What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-03 compared with 2023-08-04 · 107 added, 75 removed, 252 unchanged (42% of the section changed)

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general economic and financial conditions in the U.S.

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

and globally;

the potential effects of inflationary pressures, labor market shortages and supply chain issues;

instability or volatility in financial markets or other unfavorable economic or business conditions caused by geopolitical concerns, including as a result of the conflict between Russia and Ukraine;

the effect on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.;

instability or volatility in financial markets or other unfavorable economic or business conditions caused by geopolitical concerns, including as a result of the conflict between Russia and Ukraine, the conflict in Israel and Gaza and the possible expansion of such conflicts;

the effect of the foregoing on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.;

our ability to sell and provide our goods and services;

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

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

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

risks associated with employees working remotely or operating with a reduced workforce;

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prolonged work stoppages as a result of labor difficulties or otherwise;

cybersecurity, data privacy incidents and disruptions to our technology infrastructure;

failure to maintain effective internal controls;

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Business Overview

AdvanSix 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.

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.

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We internally polymerize caprolactam into Aegis® Nylon 6 Resins, and we also market and sell the caprolactam that is not consumed internally to customers who use it to manufacture polymer resins to produce nylon fibers, films and other nylon products.

Our Hopewell, VA manufacturing facility is one of the world’s largest single-site producers of caprolactam as of June 30, 2023.

Our Hopewell, VA manufacturing facility is one of the world’s largest single-site producers of caprolactam as of September 30, 2023.

• Chemical Intermediates – We manufacture, market and sell a number of other chemical intermediate products that are derived from the manufacturing processes within our integrated supply chain.

Most significant is acetone which is used by our customers in the production of adhesives, paints, coatings, solvents, herbicides and engineered plastic resins.

Other intermediate chemicals that we manufacture, market and sell include phenol, alpha-methylstyrene (“AMS”), cyclohexanone, oximes (methyl ethyl ketoxime, acetaldehyde oxime and 2-pentanone oxime), cyclohexanol, sulfuric acid, ammonia and carbon dioxide.

Other intermediate chemicals that we manufacture, market and sell include phenol, alpha-methylstyrene (“AMS”), cyclohexanone, 2-pentanone oxime, cyclohexanol, sulfuric acid, ammonia and carbon dioxide.

With the acquisition of U.S.

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Ammonium sulfate fertilizer is derived from the integrated operations at the Hopewell manufacturing facility.

Because of our Hopewell facility’s size, scale and technology design, we are the world’s largest single-site producer of ammonium sulfate fertilizer as of June 30, 2023.

Because of our Hopewell facility’s size, scale and technology design, we are the world’s largest single-site producer of ammonium sulfate fertilizer as of September 30, 2023.

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

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In addition, due to its nutrient density, the typical ammonium sulfate product delivers pound for pound the most readily available sulfur and nitrogen to crops as compared to other fertilizers.

We also directly supply packaged ammonium sulfate to customers, primarily in North and South America, and

diversified and optimized our offerings to include spray-grade adjuvants to support crop protection, as well as other specialty fertilizers and products for industrial use.

We also directly supply packaged ammonium sulfate to customers, primarily in North and South America, and diversified and optimized our offerings to include spray-grade adjuvants to support crop protection, as well as other specialty fertilizers and products for industrial use.

We produce ammonium sulfate fertilizer continuously throughout the year as part of our manufacturing process, however, quarterly sales experience seasonality reflecting both geographical and product sales mix considerations based on the timing and length of the growing seasons in North and South America.

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Recent Developments

Business Operations

In the second quarter of 2019, the Company entered into an alliance with Oben Holding Group S.A.

(“Oben”), a third-party producer of films for the flexible packaging industry.

On September 8, 2023, the Company entered into an agreement to exit its alliance with Oben.

The exit of the alliance provides a termination fee payable by Oben to AdvanSix in exchange for full transition of AdvanSix’s share of the alliance.

