SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



(Mark One)
ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period endedSeptember 30, ~~2017~~2018



o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Delaware						81-2525089
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)




300 Kimball Drive, Suite 101, Parsippany, New Jersey						07054
(Address of Principal Executive Offices)						(Zip Code)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer oý	Accelerated filer o	Non-accelerated filer xo	Smaller reporting company o
			Emerging growth company o

The Registrant had ~~30,482,966~~29,802,868 shares of common stock, $0.01 par value, outstanding at ~~November 1, 2017.~~October 26, 2018.

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


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017		2016			2017		2016				2018		2017		2018		2017
Sales	$	366,660	$	323,953		$	1,104,805	$	932,201		Sales	$	368,653	$	366,660	$	1,128,350	$	1,104,805
Costs, expenses and other:											Costs, expenses and other:
Costs of goods sold	309,629		285,091			923,268		804,471			Costs of goods sold	343,434		309,408		1,007,712		922,604
Selling, general and administrative expenses	19,086		11,695			54,022		33,949			Selling, general and administrative expenses	18,057		19,050		55,189		53,914
Other non-operating expense (income), net	2,133		(635		)	6,381		(1,792		)	Other non-operating expense (income), net	1,453		2,390		6,581		7,153
	330,848		296,151			983,671		836,628
Total costs, expenses and other											Total costs, expenses and other	362,944		330,848		1,069,482		983,671

Income before taxes	35,812		27,802			121,134		95,573			Income before taxes	5,709		35,812		58,868		121,134
Income taxes	14,538		11,342			46,803		36,712			Income taxes	229		14,538		13,385		46,803
Net income	$	21,274	$	16,460		$	74,331	$	58,861		Net income	$	5,480	$	21,274	$	45,483	$	74,331

Earnings per common share											Earnings per common share
Basic	$	0.70	$	0.54		$	2.44	$	1.93		Basic	$	0.18	$	0.70	$	1.50	$	2.44
Diluted	$	0.68	$	0.54		$	2.40	$	1.93		Diluted	$	0.18	$	0.68	$	1.46	$	2.40
Weighted average common shares outstanding											Weighted average common shares outstanding
Basic	30,482,966		30,482,966			30,482,966		30,482,966			Basic	30,160,991		30,482,966		30,375,873		30,482,966
Diluted	31,159,710		30,482,966			31,013,606		30,482,966			Diluted	30,983,834		31,159,710		31,189,640		31,013,606

ADVANSIX INC.

CONDENSED CONSOLIDATED ~~AND COMBINED~~ STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		2018		2017
Net income	$	5,480	$	21,274	$	45,483	$	74,331
Foreign exchange translation adjustment	(8)		(12)		(26)		(15)

Pension obligation adjustments	—		—		410		—
Other comprehensive income (loss), net of tax	(8)		(12)		384		(15)
Comprehensive income	$	5,472	$	21,262	$	45,867	$	74,316

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $ 21,274
$ 16,460
$ 74,331
$ 58,861
Foreign exchange translation adjustment (12 ) (148 ) (15 ) 284
Commodity hedges —
(3,470 ) —
(1,635 )
Other comprehensive income (loss), net of tax (12 ) (3,618 ) (15 ) (1,351 )
Comprehensive income $ 21,262
$ 12,842
$ 74,316
$ 57,510

ADVANSIX INC.

CONDENSED CONSOLIDATED ~~AND COMBINED~~ BALANCE SHEETS

(Unaudited)

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


	September 30, 2018		December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	20,206	$	55,432
Accounts and other receivables – net	149,099		196,003
Inventories – net	115,026		129,208
Other current assets	3,900		7,130
Total current assets	288,231		387,773
Property, plant and equipment – net	639,728		612,612
Goodwill	15,005		15,005

Other assets	37,312		34,884
Total assets	$	980,276	$	1,050,274

LIABILITIES
Current liabilities:
Accounts payable	$	209,239	$	227,712
Accrued liabilities	26,310		35,013

Deferred income and customer advances	2,295		17,194
Line of credit – short-term	9,400		—
Current portion of long-term debt	—		16,875
Total current liabilities	247,244		296,794
Deferred income taxes	101,092		92,276
Line of credit – long-term	190,600		—
Long-term debt	—		248,339
Postretirement benefit obligations	28,145		33,396
Other liabilities	4,350		3,144
Total liabilities	571,431		673,949

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 200,000,000 shares authorized; 30,555,715 shares issued and 29,991,468 outstanding at September 30, 2018; 30,482,966 shares issued and outstanding at December 31, 2017	306		305
Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at September 30, 2018 and December 31, 2017	—		—
Treasury stock at par (564,247 shares at September 30, 2018; 0 shares at December 31, 2017)	(6)		—
Additional paid-in capital	250,149		263,081
Retained earnings	167,058		121,985
Accumulated other comprehensive loss	(8,662)		(9,046)
Total stockholders' equity	408,845		376,325
Total liabilities and stockholders' equity	$	980,276	$	1,050,274

September 30, 2017 December 31, 2016
ASSETS

Current assets:

Cash and cash equivalents $ 39,986
$ 14,199
Accounts and other receivables – net 152,511
131,671
Inventories – net 100,474
128,978
Other current assets 8,684
7,690
Total current assets 301,655
282,538
Property, plant and equipment – net 597,877
575,375
Goodwill 15,005
15,005
Other assets 35,105
32,039
Total assets $ 949,642
$ 904,957

LIABILITIES

Current liabilities:

Accounts payable $ 177,688
$ 222,929
Accrued liabilities 27,630
25,396
Income taxes payable 18
86
Deferred income and customer advances 801
25,567
Current portion of long-term debt 10,125
—
Total current liabilities 216,262
273,978
Deferred income taxes 147,461
114,200
Long-term debt 254,995
264,838
Postretirement benefit obligations 25,372
33,544
Other liabilities 2,941
3,035
Total liabilities 647,031
689,595

COMMITMENTS AND CONTINGENCIES (Note 8)

EQUITY

Common stock, par value $0.01; 200,000,000 shares authorized and 30,482,966 shares issued and outstanding 305
305
Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding —
—
Additional paid in capital 255,709
242,806
Retained earnings/(accumulated deficit) 49,617
(24,714 )
Accumulated other comprehensive income (loss) (3,020 ) (3,035 )
Total equity 302,611
215,362
Total liabilities and equity $ 949,642
$ 904,957

ADVANSIX INC.

CONDENSED CONSOLIDATED~~AND COMBINED~~ STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Nine Months Ended September 30,
	2018		2017
Cash flows from operating activities:
Net income	$	45,483	$	74,331
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	38,905		35,524
Loss on disposal of assets	1,560		1,236
Deferred income taxes	8,816		40,478
Stock based compensation	7,506		5,686
Accretion of deferred financing fees	1,696		444
Changes in assets and liabilities:
Accounts and other receivables	46,878		(20,825)
Inventories	14,182		28,504
Accounts payable	(10,675)		(33,893)
Income taxes payable	—		(68)
Accrued liabilities	(9,703)		2,234
Deferred income and customer advances	(14,899)		(24,766)
Other assets and liabilities	(2,014)		(10,414)
Net cash provided by operating activities	127,735		98,471

Cash flows from investing activities:
Expenditures for property, plant and equipment	(72,650)		(67,206)
Other investing activities	(1,656)		(5,387)
Net cash used for investing activities	(74,306)		(72,593)

Cash flows from financing activities:

Payment of long-term debt	(266,625)		—

Borrowings from line of credit	284,500		308,500
Payments of line of credit	(84,500)		(308,500)
Payment of line of credit fees	(1,362)		—

Principal payments under capital lease	(225)		(91)

Purchase of treasury shares	(20,443)		—

Net cash used for financing activities	(88,655)		(91)

Net change in cash and cash equivalents	(35,226)		25,787
Cash and cash equivalents at beginning of period	55,432		14,199
Cash and cash equivalents at the end of period	$	20,206	$	39,986

Supplemental non-cash investing activities:
Capital expenditures included in accounts payable	$	17,649	$	17,228

Supplemental cash investing activities:
Cash paid for interest	$	4,406	$	7,976
Cash paid for income taxes	$	7,254	$	12,695

Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities:

Net income $ 74,331
$ 58,861
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization 35,524
29,964
Loss on disposal of assets 1,236
1,246
Deferred income taxes 40,478
29,206
Stock based compensation 5,686
—
Accretion of deferred financing fees 444
—
Changes in assets and liabilities:
Accounts and other receivables (20,825 ) (20,117 )
Inventories 28,504
13,581
Accounts payable (33,893 ) (161 )
Income taxes payable (68 ) —
Accrued liabilities 2,234
(9,690 )
Deferred income and customer advances (24,766 ) (23,501 )
Other assets and liabilities (10,414 ) (12,922 )
Net cash provided by operating activities 98,471
66,467

Cash flows from investing activities:

Expenditures for property, plant and equipment (67,206 ) (56,859 )
Other investing activities (5,387 ) (461 )
Net cash used for investing activities (72,593 ) (57,320 )

Cash flows from financing activities:

Proceeds from long term debt —
270,000
Payment of debt issuance costs —
(1,770 )
Borrowings from revolving credit facility 308,500
40,000
Payments to revolving credit facility (308,500 ) —
Payment of revolving credit facility fees —
(1,016 )
Distribution to Honeywell in connection with the Spin-Off —
(269,347 )
Principal payments of capital leases (91 ) —
Net decrease in invested equity —
(9,050 )
Net cash (used for) provided by financing activities (91 )
28,817

Net increase in cash and cash equivalents 25,787
37,964
Cash and cash equivalents at beginning of period 14,199
—
Cash and cash equivalents at the end of period $ 39,986

$ 37,964

Non-Cash Investing Activities:

