What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-01 compared with 2024-08-02 · 95 added, 75 removed, 230 unchanged (43% of the section changed)

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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 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.;

instability or volatility in financial markets or other unfavorable economic or business conditions caused by geopolitical concerns, including as a result of the political and policy uncertainties with the approaching U.S.

Presidential election, and the conflict between Russia and Ukraine, the conflict in Israel and Gaza and the possible expansion of such conflicts;

the effect of any 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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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.

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

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.

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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 fibers, compounds 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, 2024.

Our Hopewell, VA manufacturing facility is one of the world’s largest single-site producers of caprolactam as of September 30, 2024.

• Ammonium Sulfate – Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key plant nutrients.

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, 2024.

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, 2024.

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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North American ammonium sulfate demand and pricing, particularly for our higher-value granular product, are typically strongest during second quarter fertilizer application and then typically decline seasonally with new season fill in the third quarter.

Ammonium sulfate industry prices in the corn belt have declined approximately 10% from

the second quarter to the third quarter, on average, since 2016.

Ammonium sulfate industry prices in the corn belt have declined approximately 10% from the second quarter to the third quarter, on average, since 2016.

Due to the ammonium sulfate fertilizer sales cycle, we occasionally build up higher inventory balances because our production is continuous and not tied to seasonal demand for fertilizers.

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Business Operations

In October 2024, additional required maintenance at our Hopewell, VA manufacturing site resulted in a delayed ramp to full operating rates following our multi-site planned plant turnaround.

The Company expects an incremental approximately $17 million unfavorable impact to pre-tax income in the fourth quarter 2024, inclusive of $10 million related to fixed cost absorption and higher maintenance expense, and $7 million of lost sales.

The unplanned interruption did not have any impact on the third quarter 2024 financial results.

In January 2024, the Company experienced a process-based operational disruption at its Frankford, Pennsylvania manufacturing site temporarily reducing phenol and acetone production at the facility, as well as production at its Hopewell and Chesterfield, Virginia facilities.

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Chesterfield, VA Collective Bargaining Agreement

On May 9, 2024, the Company’s Chesterfield bargaining unit, represented by the Teamsters Local 592, ratified a new five-year labor agreement in advance of the prior agreement’s anticipated expiration date of May 14, 2024.

The ratified labor agreement affected approximately 160 workers at the Company’s manufacturing facility in Chesterfield, Virginia.

Succession of Senior Vice President and Chief Financial Officer

Michael Preston retired as the Company's Senior Vice President and Chief Financial Officer, effective as of October 1, 2024, but will remain at the Company through year-end 2024 to help facilitate the transition of his responsibilities to his successor.

Effective as of October 1, 2024, the Board of Directors has appointed Siddharth Manjeshwar as Senior Vice President and Chief Financial Officer to succeed Mr.

Results of Operations

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Three Months Ended

June 30, 2024 Six Months Ended

June 30, 2024

September 30, 2024 Nine Months Ended

September 30, 2024

Volume 10.6% 2.6%

Price 12.7% 0.6%

Sales increased in the three months ended June 30, 2024 compared to the prior year period by $25.5 million (approximately 6%) due to (i) increased volume primarily driven by higher sales of nylon and ammonium sulfate (approximately 5%) due to favorable North American supply and demand conditions, and (ii) net favorable pricing including continued strength in acetone (approximately 1%).

Sales decreased in the six months ended June 30, 2024 compared to the prior year period by $38.2 million (approximately 5%) due to (i) net unfavorable impact of market-based and raw material pass-through pricing (approximately 4%) 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, and (ii) a decrease in sales volume (approximately 1%) primarily driven by lost sales resulting from the first quarter operational disruption partially offset by strong second quarter sales volume.