The Company recorded a gain of $11.4 million in the third quarter of 2023.

The gain represents management’s estimate of the value of the termination fee, which is calculated based upon a formula that takes into account a combination of historical and future performance, and is included as a component of Other non-operating (income) expense, net.

Approximately 60% of the termination fee is subject to change as it is based on an estimate of future performance.

This fee is payable in 3 installments, with the first installment of $4.4 million received in the fourth quarter of 2023.

Subsequent installments are expected to be paid in the third quarters of 2024 and 2025.

On September 21, 2023, the Company was notified by a licensee of certain legacy ammonium sulfate fertilizer technology assets operated at the licensee's fertilizer manufacturing facility that it intends to close its facility no later than August 2024.

As a result, the Company recognized a non-cash, pre-tax charge related to the assets located at the licensee's facility of approximately $4.5 million in the third quarter of 2023.

The charge is included as a component of Other non-operating (income) expense, net.

The remaining asset balance of $2.6 million, an amount equal to the cash-flows expected to be received through the end of the contract, will be depreciated through August 2024.

During the third quarter of 2023, the Company made a strategic decision to cease production of certain low-margin products in the oximes family.

The Company incurred an approximately $2.4 million unfavorable impact to pre-tax income during the third quarter of 2023 primarily as a result of a non-cash write-down of the assets associated with these products.

Share Repurchase Authorization

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

Hopewell South Collective Bargaining Agreement

Hopewell, VA Collective Bargaining Agreements

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.

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The strike did not have a material impact on the Company’s results of operations.

On September 29, 2023, the Company’s Hopewell North bargaining unit, represented by the United Steelworkers, ratified a new five-year labor agreement in advance of the prior agreement’s anticipated expiration date of October 4, 2023.

The ratified labor agreement affects approximately 130 workers at the Company’s manufacturing facility in Hopewell, Virginia.

During 2023, the Company has declared dividends as follows:

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5/5/2023 5/16/2023 5/30/2023 $0.145

2/17/2023 3/3/2023 3/17/2023 $0.145

Results of Operations

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Three Months Ended

June 30, 2023 Six Months Ended

June 30, 2023

September 30, 2023 Nine Months Ended

September 30, 2023

Volume (1.0)% (3.6)%

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(32.6)% (25.3)%

Sales decreased in the three months ended June 30, 2023 compared to the prior year period by $155.8 million (approximately 27%) due to (i) net unfavorable market-based pricing (approximately 19%) primarily reflecting lower pricing across our ammonium sulfate and nylon product lines, (ii) lower raw material pass-through pricing (approximately 6%) as a result of a net cost decrease in benzene and propylene (inputs to cumene which is a key feedstock to our products) and (iii) a decrease in sales volume (approximately 2%).

Sales decreased in the six months ended June 30, 2023 compared to the prior year period by $234.3 million (approximately 22%) due to (i) net unfavorable market-based pricing (approximately 13%) primarily reflecting lower pricing across our ammonium sulfate and nylon product lines, (ii) unfavorable raw material pass-through pricing (approximately 6%) as a result of a net cost decrease in benzene and propylene (inputs to cumene which is a key feedstock to our products) and (iii) decreased sales volume (approximately 5%) largely driven by chemical intermediates, partially offset by the acquisition of U.S.

Sales decreased in the three months ended September 30, 2023 compared to the prior year period by $155.9 million (approximately 33%) due to (i) net unfavorable market-based pricing (approximately 24%) primarily reflecting reduced ammonium sulfate pricing amid lower raw material input costs and a more stable global nitrogen supply environment, as well as lower nylon pricing due to unfavorable supply and demand conditions, (ii) lower raw material pass-through pricing (approximately 8%) as a result of a net cost decrease in benzene and propylene (inputs to cumene which is a key feedstock to our products) and (iii) a decrease in sales volume (approximately 1%).

