 19.2 million for the three months ended March 31, 2023 and 2022, respectively, resulting in an effective tax rate of 21.0 % and 23.3 %, respectively.

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

The Company’s effective tax rate for the three months ended March 31, 2023 approximated the U.S.

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

Additionally, a current period discrete tax adjustment was recorded relating to the vesting of equity compensation that resulted in a 2.3 % decrease to the Company's quarterly effective tax rate.

The Company's effective tax rate for the three months ended March 31, 2022 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.

Amines Limited.

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.

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.

Among other provisions, the IRA introduces a corporate alternative minimum tax (CAMT) on adjusted financial statement income of certain large corporations and a 1% excise tax on share repurchases.

The Company is not currently subject to the CAMT which became effective for tax years beginning after December 31, 2022.

The 1% excise tax is generally applicable to publicly traded corporations for the net value of certain stock that the corporation repurchases during the year and is also effective for tax years beginning after December 31, 2022.

The impact of any excise tax imposed on the Company for share repurchases is generally accounted for as an equity transaction with no consequences to the Company's results in operations, and this provision of the law is not expected to have a material impact on the Company's financial condition.

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.

The Company continues to evaluate these energy credit provisions of the law in relation to our sustainability and environmental, social and governance initiatives.

Fair Value Measurements

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

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The interest rate swap, considered a Level 2 liability, expired February 21, 2023.

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

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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.

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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 and interest rate swap agreement, used to manage the Company’s interest rate risk associated with a fixed and floating-rate borrowing.

This discussion includes an explanation of any 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.

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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, 2022 or December 31, 2021.

The Company did not have any customers with significant concentrations of trade accounts receivable – net at March 31, 2023 or December 31, 2022.

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.

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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, 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.

At March 31, 2023 and 2022, we had no financial contracts related to forward commodity agreements.

Interest Rate Risk Management – The Company had 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 and matured on 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.

The interest rate swap converted 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 involved 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.

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Asset (Liability) Derivatives

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value

Derivatives designated as hedging instruments under ASC 815:

Interest Rate Contracts Accounts and other receivables, net $ 426 Accrued liabilities and Other liabilities $ ( 708 )

Interest Rate Contracts Accounts and other receivables, net $ — Accounts and other receivables, net $ 197

Total Derivatives $ — $ 197

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 )

Gain on derivative instruments included in Accumulated other comprehensive loss at December 31, 2022 $ 197

Fair value adjustment ( 197 )

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.

Gain (Loss) on derivative instruments included in Accumulated other comprehensive loss at March 31, 2023 $ —

At March 31, 2023, the Company expects no reclassifications of net gains or losses on derivative instruments from Accumulated other comprehensive income ("AOCI") to earnings during the next 12 months as the interest rate swap agreement matured on February 21, 2023.

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Interest Rate Contracts $ — $ 12

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

Amines Limited ("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 $ 97 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 $ 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,

Amines, a leading North American producer of alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals for a purchase price of approximately $ 97.5 million, net of cash acquired.

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

("CIS") for approximately $ 9.5 million.

Supplier Finance Programs

The Company has entered into a supply chain finance program with a financial intermediary providing participating suppliers the option to be paid by the intermediary earlier than the original invoice due date.

AdvanSix’s responsibility is limited to making payments to the intermediary based upon payment terms negotiated with the suppliers, regardless of whether the intermediary pays the supplier in advance of the original due date.

The Company’s payment terms with suppliers are consistent,

ADVANSIX INC.

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

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.

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 September 30, 2022 (Preliminary)

Cash $ 22,887 $ — $ 22,887

Accounts receivable 15,117 — 15,117

Inventories 11,937 ( 3,048 ) 8,889

Other current assets 1,876 ( 167 ) 1,709

Property, plant and equipment 13,600 ( 8 ) 13,592

Intangible assets 31,400 2,600 34,000

Accounts payable ( 1,487 ) ( 88 ) ( 1,575 )

Accrued liabilities ( 2,760 ) — ( 2,760 )

Deferred income taxes ( 12,243 ) 2,127 ( 10,116 )

Net tangible and intangible assets 80,327 1,416 81,743

Goodwill 40,271 ( 1,671 ) 38,600

Total purchase price $ 120,598 $ ( 255 ) $ 120,343

Cash acquired ( 22,887 ) — ( 22,887 )

Total purchase price, net of cash received 97,711 ( 255 ) 97,456

Estimated working capital adjustment due from seller 878 ( 878 ) —

Net cash paid $ 98,589 $ ( 1,133 ) $ 97,456

Goodwill deductible for tax purposes $ — $ — $ —

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 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.

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

("CIS") for approximately $ 9.5 million.

regardless of whether a vendor participates in the supply chain finance program or not.

All related agreements are terminable by either party upon at least 30 days’ notice.

The total amount due to the financial intermediaries to settle supplier invoices under the supplier finance programs was approximately $ 12 million and approximately $ 17 million as of March 31, 2023 and December 31, 2022, respectively.

These amounts outstanding are included in Accounts payable .

Subsequent Events

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.

As announced on May 5, 2023, the Board declared a quarterly cash dividend of $ 0.145 per share on the Company's common stock, payable on May 30, 2023 to stockholders of record as of the close of business on May 16, 2023.

On April 7, 2023, the Company issued a press release announcing that a labor strike had been initiated by the Hopewell South bargaining unit, consisting of the International Chemical Workers Union Council/the United Food and Commercial Workers, Local 591-C, the International Brotherhood of Electrical Workers, Local 666, the International Association of Machinists and Aerospace Workers, Local No.

10, and the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry, Local 851, affecting approximately 340 workers at the Company's manufacturing facility in Hopewell, Virginia.

The Company has robust contingency measures in place and is well prepared to support safe, stable and sustainable operations during this period.

While AdvanSix continues to operate, we do not currently have an estimate of timing for completion of negotiations with the Hopewell South bargaining unit.

The strike is not expected to have a material impact on the Company's financial condition.

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