Sales increased in the three months ended September 30, 2024 compared to the prior year period by $75.3 million (approximately 23%) due primarily to (i) increased volume (approximately 11%) primarily driven by higher sales of all product lines, particularly ammonium sulfate supported by sulfur nutrition demand, (ii) favorable raw material pass-through pricing (approximately 8%) as a result of a net cost increase in benzene and propylene (inputs to cumene which is a key feedstock to our products), and (iii) net favorable market-based pricing (approximately 5%) including continued strength in acetone, as well as ammonium sulfate as growers seeking to maximize crop yields continue to recognize the benefits of sulfur nutrition.

Sales increased in the nine months ended September 30, 2024 compared to the prior year period by $37.1 million (approximately 3%) due primarily to (i) increased volume (approximately 3%) primarily driven by higher sales of our nylon and ammonium sulfate product lines with strength in the second and third quarters more than offsetting lost sales resulting from the process-based operational disruption at the Frankford site in the first quarter, and (ii) net pricing (approximately 1%) reflecting favorable raw material pass-through pricing partially offset by lower market-based pricing.

Costs of Goods Sold

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Gross Margin percentage 14.4% 2.5% 11.9% 12.7%

Costs of goods sold increased in the three months ended June 30, 2024 compared to the prior year period by $12.1 million (approximately 3%) due to increased sales volume (approximately 4%).

Costs of goods sold increased in the six months ended June 30, 2024 compared to the prior year period by $16.0 million (approximately 2%) due to increased second quarter 2024 sales volume (approximately 2%), the impact of lower production volumes primarily driven by the process-based operational disruption at the Frankford, Pennsylvania manufacturing site (approximately 1%), partially offset by a decrease in raw material costs driven by natural gas and sulfur (approximately 2%).

Gross margin percentage increased in the three months ended June 30, 2024 compared to the prior year period (approximately 2%) due primarily to higher sales volume (approximately 1%) and lower plant costs (approximately 2%).

Gross margin percentage decreased in the six months ended June 30, 2024 compared to the prior year period (approximately 6%) due primarily to (i) the net impact of lower sales volume and changes in sales mix (approximately 2%) as well as lower production volumes (approximately 1%), primarily driven by the process-based operational disruption at the Frankford, Pennsylvania manufacturing site and (ii) the impact of market-based pricing, net of raw material costs (approximately 2%).

Costs of goods sold increased in the three months ended September 30, 2024 compared to the prior year period by $26.1 million (approximately 8%) due primarily to (i) increased prices of raw materials (approximately 8%) and (ii) i ncreased sales volume (approximately 7%), partially offset by the favorable timing of planned plant turnarounds year-over-year (approximately 8%).

Costs of goods sold increased in the nine months ended September 30, 2024 compared to the prior year period by $42.0 million (approximately 4%) due primarily to (i) increased sales volume (approximately 4%), (ii) the impact of lower production volumes (approximately 2%) primarily driven by the process-based operational disruption at the Frankford, Pennsylvania manufacturing site and (iii) increased prices of raw materials (approximately 1%), partially offset by the favorable timing of the planned plant turnarounds year-over-year (approximately 2%).

Gross margin percentage increased in the three months ended September 30, 2024 compared to the prior year period (approximately 12%) due primarily to (i) favorable timing of the planned plant turnarounds year-over-year (approximately 6%), (ii) the impact of market-based pricing, net of raw material costs (approximately 4%), and (iii) higher sales volume (approximately 3%).

Gross margin percentage decreased in the nine months ended September 30, 2024 compared to the prior year period (approximately 1%) due primarily to (i) the net impact of lower production volumes (approximately 2%) driven primarily by the process-based operational disruption at the Frankford, Pennsylvania manufacturing site and (ii) the impact of market-based pricing, net of raw material costs (approximately 1%), partially offset by the favorable timing of the planned plant turnarounds year-over-year (approximately 2%) and decreased plant costs (approximately 1%).

Selling, General and Administrative Expenses

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Percentage of Sales 6.1% 6.7% 6.1% 6.1%

Selling, general and administrative expenses remained relatively flat in the three months ended June 30, 2024 compared to the prior year period.