Sales decreased in the nine months ended September 30, 2023 compared to the prior year period by $390.2 million (approximately 25%) due to (i) net unfavorable market-based pricing (approximately 16%) primarily reflecting reduced ammonium sulfate pricing amid lower raw material input costs and a more stable global nitrogen supply environment, as well as lower nylon pricing due to unfavorable supply and demand conditions, (ii) unfavorable raw material pass-through pricing

(approximately 6%) as a result of a net cost decrease in benzene and propylene (inputs to cumene which is a key feedstock to our products) and (iii) decreased sales volume (approximately 3%) driven primarily by chemical intermediates, partially offset by the acquisition of U.S.

Amines (approximately 1%).

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Gross Margin percentage 2.5% 7.3% 12.7% 15.9%

Costs of goods sold decreased in the three months ended June 30, 2023 compared to the prior year period by $116.8 million (approximately 24%) due to (i) decreased prices of raw materials (approximately 22%) and (ii) decrease in sales volume (approximately 2%).

Costs of goods sold decreased in the six months ended June 30, 2023 compared to the prior year period by $162.4 million (approximately 19%) due to (i) decreased prices of raw materials (approximately 17%) and (ii) lower sales volume (approximately 4%), partially offset by increased plant costs (approximately 2%) and the impact of the U.S.

Costs of goods sold decreased in the three months ended September 30, 2023 compared to the prior year period by $128.9 million (approximately 29%) due to (i) decreased prices of raw materials (approximately 24%) and (ii) a decrease in plant spend driven primarily by lower planned plant turnaround expenses and natural gas utility costs (approximately 5%).

Costs of goods sold decreased in the nine months ended September 30, 2023 compared to the prior year period by $291.3 million (approximately 22%) due to (i) decreased prices of raw materials (approximately 20%), (ii) lower sales volume (approximately 3%) and (iii) a decrease due to lower planned plant turnaround expenses (approximately 1%), partially offset by the impact of the U.S.

Amines acquisition (approximately 1%).

Gross margin percentage decreased in the three months ended June 30, 2023 compared to the prior year period (approximately 2%) due primarily to the impact of market-based pricing, net of raw material costs (approximately 4%) partially offset by (i) the net impact of lower sales volume and changes in sales mix, including higher domestic plant nutrients' sales (approximately 1%) and (ii) lower planned plant turnaround expenses (approximately 1%).

Gross margin percentage decreased in the six months ended June 30, 2023 compared to the prior year period (approximately 3%) due primarily to (i) increased plant spend (approximately 2%) and (ii) the impact of market-based pricing, net of raw material costs (approximately 1%).

Gross margin percentage decreased in the three months ended September 30, 2023 compared to the prior year period (approximately 5%) due primarily to (i) the impact of market-based pricing, net of raw material costs (approximately 10%) and (ii) the net impact of lower sales volume and changes in sales mix (approximately 2%) partially offset by (i) lower planned plant turnaround expenses and natural gas utility costs (approximately 6%) and (ii) lower functional support costs (approximately 1%).

Gross margin percentage decreased in the nine months ended September 30, 2023 compared to the prior year period (approximately 3%) due primarily to the impact of market-based pricing, net of raw material costs (approximately 3%).

Selling, General and Administrative Expenses

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

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Percentage of Sales 6.7% 4.8% 6.1% 4.2%

Selling, general and administrative expenses increased by $3.2 million in the three months ended June 30, 2023 compared to the prior year period due primarily to upgrades to our enterprise resource planning systems and other functional support costs, and a reduction in bad debt expense in the prior year period associated with a cash collection of a previously reserved customer receivable.

Selling, general and administrative expenses increased by $7.1 million in the six months ended June 30, 2023 compared to the prior year period due primarily to increased functional support costs including upgrades to our enterprise resource planning system, and a reduction in bad debt expense in the prior year period associated with a cash collection of a previously reserved customer receivable partially offset by lower incentive-based compensation costs.

