AdvanSix Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS ADVANSIX INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Dollars in thousands, except share and per share amounts) Three Months Ended March 31, 2024 2023 Sales $ 336,829 $ 400,544 Costs, expenses and other: Costs of goods sold 333,864 330,042 Selling, general and administrative expenses 23,593 25,114 Interest expense, net 2,699 1,267 Other non-operating (income) expense, net 90 ( 108 ) Total costs, expenses and other 360,246 356,315 Income (loss) before taxes ( 23,417 ) 44,229 Income tax expense (benefit) ( 6,021 ) 9,275 Net Income (Loss) $ ( 17,396 ) $ 34,954 Earnings per common share Basic $ ( 0.65 ) $ 1.27 Diluted $ ( 0.65 ) $ 1.22 Weighted average common shares outstanding Basic 26,878,660 27,601,784 Diluted 26,878,660 28,586,563 See accompanying notes to Condensed Consolidated Financial Statements. 3 ADVANSIX INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Net income (loss) $ ( 17,396 ) $ 34,954 Foreign exchange translation adjustment ( 15 ) ( 33 ) Cash-flow hedges 7 ( 150 ) Other comprehensive income (loss), net of tax ( 8 ) ( 183 ) Comprehensive income (loss) $ ( 17,404 ) $ 34,771 See accompanying notes to Condensed Consolidated Financial Statements. 4 ADVANSIX INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except share and per share amounts) March 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 20,633 $ 29,768 Accounts and other receivables – net 171,196 165,393 Inventories – net 190,921 211,831 Taxes receivable 8 1,434 Other current assets 8,549 11,378 Total current assets 391,307 419,804 Property, plant and equipment – net 861,982 852,642 Operating lease right-of-use assets 86,835 95,805 Goodwill 56,192 56,192 Intangible assets 45,431 46,193 Other assets 26,236 25,384 Total assets $ 1,467,983 $ 1,496,020 LIABILITIES Current liabilities: Accounts payable $ 196,772 $ 259,068 Accrued liabilities 46,771 44,086 Income taxes payable 935 8,033 Operating lease liabilities – short-term 28,358 32,053 Deferred income and customer advances 11,286 15,678 Total current liabilities 284,122 358,918 Deferred income taxes 152,160 151,059 Operating lease liabilities – long-term 58,621 63,961 Line of credit – long-term 245,000 170,000 Postretirement benefit obligations 4,790 3,660 Other liabilities 10,133 9,185 Total liabilities 754,826 756,783 COMMITMENTS AND CONTINGENCIES (Note 9) STOCKHOLDERS' EQUITY Common stock, par value $ 0.01 ; 200,000,000 shares authorized; 32,922,935 shares issued and 26,813,996 outstanding at March 31, 2024; 32,598,946 shares issued and 26,750,471 outstanding at December 31, 2023 329 326 Preferred stock, par value $ 0.01 ; 50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2024 and December 31, 2023 — — Treasury stock at par ( 6,108,939 shares at March 31, 2024; 5,848,475 shares at December 31, 2023) ( 61 ) ( 58 ) Additional paid-in capital 133,823 138,046 Retained earnings 583,218 605,067 Accumulated other comprehensive loss ( 4,152 ) ( 4,144 ) Total stockholders' equity 713,157 739,237 Total liabilities and stockholders' equity $ 1,467,983 $ 1,496,020 See accompanying notes to Condensed Consolidated Financial Statements. 5 ADVANSIX INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Net income (loss) $ ( 17,396 ) $ 34,954 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 19,102 17,845 Loss on disposal of assets 89 168 Deferred income taxes 1,108 ( 170 ) Stock-based compensation 2,211 2,013 Amortization of deferred financing fees 155 155 Changes in assets and liabilities, net of business acquisitions: Accounts and other receivables ( 5,818 ) 14,007 Inventories 20,910 ( 9,133 ) Taxes receivable 1,426 8,748 Accounts payable ( 52,995 ) ( 54,489 ) Income taxes payable ( 7,098 ) 1,101 Accrued liabilities 2,150 ( 8,408 ) Deferred income and customer advances ( 4,392 ) ( 8,758 ) Other assets and liabilities 4,346 3,542 Net cash provided by (used for) operating activities ( 36,202 ) 1,575 Cash flows from investing activities: Expenditures for property, plant and equipment ( 35,388 ) ( 24,603 ) Other investing activities ( 1,419 ) ( 1,003 ) Net cash used for investing activities ( 36,807 ) ( 25,606 ) Cash flows from financing activities: Borrowings from line of credit 184,500 78,000 Payments of line of credit ( 109,500 ) ( 66,000 ) Principal payments of finance leases ( 239 ) ( 231 ) Dividend payments ( 4,290 ) ( 4,020 ) Purchase of treasury stock ( 7,023 ) ( 13,499 ) Issuance of common stock 426 622 Net cash provided by (used for) financing activities 63,874 ( 5,128 ) Net change in cash and cash equivalents ( 9,135 ) ( 29,159 ) Cash and cash equivalents at beginning of period 29,768 30,985 Cash and cash equivalents at the end of period $ 20,633 $ 1,826 Supplemental non-cash investing activities: Capital expenditures included in accounts payable $ 13,442 $ 8,193 Supplemental cash activities: Cash paid for interest $ 2,594 $ 1,191 Cash paid for income taxes $ 36 $ 91 See accompanying notes to Condensed Consolidated Financial Statements. 6 ADVANSIX INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) (Dollars in thousands) Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Equity Shares Amount Balance at December 31, 2023 32,598,946 $ 326 $ 138,046 $ 605,067 $ ( 58 ) $ ( 4,144 ) $ 739,237 Net Income (Loss) — — — ( 17,396 ) — — ( 17,396 ) Comprehensive income Foreign exchange translation adjustments — — — — — ( 15 ) ( 15 ) Cash-flow hedges — — — — — 7 7 Other comprehensive income (loss), net of tax — — — — — ( 8 ) ( 8 ) Issuance of common stock 323,989 3 423 — — — 426 Purchase of treasury stock ( 260,464 shares) — — ( 7,020 ) — ( 3 ) — ( 7,023 ) Stock-based compensation — — 2,211 — — — 2,211 Dividends — — 163 ( 4,453 ) — — ( 4,290 ) Balance at March 31, 2024 32,922,935 $ 329 $ 133,823 $ 583,218 $ ( 61 ) $ ( 4,152 ) $ 713,157 Common Stock Additional Paid-In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Equity Shares Amount Balance at December 31, 2022 31,977,593 $ 320 $ 174,585 $ 567,517 $ ( 45 ) $ ( 4,197 ) $ 738,180 Net Income — — — 34,954 — — 34,954 Comprehensive income Foreign exchange translation adjustments — — — — — ( 33 ) ( 33 ) Cash-flow hedges — — — — — ( 150 ) ( 150 ) Other comprehensive income (loss), net of tax — — — — — ( 183 ) ( 183 ) Issuance of common stock 555,249 5 617 — — — 622 Purchase of treasury stock ( 333,054 shares) — — ( 13,496 ) — ( 3 ) — ( 13,499 ) Stock-based compensation — — 2,013 — — — 2,013 Dividends — — 112 ( 4,132 ) — — ( 4,020 ) Balance at March 31, 2023 32,532,842 $ 325 $ 163,831 $ 598,339 $ ( 48 ) $ ( 4,380 ) $ 758,067 See accompanying notes to Condensed Consolidated Financial Statements. 7 ADVANSIX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and as otherwise noted) 1. Organization, Operations and Basis of Presentation Description of Business AdvanSix Inc. ("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, plant nutrients and chemical intermediates, guided by our core values of Safety, Integrity, Accountability and Respect. Basis of Presentation The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. 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 March 31, 2024, and its results of operations for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023. The year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. 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. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Form 10-K"). All intercompany transactions have been eliminated. Certain prior period amounts have been reclassified for consistency with the current period presentation. It is our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes. Historically, the effects of this practice 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, 2024 and 2023 were March 30, 2024 and April 1, 2023, respectively. Liabilities to creditors to whom we have issued checks that remained outstanding at March 31, 2024 and December 31, 2023 aggregated to $ 5.0 million and $ 2.9 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 (millions) Authorized Amount Remaining as of March 31, 2024 (millions) May 4, 2018 $ 75.0 $ — February 22, 2019 75.0 — February 17, 2023 75.0 65.2 Totals $ 225.0 $ 65.2 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 10b5-1 of the Exchange Act. The size and timing of these repurchases will depend on pricing, market and economic conditions, 8 ADVANSIX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and as otherwise noted) legal and contractual requirements and other factors. The share repurchase program has no expiration date and may be modified, suspended or discontinued at any time. 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 March 31, 2024, the Company has repurchased a total of 6,108,939 shares of common stock, including 999,111 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $ 189.0 million at a weighted average market price of $ 30.94 per share. As of March 31, 2024, $ 65.2 million remained available for share repurchases under the current authorization. During the period April 1, 2024 through April 26, 2024, the Company repurchased 2,865 shares covering tax withholding obligations in connection with the vesting of equity awards at a weighted average market price of $ 27.15 , and no additional shares were repurchased under the currently authorized repurchase program. 2. 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”). 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. On December 13, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require that public business entities, on an annual basis, disclose specific categories in the rate reconciliation and provide additional information for reconciling items that are equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate. The amendments also require that the Company disclose the following (net of refunds received): (1) the amount of income taxes paid disaggregated by federal (national), state, and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid. Additionally, the amendments in this update eliminate the requirement for all entities to disclose the nature and estimate of the range of the reasonably possible change in the unrecognized tax benefits balance in the next 12 months or to make a statement that an estimate of the range cannot be made, and remove the requirement to disclose the cumulative amount of each type of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of deferred taxes related to subsidiaries and corporate joint ventures. The guidance is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption of the amendments in this update are permitted for annual financial statements that have not yet been issued. The Company is evaluating the pronouncement and does not expect adoption to have a material impact on the Company's consolidated financial position or results of operations. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this ASU require incremental disclosures about the Company's reportable segments, but do not change the definition of a segment or the guidance for determining reportable segments. The incremental disclosures should include (1) significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss, (2) an amount for other segment items by reportable segment and a description of its composition, (3) profit or loss and assets currently required by Topic 280 in interim periods, (4) clarification if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources and (5) the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The guidance is effective for public entities with fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Additionally, public entities should apply the amendments retrospectively to all prior periods presented in the financial statements, unless impractical. The Company is evaluating the pronouncement and does not expect adoption to have a material impact on the Company's consolidated financial position or results of operations. 3. Revenues Revenue Recognition We serve approximately 400 customers annually in approximately 45 countries across a wide variety of industries. For each of the three months ended March 31, 2024 and 2023, the Company's ten largest customers accounted for approximately 37 % of total sales. We typically sell to customers under master service agreements, with primarily one-year terms, or by purchase orders. We have historically experienced low customer turnover and have long-standing customer relationships, which span decades. Our largest 9 ADVANSIX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and as otherwise noted) customer is Shaw Industries Group, Inc. (“Shaw”), a significant consumer of caprolactam and Nylon 6 resin, to whom we sell under a long-term agreement. For the three months ended March 31, 2024 and 2023, the Company's sales to Shaw were 9 % and 10 % 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, 2024 and 2023 were as follows: Three Months Ended March 31, 2024 2023 Nylon $ 84,389 25 % $ 99,372 25 % Caprolactam 61,476 18 % 72,390 18 % Ammonium Sulfate 85,263 25 % 114,218 28 % Chemical Intermediates 105,701 32 % 114,564 29 % Total $ 336,829 100 % $ 400,544 100 % The Company's revenues by geographic area, and related approximate percentage of total sales, for the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, 2024 2023 United States $ 284,587 84 % $ 320,926 80 % International 52,242 16 % 79,618 20 % Total $ 336,829 100 % $ 400,544 100 % Deferred Income and Customer Advances 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 three months ended March 31, 2024: Opening balance January 1, 2024 $ 15,678 Additional cash advances 393 Less amounts recognized in revenues ( 4,785 ) Ending balance March 31, 2024 $ 11,286 The Company expects to recognize as revenue the March 31, 2024 ending balance of Deferred income and customer advances within one year or less. 4. Earnings Per Share The computation of basic and diluted earnings per share ("EPS") is based on Net income (loss) 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, 2024 and 2023 were as follows: 10 ADVANSIX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and as otherwise noted) Three Months Ended March 31, 2024 2023 Basic Net Income (Loss) $ ( 17,396 ) $ 34,954 Weighted average common shares outstanding 26,878,660 27,601,784 EPS – Basic $ ( 0.65 ) $ 1.27 Diluted Dilutive effect of equity awards and other stock-based holdings — 984,779 Weighted average common shares outstanding 26,878,660 28,586,563 EPS – Diluted $ ( 0.65 ) $ 1.22 Diluted EPS is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the period. The diluted EPS calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. The anti-dilutive common stock equivalents outstanding at the three months ended March 31, 2024 and 2023 were as follows: Three Months Ended March 31, 2024 2023 Options and stock equivalents 909,231 266,644 Dividend activity for the three months ended March 31, 2024 and 2023 was as follows: Three Months Ended March 31, 2024 2023 Cash dividends declared per share $ 0.16 $ 0.145 Aggregate dividends paid to shareholders $ 4,290 $ 4,020 5. Accounts and Other Receivables – Net March 31, 2024 December 31, 2023 Accounts receivables $ 161,189 $ 155,267 Other 10,766 10,959 Total accounts and other receivables 171,955 166,226 Less – allowance for doubtful accounts ( 759 ) ( 833 ) Total accounts and other receivables – net $ 171,196 $ 165,393 6. Inventories 11 ADVANSIX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and as otherwise noted) March 31, 2024 December 31, 2023 Raw materials $ 103,227 $ 159,240 Work in progress 58,620 54,936 Finished goods 60,893 61,891 Spares and other 32,232 30,931 254,972 306,998 Reduction to LIFO cost basis ( 64,051 ) ( 95,167 ) Total inventories $ 190,921 $ 211,831 Substantially all of the Company’s inventories at March 31, 2024 and December 31, 2023 are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method. However, approximately 8 % was valued at average cost using the first-in, first-out (“FIFO”) method at March 31, 2024. The excess of replacement cost over the carrying value of total inventories subject to LIFO was $ 62.2 million and $ 65.3 million at March 31, 2024 and December 31, 2023, respectively. 7. Leases We determine if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets ("ROU"), Operating lease liabilities – short-term, and Operating lease liabilities – long-term in our Condensed Consolidated Balance Sheets. Finance leases are included in Property, plant and equipment – net, Accounts payable, and Other liabilities in our Condensed Consolidated Balance Sheets. The components of lease expense were as follows: Three Months Ended March 31, 2024 2023 Finance lease cost: Amortization of right-of-use asset $ 243 $ 221 Interest on lease liabilities 38 18 Total finance lease cost 281 239 Operating lease cost 12,252 11,356 Short-term lease cost 1,193 1,026 Total lease cost $ 13,726 $ 12,621 As of March 31, 2024, we have additional operating and finance leases that have not yet commenced for approximately $ 126.7 million and approximately $ 0.4 million. These leases will commence during 2024 with lease terms of up to 7 years. 8. Goodwill and Intangible Assets Intangible assets with finite lives acquired through a business combination are recorded at fair value, less accumulated amortization. Customer relationships and trade-names are amortized on a straight-line basis over their expected useful lives of 15 to 20 years and 5 years, respectively. Goodwill There was no change in the carrying amount of goodwill for the three months ended March 31, 2024. Finite-Lived Intangible Assets Intangible assets subject to amortization were as follows: 12 ADVANSIX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and as otherwise noted) March 31, 2024 December 31, 2023 Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Customer relationships $ 36,820 $ ( 4,236 ) $ 32,584 $ 36,820 $ ( 3,760 ) $ 33,060 Licenses 18,451 ( 6,227 ) 12,224 18,451 ( 5,996 ) 12,455 Trade names 1,100 ( 477 ) 623 1,100 ( 422 ) 678 Total $ 56,371 $ ( 10,940 ) $ 45,431 $ 56,371 $ ( 10,178 ) $ 46,193 For each of the three months ended March 31, 2024 and March 31, 2023, the Company recorded amortization expense on intangible assets of $ 0.8 million. 9. 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 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. We assumed from Honeywell International Inc. ("Honeywell") all health, safety and environmental (“HSE”) liabilities and compliance obligations related to the past and future operations of our current business as of the spin-off, as well as all HSE liabilities associated with the three manufacturing locations assumed from Honeywell that are used in our current operations, including any cleanup or other liabilities related to any contamination that may have occurred at such locations in the past. Honeywell retained all HSE liabilities related to former business locations or the operation of our former businesses. 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. 10. Income Taxes The (benefit) provision for income taxes was ($ 6.0 million) and $ 9.3 million for the three months ended March 31, 2024 and 2023, respectively, resulting in an effective tax rate of 25.7 % and 21.0 %, 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 effective tax rate for the three months ended March 31, 2024 was higher than the U.S. federal statutory rate, due to the impacts of state taxes and executive compensation deduction limitations, partially offset by tax credits. 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 discrete tax adjustment was recorded in the first quarter of 2023 related to the vesting of equity compensation that resulted in a 2.3 % decrease to the Company's quarterly effective tax rate. 11. Fair Value Measurements 13 ADVANSIX INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share and per share amounts and as otherwise noted) Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 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. The Company also has assets that are required to be recorded at fair value on a non-recurring basis. These assets are evaluated when certain triggering events occur (including a decrease in estimated future cash flows) that indicate the asset should be evaluated for impairment which could result in such assets being measured at fair value. Goodwill must be evaluated at least annually. Our annual evaluation occurred on October 28, 2023 and we concluded that an impairment for goodwill did no t occur. 12. Derivative and Hedging Instruments The Company had entered into an 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 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. At March 31, 2024, the Company had no derivatives designated as hedging instruments under ASC 815 and had no fair value adjustments related to cash flow hedging for the three months ended March 31, 2024. 13. 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, 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 $ 13 million as of March 31, 2024 and approximately $ 17 million as of December 31, 2023. These amounts outstanding are included in Accounts payable . 14. Subsequent Events As announced on May 3, 2024, the Board declared a quarterly cash dividend of $ 0.160 per share on the Company's common stock, payable on May 28, 2024 to stockholders of record as of the close of business on May 14, 2024. 14