Selling, general and administrative expenses decreased by $1.1 million in the six months ended June 30, 2024 compared to the prior year period due to lower bad debt expense and a decline in functional support costs, including a moderation of enterprise resource planning system expense from the prior year.

Selling, general and administrative expenses increased by $2.7 million in the three months ended September 30, 2024 compared to the prior year period due primarily to increased incentive-based compensation expense and enterprise resource planning system expense partially offset by moderated functional support costs.

Selling, general and administrative expenses increased by $1.6 million in the nine months ended September 30, 2024 compared to the prior year period due to increased incentive-based compensation expense and enterprise resource planning system expense partially offset by lower bad debt expense and moderated functional support costs.

Income Tax Expense

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Income tax expense $ 13,145 $ 10,555 $ 7,124 $ 19,829

Income tax expense (benefit) $ 7,479 $ (2,076) $ 14,603 $ 17,753

Effective tax rate 25.1% 20.7% 25.0% 22.9%

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 and six months ended June 30, 2024 was higher than the U.S.

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

The Company’s effective tax rate for the three and six months ended June 30, 2023 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 0.9% decrease to the year-to-date effective tax rate.

The Company's effective tax rate for the three months ended June 30, 2024 was higher than the prior year period due primarily to impacts of executive compensation deduction limitations and a decrease in the projected foreign-derived intangible income deduction.

The Company's effective tax rate for the six months ended June 30, 2024 was higher than the prior year period due primarily to the larger benefit from the vesting of equity compensation in the prior year period versus the current year period and a decrease in the projected foreign-derived intangible income deduction.

On January 31, 2024, the U.S.

House of Representatives approved a tax bill, which among other provisions, aims to reinstate 100% bonus depreciation for property placed in service after December 31, 2022 until January 1, 2026 and to allow taxpayers to expense domestic research costs retroactively back to 2022 and prospectively through tax years beginning before 2026.

Enactment remains highly uncertain, but the Company continues to monitor ongoing developments in the proposed legislation.

The Company’s provision (benefit) 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 and nine months ended September 30, 2024 and 2023 differed from the U.S.

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

In 2024, the Company recorded discrete tax adjustments related to the vesting of equity compensation, changes to state tax legislation, and return to provision adjustments related to the filing of the Company's 2023 U.S.

federal income tax return which resulted in a net 3.3% increase to the quarterly effective tax rate and a net 1.5% increase to the year-to-date effective tax rate.

Additionally for 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, 2024 was higher than the prior year period due primarily to the Loss before taxes recorded in the prior year period and a related reduction in the foreign-derived intangible income benefit that collectively reduced the 2023 quarterly rate by approximately 6%.

The Company's effective tax rate for the nine months ended September 30, 2024 was higher than the prior year period due primarily to the impacts of discrete adjustments in each respective period, which represented a net increase in the quarterly rate of approximately 3.1% as compared to the prior year period.

This increase in the effective tax rate was attributable to the return to provision adjustments related to the filing of the Company's U.S.

federal income tax returns and a reduction in the benefit associated with vesting of equity compensation, net of a decrease in effective tax rate associated with state legislation enacted during the period ended September 30, 2024.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income $ 38,927 $ 32,728 $ 21,531 $ 67,682

As a result of the factors described above, Net income was $38.9 million for the three months ended June 30, 2024 as compared to $32.7 million in the corresponding prior year period.

As a result of the factors described above, Net income was $21.5 million for the six months ended June 30, 2024 as compared to $67.7 million in the corresponding prior year period.

Net income (loss) $ 22,266 $ (7,977) $ 43,797 $ 59,705

As a result of the factors described above, Net income (loss) was $22.3 million for the three months ended September 30, 2024 as compared to $(8.0) million in the corresponding prior year period.

As a result of the factors described above, Net income was $43.8 million for the nine months ended September 30, 2024 as compared to $59.7 million in the corresponding prior year period.