Selling, general and administrative expenses decreased by $1.5 million in the three months ended September 30, 2023 compared to the prior year period due to lower incentive-based compensation expense and reduction in IT and other functional support costs.

Selling, general and administrative expenses increased by $5.6 million in the nine months ended September 30, 2023 compared to the prior year period due primarily to increased functional support costs including upgrades to our enterprise resource planning system, costs associated with pursuing the business interruption insurance claim in connection with the June 2019 shutdown of cumene supplier, Philadelphia Energy Solutions, and a reduction in bad debt expense in the prior year period associated with a cash collection of a previously reserved customer receivable partially offset by lower incentive-based compensation costs.

Income Tax Expense

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Income tax expense $ 10,555 $ 19,962 $ 19,829 $ 39,145

Income tax expense (benefit) $ (2,076) $ 2,730 $ 17,753 $ 41,876

Effective tax rate 20.7% 21.4% 22.9% 23.2%

The Company’s effective tax rate for the three and six months ended June 30, 2023 and 2022 differed from 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, discrete tax adjustments recorded in the first half of 2023 relating to the vesting of equity compensation and changes in state tax legislation resulted in a net 0.6% increase to the quarterly effective tax rate and a net 0.9% decrease to the year-to-date effective tax rate.

The Company's effective tax rate for the three months ended June 30, 2023 was higher than the prior year period due primarily to state tax legislation changes enacted in the current period that resulted in a 0.7% increase to the Company's quarterly effective tax rate.

The Company's effective tax rate for the six months ended June 30, 2023 was lower than the prior year period due primarily to the vesting of equity compensation that resulted in a 1.3% decrease to the Company's effective tax rate in the current year.

The Company’s effective tax rate for the three and nine months ended September 30, 2023 and 2022 differed from the U.S.

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

Additionally in 2023, discrete tax adjustments relating to the vesting of equity compensation, changes in state tax legislation and return to provision adjustments related to the filing of the Company's 2022 U.S.

federal income tax return resulted in a net 4.4% increase to the quarterly effective tax rate and a net 1.6% decrease to the year-to-date effective tax rate.

The Company's effective tax rate for the three months ended September 30, 2023 slightly differed from the prior period due primarily to changes in state taxes, including the impact of state rate changes, additional tax credits, and a decrease in the foreign-derived intangible income deduction.

The Company's effective tax rate for the nine months ended September 30, 2023 approximated the prior year.

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

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 32,728 $ 65,157 $ 67,682 $ 128,230

As a result of the factors described above, Net income was $32.7 million and $67.7 million for the three and six months ended June 30, 2023 as compared to $65.2 million and $128.2 million in the corresponding prior year period.

Net income (loss) $ (7,977) $ 10,032 $ 59,705 $ 138,262

As a result of the factors described above, Net income (loss) was ($8.0) million and $59.7 million for the three and nine months ended September 30, 2023 as compared to $10.0 million and $138.3 million in the corresponding prior year period.

Non-GAAP Measures

(Dollars in thousands, unless otherwise noted)

The following tables set forth the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Earnings Per Share.

Adjusted EBITDA is defined as Net income before Interest, Income taxes, Depreciation and amortization, Non-cash stock-based compensation, Non-recurring, unusual or extraordinary expenses, Non-cash amortization from acquisitions and One-time merger and acquisition costs.

The following tables set forth the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income (Loss) and Adjusted Earnings Per Share.

Adjusted EBITDA is defined as Net income (loss) before Interest, Income taxes, Depreciation and amortization, Non-cash stock-based compensation, Non-recurring, unusual or extraordinary expenses, Non-cash amortization from acquisitions and One-time merger and acquisition costs.

Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by Sales.

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

Non-GAAP financial measures should be read only in conjunction with the comparable U.S.