Capital expenditures included in accounts payable $ 17,228
$ 19,935

Supplemental Disclosure of Cash Flow Information:

Interest paid $ 7,976
$ —
Income taxes paid $ 12,695
$ —

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED ~~AND COMBINED~~ 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 ~~the “Company”~~"our") is an integrated manufacturer of Nylon 6, a polymer resin which is a synthetic material used by our customers to produce engineered plastics, fibers, filaments and films that, in turn, are used in such end-products as automotive and electronic components, carpets, sports apparel, fishing nets and food and industrial packaging. As a result of our backward integration and the configuration of our manufacturing facilities, we also sell a variety of other products, all of which are produced as part of our integrated Nylon 6 ~~integrated~~resin manufacturing ~~chain~~process including caprolactam, ammonium sulfate fertilizers, acetone and other chemical intermediates. ~~Each of our product lines represented the following approximate percentage of our sales:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Nylon 28% 29% 29% 29%
Caprolactam 19% 16% 19% 16%
Ammonium Sulfate Fertilizers 20% 22% 20% 24%
Chemical Intermediates 33% 33% 32% 31%

Separation from Honeywell

On October 1, 2016, Honeywell International Inc. (“Honeywell”) completed the separation of AdvanSix. The separation was completed by Honeywell distributing (the “Distribution”) all of the then outstanding shares of common stock of AdvanSix on October 1, 2016 (the “Distribution Date”) through a dividend in kind of AdvanSix common stock, par value $0.01, to holders of Honeywell common stock as of the close of business on the record date of September 16, 2016 who held their shares through the Distribution Date (the “Spin-Off”).

Each Honeywell stockholder who held their shares through the Distribution Date received one share of AdvanSix common stock for every 25 shares of Honeywell common stock held at the close of business on the record date of September 16, 2016. ~~The separation~~We filed our Form 10 describing the Spin-Off with the Securities and Exchange Commission (the “SEC”), which was ~~completed pursuant to a Separation and Distribution Agreement and other agreements with Honeywell related to~~declared effective by the separation, including an Employee Matters Agreement, a Tax Matters Agreement, and Transition Services Agreement as well as Site Sharing and Services Agreements for Chesterfield, Colonial Heights and Pottsville. These agreements govern the relationship between AdvanSix and Honeywell following the separation and provide for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to be provided by Honeywell to AdvanSix and by AdvanSix to Honeywell.

SEC on September 8, 2016 (the “Form 10”). On October 3, 2016, AdvanSix stock began “regular-way” trading on the New York Stock Exchange under the “ASIX” stock symbol.

Basis of Presentation

Unless the context otherwise requires, references in these Notes to Condensed Consolidated and Combined Financial Statements to “we,” “us,” “our,” “AdvanSix” and the “Company” refer to AdvanSix Inc. and its consolidated subsidiaries after giving effect to the Spin-Off. All significant intercompany balances and transactions have been eliminated.

The Condensed Consolidated ~~and Combined~~ 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 ~~and Combined~~ Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of ~~its~~the Company's financial position as of September 30, ~~2017,~~2018, and its results of operations for the three and nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, and cash flows for the nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017. The Condensed Consolidated ~~and~~

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

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

~~Combined~~ Balance ~~Sheet~~Sheets at December 31, ~~2016 was~~2017 were derived from audited annual financial statements but ~~does~~do not contain all of the footnote disclosures from the annual financial statements. 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 (the "2017 Form 10-K") for the year ended December 31, ~~2016.~~

~~In preparing these Condensed Consolidated and Combined Financial Statements, the Company has evaluated events and~~2017. All intercompany transactions ~~for potential recognition or disclosure through the date that the Condensed Consolidated and Combined Financial Statements were issued.~~have been eliminated.

Certain prior period amounts have been reclassified for consistency with the current period presentation.

Liabilities to creditors to whom we have issued checks that remained outstanding at September 30, ~~2017~~2018, and December 31, ~~2016~~2017 aggregated ~~$6.4~~$8.2 million and ~~$12.5~~$8.5 million, respectively, and were included in Cash and cash equivalents and Accounts payable in the Condensed Consolidated ~~and Combined~~ Balance Sheets.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

discontinued at any time. The Company had approximately 30 million shares of common stock outstanding as of September 30, 2018. The par value of the shares repurchased is applied to Treasury stock and the excess of the purchase price over par value is applied to Additional paid-in capital.

As of September 30, 2018, the Company had repurchased 545,282 shares of common stock for an aggregate of $19.7 million under the currently authorized program at a weighted average market price of $36.06 per share. As of September 30, 2018, $55.3 million remained available for share repurchases under the currently authorized program.

2. Recent Accounting Pronouncements

The Company considers the applicability and impact of all Accounting Standards Updates (“~~ASU”~~ASUs”). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,~~ which simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under ASC 350. Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The amendment eliminates the requirement to calculate a goodwill impairment charge by comparing the implied fair value of goodwill with its carrying amount (i.e., Step 2 of today’s goodwill impairment test). The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company elected to adopt ASU 2017-04 early beginning in January 2017 and there was no impact on the Company’s consolidated financial position and results of operations upon ~~adoption.~~adoption other than pension expense reclassifications in the 2017 Consolidated Statement of Operations which reduced Costs of goods sold and Selling, general and administrative expenses and increased Other non-operating expense (income), net.

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

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

acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The new guidance requires an entity to first evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set of transferred assets and activities is not a business. If the threshold is not met, the entity evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. For public business entities, the effective date for ASU 2017-01 is annual periods beginning after December 15, 2017, including interim periods within those periods. The Company elected to adopt ASU 2017-01 early beginning in January 2017 and there was no impact on the Company’s consolidated financial position and results of operations upon adoption.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Compensation – Stock Compensation (Topic 718)~~, which simplifies certain aspects of share-based payment transactions including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The new guidance requires an entity to record all excess tax benefits / deficiencies as income tax expense / benefit in the income statement. The new guidance also allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. For public business entities, the effective date for ASU 2016-09 is annual periods beginning after December 15, 2016, including interim periods within those periods. The Company adopted this ASU effective January 1, 2017 and has elected to continue to accrue compensation cost for forfeitures based on the number of awards that are expected to vest. There was no impact on the Company’s consolidated financial position and results of operations upon adoption.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. The new standard also requires disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases and will be effective for interim and annual periods beginning after December 15, 2018 (early adoption is permitted). ~~The~~Initial guidance states the new standard ~~should~~ be applied under a modified retrospective approach. During August 2018, however, the FASB issued ASU 2018-11, Leases (Topic 842), providing another transition method allowing a company to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We ~~are evaluating~~continue to evaluate the impact of the new standard on the Company’s consolidated financial position, ~~and~~ results of operations and related disclosures. Although we have not yet completed our assessment, adoption of this standard will have a significant impact on ~~our~~the Consolidated Balance Sheets. However, we do not expect adoption of this standard to have a significant impact on the recognition, measurement or presentation of lease expenses within the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows. Information about our undiscounted future lease payments and the timing of those payments is provided ~~under “Contractual Obligations”~~ in ~~Management’s Discussion and Analysis~~Note 8 of ~~Financial Condition and Results of Operations in our 2016~~the 2017 Form 10-K. ~~We will~~The Company plans to adopt this standard effective January 1, 2019.

~~3. Related Party Transactions with Honeywell~~

Prior to consummation of the Spin-Off, the Condensed Consolidated and Combined Financial Statements have been prepared on a stand-alone basis and are derived from the consolidated financial statements and accounting records of Honeywell.

During the three and nine months ended September 30, 2016, AdvanSix was allocated $10,470 and $31,877, respectively, of general corporate expenses incurred by Honeywell for certain services, such as legal, accounting, information technology, human resources,

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED ~~AND COMBINED~~ FINANCIAL STATEMENTS

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

December 15, 2017. The Company adopted this standard effective January 1, 2018 using the modified retrospective method of transition and there was no cumulative impact adjustment on the Company’s consolidated financial position and results of operations. Under this standard, revenue recognition from the Company's products remained unchanged from the Company's previous revenue recognition model. As a result of adopting this standard, the Company expanded its revenue recognition disclosures (see Note 3).

~~other infrastructure support~~

3. Revenues

Revenue Recognition

The Company recognizes revenue upon the transfer of control of goods or services to customers at amounts that reflect the consideration expected to be received. AdvanSix primarily recognizes revenues when title and ~~shared facilities, on behalf~~control of ~~AdvanSix. These expenses were~~the product transfers from the Company to the customer. Outbound shipping costs incurred by the Company are not included in revenues but are reflected ~~within~~as freight expense in Costs of goods sold ~~and Selling, general and administrative expenses~~ in the ~~Condensed~~ Consolidated ~~and Combined~~ Statements of Operations.

Sales of our products to customers are made under a purchase order, and in certain cases in accordance with the terms of a master services agreement. These agreements typically contain formula-based pass-through pricing tied to key feedstock materials and volume ranges, but often do not specify the goods, including the quantities thereof, to be transferred. Certain master services agreements (including with respect to our largest customer) may contain minimum purchase volumes which can be satisfied by the customer on a periodic basis by choosing from various products offered by the Company. In these cases, a performance obligation is created when a customer submits a purchase order for a specific product at a specified price, typically providing for delivery within the next 60 days. The Company considers the performance obligation with respect to such purchase order satisfied at the point in time when control of the product is transferred to the customer, which is indicated by shipment of the product and transfer of title and risk of loss to the customer. Variable consideration is estimated for future volume rebates and early pay discounts on certain products and product returns. The Company records variable consideration as an adjustment to the sale transaction price. Since variable consideration is generally settled within one year, the time value of money is not significant.