Non-GAAP Measures

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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.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income $ 38,927 $ 32,728 $ 21,531 $ 67,682

Net income (loss) $ 22,266 $ (7,977) $ 43,797 $ 59,705

Non-cash stock-based compensation 1,559 1,391 5,963 5,840

Non-recurring, unusual or extraordinary expenses* 1,200 — 1,200 —

Non-recurring, unusual or extraordinary (income) expense* — (4,472) 1,200 (4,472)

Non-cash amortization from acquisitions 531 532 1,595 1,596

Non-recurring M&A costs — — — —

Benefit from income taxes relating to reconciling items (762) (498) (1,227) (933)

Adjusted Net income (non-GAAP) 42,090 35,198 26,972 72,262

Income tax expense (benefit) relating to reconciling items (367) 776 (1,594) (157)

Adjusted Net income (loss) (non-GAAP) 23,989 (9,750) 50,961 62,512

Interest expense, net 2,924 2,075 9,137 5,296

Income tax expense - Adjusted 13,907 11,053 8,351 20,763

Income tax expense (benefit) - Adjusted 7,846 (2,852) 16,197 17,911

Depreciation and amortization - Adjusted 18,402 17,848 55,602 52,741

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Adjusted EBITDA Margin** (non-GAAP) 13.4% 2.3% 11.1% 12.0%

* Includes a pre-tax loss of approximately $1.2 million related to the reduction of the Company's anticipated receivable related to the gain on the termination fee recorded upon the exit from the Oben alliance during the third quarter of 2023.

* 2024 includes a pre-tax loss of approximately $1.2 million from the reduction of the Company's anticipated receivable related to the gain on the termination fee recorded upon the exit from the Oben Holding Group S.A.

alliance during the third quarter of 2023.

During 2023, there were several transactions including the exit from the Oben Holding Group S.A.

alliance, licensee exit of legacy technology and exit of certain low-margin oximes products that resulted in a $4.5 million net pre-tax loss.

** 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,

2024 2023 2024 2023

Net income $ 38,927 $ 32,728 $ 21,531 $ 67,682

Adjusted Net income (non-GAAP) 42,090 35,198 26,972 72,262

Net income (loss) $ 22,266 $ (7,977) $ 43,797 $ 59,705

Adjusted Net income (loss) (non-GAAP) 23,989 (9,750) 50,961 62,512

Weighted-average number of common shares outstanding - basic 26,790,752 27,209,521 26,836,114 27,433,851

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(Dollars in thousands, unless otherwise noted)

We believe that cash balances and operating cash flows, together with available capacity under our credit agreement, as utilized in the second quarter of 2024, will provide adequate funds to support our current short-term operating objectives as well as our longer-term strategic plans, subject to the risks and uncertainties outlined below, in our "Note Regarding Forward-Looking Statements" above, and in the risk factors previously disclosed in Item 1A of Part I of our 2023 Form 10-K.

We believe that cash balances and operating cash flows, together with available capacity under our credit agreement, as utilized in the third quarter of 2024, will provide adequate funds to support our current short-term operating objectives as well as our longer-term strategic plans, subject to the risks and uncertainties outlined below, in our "Note Regarding Forward-Looking Statements" above, and in the risk factors previously disclosed in Item 1A of Part I of our 2023 Form 10-K.

Our principal source of liquidity is our cash flow generated from operating activities, which is expected to provide us with the ability to meet the majority of our short-term funding requirements.

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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 2023 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 2024, the Company had approximately $12.1 million of cash on hand with approximately $269 million of additional capacity available under the revolving credit facility.

As of the end of the third quarter of 2024, the Company had approximately $17.3 million of cash on hand with approximately $284 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 $140 million to $150 million in 2024 compared to $107 million in 2023, reflecting increased spend due to replacement maintenance, growth and cost savings projects and enterprise programs.

Capital expenditures are expected to be approximately $135 million to $140 million in 2024 compared to $107 million in 2023, reflecting refined execution timing

to address critical enterprise risk mitigation and growth projects including our SUSTAIN (Sustainable U.S.

Sulfate to Accelerate Increased Nutrition) program.

We assumed from Honeywell International Inc.

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We expect that our primary cash requirements for 2024 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, 2024.

The Company expects aggregate cash contributions of $0 to $2 million in 2024 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, 2024 and does not expect to make cash contributions during the fourth quarter of 2024.

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, 2024

Authorized Amount Remaining as of September 30, 2024

May 4, 2018 $ 75.0 $ —

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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, 2024, the Company has repurchased a total of 6,250,181 shares of common stock life-to-date, including 1,004,725 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $192.4 million at a weighted average market price of $30.78 per share.

As of June 30, 2024, $62.0 million remained available for share repurchases under the current authorization.

During the period from July 1, 2024 through July 26, 2024, 1,933 additional shares were repurchased for tax withholding obligations in connection with the vesting of equity awards at a weighted average market price of $21.64, and no additional shares were repurchased under the currently authorized repurchase program.

As of June 30, 2024, 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 2023 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, 2024, the Company has repurchased a total of 6,252,129 shares of common stock life-to-date, including 1,006,673 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $192.4 million at a weighted average market price of $30.78 per share.

As of September 30, 2024, $62.0 million remained available for share repurchases under the current authorization.

During the period October 1, 2024 through October 25, 2024, no additional shares were repurchased for tax withholding obligations or under the currently authorized repurchase program.

As of September 30, 2024, 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 2023 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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5/3/2024 5/14/2024 5/28/2024 $0.16 $4.3

2/16/2024 3/4/2024 3/18/2024 $0.16 $4.3

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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Credit Agreement

On September 30, 2016, the Company as the borrower, entered into a Credit Agreement with Bank of America, as administrative agent (the "Original Credit Agreement"), which was amended on February 21, 2018 (the "First Amended and Restated Credit Agreement"), and further amended on February 19, 2020 (the “Second Amended and Restated Credit

The Second Amended and Restated Credit Agreement had a five-year term with a scheduled maturity date of February 21, 2023.

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The Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets.

The Credit Agreement also contains financial covenants that require the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 3.00 to 1.00 and to maintain a Consolidated Leverage Ratio of (i) 4.00 to 1.00 or less for the fiscal quarter ending December 31, 2021, through and including the fiscal quarter ending September 30, 2023 and (ii) 3.75 to 1.00 or less for each fiscal quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in connection with certain acquisitions).

(ii) 3.75 to 1.00 or less for each fiscal quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in connection with certain acquisitions).

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

We were in compliance with all of our covenants at June 30, 2024 and through the date of the filing of this Form 10-Q.

We were in compliance with all of our covenants at September 30, 2024 and through the date of the filing of this Form 10-Q.

We had a borrowed balance of $170 million under the Revolving Credit Facility at December 31, 2023.

We borrowed an incremental net amount of $60 million during the six months ended June 30, 2024, bringing the balance under the Revolving Credit Facility to $230 million, and available credit for use of approximately $269 million as of June 30, 2024.

We borrowed an incremental net amount of $45 million during the nine months ended September 30, 2024, bringing the balance under the Revolving Credit Facility to $215 million, and available credit for use of approximately $284 million as of September 30, 2024.

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 $ (12,470) $ (8,875)

Cash provided by operating activities decreased by $22.6 million for the six months ended June 30, 2024 versus the prior year period due primarily to (i) a $46.2 million decrease in Net income and (ii) the unfavorable cash impact of $12.8 million from Taxes receivable and Income taxes payable combined, driven by the timing of tax payments.

These net unfavorable impacts were partially offset by (i) a $20.1 million favorable cash impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) with a $46.2 million unfavorable cash impact from working capital for the six months ended June 30, 2024 compared to a $66.3 million unfavorable cash impact in the prior year period due primarily to the favorable impact of Inventory and Deferred income and customer advances partially offset by Accounts and other receivables and Accounts payable, (ii) a $11.9 million favorable cash impact from accrued liabilities due primarily to the timing of payments during the six months ended June 30, 2023 compared to the prior year period and (iii) a $4.3 million favorable impact from other assets and liabilities.

Cash used for investing activities increased by $26.7 million for the six months ended June 30, 2024 versus the prior year period due primarily to higher cash payments for capital expenditures of approximately $25.0 million during the current year period primarily reflecting increased spend on replacement maintenance and enterprise programs.

Cash provided by financing activities increased by $52.1 million for the six months ended June 30, 2024 versus the prior year period due primarily to net borrowings of $60.0 million during the six months ended June 30, 2024 compared to net borrowings of $25.0 million during the prior year period, partially offset by payments for share repurchases of $10.4 million and cash paid for dividends of approximately $8.6 million during the six months ended June 30, 2024 compared to $28.4 million and $8.0 million during the prior year period, respectively.

Cash provided by operating activities increased by $13.9 million for the nine months ended September 30, 2024 versus the prior year period due primarily to (i) an $18.8 million favorable cash impact from accrued liabilities due primarily to the timing of payments and accruals during the nine months ended September 30, 2024 related to incentive-based compensation and other accrued liabilities compared to the prior year period and (ii) a $9.7 million favorable cash impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) with a $44.4 million unfavorable cash impact from working capital for the nine months ended September 30, 2024 compared to a $54.0 million unfavorable cash impact in the prior year period due primarily to the favorable impact of Deferred income and customer advances, Inventory and Accounts payable partially offset by Accounts and other receivables.

These net favorable impacts were partially offset by a $15.9 million decrease in Net income.

Cash used for investing activities increased by $34.0 million for the nine months ended September 30, 2024 versus the prior year period due primarily to higher cash payments for capital expenditures of approximately $30.3 million during the current year period primarily reflecting increased spend on replacement maintenance and enterprise programs.

Cash provided by financing activities increased by $16.5 million for the nine months ended September 30, 2024 versus the prior year period due primarily to net borrowings of $45.0 million during the nine months ended September 30, 2024 compared to net borrowings of $55.0 million during the prior year period, partially offset by payments for share repurchases of $10.4 million during the nine months ended September 30, 2024 compared to $37.7 million during the prior year period.

Cash paid for dividends was relatively unchanged year-over-year.

Capital Expenditures

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The following table summarizes ongoing and expansion capital expenditures:

Six Months Ended

June 30, 2024

Nine Months Ended

September 30, 2024

Capital expenditures in Accounts payable at December 31, 2023

Purchases of property, plant and equipment 91,731

Capital expenditures in Accounts payable at June 30, 2024

Capital expenditures in Accounts payable at September 30, 2024

Cash paid for capital expenditures $ 99,373

For 2024, we expect our total capital expenditures to be approximately $140 million to $150 million compared to $107 million in 2023, reflecting increased spend to address critical enterprise risk mitigation and growth projects including our SUSTAIN (Sustainable U.S.

For 2024, we expect our total capital expenditures to be approximately $135 million to $140 million compared to $107 million in 2023, reflecting refined execution timing to address critical enterprise risk mitigation and growth projects including our SUSTAIN (Sustainable U.S.

Sulfate to Accelerate Increased Nutrition) program.

3 unchanged sentences

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

For a full description of our critical accounting policies, refer to Management’s Discussion

and Analysis of Financial Condition and Results of Operations contained in our 2023 Form 10-K.

For a full description of our critical accounting policies, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2023 Form 10-K.

While there have been no material changes to our critical accounting policies, or the methodologies or assumptions we apply under them since the filing of the 2023 Form 10-K, we continue to monitor such methodologies and assumptions.

3 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