Non-GAAP financial measures should be read only in

conjunction with the comparable U.S.

GAAP financial measures.

The Company's non-GAAP measures may not be comparable to other companies' non-GAAP measures.

The following is a reconciliation between the non-GAAP financial measures of Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin to their most directly comparable U.S.

The following is a reconciliation between the non-GAAP financial measures of Adjusted Net Income (Loss), Adjusted EBITDA and Adjusted EBITDA Margin to their most directly comparable U.S.

GAAP financial measure:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 32,728 $ 65,157 $ 67,682 $ 128,230

Net Income (loss) $ (7,977) $ 10,032 $ 59,705 $ 138,262

Non-cash stock-based compensation 1,391 2,220 5,840 7,599

Non-recurring, unusual or extraordinary expenses (income) * (4,472) — (4,472) —

Non-cash amortization from acquisitions 532 532 1,596 1,284

Non-recurring M&A costs — — — 277

Benefit from income taxes relating to reconciling items (498) (439) (933) (995)

Adjusted Net Income (non-GAAP) 35,198 67,274 72,262 133,643

Expense (benefit) from income taxes relating to reconciling items 776 (466) (157) (1,461)

Adjusted Net Income (loss) (non-GAAP) (9,750) 12,318 62,512 145,961

Interest expense, net 2,075 686 5,296 2,017

Income tax expense - adjusted 11,053 20,401 20,763 40,141

Income tax expense (benefit) - Adjusted (2,852) 3,196 17,911 43,337

Depreciation and amortization - Adjusted 17,848 17,113 52,741 50,586

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Adjusted EBITDA Margin** (non-GAAP) 2.3% 7.0% 12.0% 15.7%

* Includes a pre-tax gain of approximately $11.4 million related to the Company's exit from the Oben alliance, the unfavorable impact to pre-tax income of approximately $4.5 million associated with a licensee of certain legacy ammonium sulfate fertilizer technology assets closing its facility, and the unfavorable impact to pre-tax income of approximately $2.4 million from the exit of certain low-margin oximes products.

** Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Sales

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net Income $ 32,728 $ 65,157 $ 67,682 $ 128,230

Adjusted Net Income (non-GAAP) 35,198 67,274 72,262 133,643

Net Income (loss) $ (7,977) $ 10,032 $ 59,705 $ 138,262

Adjusted Net Income (loss) (non-GAAP) (9,750) 12,318 62,512 145,961

Weighted-average number of common shares outstanding - basic 27,209,521 27,944,494 27,433,851 28,103,255

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Our ability to fund our capital needs, however, will depend on our ongoing ability to generate cash from operations and access to credit and capital markets, both of which are subject to the risk factors previously disclosed in Item 1A of Part I of our 2022 Form 10-K, as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.

As of the end of the second quarter of 2023, the Company had approximately $10.5 million of cash on hand with approximately $359 million of additional capacity available under the revolving credit facility.

As of the end of the third quarter of 2023, the Company had approximately $22.1 million of cash on hand with approximately $329 million of additional capacity available under the revolving credit facility.

The Company’s Consolidated Leverage Ratio financial covenant of its credit facility allows it to net up to $75 million of cash with debt.

Capital expenditures are expected to be approximately $110 million to $120 million in 2023 compared to $89 million in 2022, reflecting increased spend due to critical infrastructure, other maintenance, and growth and cost savings projects.

Capital expenditures are expected to be approximately $115 million in 2023 compared to $89 million in 2022, reflecting increased spend due to critical infrastructure, other maintenance, and growth and cost savings projects.

We assumed from Honeywell International Inc.

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We expect that our primary cash requirements for 2023 will be to fund costs associated with ongoing operations, capital expenditures, and amounts related to other contractual obligations.

The Company made no cash contributions to the defined benefit pension plan during the six months ended June 30, 2023.

The Company expects cash contributions of up to $5 million in 2023 and additional contributions in future years sufficient to satisfy pension funding requirements in those periods.