~~Sales~~The Company applies the practical expedient in Topic 606 and does not include disclosures regarding remaining performance obligations that have original expected durations of one year or less, or amounts for variable consideration allocated to ~~Honeywell during~~wholly-unsatisfied performance obligations or wholly-unsatisfied distinct goods that form part of a single performance obligation, if any.

The Company also utilizes the practical expedient in Topic 606 and does not include an adjustment for the effects of a significant financing component given the expected period duration of one year or less.

We serve more than 500 customers annually in more than 40 countries and across a wide variety of industries. For the three months ended September 30, 2018 and 2017, the Company's ten largest customers accounted for approximately 48% and 44% of total sales, respectively. For the nine months ended September 30, ~~2016 were $3,274~~2018 and ~~$5,955,~~2017, the Company’s ten largest customers accounted for approximately 45% and 43% of total sales, respectively. ~~Of these sales, $3,080 and $5,682, respectively, were sold~~

We typically sell to ~~Honeywell at zero margin. Costs of goods sold~~customers under contracts, with one- to Honeywell during the three and nine months ended September 30, 2016 were $3,157 and $5,842, respectively. Purchases from Honeywell during the three and nine months ended September 30, 2016 were $1,041 and $3,299, respectively. The total net effecttwo-year terms on average, or by purchase orders. We have historically experienced low customer turnover.

Each of the ~~settlement~~Company’s product lines represented the following approximate percentage of ~~these inter-company transactions was reflected in the Condensed Consolidated and Combined Statements of Cash Flows as a financing activity identified as Invested equity.~~

When the Company was owned by Honeywell, a centralized approach was used for cash management and financing of operations. Prior to consummation of the Spin-Off, the Company’s cash was transferred to Honeywell daily and Honeywell funded the Company’s operating and investing activities as needed.

~~Subsequent to the Spin-Off on October 1, 2016, transactions with Honeywell were not considered related party transactions. Accordingly, no related party transactions with Honeywell were recorded~~total sales for the three and nine months ended September 30, ~~2017.~~2018 and 2017:


	Three Months Ended September 30,			Nine Months Ended September 30,
	2018	2017	2018	2017
Nylon	28%	28%	28%	29%
Caprolactam	18%	19%	18%	19%
Ammonium Sulfate Fertilizers	19%	20%	20%	20%
Chemical Intermediates	35%	33%	34%	32%
	100%	100%	100%	100%

~~4. Earnings Per Share~~

ADVANSIX INC.

~~On October 1, 2016, the date of consummation of the Spin-Off, 30,482,966 shares of the Company’s Common Stock were distributed to Honeywell shareholders of record as of September 16, 2016. This~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except share ~~amount is being utilized for the calculation of basic earnings~~and per share ~~for all periods presented~~amounts and as no Common Stock was outstanding prior to the date of the Spin-Off. In October 2016, the Company issued 908,540 time-based restricted stock units in connection with the Spin-Off with vesting periods ranging from 18 to 42 months. These restricted stock units were not included in the computation of diluted earnings per shareotherwise noted)

The Company's revenues by geographic area for the three and nine months ended September 30, ~~2016.~~2018 and 2017 were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		2018		2017
United States	$	306,050	$	289,480	$	946,195	$	889,515
International	62,603		77,180		182,155		215,290
Total	$	368,653	$	366,660	$	1,128,350	$	1,104,805

Deferred Income and Customer Advances

The Company defers revenues when cash payments are received in advance of our performance. Customer advances relate primarily to sales from the ammonium sulfate business. Below is a roll-forward of Deferred Income and Customer Advances for the nine months ended September 30, 2018:



Opening balance January 1, 2018	$	17,194

Additional cash advances	2,883

Less amounts recognized in revenues	(17,782)

Ending balance September 30, 2018	$	2,295

The Company expects to recognize as revenue the September 30, 2018 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 divided by the basic weighted average number of common shares and diluted weighted average number of common shares, respectively. The details of the ~~earnings per share~~basic and diluted EPS calculations for the three and nine months ended September 30, 2018 and 2017 ~~and 2016 are as~~were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2018		2017		2018		2017
Basic
Net Income	$	5,480	$	21,274	$	45,483	$	74,331
Weighted average common shares outstanding	30,160,991		30,482,966		30,375,873		30,482,966
EPS – Basic	$	0.18	$	0.70	$	1.50	$	2.44
Diluted
Dilutive effect of unvested equity awards and other stock-based holdings	822,843		676,744		813,767		530,640
Weighted average common shares outstanding	30,983,834		31,159,710		31,189,640		31,013,606
EPS – Diluted	$	0.18	$	0.68	$	1.46	$	2.40

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Basic

Net Income $ 21,274
$ 16,460
$ 74,331
$ 58,861
Weighted average common shares outstanding 30,482,966
30,482,966
30,482,966
30,482,966
EPS – Basic $ 0.70
$ 0.54
$ 2.44
$ 1.93
Diluted

Dilutive effect of unvested equity awards 676,744
—
530,640
—
Weighted average common shares outstanding 31,159,710
30,482,966
31,013,606
30,482,966
EPS – Diluted $ 0.68
$ 0.54
$ 2.40
$ 1.93

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. For the three months ended September 30, 2018 and 2017, stock options of 135,535 and 70,782, respectively, were anti-dilutive and excluded from the computations of dilutive EPS.

On March ~~8, 2017,~~2, 2018, the Company granted equity awards representing ~~333,719~~231,162 shares of common stock under the 2016 Stock Incentive Plan of AdvanSix Inc. and its Affiliates (the "2016 Stock Plan") to Company employees consisting of ~~175,026~~128,777 stock options, ~~89,896~~58,078 performance stock units (at target) and ~~68,797~~44,307 restricted stock units. These equity awards have a per share

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

strike price (for stock options) or grant date fair value per share (for performance stock units and restricted stock units) of ~~$26.66~~$41.97 with vesting periods ranging from 12 to 36 months.

On June ~~1, 2017,~~14, 2018, the Company granted equity awards representing ~~28,856~~20,760 shares of common stock under the 2016 Stock ~~Incentive~~ Plan ~~of AdvanSix Inc. and its Affiliates~~ to certain Company employees and the ~~Company's~~Company’s Board of Directors consisting of restricted stock units. These equity awards have a grant date fair value per share of ~~$29.25~~$40.74 with vesting periods ranging from 12 to 36 months.

In September 2017, the Board adopted the AdvanSix Inc. Deferred Compensation Plan (the “DCP”), effective January 1, 2018. Pursuant to the DCP, our directors may elect to defer their cash retainer fees and allocate their deferrals to the AdvanSix stock unit fund. Each unit allocated under the stock unit fund represents the economic equivalent of one share of common stock. Units are paid out in shares of AdvanSix Inc. common stock upon distribution. As of September 30, 2018, a total of 8,570 units were allocated to the AdvanSix stock unit fund under the DCP during 2018.

In the third quarter of 2018, the Company repurchased 475,175 shares of common stock under the share repurchase program and 9,970 shares of common stock covering the tax withholding obligations in connection with the vesting of equity awards for a total of $17.3 million at a weighted average market price of $35.70 per share. The purchase of shares reduces the weighted average number of shares outstanding in the basic and diluted earnings per share calculations.

5. Accounts and Other Receivables – Net


	September 30, 2018		December 31, 2017
Accounts receivables	$	145,444	$	188,477
Other	5,380		8,936
Total accounts and other receivables	150,824		197,413
Less – allowance for doubtful accounts	(1,725)		(1,410)
Total accounts and other receivables – net	$	149,099	$	196,003

The decrease in Total accounts and other receivables – net at September 30, 2018 versus December 31, 2017 was due primarily to increased collections during the nine months ended September 30, 2018 related to a trade receivables discount arrangement with a third-party financial institution, lower sales and the collection of a Federal income tax refund.

6. Inventories


	September 30, 2018		December 31, 2017
Raw materials	$	34,334	$	48,502
Work in progress	56,049		50,511
Finished goods	29,063		35,430
Spares and other	24,052		23,091
	143,498		157,534
Reduction to LIFO cost basis	(28,472)		(28,326)
Total inventories – net	$	115,026	$	129,208

The decrease in Total inventories – net as of September 30, 2018 compared to December 31, 2017 is due to lower levels of raw materials driven by the timing of cumene deliveries.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED ~~AND COMBINED~~ FINANCIAL STATEMENTS

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

7. Long-term Debt and Credit Agreement

~~Stock compensation expense related~~

The Company’s debt at September 30, 2018 consisted of the following:


Total term loan outstanding	$	—
Amounts outstanding under the Revolving Credit Facility	200,000
Total outstanding indebtedness	200,000
Less: Line of credit – short-term	(9,400)
Line of credit – long-term	$	190,600

At September 30, 2018, the Company assessed the amount recorded under the Revolving Credit Facility (defined below) and determined that such amounts approximate fair value. The fair values of the debt are based on quoted inactive market prices and are therefore classified as Level 2 within the valuation hierarchy.

The outstanding balances under the Revolving Credit Agreement are classified as $9.4 million as short-term and $190.6 million as long-term. The amount included in Line of credit - short-term, noted above and included on the accompanying Condensed Consolidated Balance Sheets, represents the outstanding balance the Company anticipates paying within one year.

Credit Agreement

On February 21, 2018 (the “Amendment Date”), the Company entered into Amendment No. 1 (the “Amendment”) to the Credit Agreement, dated September 30, 2016 (the “Original Credit Agreement”), among the Company, the guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent (the Original Credit Agreement, after giving effect to the Amendment, the “Amended and Restated Credit Agreement”).

The credit facilities under the Original Credit Agreement consisted of a senior secured term loan in an aggregate principal amount of $270 million, of which $267 million was outstanding just prior to entering into the Amendment, and a senior secured revolving credit facility in a principal amount of $155 million. Pursuant to the Amendment, (i) the term loan facility under the Original Credit Agreement was terminated and the entire outstanding balance of the term loan facility (the “Term Loan”) thereunder was paid in full and (ii) the maximum aggregate principal amount of the senior secured revolving credit facility (the “Revolving Credit Facility”) was increased to $425 million.

On the Amendment Date, the Company borrowed $242 million under the Revolving Credit Facility. The proceeds of such loans, as well as cash on hand, were used to repay the outstanding Term Loan under the Original Credit Agreement. The Revolving Credit Facility under the Amended and Restated Credit Agreement has a 5-year term with a scheduled maturity date of February 21, 2023. The Amendment resulted in an increase in the Revolving Credit Facility to replace the Term Loan and provides increased borrowing flexibility and reduced overall borrowing costs with an approximate 50 basis point reduction in the interest rate spread.

The Amended and Restated Credit Agreement permits the Company to utilize up to $40 million of the Revolving Credit Facility for the issuance of letters of credit and up to $40 million for swing line loans. The Company has the option to incur incremental term loans and/or increase the amount of the Revolving Credit Facility in an aggregate principal amount for all ~~outstanding equity awards is being ratably recognized over~~such incremental term loans and increases of the ~~vesting period~~Revolving Credit Facility of up to the sum of (x) $175 million plus (y) an amount such that the Company’s Consolidated Senior Secured Leverage Ratio (as defined in the Amended and Restated Credit Agreement) would not be greater than 1.75 to 1.00, in each ~~type~~case, to the extent that any one or more lenders, whether or not currently party to the Amended and Restated Credit Agreement, commits to be a lender for such amount. Borrowings under the Amended and Restated Credit Agreement bear interest at a rate equal to either the sum of ~~equity award with vesting periods~~a base rate plus a margin ranging from 120.50% to ~~42 months based~~1.50% or the sum of a Eurodollar rate plus a margin ranging from 1.50% to 2.50%, with either such margin varying according to the Company’s Consolidated Leverage Ratio (as defined in the Amended and Restated Credit Agreement). 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 0.20% to 0.40% per annum depending on ~~grant date fair value. Stock compensation expense aggregated $2,067~~the Company’s Consolidated Leverage Ratio. The initial margin under the Amended and ~~$5,686~~Restated Credit Agreement is 0.75% for base rate loans and 1.75% for Eurodollar rate loans and the ~~three~~initial commitment fee rate is 0.25% per annum. Substantially all domestic tangible and ~~nine months ended September 30, 2017.~~intangible assets of the Company and its subsidiaries are pledged as collateral to secure the obligations under the Amended and Restated Credit Agreement.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED ~~AND COMBINED~~ FINANCIAL STATEMENTS

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

~~5. Accounts and Other Receivables~~ – ~~Net~~

September 30, 2017 December 31, 2016
Accounts receivables $ 151,318
$ 119,475
Other 1,816
15,407
Total accounts and other receivables 153,134
134,882
Less – allowance for doubtful accounts (623 ) (3,211 )
Total accounts and other receivables – net $ 152,511
$ 131,671

The Amended and Restated 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 Amended and Restated Credit Agreement also contains financial covenants that require the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Amended and Restated Credit Agreement) of not less than 3.00 to 1.00 and to maintain a Consolidated Leverage Ratio of (i) 3.50 to 1.00 or less for the fiscal quarter ending March 31, 2018, through and including the fiscal quarter ending December 31, 2019, (ii) 3.25 to 1.00 or less for the fiscal quarter ending March 31, 2020, through and including the fiscal quarter ending December 31, 2020, (iii) 3.00 to 1.00 or less for the fiscal quarter ending March 31, 2021, through and including the fiscal quarter ending December 31, 2021, and (iv) 2.75 to 1.00 or less for the fiscal quarter ending March 31, 2022 and each fiscal quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in ~~Accounts receivable~~connection with certain acquisitions). If the Company does not comply with the covenants in the Amended and Restated Credit Agreement, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility.

In addition to the amount borrowed on the Amendment Date, the Company has since borrowed an incremental $43 million ($4 million in first quarter, $15 million in second quarter and $24 million in the third quarter) for working capital purposes under the Revolving Credit Facility and repaid $85 million ($16 million in first quarter, $35 million in second quarter and $34 million in the third quarter) to bring the balance under the Revolving Credit Facility to $200 million at September 30, ~~2017 versus December 31, 2016 was due to significantly higher sales during~~2018.

The Company had approximately $6.6 million of letter of credit agreements outstanding at the end of the third quarter, of ~~2017 versus~~which $5.5 million are bi-lateral letters of credit outside the ~~fourth quarter of 2016 which was impacted by~~Revolving Credit Facility with $1.1 million outstanding under the Company's plant turnaround activities. The increase in accounts receivable at September 30, 2017 was partially offset by higher accounts receivable collections related to a trade receivables discount arrangement with a third party financial institution which enhances liquidity and enables the Company to efficiently manage its working capital needs.Revolving Credit Facility.

~~6. Inventories~~

September 30, 2017 December 31, 2016
Raw materials $ 39,313
$ 68,900
Work in progress 36,801
47,759
Finished goods 32,946
19,069
Spares and other 24,118
23,129
133,178
158,857
Reduction to LIFO cost basis (32,704 ) (29,879 )
Total inventories $ 100,474
$ 128,978

The decrease in total inventories as of September 30, 2017 compared to December 31, 2016 is due primarily to lower levels of raw materials driven primarily by cumene delivery delays resulting from hurricane impacts on logistics as well as higher than normal levels of cumene inventory at December 31, 2016. The decrease was partially offset by a buildup of finished goods inventory compared to December 31, 2016 following fourth quarter 2016 plant outages. The overall lower levels of inventories at September 30, 2017 resulted in a change in the LIFO cost basis reserve of $4.4 million (unfavorable pretax income impact) during the three months ended September 30, 2017.

7.8. Postretirement Benefit Cost

The components of net periodic benefit cost of the Company’s pension plan are as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016		2017			2016			2018		2017		2018		2017
Service costs	$	1,908		$	—	$	5,724		$	—	Service costs	$	2,001	$	1,908	$	6,004	$	5,724
Interest costs	333			—		999			—		Interest costs	469		333		1,407		999
Expected return on plan assets	(76		)	—		(228		)	—		Expected return on plan assets	(287)		(76)		(862)		(228)
Other (1)	—			1,717		—			5,151

Net periodic benefit cost	$	2,165		$	1,717	$	6,495		$	5,151	Net periodic benefit cost	$	2,183	$	2,165	$	6,549	$	6,495


~~(1)~~	Prior to the Spin-Off, certain of our employees participated in a defined benefit pension plan (“Shared Plan”) sponsored by Honeywell which included participants of other Honeywell subsidiaries and operations. Net periodic benefit cost related to participation in the Shared Plan was $1.7 million and $5.2 million for the three and nine months ended September 30, 2016, respectively.

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS~~

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

The Company made pension plan contributions of approximately $12 million during ~~2017~~the nine months ended September 30, 2018 sufficient to satisfy pension funding requirements under the AdvanSix Retirement Earnings Plan ~~in an aggregate amount of approximately $17.0 million~~ and will make additional contributions in future years sufficient to satisfy pension funding requirements in those periods. The Company made contributions of ~~$2.2~~$2.0 million in the first quarter of ~~2017, $1.6~~2018, $6.6 million in the second quarter of ~~2017, $11.1~~2018 and $3.3 million in the third quarter of ~~2017 and $2.0 million in October 2017.~~ 2018. The Company does not plan to make additional pension plan contributions during the fourth quarter of 2018.

The pension plan assets are invested through a master trust fund. The strategic asset allocation for the trust fund is selected by the Company's Investment Committee reflecting the results of comprehensive asset and liability modeling. The Investment Committee establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk.

~~The approximate target asset allocation for the Company's pension plan assets is summarized~~

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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



			~~September 30, 2017~~
~~Cash and cash equivalents~~			2%
~~US and non-US equity securities~~			~~65%~~
~~Fixed income / other securities~~			~~33%~~
~~Total Pension Assets~~			~~100%~~

Fixed income and other securities include investment grade securities covering the Treasury, agency, asset-backed, mortgage-backed and credit sectors of the U.S. Bond Market, as well as listed real estate companies and real estate investment trusts located in both developed and emerging markets.

8.9. Commitments and Contingencies

The Company is subject to a number of lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of the conduct of the Company or other third parties in the normal and ordinary course of ~~business, including matters relating to commercial transactions.~~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 (taking into consideration any insurance recoveries), 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, results of operations or cash flows. 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.

WeOn March 13, 2018, a federal search warrant was executed at the Company’s Hopewell, Virginia manufacturing facility. On the same date, the Company was separately served with a grand jury subpoena issued by the U.S. District Court for the Eastern District of Virginia, which requested documents related to the Hopewell facility’s air emissions and its compliance with the terms of a previously disclosed 2013 consent decree with the federal government and the Commonwealth of Virginia. The Company continues to cooperate fully with the authorities and is providing information in response to the subpoena. The Company’s production across its sites was not affected by these events and the Company expects to continue operating safely at plan moving forward. While the Company may incur penalties or fines in connection with the federal inquiry, the amount of such penalties or fines, if any, cannot be reasonably estimated at this time.

Following the Spin-Off, the Company assumed from Honeywell all health, safety and environmental (“HSE”) liabilities and compliance obligations related to the past and future operations of our current business, as well as all HSE liabilities associated with our three current manufacturing locations and the other locations 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 be material for ~~2017.~~2018.

9.10. Income Taxes

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.~~period in addition to recording any tax effects of discrete items for the three and nine months ended September 30, 2018. For interim reporting purposes, the Company recorded a benefit to the Income taxes of $0.4 million as a discrete item related to excess tax benefits associated with the vesting of restricted stock units for the nine months ended September 30, 2018. The provision for income taxes was ~~$14.5~~$0.2 million and ~~$11.3~~$14.5 million for the three months ended September 30, 2018 and 2017, respectively. The provision for income taxes was $13.4 million and $46.8 million for the nine months ended September 30, 2018 and 2017, respectively.

The Company recorded a $1.0 million immaterial out of period adjustment in connection with the filing of the 2017 U.S. federal income tax return, resulting in an income tax benefit in the third quarter. Additionally, under Staff Accounting Bulletin No. 118 (“SAB 118”), the Company recorded a $0.6 million income tax benefit as a measurement period adjustment for the income tax effects related to the Tax Act for which the accounting under ASC 740 is incomplete and provisional estimates were recorded in the period of enactment. As a result of the total adjustments of $1.6 million, the Company revised the provisional estimate of the deferred income tax benefit attributable to the reduction in the U.S. federal corporate tax rate from 35% to 21% as originally recorded in December 2017. These adjustments decrease the Company’s effective tax rate for the nine months ended September 30, 2018 by 2.8%. The Company has not completed the accounting for the income tax effects of the Tax Act and the amounts recorded under SAB 118 remain provisional. The Company will complete the accounting for the income tax effects of the Tax Act during the quarter ending December 31, 2018.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED ~~AND COMBINED~~ FINANCIAL STATEMENTS

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

~~ended September 30, 2017 and 2016, respectively. The provision for income taxes was $46.8 million and $36.7 million for~~As a result of the early adoption of ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, during the nine months ended September 30, ~~2017 and 2016, respectively.~~

~~During the three months ended September 30, 2017,~~2018, the Company ~~adjusted its~~elected to reclassify $0.4 million from Accumulated other comprehensive income to Retained earnings. The reclassification results from the remeasurement of deferred ~~tax assets and liabilities to account for changes~~taxes pursuant to the ~~September 30, 2016 deferred tax balances~~Tax Act related to the ~~separation from Honeywell.~~Company’s pension plan that was recognized as a component of Income taxes related to continuing operations for the year ended December 31, 2017 which was originally recognized in Other comprehensive income. The ~~changes were attributable~~Company elected the optional transition method and recorded the adjustment at the beginning of the period of adoption of ASU 2018-02. The Company’s current accounting policy related to ~~the completion of Honeywell’s 2016~~stranded tax effects in Accumulated other comprehensive income ~~tax return~~is to review and ~~related return to provision adjustment. The current period adjustment resulted in a $7.2 million decrease in Deferred income taxes and~~reclassify on an ~~increase in Additional paid in capital.~~item by item basis.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations, which we refer to as our “MD&A,” should be read in conjunction with the Condensed Consolidated ~~and Combined~~ Financial Statements and the notes thereto contained elsewhere in this Report, as well as the MD&A section included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017 filed with the ~~SEC~~Securities and Exchange Commission ("SEC") on ~~March 6, 2017~~February 27, 2018 (the ~~“2016~~“2017 Form 10-K”). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those incorporated by reference in Item 1A of Part II of this Report, as well as those discussed in the section entitled “Note Regarding Forward-Looking Statements” below.

Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this Report including, without limitation, statements in this MD&A regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. When used in this Report, words such as “anticipate,” “believe,” “will,” “estimate,” “expect,” “intend” and similar expressions identify forward-looking statements. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and information ~~currently~~then available to, our ~~management.~~management at the time such statements are made. Actual results could differ materially from those contemplated by the forward-looking statements as a result of ~~certain~~a number of factors including those detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.

Separation from Honeywell

On October 1, 2016, Honeywell International Inc. (“Honeywell”) completed the separation of AdvanSix Inc. The separation was completed by Honeywell distributing all of the then outstanding shares of common stock of AdvanSix on October 1, 2016 (the “Distribution Date”) through a dividend in kind of AdvanSix common stock, par value $0.01, to holders of Honeywell common stock as of the close of business on the record date of September 16, 2016 who held their shares through the Distribution Date (the “Spin-Off”). Each Honeywell stockholder who held their shares through the Distribution Date received one share of AdvanSix common stock for every 25 shares of Honeywell common stock held at the close of business on the record date of September 16, 2016. We filed our Form 10 describing the Spin-Off with the SEC, which was declared effective by the SEC on September 8, 2016 (the “Form 10”). On October 3, 2016, AdvanSix stock began “regular-way” trading on the New York Stock Exchange under the “ASIX” stock symbol.

Business Overview

We produce and sell ~~our Nylon 6 resin and~~ caprolactam as a commodity ~~products~~product and ~~also~~ produce and sell our Nylon 6 resin as both a commoditized and specialized resin product. The production of these products is capital intensive, requiring ongoing investments ~~in improving~~to improve plant reliability, ~~expanding~~expand production capacity and ~~achieving~~achieve higher quality. Our results of operations are primarily driven by production volume and the spread between the sales prices of our products and the costs of the underlying raw materials built into the market-based pricing models for most of our ~~sales.~~products. The global prices for nylon resin typically track a spread over the price of caprolactam, which in turn tracks as a spread over benzene because the key feedstock materials for caprolactam, phenol or cyclohexane are ~~ultimately~~ derived from benzene. This price spread has historically experienced cyclicality as a result of global changes in supply and demand. Generally, Nylon 6 resin prices track the cyclicality of caprolactam prices, although prices set above the spread are achievable when nylon resin manufacturers, like AdvanSix, ~~are able to~~ formulate and produce specialized nylon resin products. Our specialized Nylon 6 products are typically valued at a higher level than commodity resin products.

~~In recent years,~~Following the peak in 2011 through the first half of 2016, nylon and caprolactam prices ~~have~~ experienced a cyclical period of downturn as the global market ~~has~~ experienced large increases in supply without a commensurate increase in demand. Most of this supply increase ~~has been built by new~~was the result of Chinese manufacturers, resulting in margin compression for Nylon 6 resin and caprolactam ~~in recent years~~ to historic lows. ~~Over~~Beginning in the ~~last year,~~second half of 2016, capacity reductions by our competitors have occurred in North America and Europe improving supply/demand fundamentals in North America with continued dynamic conditions globally. We believe that, in addition to a potential recovery that has historically followed periods of oversupply and declining prices, Nylon 6 end-market growth will continue to generally track global GDP with certain applications, ~~growing at faster rates~~ including engineered plastics and ~~packaging.~~packaging, growing at faster rates. Additionally, one of our strategies is to continue developing specialty nylon 6 and nylon 6 based copolymer products that we believe will ~~obtain~~generate higher margins.

Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key crop nutrients. Global prices for ammonium sulfate fertilizer are influenced by several factors including the price of urea, which is the most widely used source of nitrogen-based fertilizer in the world. ~~A secondary~~Other global ~~price driver for~~factors driving ammonium sulfate fertilizer ~~is the price of future deliveries of crops,~~demand are general agriculture trends, including ~~corn, wheat and coffee, which are impacted by general trends in the agricultural industry. We expect agriculture fundamentals to remain challenging through the 2017/2018 planting season.~~crop prices.

We produce ammonium sulfate fertilizer continuously throughout the year as part of our manufacturing process, but quarterly sales experience ~~quarterly~~ cyclicality based on the timing and length of the growing seasons in North and South America. North America ammonium sulfate prices are typically strongest during second quarter fertilizer application and then typically decline seasonally with new season fill in the third quarter. 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. Sales of most of our other products have generally been subject to minimal, or no, seasonality.

We also manufacture, market and sell a number of chemical intermediate products that are derived from the chemical processes within our integrated supply chain. Most significant is acetone, which is used by our customers in the production of adhesives, paints, coatings and solvents. Prices for acetone are influenced by its own supply and demand dynamics but can also be influenced by the underlying move in propylene input costs.

We seek to run our production facilities on a nearly continuous basis for maximum efficiency ~~and~~as several of our intermediate products are key feedstock materials for other products in our integrated manufacturing chain. We schedule several planned ~~outages~~turnarounds each year, referred to as plant turnarounds, to conduct routine and major maintenance across our ~~facilities, which are referred to as plant turnarounds.~~facilities. While we

may experience unplanned interruptions from time to time, we seek to mitigate the risk through regularly scheduled maintenance both for major and minor repairs at all of our production facilities. We also utilize maintenance excellence and mechanical integrity programs and maintain appropriate buffer inventory of intermediate chemicals necessary for our manufacturing process, which are intended to mitigate the extent of any production losses as a result of planned and unplanned downtime.

While our integrated manufacturing, scale and the quantity and range of our product offerings make us one of the most efficient manufacturers in our industry, ~~we are~~it also ~~exposed~~exposes us to increased risk associated with unplanned downtime or material disruptions at any one of our production facilities which could impact ~~our~~the supply chain ~~to downstream plants in~~throughout our manufacturing process. Should unplanned outages occur, we may not have enough buffer inventory at any given time to offset such production losses. Moreover, taking our production facilities offline for regularly scheduled repairs can be an expensive and time-consuming operation with risk that discoverable items and delays during the repair process may cause unplanned downtime as well.

Recent Developments

On March 13, 2018, a federal search warrant was executed at the Company’s Hopewell, Virginia manufacturing facility. On the same date, the Company was separately served with a grand jury subpoena issued by the U.S. District Court for the Eastern District of Virginia, which requested documents related to the Hopewell facility’s air emissions and its compliance with the terms of a previously disclosed 2013 consent decree with the federal government and the Commonwealth of Virginia. The Company continues to cooperate fully with the authorities and is providing information in response to the subpoena. The Company’s production across its sites was not affected by these events and the Company expects to continue operating safely at plan moving forward. While the Company may incur penalties or fines in connection with the federal inquiry, the amount of such penalties or fines, if any, cannot be reasonably estimated at this time.

On May 4, 2018, the Company announced that its Board of Directors authorized a share repurchase program of up to $75 million of the Company’s common stock. Repurchases may be made from time to time on the open market, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended (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. The repurchase program has no expiration date and may be modified, suspended or discontinued at any time. The Company had approximately 30.0 million shares of common stock outstanding as of September 30, 2018. See Part II, Item 2 of this Form 10-Q for information regarding the Company's repurchase activity during the three months ended September 30, 2018.

2018 Operational Events

On January 17, 2018, the Company announced that it had experienced a temporary production issue at its Hopewell, Virginia facility related to the severe winter weather. As a result of this unplanned interruption, caprolactam and resin production had been reduced at the Hopewell and Chesterfield, Virginia facilities. As a result of these events, the Company incurred a $20

million unfavorable impact to pre-tax income in the first quarter of 2018 including the impact of fixed cost absorption, maintenance expense and incremental raw material costs. In addition, the Company incurred an approximately $10 million unfavorable impact to pre-tax income in the first quarter due to lost sales. The Company informed its customers of this force majeure event and actively worked to mitigate the impact of reduced production output on its customers’ operations. As previously disclosed, the required mechanical repair work was completed as expected. The Company has submitted a business interruption insurance claim.

Results of Operations

(Dollars in thousands, unless otherwise noted)

Sales


	Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
	2017	2016	2017	2016		2018	2017	2018	2017
Sales	$366,660	$323,953	$1,104,805	$932,201	Sales	$368,653	$366,660	$1,128,350	$1,104,805
% change compared with prior year period	13.2%		18.5%		% change compared with prior year period	0.5%		2.1%

The change in sales compared to the prior year period is attributable to the following:


	Three Months Ended September 30, 2017	Nine Months Ended September 30, 2017		Three Months Ended September 30, 2018	Nine Months Ended September 30, 2018
Volume	4.9%	4.1%	Volume	(9.7)%	(4.5)%
Price	8.3%	14.4%	Price	10.2%	6.6%
	13.2%	18.5%		0.5%	2.1%

Sales increased in the three months ended September 30, ~~2017~~2018 compared to the prior year period by ~~$42.7~~$2.0 million (approximately ~~13.2%~~1%) due primarily to higher sales prices (approximately ~~8.3%~~10%) ~~and volume increases (approximately 4.9%) of caprolactam, chemical intermediates, and ammonium sulfate offset partially~~driven by ~~lower nylon volume. Sales prices increased due primarily to (i) higher prices of the raw materials used to manufacture caprolactam, nylon and chemical intermediates impacting~~ formula-based pass-through pricing, ~~(approximately 4.2% favorable impact),~~ particularly for benzene and propylene (inputs to cumene which is a key feedstock material for our products)~~, and (ii) market-based~~. Market-based pricing was nearly flat due to increases in ammonium sulfate primarily offset by decreases in chemical intermediates, particularly acetone. Volume decreased by approximately 10% due primarily to ~~increases in nylon~~a planned plant turnaround at the Hopewell facility and ~~caprolactam pricing offset partially by~~ lower ~~prices of ammonium sulfate (approximately 4.1% favorable impact).~~production output versus the prior year.

Sales increased in the nine months ended September 30, ~~2017~~2018 compared to the prior year period by ~~$172.6~~$23.5 million ~~or approximately 18.5%~~(approximately 2%) due ~~primarily~~ to higher sales prices (approximately ~~14.4%~~7%) driven by (i) formula-based pass-through pricing (approximately 6% favorable impact), and ~~volume~~(ii) market-based price increases ~~(approximately 4.1%) of~~in ammonium sulfate ~~chemical intermediates~~ and ~~caprolactam~~nylon (approximately 1% favorable impact), partially offset ~~partially~~ by volume decreases of ~~nylon. Sales prices increased due primarily to (i) higher prices~~approximately 5% associated with the unplanned outage in January 2018 and timing of the raw materials used to manufacture caprolactam, nylon and chemical intermediates impacting formula-based pass-through pricing (approximately 10.5% favorable impact), particularly benzene and propylene, and (ii) market-based pricing due primarily to increasesplanned plant turnaround in ~~nylon, caprolactam and chemical intermediates pricing offset partially by lower prices~~the third quarter of ~~ammonium sulfate (approximately 3.9% favorable impact).~~2018.


	Three Months Ended September 30,			Nine Months Ended September 30,
	2018	2017	2018	2017
Costs of goods sold	$343,434	$309,408	$1,007,712	$922,604
% change compared with prior year period	11.0%		9.2%
Gross Margin percentage	6.8%	15.6%	10.7%	16.5%

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Costs of goods sold $309,629 $285,091 $923,268 $804,471
% change compared with prior year period 8.6% 14.8%
Gross Margin percentage 15.6% 12.0% 16.4% 13.7%

Costs of goods sold increased in the three months ended September 30, ~~2017~~2018 compared to the prior year period by ~~$24.5~~$34 million ~~or approximately 8.6%~~(approximately 11%) due primarily to (i) higher prices of raw materials, ~~(approximately 5.7%),~~ particularly propylene, benzene and ~~propylene (inputs to cumene~~sulfur (approximately 13%), and (ii) increased manufacturing costs including the planned plant turnarounds in the third quarter of 2018 and purchases of feedstocks which ~~is a key feedstock material for our products) and higher~~are normally manufactured by the Company (approximately 10%), partially offset by lower sales volumes (approximately ~~1.8%~~10%).

~~Gross margin percentage increased~~ driven by ~~approximately 3.6%~~the planned plant turnaround in the ~~three months ended September 30, 2017 compared to~~third quarter of 2018 and lower production output and the impact of the prior year ~~period due primarily to higher sales prices net of rising raw materials costs~~LIFO cost basis charge (approximately ~~2.1%) and increased sales volumes (approximately 2.1%~~1%).

Costs of goods sold increased in the nine months ended September 30, ~~2017~~2018 compared to the prior year period by ~~$118.8~~$85.1 million ~~or approximately 14.8%~~(approximately 9%) due primarily to (i) the higher prices of raw materials, ~~(approximately 13.4%),~~ particularly propylene, benzene and ~~propylene,~~sulfur (approximately 8%), and ~~a one-time prior year benefit related to~~(ii) the ~~termination~~impact of ~~a long-term supply agreement~~planned plant turnarounds and the unplanned outage in January 2018, including fixed cost absorption, maintenance expense and higher costs associated with the purchase of feedstocks which are normally manufactured by the Company (approximately 7%), partially offset by lower sales volumes (approximately 4%).

Gross margin percentage decreased by approximately 9% in the three months ended ~~March 31, 2016~~September 30, 2018 compared to the prior year period due to (i) increased manufacturing costs including planned plant turnarounds and purchases of feedstocks which are normally manufactured by the Company (approximately ~~2.0% unfavorable)~~8%), and (ii) the impact of formula-based pass-through pricing as discussed above (approximately 2%) partially offset by the impact of the prior year LIFO cost basis charge (approximately 1%).

Gross margin percentage ~~increased~~decreased by approximately ~~2.7%~~6% in the nine months ended September 30, ~~2017~~2018 compared to the prior year period due primarily to ~~higher sales~~the impact of the unplanned outage in January 2018 and ~~production volumes on a year-over-year basis (approximately 3.7%) offset partially by~~planned plant turnarounds (as discussed above) as well as the ~~termination~~impact of ~~a long-term supply agreement in the three months ended March 31, 2016 (approximately~~ ~~1.4%~~).formula-based pass-through pricing.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased by $1.0 million in the three months ended September 30, 2018 compared to the prior year period due to lower IT infrastructure costs associated with the exit of Honeywell transition services, partially offset by legal costs associated with the federal inquiry at the Hopewell facility discussed above.

Selling, general and administrative expenses increased by ~~$7.4 million and $20.1~~$1.3 million in the ~~three and~~ nine months ended September 30, ~~2017, respectively~~2018 compared to the ~~corresponding~~ prior year ~~periods~~period due primarily to ~~higher stand-alone~~legal costs ~~incurred since~~associated with the Spin-Off on October 1, 2016. These stand-alone costs are related primarily to workforce and other infrastructure and shared facilities including costs for transition services provided by Honeywell which werefederal inquiry at the Hopewell facility partially offset by ~~the elimination of~~lower IT infrastructure costs allocated in the prior year to the Company from Honeywell on the basis of sales. The incremental one-time and ongoing stand-alone costs to operate our business as an independent public company remain in lineassociated with the ~~Company’s expectations as previously disclosed in our Form 10 filed with the SEC and are expected to exceed the historical allocations~~exit of ~~expenses from Honeywell.~~ Honeywell transition services.

The Company’s effective tax rate for the three months ended September 30, 2018 was lower compared to the U.S. federal statutory rate due primarily to a $1.0 million income tax benefit associated with the filing of the 2017 U.S. federal income tax return as well as $0.2 million of excess tax benefits related to vesting of restricted stock units partially offset by state taxes. The Company's effective tax rate for the nine months ended September 30, 2018 was slightly higher compared to the U.S. federal statutory rate due primarily to state taxes and executive compensation deduction limitations resulting from the Tax Cuts and Jobs Act ("Tax Act"), partially offset by a $1.0 million income tax benefit associated with the filing of the 2017 U.S. federal income tax return as well as excess tax benefits realized upon vesting of restricted stock units. The Company’s effective tax rate for the three and nine months ended September 30, ~~2017~~2018 was ~~higher compared to~~lower than the ~~U.S. federal statutory rate~~prior year period due primarily to ~~state taxes and changes in~~ the ~~Company's domestic manufacturing deduction.~~

~~The Company’s effective~~passage of the Tax Act which reduced the corporate tax rate to 21% from 35% for ~~three and nine months ended September 30, 2017 were comparable to the effective tax rates in the same prior year periods.~~periods beginning after December 31, 2017.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Net income $21,274 $16,460 $74,331 $58,861


	Three Months Ended September 30,			Nine Months Ended September 30,
	2018	2017	2018	2017
Net income	$5,480	$21,274	$45,483	$74,331

As a result of the factors described above, ~~net~~Net income was ~~$21.3~~$5.5 million and ~~$74.3~~$45.5 million for the three and nine months ended September 30, ~~2017,~~2018, respectively, as compared to ~~$16.5~~$21.3 million and ~~$58.9~~$74.3 million in the corresponding prior year period.

(Dollars in thousands, unless otherwise noted)

The following tables set forth the non-GAAP financial measures of EBITDA and EBITDA ~~Margin, and EBITDA and EBITDA Margin excluding the prior year one-time benefit described below.~~Margin. EBITDA is defined as Net income before Interest, Income taxes, Depreciation and amortization. EBITDA Margin is equal to EBITDA divided by Sales. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they are used by the Company’s management to evaluate the Company’s operating performance, enhance a reader’s understanding of the financial performance of the Company, and facilitate a better comparison among fiscal periods and performance relative to its competitors, as the non-GAAP measures exclude items that are not considered core to the Company’s operations.

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 GAAP. Non-GAAP financial measures should be read only in conjunction with the comparable 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 EBITDA and EBITDA Margin ~~and EBITDA and EBITDA Margin excluding the prior year one-time benefit~~ to their most directly comparable GAAP financial measure:

Prior year one-time benefit (1)

Liquidity and Capital Resources

(Dollars in thousands, unless otherwise noted)

We believe that cash balances and operating cash flows, together with available capacity under our credit agreement, will provide adequate funds to support our current ~~annual~~short-term operating ~~and longer term~~objectives as well as our longer-term strategic plans, subject to the risks and uncertainties outlined below and in the risk factors as previously disclosed in our ~~2016~~2017 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. Our operating cash flows are affected by capital requirements and production volume as well as the prices of our raw materials and general economic and industry trends. We utilize asupply chain financing and trade receivables discount ~~arrangement~~arrangements with a third party financial ~~institution~~institutions which ~~enhances~~enhance liquidity and ~~enables~~enable us to efficiently manage our working capital needs. In addition, we monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on the safety of principal and secondarily on maximizing yield on those funds. We diversify our cash and cash equivalents among counterparties to minimize exposure to any one of these entities.

On a recurring basis, our primary future cash needs will be centered on operating activities, working capital, capital expenditures including high return growth and cost savings investments, ~~environmental compliance costs,~~share repurchases, employee benefit obligations, interest payments, debt ~~repayment~~management and strategic acquisitions. We believe that our future cash from operations, together with our access to funds on hand and credit and capital markets, will provide adequate resources to fund our expected operating and financing needs. 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 our ~~2016~~2017 Form 10-K and subsequent Quarterly Reports on Form 10-Q, as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.

We assumed from Honeywell all health, safety and environmental (“HSE”) liabilities and compliance obligations related to the past and future operations of our current business, as well as all HSE liabilities associated with our three current manufacturing locations and the other locations 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 be material for ~~2017.~~

The Company made contributions during 2017 sufficient to satisfy pension funding requirements under the AdvanSix Retirement Earnings Plan in the aggregate amount of approximately $17 million and will make additional contributions in future years sufficient to satisfy pension funding requirements in those periods. The Company made contributions of $2.2 million in first quarter of 2017, $1.6 million in the second quarter of 2017, $11.1 million in third quarter of 2017 and $2.0 million in October 2017.2018.

We expect that our primary cash requirements for the remainder of ~~2017~~2018 will be to fund costs associated with ongoing operations, capital expenditures, share repurchases and amounts related to other contractual obligations.

The Company made pension contributions of approximately $12 million during the nine months ended September 30, 2018 sufficient to satisfy pension funding requirements. The Company made contributions of approximately $2.0 million during the first quarter of 2018, $6.6 million in the second quarter of 2018, and $3.3 million in the third quarter of 2018. The Company does not plan to make additional pension plan contributions during the fourth quarter of 2018.

On May 4, 2018, the Company announced that its Board of Directors authorized a share repurchase program of up to $75 million of the Company’s common stock. Repurchases may be made from time to time on the open market, including ~~planned plant outages~~through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and ~~capital expenditures.~~timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors. The repurchase program has no expiration date and may be modified, suspended or discontinued at any time. The Company had approximately 30.0 million shares of common stock outstanding as of September 30, 2018.

The credit facilities under the Original Credit Agreement ~~we incurred indebtedness~~consisted of a senior secured term loan in ~~the~~an aggregate principal amount of ~~approximately $270.0~~$270 million, ~~in the form of a term loan, the net proceeds~~ of which ~~were distributed~~$267 million was outstanding just prior to ~~Honeywell substantially concurrent with~~entering into the ~~consummation of the Spin-Off,~~Amendment, and ~~we also entered into~~ a ~~$155.0 million~~senior secured revolving credit facility in a principal amount of $155 million. Pursuant to ~~fund our working capital and other cash needs. For information regarding our~~the Amendment, (i) the term loan facility under the Original Credit Agreement ~~refer to “Note 9-Long-term Debt~~was terminated and ~~Credit Agreement” to~~ the ~~Consolidated and Combined Financial Statements in Item 8 of our 2016 Form 10-K. Going forward, cash provided by operating activities will be needed to fund future interest payments on the Company's~~entire outstanding ~~indebtedness.~~

~~Under the terms~~balance of the term loan facility (the “Term Loan”) thereunder was paid in full and (ii) the maximum aggregate principal amount of the senior secured revolving credit facility (the “Revolving Credit Facility”) was increased to $425 million.

On the Amendment Date, the Company borrowed $242 million under the Revolving Credit Facility. The proceeds of such loans, as well as cash on hand, were used to repay the outstanding Term Loan under the Original Credit Agreement. The Revolving Credit Facility under the Amended and Restated Credit Agreement ~~we are subject~~has a 5-year term with a scheduled maturity date of February 21, 2023. The Amendment resulted in an increase in the Revolving Credit Facility to ~~restrictive~~replace the Term Loan and provides

increased borrowing flexibility and reduced overall borrowing costs with an approximate 50 basis point reduction in the interest rate spread.

The Amended and Restated Credit Agreement contains customary covenants ~~that limit our~~limiting the ability of the Company and its subsidiaries to, among other things, topay cash dividends, incur ~~additional indebtedness, pay dividends~~debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make ~~other distributions, and~~investments, make capital expenditures, merge or consolidate ~~merge, sell~~with others or ~~otherwise~~ dispose of assets, as well as financial covenants that require usthe Company to maintain interest coverage and leverage ratios at levels specified in the Amended and Restated Credit Agreement. These covenants may limit how we conduct our business, and in the event of certain defaults, our repayment obligations may be accelerated. We were in compliance with all of our covenants at September 30, ~~2017.~~2018. As of September 30, ~~2017, $152.9~~2018, $223.9 million is available for use out of the total ~~credit facility~~ of ~~$425.0~~$425 million ~~is available to be drawn~~ under the Revolving Credit ~~Agreement.~~Facility.

~~During~~In addition to the ~~three months ended September 30, 2017, we~~amount borrowed ~~$32.5~~on the Amendment Date, the Company borrowed an incremental $43 million ($4 million in first quarter, $15 million in second quarter and $24 million in the ~~aggregate from our revolving credit facility~~third quarter) for ~~our~~ working capital purposes under the Revolving Credit Facility and ~~other cash needs~~repaid $85 million ($16 million in first quarter, $35 million in second quarter and ~~these borrowings were fully repaid by September 30, 2017. During the nine months ended September 30, 2017, we borrowed $308.5~~$34 million in the ~~aggregate from our revolving credit facility for our working capital and other cash needs and these borrowings were fully repaid by~~third quarter) to bring the balance under the Revolving Credit Facility to $200 million at September 30, ~~2017.~~2018. Going forward, we expect that cash provided by operating activities will fund future interest payments on the Company's outstanding indebtedness.

For additional details regarding the Amended and Restated Credit Agreement, refer to “Note 7. Long-term Debt and Credit Agreement” to the Condensed Consolidated Financial Statements.

Nine Months Ended
September 30,
2017 2016
Cash provided by (used for):

Operating activities $ 98,471
$ 66,467
Investing activities (72,593 ) (57,320 )
Financing activities (91 ) 28,817
Net increase in cash and cash equivalents $ 25,787
$ 37,964


	Nine Months Ended September 30,
	2018		2017
Cash provided by (used for):
Operating activities	$	127,735	$	98,471
Investing activities	(74,306)		(72,593)
Financing activities	(88,655)		(91)
Net change in cash and cash equivalents	$	(35,226)	$	25,787

Cash provided by operating activities increased by ~~$32.0~~$29.3 million for the nine months ended September 30, ~~2017~~2018 versus the prior year period due primarily to an $86.5 million improvement in working capital (comprised of Accounts receivables, Inventories, Accounts payable and Deferred income and customer advances) with higher collections providing $46.9 million of cash from Accounts and other receivables during the nine months ended September 30, 2018 compared to a $20.8 million unfavorable cash impact in the prior year period, and a $23.2 million favorable cash impact in Accounts payable due to the timing of payments, with cash outflows of $10.7 million during the nine months ended September 30, 2018 compared to larger outflows of $33.9 million during the prior year period, partially offset by (i) a ~~$15.5~~$28.8 million ~~increase~~decrease in Net income versus the prior year period due to significantly higher sales for the nine months ended September 2017, (ii) a $14.9 million larger decrease in Inventory during the nine months ended September 30, 2017 versus the prior year period due primarily to the ~~timing~~January 2018 unplanned outage and the planned plant turnaround in the third quarter of ~~cumene purchases, (iii)~~2018, and (ii) a ~~$11.9~~$31.7 million ~~increase~~less favorable cash impact from changes in ~~Accrued liabilities due to the timing of payments during the nine months ended September 30, 2017 versus the same period last year and (iv) a $11.3 million increase in deferred~~Deferred income taxes versus the prior year period due primarily to ~~lower cash~~the utilization of net operating losses in 2017 and the reduction in the U.S. federal corporate tax ~~payments relative~~rate from 35% to the income tax provision. This activity was offset partially by a net $33.8 million unfavorable cash impact from Accounts payable due primarily to the timing of payments during the nine months ended September 30, 2017 versus the prior year period.21%.

Cash used for investing activities increased by ~~$15.3~~$1.7 million for the nine months ended September 30, ~~2017~~2018 versus the prior year period due primarily to an increase in cash paid for capital ~~expenditures of $10.3 million.~~expenditures.

Cash ~~from~~used for financing activities ~~decreased~~increased by ~~$28.9~~$88.6 million for the nine months ended September 30, ~~2017~~2018 versus the prior year ~~period. Cash provided by operating activities was sufficient~~period primarily due to ~~repay all current period~~the repayment of borrowings ~~under~~and the ~~revolving credit facility whereas revolver borrowings from~~impact of the ~~prior year period were not repaid and remained outstanding during that period.~~share repurchase program, both of which are described above. During the nine months ended September 30, 2018, the Company amended its Credit Facility, as described above.

Capital Expenditures

(Dollars in thousands, unless otherwise noted)

Our operations are capital intensive, requiring ongoing investments that have consisted, and are expected to continue to consist, primarily of capital expenditures required to maintain and improve equipment reliability, expand production ~~capacity,~~output, further improve mix, yield ~~throughput,~~ and cost position, and comply with environmental and safety regulations.

The following table summarizes ongoing and expansion capital expenditures:

Nine Months Ended
September 30, 2017
Capital expenditures in Accounts payable at December 31, 2016 $ 28,485
Purchases of property, plant and equipment 55,949
Capital expenditures in Accounts payable at September 30, 2017 (17,228 )
Cash paid for capital expenditures $ 67,206


	Nine Months Ended September 30, 2018
Capital expenditures in Accounts payable at December 31, 2017	$	25,222
Purchases of property, plant and equipment	65,077
Less: Capital expenditures in Accounts payable at September 30, 2018	(17,649)
Cash paid for capital expenditures	$	72,650

For the full year ~~2017,~~2018, we expect the Company’s total capital expenditures to be approximately ~~$90~~$110 million.

Critical Accounting Policies

The preparation of our Condensed Consolidated ~~and Combined~~ 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. We consider these accounting policies to be critical to the understanding of our Condensed Consolidated ~~and Combined~~ 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 ~~the 2016~~our 2017 Form 10-K. While there have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them, we continue to monitor such methodologies and assumptions.

Off-Balance Sheet Arrangements and Contractual Obligations

As of September 30, ~~2017, we~~2018, the Company did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any material changes in the commitments or contractual obligations ~~other than those~~ detailed in ~~our 2016~~the Company's 2017 Form 10-K. ~~We have~~The Company has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Recent Accounting Pronouncements

See “Note 22. Recent Accounting Pronouncements” to the Condensed Consolidated ~~and Combined~~ Financial Statements included in Part I, Item 1 of this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to risk based on changes in interest rates relates primarily to our Amended and Restated Credit Agreement. We have not used derivative financial instruments in our investment portfolio. The Amended and Restated Credit Agreement bears interest at floating rates. For variable rate debt, interest rate changes generally do not affect the fair market value of such debt assuming all other factors remain constant but do impact future earnings and cash flows. Accordingly, we may be exposed to interest rate risk on borrowings under the Amended and Restated Credit Agreement. Based on current borrowing levels, a ~~25 basis~~25-basis point fluctuation in interest rates for the nine months ended September 30, ~~2017~~2018 would result in an increase or decrease to our interest expense of approximately ~~$0.5~~$0.4 million.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures designed to give reasonable assurance that information required to be disclosed in the Company’s reports filed or submitted under the ~~Securities~~ Exchange Act ~~of 1934, as amended (the “Exchange Act”)~~ is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to management to allow timely decisions regarding required disclosures.

Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud have been or will be detected.

Our Chief Executive Officer and Chief Financial Officer, with the assistance of other members of our management, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

Management has not identified any change in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, ~~2017~~2018 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in litigation relating to claims arising out of the ordinary course of our business operations. We are not a party to, and, to our knowledge, there are not threats of any claims or actions against us, the ultimate disposition of which would have a material adverse effect on our consolidated results of operations or liquidity.

ITEM 1A. RISK FACTORS

There have been no material changes to our risk factors as previously disclosed in the Company’s ~~2016~~2017 Form ~~10-K.~~ 10-K and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.

The below table sets forth the repurchases of Company common stock, by month, for the quarter ended September 30, 2018:

(1) Includes 9,970 shares covering the tax withholding obligations in connection with the vesting of equity awards.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ADVANSIX INC.

~~ADVANSIX INC.~~

Date: November ~~7, 2017~~2, 2018

By:

/s/ Michael Preston

Michael Preston

Senior Vice President and Chief Financial Officer


Part I.		FINANCIAL INFORMATION

~~Part I.~~		~~FINANCIAL INFORMATION~~

Item 1.	Financial Statements		3
		Condensed Consolidated ~~and Combined~~ Statements of Operations for the Three and Nine Months Ended September 30, 2018 and 2017 ~~and 2016~~ (unaudited)		3
		Condensed Consolidated ~~and Combined~~ Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 ~~and 2016~~ (unaudited)		4
		Condensed Consolidated ~~and Combined~~ Balance Sheets as of September 30, ~~2017~~2018 and December 31, ~~2016~~2017 (unaudited)		5
		Condensed Consolidated ~~and Combined~~ Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017 ~~and 2016~~ (unaudited)		6
		Notes to Condensed Consolidated ~~and Combined~~ Financial Statements (unaudited)		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		1516
Item 3.		Quantitative and Qualitative Disclosures About Market Risk		2123
Item 4.		Controls and Procedures		2124

Part II.		OTHER INFORMATION		2225

Item 1.		Legal Proceedings		2225
Item 1A.		Risk Factors		2225
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		25
Item 6.		Exhibits		2226
		Signature		2327


	Three Months Ended September 30,		Nine Months Ended September 30,			Three Months Ended September 30,			Nine Months Ended September 30,
	2017	2016	2017	2016		2018	2017	2018	2017
Tax expense	$14,538	$11,342	$46,803	$36,712	Tax expense	$229	$14,538	$13,385	$46,803
Effective tax rate	40.6%	40.8%	38.6%	38.4%	Effective tax rate	4.0%	40.6%	22.7%	38.6%


Period		Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
July 2018		124,767	$	38.32	124,767	$	67,478,054
August 2018	⁽¹⁾	196,878	34.92		186,908	61,001,676
September 2018		163,500	34.66		163,500	55,335,379
Total		485,145	$	35.70	475,175	$	—



Exhibit		Description
3.1		Amended and Restated Certificate of Incorporation of AdvanSix Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 3, 2016).
3.2		Amended and Restated By-laws of AdvanSix Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 3, 2016).
~~10.1~~31.1		~~AdvanSix Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on September 26, 2017).~~
~~31.1~~	Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer.
31.2		Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer.
32.1		Section 1350 Certification of the Company’s Principal Executive Officer. The information contained in this Exhibit shall not be deemed filed with the SEC nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended.
32.2		Section 1350 Certification of the Company’s Principal Financial Officer. The information contained in this Exhibit shall not be deemed filed with the SEC nor incorporated by reference in any registration statement filed by the registrant under the Securities Act of 1933, as amended.
101.INS		XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


AdvanSix Inc.
~~AdvanSix Inc.~~ (Exact Name of Registrant as Specified in its Charter)



	September 30, 2017			December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	39,986		$	14,199
Accounts and other receivables – net	152,511			131,671
Inventories – net	100,474			128,978
Other current assets	8,684			7,690
Total current assets	301,655			282,538
Property, plant and equipment – net	597,877			575,375
Goodwill	15,005			15,005
Other assets	35,105			32,039
Total assets	$	949,642		$	904,957

LIABILITIES
Current liabilities:
Accounts payable	$	177,688		$	222,929
Accrued liabilities	27,630			25,396
Income taxes payable	18			86
Deferred income and customer advances	801			25,567
Current portion of long-term debt	10,125			—
Total current liabilities	216,262			273,978
Deferred income taxes	147,461			114,200
Long-term debt	254,995			264,838
Postretirement benefit obligations	25,372			33,544
Other liabilities	2,941			3,035
Total liabilities	647,031			689,595

COMMITMENTS AND CONTINGENCIES (Note 8)

EQUITY
Common stock, par value $0.01; 200,000,000 shares authorized and 30,482,966 shares issued and outstanding	305			305
Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding	—			—
Additional paid in capital	255,709			242,806
Retained earnings/(accumulated deficit)	49,617			(24,714		)
Accumulated other comprehensive income (loss)	(3,020		)	(3,035		)
Total equity	302,611			215,362
Total liabilities and equity	$	949,642		$	904,957


~~(1)~~	~~Prior year one-time benefit reflects the $15.5 million one-time benefit in the first quarter of 2016 related to the termination of a long-term supply agreement.~~



	Nine Months Ended September 30, 2017
Capital expenditures in Accounts payable at December 31, 2016	$	28,485
Purchases of property, plant and equipment	55,949
Capital expenditures in Accounts payable at September 30, 2017	(17,228		)
Cash paid for capital expenditures	$	67,206