The Company made no cash contributions to the defined benefit pension plan during the nine months ended September 30, 2023 and does not expect to make cash contributions during the fourth quarter of 2023.

Additional contributions may be made in future years sufficient to satisfy pension funding requirements in those periods.

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 June 30, 2023

Authorized Amount Remaining as of September 30, 2023

May 4, 2018 $ 75.0 $ —

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Totals $ 225.0 $ 76.6

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.

Repurchases may be made from time to time on the open market in accordance with Rule 10b-18 of 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.

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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 June 30, 2023, the Company has repurchased a total of 5,274,989 shares of common stock life-to-date, including 849,265 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $164.4 million at a weighted average market price of $31.17 per share.

As of June 30, 2023, $85.6 million remained available for share repurchases under the current authorization.

During the period from July 1, 2023 through July 28, 2023, we repurchased an additional 94,715 shares at a weighted average market price of $36.45 per share primarily under the currently authorized repurchase program.

As of June 30, 2023, the Company did not have any off-balance sheet arrangements as described in Instruction 8 to Item 303(b) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the Company's 2022 Form 10-K (see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Liquidity and Capital Resources - Liquidity").

As of September 30, 2023, the Company has repurchased a total of 5,541,948 shares of common stock life-to-date, including 854,340 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $173.6 million at a weighted average market price of $31.33 per share.

As of September 30, 2023, $76.6 million remained available for share repurchases under the current authorization.

During the period from October 1, 2023 through October 27, 2023, we repurchased an additional 101,387 shares at a weighted average market price of $29.07 per share primarily under the currently authorized repurchase program.

As of September 30, 2023, the Company did not have any off-balance sheet arrangements as described in Instruction 8 to Item 303(b) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the Company's 2022 Form 10-K (see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Liquidity and Capital Resources - Liquidity").

The Company has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

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2/18/2022 3/1/2022 3/15/2022 $0.125 $ 3.5

9/28/2021 11/9/2021 11/23/2021 $0.125 $ 3.5

The timing, declaration, amount and payment of future dividends to stockholders, if any, will fall within the discretion of our Board.

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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 June 30, 2023, the applicable margin under the Credit Agreement was 0.25% for base rate loans and 1.25% for Adjusted Term SOFR loans and the applicable commitment fee rate was 0.15% 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.

In conjunction with the cessation of LIBOR, as of July 1, 2023, the applicable margin under the Credit Agreement was 0.25% for base rate loans and 1.25% for Adjusted Term SOFR loans and the applicable commitment fee rate was 0.15% per annum.

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

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.

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

We were in compliance with all of our covenants at June 30, 2023 and through the date of the filing of this Form 10-Q.

We were in compliance with all of our covenants at September 30, 2023 and through the date of the filing of this Form 10-Q.

We had a borrowed balance of $115 million under the Revolving Credit Facility at December 31, 2022.

We borrowed an incremental net amount of $25 million during the six months ended June 30, 2023, bringing the balance under the Revolving Credit Facility to $140 million, and available credit for use of approximately $359 million as of June 30, 2023.

We borrowed an incremental net amount of $55 million during the nine months ended September 30, 2023, bringing the balance under the Revolving Credit Facility to $170 million, and available credit for use of approximately $329 million as of September 30, 2023.

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

Cash Flow Summary

Six Months Ended

Nine Months Ended

September 30,

Cash provided by (used for):

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Net change in cash and cash equivalents $ (8,875) $ 9,594

Cash provided by operating activities decreased by $108.5 million for the six months ended June 30, 2023 versus the prior year period due primarily to (i) a $69.8 million unfavorable cash impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) year-over-year largely driven by changes occurring during the six months ended June 30, 2023 and (ii) a $60.5 million decrease in net income.

This was partially offset by (i) an $8.6 million favorable cash impact from Other assets and liabilities driven primarily by a reduction in the net pension liability due to previous year cash contributions to the defined benefit pension plan, (ii) an $8.3 million favorable cash impact from Taxes receivable and (iii) a $3.1 million favorable cash impact from accrued liabilities primarily due to lower short-term incentive payments during the six months ended June 30, 2023 compared to the prior year period.

Cash used for investing activities decreased by $91.5 million for the six months ended June 30, 2023 versus the prior year period due primarily to cash paid for the acquisition of U.S.

Amines for approximately $97.5 million during the prior year period, and increased cash payments for capital expenditures of approximately $5.1 million during the current year period due primarily to increased spend for critical infrastructure, other maintenance, and growth and cost savings projects.

Cash used for financing activities increased by $5.7 million for the six months ended June 30, 2023 versus the prior year period due primarily to payments for share repurchases of $28.4 million and cash paid for dividends of approximately $8.0 million during the six months ended June 30, 2023 compared to $10.4 million and $7.0 million during the prior year period, respectively, partially offset by net borrowings of $25.0 million during the six months ended June 30, 2023 compared to net borrowings of $11.5 million during the prior year period.

Cash provided by operating activities decreased by $146.6 million for the nine months ended September 30, 2023 versus the prior year period due primarily to (i) a $92.9 million unfavorable cash impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) with a $51.9 million unfavorable cash impact from working capital for the nine months ended September 30, 2023 compared to a $41.0 million favorable cash impact in the prior year period, primarily due to the timing of payments and lower raw material prices in accounts payable of $81.8 million and the unfavorable impact of customer advances of $32.0 million driven by the unwinding of ammonium sulfate pre-buy advances and (ii) a $78.6 million decrease in net income.

This was partially offset by (i) a $22.3 million favorable cash impact from Taxes receivable and (ii) a $14.4 million favorable cash impact from Other assets and liabilities driven primarily by a reduction in the net pension liability due to previous year cash contributions to the defined benefit pension plan during the nine months ended September 30, 2023 compared to the prior year period.

Cash used for investing activities decreased by $88.6 million for the nine months ended September 30, 2023 versus the prior year period due primarily to cash paid for the acquisition of U.S.

Amines for approximately $97.5 million during the prior year period offset by increased cash payments for capital expenditures of approximately $8.0 million during the current year period due primarily to increased spend for critical infrastructure, other maintenance, and growth and cost savings projects.

Cash used for financing activities decreased by $39.5 million for the nine months ended September 30, 2023 versus the prior year period due primarily to payments for share repurchases of $37.7 million and cash paid for dividends of approximately $12.4 million during the nine months ended September 30, 2023 compared to $23.6 million and $11.1 million during the prior year period, respectively, partially offset by net borrowings of $55.0 million during the nine months ended September 30, 2023 compared to net borrowings of $0, where incremental borrowings equaled incremental repayments, during the prior year period.

Capital Expenditures

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The following table summarizes ongoing and expansion capital expenditures:

Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2023

Capital expenditures in Accounts payable at December 31, 2022

Purchases of property, plant and equipment 75,334

Capital expenditures in Accounts payable at June 30, 2023

Capital expenditures in Accounts payable at September 30, 2023

Cash paid for capital expenditures $ 69,025

For 2023, we expect our total capital expenditures to be approximately $110 million to $120 million compared to $89 million in 2022, reflecting increased spend due to critical infrastructure, other maintenance, and growth and cost savings projects.

For 2023, we expect our total capital expenditures to be approximately $115 million compared to $89 million in 2022, reflecting increased spend due to critical infrastructure, other maintenance, and growth and cost savings projects.

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

1 unchanged sentence

The preparation of our Condensed Consolidated Financial Statements in accordance with U.S.

GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain.

GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters

that are inherently uncertain.

We consider these accounting policies to be critical to the understanding of our Condensed Consolidated Financial Statements.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis