UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, ~~2020~~2021


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

For the transition period from _____ to _____

Commission File Number: 1-37774


AdvanSix Inc.
(Exact name of registrant as specified in its charter)


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)

(973) 526-1800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading ~~Symbol~~Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ASIX

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth 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 ýo	Accelerated filer oý	Non-accelerated filer o	Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The Registrant had ~~28,004,331~~28,051,056 shares of common stock, $0.01 par value, outstanding at April ~~24, 2020.~~23, 2021.

ADVANSIX INC.

FORM 10-Q

TABLE OF CONTENTS


Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 (unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020 ~~and~~ ~~2019~~(unaudited)	4
	Condensed Consolidated Balance Sheets asa s of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 (unaudit ~~(unaudited)~~ed)	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 ~~and~~ ~~2019~~(unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2021 and 2020 ~~and~~ ~~2019~~(unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2017
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3025
Item 4.	Controls and Procedures	3126

Part II.	OTHER INFORMATION	3126
Item 1.	Legal Proceedings	3126
Item 1A.	Risk Factors	3226
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3326
Item 6.	Exhibits	3428
	Signature	3529

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ADVANSIX INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Sales	Sales	$	302,713	$	314,895	Sales	$	376,383	$	302,713
Costs, expenses and other:	Costs, expenses and other:					Costs, expenses and other:
Costs of goods sold	Costs of goods sold	272,008		266,880		Costs of goods sold	317,899		272,008
Selling, general and administrative expenses	Selling, general and administrative expenses	16,740		19,413		Selling, general and administrative expenses	19,308		16,740
Interest expense, net						Interest expense, net	1,544		1,959
Other non-operating expense (income), net	Other non-operating expense (income), net	1,725		1,604		Other non-operating expense (income), net	230		(234)
Total costs, expenses and other	Total costs, expenses and other	290,473		287,897		Total costs, expenses and other	338,981		290,473

Income before taxes	Income before taxes	12,240		26,998		Income before taxes	37,402		12,240
Income tax expense	Income tax expense	3,664		6,824		Income tax expense	9,271		3,664
Net income	Net income	$	8,576	$	20,174	Net income	$	28,131	$	8,576

Earnings per common share	Earnings per common share					Earnings per common share
Basic	Basic	$	0.31	$	0.70	Basic	$	1.00	$	0.31
Diluted	Diluted	$	0.31	$	0.68	Diluted	$	0.98	$	0.31
Weighted average common shares outstanding	Weighted average common shares outstanding					Weighted average common shares outstanding
Basic	Basic	27,942,486		28,820,603		Basic	28,093,764		27,942,486
Diluted	Diluted	28,050,955		29,786,957		Diluted	28,741,066		28,050,955

See accompanying notes to Condensed Consolidated Financial Statements.

ADVANSIX INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Net income	Net income	$	8,576	$	20,174	Net income	$	28,131	$	8,576
Foreign exchange translation adjustment	Foreign exchange translation adjustment	(57)		(1)		Foreign exchange translation adjustment	(70)		(57)

Cash-flow hedges	Cash-flow hedges	(1,836)		(192)		Cash-flow hedges	483		(1,836)

Pension obligation adjustments						Pension obligation adjustments	0		0
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(1,893)		(193)		Other comprehensive income (loss), net of tax	413		(1,893)
Comprehensive income	Comprehensive income	$	6,683	$	19,981	Comprehensive income	$	28,544	$	6,683

See accompanying notes to Condensed Consolidated Financial Statements.

ADVANSIX INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

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


		March 31, 2020		December 31, 2019			March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	30,754	$	7,050	Cash and cash equivalents	$	14,124	$	10,606
Accounts and other receivables – net	Accounts and other receivables – net	113,302		104,613		Accounts and other receivables – net	149,461		123,554
Inventories – net	Inventories – net	158,066		171,710		Inventories – net	141,810		180,085
Taxes receivable	Taxes receivable	9,701		2,047		Taxes receivable	340		12,289
Other current assets	Other current assets	4,641		5,117		Other current assets	4,342		6,969
Total current assets	Total current assets	316,464		290,537		Total current assets	310,077		333,503
Property, plant and equipment – net	Property, plant and equipment – net	766,355		755,881		Property, plant and equipment – net	763,605		765,469
Operating lease right-of-use assets	Operating lease right-of-use assets	127,501		135,985		Operating lease right-of-use assets	113,458		114,484
Goodwill	Goodwill	15,005		15,005		Goodwill	17,592		15,005

Other assets	Other assets	37,987		38,561		Other assets	38,051		34,946
Total assets	Total assets	$	1,263,312	$	1,235,969	Total assets	$	1,242,783	$	1,263,407

LIABILITIES	LIABILITIES					LIABILITIES
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	185,938	$	205,911	Accounts payable	$	173,593	$	190,227
Accrued liabilities	Accrued liabilities	31,311		28,114		Accrued liabilities	39,724		41,152

Operating lease liabilities – short-term	Operating lease liabilities – short-term	38,361		38,005		Operating lease liabilities – short-term	26,589		29,279
Deferred income and customer advances	Deferred income and customer advances	13,070		19,696		Deferred income and customer advances	19,576		26,379

Total current liabilities	Total current liabilities	268,680		291,726		Total current liabilities	259,482		287,037
Deferred income taxes	Deferred income taxes	120,663		110,071		Deferred income taxes	127,973		125,575
Operating lease liabilities – long-term	Operating lease liabilities – long-term	89,759		98,347		Operating lease liabilities – long-term	87,231		85,605
Line of credit – long-term	Line of credit – long-term	337,000		297,000		Line of credit – long-term	246,000		275,000

Postretirement benefit obligations	Postretirement benefit obligations	32,734		32,410		Postretirement benefit obligations	39,795		39,168
Other liabilities	Other liabilities	6,640		5,537		Other liabilities	7,714		6,899
Total liabilities	Total liabilities	855,476		835,091		Total liabilities	768,195		819,284

COMMITMENTS AND CONTINGENCIES (Note 10)
COMMITMENTS AND CONTINGENCIES (Note 9)						COMMITMENTS AND CONTINGENCIES (Note 9)	0		0

STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 200,000,000 shares authorized; 31,578,393 shares issued and 27,996,115 outstanding at March 31, 2020; 31,423,898 shares issued and 27,914,777 outstanding at December 31, 2019		316		314
Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2020 and December 31, 2019		—		—
Treasury stock at par (3,582,278 shares at March 31, 2020; 3,509,121 shares at December 31, 2019)		(36)		(35)
Common stock, par value $0.01; 200,000,000 shares authorized; 31,660,339 shares issued and 28,051,056 outstanding at March 31, 2021; 31,627,139 shares issued and 28,033,227 outstanding at December 31, 2020						Common stock, par value $0.01; 200,000,000 shares authorized; 31,660,339 shares issued and 28,051,056 outstanding at March 31, 2021; 31,627,139 shares issued and 28,033,227 outstanding at December 31, 2020	317		316
Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2021 and December 31, 2020						Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2021 and December 31, 2020	0		0
Treasury stock at par (3,609,283 shares at March 31, 2021; 3,593,912 shares at December 31, 2020)						Treasury stock at par (3,609,283 shares at March 31, 2021; 3,593,912 shares at December 31, 2020)	(36)		(36)
Additional paid-in capital	Additional paid-in capital	181,158		180,884		Additional paid-in capital	186,652		184,732
Retained earnings	Retained earnings	237,742		229,166		Retained earnings	303,374		275,243
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(11,344)		(9,451)		Accumulated other comprehensive loss	(15,719)		(16,132)
Total stockholders' equity	Total stockholders' equity	407,836		400,878		Total stockholders' equity	474,588		444,123
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,263,312	$	1,235,969	Total liabilities and stockholders' equity	$	1,242,783	$	1,263,407

See accompanying notes to Condensed Consolidated Financial Statements.

ADVANSIX INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	8,576	$	20,174	Net income	$	28,131	$	8,576
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used for) provided by operating activities:						Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Depreciation and amortization	Depreciation and amortization	14,432		13,915		Depreciation and amortization	16,104		14,432
Loss on disposal of assets	Loss on disposal of assets	35		415		Loss on disposal of assets	84		35
Deferred income taxes	Deferred income taxes	11,204		3,747		Deferred income taxes	2,237		11,204
Stock based compensation	Stock based compensation	1,198		2,762		Stock based compensation	2,363		1,198
Accretion of deferred financing fees	Accretion of deferred financing fees	130		107		Accretion of deferred financing fees	141		130

Changes in assets and liabilities:
Changes in assets and liabilities, net of business acquisitions:						Changes in assets and liabilities, net of business acquisitions:
Accounts and other receivables	Accounts and other receivables	(8,746)		42,621		Accounts and other receivables	(25,119)		(8,746)
Inventories	Inventories	13,644		(3,416)		Inventories	38,986		13,644
Taxes receivable	Taxes receivable	(7,654)		397		Taxes receivable	11,949		(7,654)
Accounts payable	Accounts payable	(9,752)		(30,674)		Accounts payable	(13,781)		(9,752)

Accrued liabilities	Accrued liabilities	2,912		(7,232)		Accrued liabilities	912		2,912
Deferred income and customer advances	Deferred income and customer advances	(6,626)		(1,862)		Deferred income and customer advances	(6,803)		(6,626)
Other assets and liabilities	Other assets and liabilities	366		1,122		Other assets and liabilities	1,886		366
Net cash provided by operating activities	Net cash provided by operating activities	19,719		42,076		Net cash provided by operating activities	57,090		19,719

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Expenditures for property, plant and equipment	Expenditures for property, plant and equipment	(34,100)		(39,512)		Expenditures for property, plant and equipment	(14,177)		(34,100)
Acquisition of business						Acquisition of business	(9,523)		0

Other investing activities	Other investing activities	(385)		(587)		Other investing activities	(231)		(385)
Net cash used for investing activities	Net cash used for investing activities	(34,485)		(40,099)		Net cash used for investing activities	(23,931)		(34,485)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Borrowings from line of credit	Borrowings from line of credit	133,500		85,500		Borrowings from line of credit	54,000		133,500
Payments of line of credit	Payments of line of credit	(93,500)		(65,500)		Payments of line of credit	(83,000)		(93,500)
Payment of line of credit facility fees	Payment of line of credit facility fees	(425)		—		Payment of line of credit facility fees	0		(425)

Principal payments of finance leases	Principal payments of finance leases	(182)		(145)		Principal payments of finance leases	(199)		(182)
Purchase of treasury stock	Purchase of treasury stock	(925)		(23,853)		Purchase of treasury stock	(443)		(925)
Issuance of common stock	Issuance of common stock	2		16		Issuance of common stock	1		2

Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	38,470		(3,982)		Net cash provided by (used for) financing activities	(29,641)		38,470

Net change in cash and cash equivalents	Net change in cash and cash equivalents	23,704		(2,005)		Net change in cash and cash equivalents	3,518		23,704
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	7,050		9,808		Cash and cash equivalents at beginning of period	10,606		7,050
Cash and cash equivalents at the end of period	Cash and cash equivalents at the end of period	$	30,754	$	7,803	Cash and cash equivalents at the end of period	$	14,124	$	30,754

Supplemental non-cash investing activities:	Supplemental non-cash investing activities:					Supplemental non-cash investing activities:
Capital expenditures included in accounts payable	Capital expenditures included in accounts payable	$	11,553	$	14,039	Capital expenditures included in accounts payable	$	2,965	$	11,553

Supplemental cash activities:	Supplemental cash activities:					Supplemental cash activities:
Cash paid for interest	Cash paid for interest	$	730	$	1,040	Cash paid for interest	$	1,518	$	730
Cash paid for income taxes	Cash paid for income taxes	$	109	$	21	Cash paid for income taxes	$	35	$	109

See accompanying notes to Condensed Consolidated Financial Statements.

ADVANSIX INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

(Dollars in thousands)


		Common Stock							Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)			Treasury Stock		Accumulated Other Comprehensive Income (Loss)				Total Equity		Common Stock						Additional Paid-In Capital		Retained Earnings					Treasury Stock		Accumulated Other Comprehensive Income (Loss)		Total Equity
			Shares			Amount																Shares					Treasury Stock							Accumulated Other Comprehensive Income (Loss)							Total Equity
Balance at December 31, 2019		31,423,898		$	314		$	180,884				$	229,166			$	(35)			$	(9,451)		$	400,878
Balance at December 31, 2020																		Balance at December 31, 2020	31,627,139			$	316					$	184,732	$	275,243						$	(36)	$	(16,132)		$	444,123

Net Income	Net Income	—		—			—		8,576			—		—		8,576		Net Income	—			—			—			28,131				—			—		28,131
Comprehensive income	Comprehensive income																	Comprehensive income
Foreign exchange translation adjustments	Foreign exchange translation adjustments	—		—			—		—			—		(57)		(57)		Foreign exchange translation adjustments	—			—			—			—				—			(70)		(70)
Cash-flow Hedges		—		—			—		—			—		(1,836)		(1,836)
Cash-flow hedges																		Cash-flow hedges	—			—			—			—				—			483		483
Pension obligation adjustments	Pension obligation adjustments	—		—			—		—			—		—		—		Pension obligation adjustments	—			—			—			—				—			—		0
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—		—			—		—			—		(1,893)		(1,893)		Other comprehensive income (loss), net of tax	—			—			—			—				—			413		413
Issuance of common stock	Issuance of common stock	154,495		2			—		—			—		—		2		Issuance of common stock	33,200			1			—			—				—			—		1
Purchase of treasury stock (73,157 shares)		—		—			(924)		—			(1)		—		(925)
Purchase of treasury stock (15,371 shares)																		Purchase of treasury stock (15,371 shares)	—			—			(443)			—				—			—		(443)
Stock-based compensation	Stock-based compensation	—		—			1,198		—			—		—		1,198		Stock-based compensation	—			—			2,363			—				—			—		2,363
Balance at March 31, 2020		31,578,393		$	316		$	181,158	$	237,742		$	(36)	$	(11,344)	$	407,836
Balance at March 31, 2021																		Balance at March 31, 2021	31,660,339			$	317		$	186,652		$	303,374			$	(36)		$	(15,719)	$	474,588

Common Stock Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Equity
Shares Amount
Balance at December 31, 2018 30,555,715 $ 306 $ 234,699 $ 187,819 $ (12) $ (2,474) $ 420,338
Net Income — — — 20,174 — — 20,174
Comprehensive income
Foreign exchange translation adjustments — — — — — (1) (1)
Cash-flow Hedges — — — — — (192) (192)
Pension obligation adjustments — — — — — — —
Other comprehensive income (loss), net of tax — — — — — (193) (193)
Issuance of common stock 22,497 — 16 — — — 16
Purchase of treasury stock (793,754 shares) — — (23,845) — (8) — (23,853)
Stock-based compensation — — 2,762 — — — 2,762
Balance at March 31, 2019 30,578,212 $ 306 $ 213,632 $ 207,993 $ (20) $ (2,667) $ 419,244


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















































Balance at December 31, 2019	31,423,898	$	314	$	180,884	$	229,166	$	(35)	$	(9,451)	$	400,878

Net Income	—	—		—		8,576		—		—		8,576
Comprehensive income
Foreign exchange translation adjustments	—	—		—		—		—		(57)		(57)
Cash-flow hedges	—	—		—		—		—		(1,836)		(1,836)
Pension obligation adjustments	—	—		—		—		—		—		0
Other comprehensive income (loss), net of tax	—	—		—		—		—		(1,893)		(1,893)
Issuance of common stock	154,495	2		—		—		—		—		2
Purchase of treasury stock (73,157 shares)	—	—		(924)		—		(1)		—		(925)
Stock-based compensation	—	—		1,198		—		—		—		1,198
Balance at March 31, 2020	31,578,393	$	316	$	181,158	$	237,742	$	(36)	$	(11,344)	$	407,836

See accompanying notes to Condensed Consolidated Financial Statements.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1. Organization, Operations and Basis of Presentation

Description of Business

AdvanSix Inc. ~~(“AdvanSix”,~~("AdvanSix," the ~~“Company”,~~"Company," "we" or "our") ~~is an~~plays a critical role in global supply chains, innovating and delivering essential products for our customers in a wide variety of end markets and applications that touch people’s lives, such as building and construction, fertilizers, plastics, solvents, packaging, paints, coatings, adhesives and electronics. Our reliable and sustainable supply of quality products emerges from the vertically integrated ~~manufacturer~~value chain of ~~Nylon 6, a polymer resin which is a synthetic material used~~our 3 U.S.-based manufacturing facilities. AdvanSix strives to deliver best-in-class customer experiences and differentiated products in the industries of nylon solutions, chemical intermediates, and plant nutrients, guided by our ~~customers to produce fibers, filaments, engineered plastics~~core values of Safety, Integrity, Accountability and films that, in turn, are used in such end-products as carpets, automotive and electronic components, sports apparel, food packaging and other industrial applications. 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 manufacturing value chain including caprolactam, ammonium sulfate fertilizers, acetone and other chemical intermediates.Respect.

COVID-19

In March 2020, the World Health Organization categorized the novel coronavirus ~~("COVID-19")~~(COVID-19) as a global pandemic with numerous countries around the world declaring national emergencies, including the United States. Since early 2020, COVID-19 has continued to spread rapidly, with most countries and territories worldwide having confirmed cases, and with ~~confirmed cases.~~certain jurisdictions experiencing resurgences. The spread ~~has~~ resulted in authorities implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. The pandemic and these containment measures have had ~~and are expected to continue to have,~~ a substantial ~~negative~~ impact on businesses around the world and on global, regional and national economies, including disruptions to supply chains, reduced demand, production and ~~production~~sales across most industries, declines and volatility within global financial markets, and decreased workforces causing increased unemployment. The ~~U.S. Department~~continuously evolving nature of Homeland Security has designated our industry as "essential critical infrastructure" during the response to COVID-19 for both public health and safety as well as community well-being and we are executing our business continuity plans to maintain operations and meet customer demand. The Company continues to evaluate the potential impact of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted on March 27, 2020. The CARES Act, and other government stimulus programs are intended to provide economic relief resulting from the COVID-19this pandemic and ~~includes, but is not limited~~the pace of recovery may continue to ~~provisions for taxes, employment related costs, deferral of pension payments~~have an impact on the United States and ~~options for liquidity.~~global economies.

The Company’s ~~Condensed~~ Consolidated Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ~~Condensed~~ Consolidated Financial Statements and reported amounts of revenue and expenses during the reporting periods presented. The Company ~~considered~~continues to consider the impact of COVID-19 on the estimates and assumptions ~~and estimates~~ used ~~and determined that there were no~~for the financial statements. As previously disclosed, the Company experienced a material ~~adverse impacts~~impact on ~~the Company’s first~~its second quarter 2020 results of operations ~~however, it~~associated with lower demand, particularly in nylon, caprolactam and phenol, and a decrease in overall sales volume related to global markets and the economic impact of COVID-19. During the second half of 2020, and through the first quarter of 2021, demand improved to pre-COVID-19 levels with states, regions and countries in various phases of re-opening and continued administration of vaccines for COVID-19, although there is no assurance demand recovery will continue given the potential for surges in infection rates and newly identified strains of COVID-19. The Company will continue to monitor developments and execute our operational and safety mitigation plans as previously disclosed.

As the situation surrounding COVID-19 remains fluid and unpredictable, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have ~~a material impact in the future~~ on the ~~Company's~~Company’s results of operations, financial position, and liquidity.

Basis of Presentation

The Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of March 31, ~~2020,~~2021, and its results of operations for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 and cash flows for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. The year-end Condensed Consolidated Balance Sheet data were derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~"2019~~"2020 Form 10-K"). All intercompany transactions have been eliminated.

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

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

It is our practice to establish actual quarterly closing dates using a predetermined fiscal calendar, which requires our businesses to close their books on a Saturday in order to minimize the potentially disruptive effects of quarterly closing on our business processes. Historically, the effects of this practice were generally not significant to reported results for any quarter and only existed within a reporting year. In the event that differences in actual closing dates are material to year-over-year comparisons

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

of quarterly or year-to-date results, we will provide the appropriate disclosures. Our actual closing dates for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were April 3, 2021 and March 28, 2020, ~~and March 30, 2019,~~ respectively.

Liabilities to creditors to whom we have issued checks that remained outstanding at March 31, ~~2020~~2021 and December 31, ~~2019~~2020 aggregated ~~$0.3~~$1.0 million and ~~$1.7~~$7.2 million, respectively, and were included in Cash and cash equivalents and Accounts payable in the Condensed Consolidated Balance Sheets.

On May 4, 2018, the Company announced that its Board of Directors (the “Board”) authorized a share repurchase program of up to $75 million of the Company’s common stock. On February 22, 2019, the Company announced that the Board authorized a share repurchase program of up to an additional $75 million of the Company's common stock, which was in addition to the remaining capacity available under the May 2018 share repurchase program. 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 share repurchase program has no expiration date and may be modified, suspended or discontinued at any time. The par value of the shares repurchased is applied to Treasury stock and the excess of the purchase price over par value is applied to Additional paid-in capital.

As of March 31, ~~2020,~~2021, the Company had repurchased ~~3,582,278~~3,609,283 shares of common stock, including ~~492,516~~519,521 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of ~~$101.6~~$102.2 million at a weighted average market price of ~~$28.36~~$28.30 per share. As of March 31, ~~2020,~~2021, $59.6 million remained available for share repurchases under the current authorization. During the period April 1, ~~2020~~2021 through April ~~24, 2020,~~23, 2021, 0 additional shares were repurchased under the currently authorized repurchase program.

2. Recent Accounting Pronouncements

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

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments of ASU No. 2020-04 are effective for companies as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. The amendments in this update apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform and provide optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The Company is evaluating the impact that the amendments of this standard would have on the Company's consolidated financial position or results of operations upon adoption.

On December 18, 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU removes the exception to the general principles in ASC 740, Income Taxes, associated with the incremental approach for intra-period tax allocation, accounting for basis differences when there are ownership changes in foreign investments and interim-period income tax accounting for year-to-date losses that exceed anticipated losses. In addition, the ASU improves the application of income tax related guidance and simplifies U.S. GAAP when accounting for franchise taxes that are partially based on income, transactions with government resulting in a step-up in tax basis goodwill, separate financial statements of legal entities not subject to tax, and enacted changes in tax laws in interim periods. Different transition approaches, retrospective, modified retrospective, or prospective, will apply to each income tax simplification provision. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments in this update is permitted, including adoption in any interim period. ~~The Company is evaluating these changes and does not anticipate any material impact on the Company’s consolidated financial position or results of operations upon adoption.~~

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments of ASU No. 2018-13 are effective for companies for fiscal years beginning after December 15, 2019. The Company adopted ASU 2018-13 effective January 1, 2020, which did not have a material impact on the Company's consolidated financial position or results of operations upon adoption.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates step 2, which measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill, from the goodwill impairment test. The amendments of ASU No. 2017-04 are effective for companies for fiscal years beginning after December 15, 2019 and requires a one-step impairment test in which an entity compares the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, if any. The Company adopted ASU ~~2017-04~~2019-12 effective January 1, ~~2020,~~2021, which did not have a material impact on the ~~Company's consolidated financial position or results of operations upon adoption.~~

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments of ASU No. 2016-13 are effective for companies for fiscal years beginning after December 15, 2019 and modify existing guidance related to the measurement of credit losses on financial instruments, including trade and loan receivables. The new guidance requires impairments to be measured based on expected losses over the life of the asset rather than incurred losses. The Company adopted ASU 2016-13 effective January 1, 2020, using a modified retrospective approach, which did not have a material impact on the Company'sCompany’s consolidated financial position or results of operations upon adoption.

3. Revenues

Revenue Recognition

We serve approximately 400 customers annually in ~~more than 40~~approximately 50 countries and across a wide variety of industries. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020 the Company's ten largest customers accounted for approximately ~~43%~~38% and ~~48%~~43% of total sales, respectively.

We typically sell to customers under master service agreements, with primarily one-year terms, or by purchase orders. We have historically experienced low customer turnover and have ~~an average~~long-standing customer ~~relationship of approximately 20 years.~~relationships, which span decades. Our largest customer is Shaw Industries Group Inc. (“Shaw”), a significant consumer of caprolactam and Nylon 6 ~~resin. We~~resin, to whom we sell ~~Nylon 6 resin and caprolactam to Shaw~~ under a long-term agreement. For the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, our sales to Shaw were ~~17%~~12% and ~~22%~~17%, respectively, of our total sales.

Each of the Company’s product lines represented the following approximate percentage of total sales for the three months ended March 31, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended March 31,				Three Months Ended March 31,
		2020	2019		2021	2020
Nylon	Nylon	26%	31%	Nylon	22%	26%
Caprolactam	Caprolactam	22%	20%	Caprolactam	21%	22%
Ammonium Sulfate Fertilizers		23%	21%
Chemical Intermediates	Chemical Intermediates	29%	28%	Chemical Intermediates	38%	29%
Ammonium Sulfate				Ammonium Sulfate	19%	23%
		100%	100%		100%	100%

The Company's revenues by geographic area for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
United States	United States	$	230,443	$	257,642	United States	$	300,672	$	230,443
International	International	72,270		57,253		International	75,711		72,270
Total	Total	$	302,713	$	314,895	Total	$	376,383	$	302,713

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

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 three months ended March 31, ~~2020:~~2021:



Opening balance January 1, ~~2020~~2021	$	~~19,696~~26,379

~~Additions to deferred revenues~~Additional cash advances	~~678~~1,016

Less amounts recognized in revenues	~~(7,304)~~(7,819)

Ending balance March 31, ~~2020~~2021	$	~~13,070~~19,576

The Company expects to recognize as revenue the March 31, ~~2020~~2021 ending balance of Deferred income and customer advances within one year or less.

4. Earnings (Loss) Per Share

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The computation of basic and diluted earnings (loss) per share ("EPS") is based on Net income divided by the basic weighted average number of common shares and diluted weighted average number of common shares, respectively. The details of the basic and diluted EPS calculations for the three months ended March 31, 2021 and 2020 ~~and 2019~~ were aass follows:


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Basic	Basic					Basic
Net Income		$	8,576	$	20,174
Net Income (loss)						Net Income (loss)	$	28,131	$	8,576
Weighted average common shares outstanding	Weighted average common shares outstanding	27,942,486		28,820,603		Weighted average common shares outstanding	28,093,764		27,942,486
EPS – Basic	EPS – Basic	$	0.31	$	0.70	EPS – Basic	$	1.00	$	0.31
Diluted	Diluted					Diluted
Dilutive effect of equity awards and other stock-based holdings	Dilutive effect of equity awards and other stock-based holdings	108,469		966,354		Dilutive effect of equity awards and other stock-based holdings	647,302		108,469
Weighted average common shares outstanding	Weighted average common shares outstanding	28,050,955		29,786,957		Weighted average common shares outstanding	28,741,066		28,050,955
EPS – Diluted	EPS – Diluted	$	0.31	$	0.68	EPS – Diluted	$	0.98	$	0.31

Diluted EPS is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents ~~(which includes units allocated to the AdvanSix stock unit fund under the AdvanSix Inc. Deferred Compensation Plan)~~ using the treasury stock method and the average market price of our common stock for the year.

The diluted EPS calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. The anti-dilutive common stock equivalents outstanding at the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


	Three Months Ended March 31,
	2021	2020
Options and stock equivalents	861,376	935.402

Three Months Ended
March 31,
2020 2019
Options and stock equivalents 935,402 330,823

5. Accounts and Other Receivables – Net


	March 31, 2021		December 31, 2020
Accounts receivables	$	147,717	$	122,357
Other	3,221		2,668
Total accounts and other receivables	150,938		125,025
Less – allowance for doubtful accounts	(1,477)		(1,471)
Total accounts and other receivables – net	$	149,461	$	123,554

6. Inventories


	March 31, 2021		December 31, 2020
Raw materials	$	51,259	$	88,612
Work in progress	31,340		54,291
Finished goods	39,187		45,345
Spares and other	27,562		27,198
	149,348		215,446
Reduction to LIFO cost basis	(7,538)		(35,361)
Total inventories	$	141,810	$	180,085

7. Postretirement Benefit Cost

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

March 31,
2020 December 31,
2019
Accounts receivables $ 113,326 $ 105,275
Other 1,838 1,661
Total accounts and other receivables 115,164 106,936
Less – allowance for doubtful accounts (1,862) (2,323)
Total accounts and other receivables – net $ 113,302 $ 104,613

~~6. Inventories~~

March 31,
2020 December 31,
2019
Raw materials $ 63,487 $ 63,644
Work in progress 53,014 56,065
Finished goods 50,993 58,527
Spares and other 25,984 25,035
193,478 203,271
Reduction to LIFO cost basis (35,412) (31,561)
Total inventories – net $ 158,066 $ 171,710

~~7. Postretirement Benefit Cost~~

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


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Service cost	Service cost	$	2,005	$	1,714	Service cost	$	1,954	$	2,005
Interest cost	Interest cost	544		521		Interest cost	518		544
Expected return on plan assets	Expected return on plan assets	(524)		(334)		Expected return on plan assets	(731)		(524)

Amortization of actuarial net losses						Amortization of actuarial net losses	86		0

Net periodic benefit cost	Net periodic benefit cost	$	2,025	$	1,901	Net periodic benefit cost	$	1,827	$	2,025

The Company made cash contributions to the defined benefit pension plan of ~~$1.7~~$1.2 million during the three months ended March 31, ~~2020.~~2021. The Company currently plans to make pension plan contributions during ~~2020~~2021 sufficient to satisfy ~~pension~~ funding requirements under the AdvanSix Retirement Earnings Plan in an aggregate amount of approximately $5$9.0 million to ~~$10 million and will continue to evaluate options afforded under the CARES Act with respect to the deferral of pension plan contributions for calendar year 2020.~~$11.0 million. We anticipate making additional contributions in future years sufficient to satisfy pension funding requirements in those periods.

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.

8. ~~Long-term Debt and Credit Agreement~~

At March 31, 2020, the Company assessed the amount recorded under the Revolving Credit Facility (defined below) and determined that such amounts approximate fair value. Since a floating rate interest is applied to all borrowings from our Revolving Credit Facility, the fair value of our debt closely approximates the carrying value and is therefore classified as Level 2 within the valuation hierarchy.

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~Credit Agreement~~

On September 30, 2016, in connection with the consummation of the Spin-Off, the Company as the borrower, entered into a Credit Agreement with Bank of America, as administrative agent (the “Original Credit Agreement”). The Original Credit Agreement consisted of a $270 million term loan (the “Original Term Loan”) and a $155 million revolving loan facility (the “Original Revolving Credit Facility”). The Original Revolving Credit Facility included a $25 million letter-of-credit sub-facility and a $20 million Swing-Line Loan sub-facility, issuances against which reduce the available capacity for borrowing.

On February 21, 2018 (the “First Amendment Date”), the Company entered into Amendment No. 1 (the “First Amendment”) to the 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 First Amendment, the “First Amended and Restated Credit Agreement”).

As discussed above, 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 First Amendment, and a senior secured revolving credit facility in a principal amount of $155 million. Pursuant to the First 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 First 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 First Amended and Restated Credit Agreement has a 5-year term with a scheduled maturity date of February 21, 2023. The First Amendment resulted in an increase in the Revolving Credit Facility to replace the Term Loan and provided increased borrowing flexibility and reduced overall borrowing costs with an approximate 50 basis point reduction in the interest rate spread.

The First 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 such incremental term loans and increases of the 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 First Amended and Restated Credit Agreement) would not be greater than 1.75 to 1.00, in each case, to the extent that any one or more lenders, whether or not currently party to the First Amended and Restated Credit Agreement, commits to be a lender for such amount. Borrowings under the First Amended and Restated Credit Agreement bore interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.50% to 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 First Amended and Restated Credit Agreement). The Company was 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 the Company’s Consolidated Leverage Ratio. The initial margin under the First Amended and Restated Credit Agreement was 0.75% for base rate loans and 1.75% for Eurodollar rate loans and the initial commitment fee rate was 0.25% per annum.

The First Amended and Restated Credit Agreement contained 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 First Amended and Restated Credit Agreement also contained financial covenants that required the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the First 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 connection with certain acquisitions). If the Company did not comply with the covenants in the First Amended and Restated Credit Agreement, the lenders could have, subject to customary cure rights, required the immediate payment of all amounts outstanding under the Revolving Credit Facility. The Company was compliant with all related covenants at December 31, 2019.

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

On February 19, 2020, the Company entered into Amendment No. 2 (the “Second Amendment”) to the First Amended and Restated Credit Agreement (after giving effect to the Second Amendment, the “Second Amended and Restated Credit Agreement”).

The Second Amendment amended the Consolidated Leverage Ratio financial covenant of the Credit Agreement and requires the Company to maintain a Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of (i) 3.50 to 1.00 or less for the fiscal quarter ended March 31, 2020, (ii) 4.50 to 1.00 or less for the fiscal quarter ending June 30, 2020, (iii) 4.25 to 1.00 or less for the fiscal quarter ending September 30, 2020, (iv) 3.50 to 1.00 or less for the fiscal quarter ending December 31, 2020, (v) 3.25 to 1.00 or less for the fiscal quarter ending March 31, 2021 through and including the fiscal quarter ending December 31, 2021, and (vi) 3.00 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 connection with certain acquisitions). The Consolidated Interest Coverage Ratio financial covenant of the First Amended and Restated Credit Agreement was not changed and continues to require the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of not less than 3.00 to 1.00. If the Company does not comply with the covenants in the Second 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.

Borrowings under the Second Amended and Restated Credit Agreement bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.50% to 2.00% or the sum of a Eurodollar rate plus a margin ranging from 1.50% to 3.00%, with either such margin varying according to the Company’s Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement). The Company is also required to pay a commitment fee in respect of unused commitments under the credit facility, if any, at a rate ranging from 0.20% to 0.50% per annum depending on the Company’s Consolidated Leverage Ratio. The initial margin under the Second Amended and Restated Credit Agreement was 1.25% for base rate loans and 2.25% for Eurodollar rate loans and the applicable commitment fee rate was 0.35% per annum.

~~In addition, the Second Amendment also amended certain administrative provisions associated with the LIBOR Successor Rate (as defined in the Second Amended and Restated Credit Agreement).~~

~~The obligations under the Second Amended and Restated Credit Agreement are secured by a pledge of assets and liens on substantially all of the assets of AdvanSix.~~

Since the start of 2020, the Company has since borrowed an incremental $133.5 million for working capital purposes under the Revolving Credit Facility and repaid $93.5 million to bring the balance under the Revolving Credit Facility to $337 million at March 31, 2020.

The Company had approximately $1.0 million of letter of credit agreements outstanding under the Revolving Credit Facility at March 31, 2020, as well as an immaterial amount associated with bilateral letters of credit outside the Revolving Credit Facility.

9. Leases

We determine if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets ("ROU"), Operating lease liabilities – short-term, and Operating lease liabilities – long-term in our Condensed Consolidated Balance Sheets. Finance leases are included in Property, plant and equipment – net, Accounts payable, and Other liabilities in our Condensed Consolidated Balance Sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any lease pre-payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease and, when it is reasonably certain that such an option will be exercised, it is included in the determination of the corresponding assets and liabilities. Short-term leases are not recognized on our unaudited Condensed Consolidated Balance Sheets. Lease expense for all operating lease payments is recognized on a straight-line basis over the lease term.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. Additionally, for certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

The Company has entered into agreements to lease transportation equipment, storage facilities, office space, dock access and other equipment. The leases have initial terms of up to 20 years with some containing renewal options subject to customary conditions.

The components of lease expense were as follows:


	~~Three Months Ended March 31, 2020~~
~~Finance lease cost:~~
~~Amortization of right-of-use asset~~	$	~~181~~
~~Interest on lease liabilities~~	15
~~Total finance lease cost~~	~~196~~
~~Operating lease cost~~	~~11,044~~
~~Short-term lease cost~~	~~1,873~~
~~Variable lease cost~~	—
~~Total lease cost~~	$	~~13,113~~


	Three Months Ended March 31,
	2021		2020
Finance lease cost:
Amortization of right-of-use asset	$	183	$	181
Interest on lease liabilities	8		15
Total finance lease cost	191		196
Operating lease cost	11,571		11,044
Short-term lease cost	1,913		1,873

Total lease cost	$	13,675	$	13,113

~~Supplemental cash flow information related~~As of March 31, 2021, we have additional operating leases that have not yet commenced for approximately $24.4 million. These leases commence during 2021 with lease terms of up to ~~leases was as follows:~~


	~~Three Months Ended March 31, 2020~~
~~Cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash flows from operating leases~~	$	~~10,958~~
~~Operating cash flows from finance leases~~	16
~~Financing cash flows from finance leases~~	~~182~~
~~Non-cash information:~~
~~Right-of-use assets obtained in exchange for lease obligations:~~
~~Operating leases~~	~~1,048~~
~~Finance leases~~	5

~~Supplemental balance sheet information related to leases was as follows:~~

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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


	March 31, 2020
~~Operating Leases~~
~~Operating lease right-of-use assets~~	$	~~127,501~~
~~Operating lease liabilities – short term~~	~~38,361~~
~~Operating lease liabilities – long term~~	~~89,759~~
~~Total operating lease liabilities~~	$	~~128,120~~
~~Finance Leases~~
~~Property, plant and equipment – gross~~	$	~~2,068~~
~~Accumulated depreciation~~	~~(842)~~
~~Property, plant and equipment – net~~	$	~~1,226~~
~~Accounts payable~~	~~700~~
~~Other liabilities~~	~~543~~
~~Total finance lease liabilities~~	$	~~1,243~~
~~Weighted Average Remaining Lease Term~~
~~Operating leases~~	~~9.3 years~~
~~Finance leases~~	~~2.0 years~~
~~Weighted Average Discount Rate~~
~~Operating leases~~	~~5.77~~		%
~~Finance leases~~	~~4.76~~		%

~~Maturities of lease liabilities are as follows:~~

Year Ending December 31, Operating Leases Finance Leases
2020 (remainder) $ 33,059 $ 562
2021 32,932 528
2022 22,814 195
2023 13,335 11
2024 11,468 8
Thereafter 61,561 —
Total lease payments 175,169 1,304
Less imputed interest (47,049) (61)
Total $ 128,120 $ 1,243
6 years.

~~10.~~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. 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.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Given the uncertainty inherent in such lawsuits, investigations and disputes, the Company does not believe it is possible to develop estimates of reasonably possible loss in excess of current accruals for these matters. Considering the Company’s past experience and existing accruals, the Company does not expect the outcome of these matters, either individually or in the aggregate, to have a material adverse effect on the Company’s consolidated financial position or results of operations. Potential liabilities are subject to change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause the Company to pay damage awards or settlements (or become subject to equitable remedies)

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

that could have a material adverse effect on the Company’s consolidated results of operations, balance sheet and/or operating cash flows in the periods recognized or paid.

We assumed from Honeywell 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 ~~3 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 have a material adverse effect on the Company's consolidated financial position or results of operations.

~~11.~~10. Income Taxes

The ~~CARES Act includes various modifications to current~~provision for income taxes was $9.3 million and $3.7 million for the three months ended March 31, 2021 and 2020, respectively, resulting in an effective tax ~~law~~rate of 24.8% and ~~is intended to provide economic relief in response to the COVID-19 pandemic. One~~29.9%, respectively.

Under a provision included in the ~~CARES~~Coronavirus Aid, Relief, and Economic Security ("CARES") Act, ~~allows for~~the Company filed a ~~five-year carryback of~~ Federal net operating ~~losses (NOLs)~~loss (NOL) carryback claim in July 2020 which generated in tax years beginning in 2018, 2019 and 2020. At this point, the Company anticipates filing its 2019 federal income tax return with a net operating loss, on a tax basis, which now may be carried back to earlier years to request a refund of previously paid ~~taxes. As such, we have recorded the estimated impact of the federal NOL carryback~~taxes in the quarterly financial results, which includes an $8.0 million reclassification from Deferred income taxes to Taxes receivable. However, we have not yet filed our 2019 federal income tax return and continue to evaluateamount of $12.3 million. The refund was received in the ~~impact~~first quarter of ~~the CARES Act on our tax positions, which may result in a change to our estimate.~~2021.

The Company’s provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against Income before taxes for the period in addition to recording any tax effects of discrete items for the quarter. ~~For~~The Company’s estimated annual effective tax rate applied against the three months ended March 31, 2021 and 2020 was higher compared to the U.S. federal statutory rate, due primarily to state taxes and executive compensation deduction limitations, partially offset by tax credits. Additionally, for interim reporting purposes, the Company recorded Income tax expense of $0.1 million and $0.6 million as discrete ~~items.~~items for the three months ended March 31, 2021 and 2020, respectively, resulting in an increase in the effective tax rate of 0.3% and 4.5%, respectively. The discrete ~~items~~tax adjustments in the prior year period relate to tax deficiencies on the vesting of equity compensation ~~in the quarter~~ and the ~~expected~~ loss of 2018 foreign-derived intangible income tax benefits ~~resulting from~~related to the ~~anticipated~~ Federal NOL carryback ~~under~~claim.

On March 11, 2021, the ~~CARES Act.~~American Rescue Plan Act ("ARPA") was signed into law. The ~~provision~~ARPA is aimed at addressing the continuing economic and health impacts of the COVID-19 pandemic. This legislative relief, along with the previous governmental relief packages, provide for ~~income taxes was $3.7 million~~numerous changes to current tax law. The ARPA did not have a material impact on our financial statements in the first quarter of 2021, and ~~$6.8 million for~~we do not anticipate that it will have a material impact on our financial statements throughout the ~~three months ended March 31, 2020 and 2019, respectively.~~remainder of 2021.

~~12.~~11. Fair Value Measurements

Financial and non-financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. During the fourth quarter of 2018, the Company acquired a royalty stream which has been treated as an asset acquisition. The purchase price of the royalty stream for $1.0 million approximated its fair value at December 31, 2018 and is considered a Level 3 asset. The fair value measurement is based on the expected future cash flows and, as there is no reason to believe that the asset is impaired, it is assumed that the valuation remains unchanged at March 31, 2020. In November 2018 and July 2019, the Company entered into 2 interest rate swap transactions related to its credit agreement. The fair value of the interest rate swaps at March 31, ~~2020~~2021 was a loss of approximately ~~$4.2~~$2.4 million and is considered a Level 2 liability.

The pension plan assets are invested in collective investment trust funds. These investments are measured at fair value using the net asset value per share as a practical expedient. Investments valued using the net asset value method (NAV) (or its equivalent) practical expedient are excluded from the fair value hierarchy disclosure.

The Company’s Condensed Consolidated Balance Sheets also include Cash and cash equivalents, Accounts receivable and Accounts payable all of which are recorded at amounts which approximate fair value.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The Company also has assets that are required to be recorded at fair value on a non-recurring basis. These assets are evaluated when certain triggering events occur (including a decrease in estimated future cash flows) that indicate the asset should be evaluated for impairment which could result in such assets being measured at fair value. Goodwill ~~and indefinite lived intangible assets~~ must be evaluated at least annually. Our annual evaluation occurred on March 31, ~~2020~~2021 and we have concluded that an impairment for goodwill ~~or indefinite-lived intangible assets~~ did 0t occur.

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~13.~~12. Derivative and Hedging Instruments

The specific credit and market, commodity price and interest rate risks to which the Company is exposed in connection with its ongoing business operations are described below. This discussion includes an explanation of the hedging instrument, interest rate swap agreements, used to manage the Company’s interest rate risk associated with a fixed and floating-rate borrowing.

For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is recorded in Other comprehensive income. Those amounts are reclassified to earnings in the same income statement line item that is used to present the earnings effect of the hedged item when the hedged item affects earnings.

Credit and Market Risk – Financial instruments, including derivatives, expose the Company to counterparty credit risk for non-performance and to market risk related to changes in commodity prices, interest rates and foreign currency exchange rates. The Company manages its exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. The Company’s counterparties in derivative transactions are substantial investment and commercial banks with significant experience using such derivative instruments. The Company monitors the impact of market risk on the fair value and cash flows of its derivative and other financial instruments considering reasonably possible changes in commodity prices, interest rates and foreign currency exchange rates and restricts the use of derivative financial instruments to hedging activities.

The Company continually monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business. The terms and conditions of credit sales are designed to mitigate or eliminate concentrations of credit risk with any single customer. The Company did not have any customers ~~accounting for a~~with significant ~~percentage~~concentrations of trade accounts receivable -– net at March 31, ~~2020,~~2021 or December 31, ~~2019.~~2020. Allowance for doubtful accounts is calculated based upon the Company's estimate of expected credit losses over the life of exposure based upon both historical information as well as future expected losses.

Commodity Price Risk Management – The Company's exposure to market risk for commodity prices can result in changes in the cost of production. We primarily mitigate our exposure to commodity price risk by using long-term, formula-based price contracts with our suppliers and formula-based price agreements with customers. Our customer agreements provide for price adjustments based on relevant market indices and raw material prices and generally do not include take-or-pay terms. We may also enter into forward commodity contracts with third-parties designated as hedges of anticipated purchases of several commodities. Forward commodity contracts are marked-to-market, with the resulting gains and losses recognized in earnings, in the same category as the items being hedged, when the hedged transaction is recognized. At March 31, ~~2020~~2021 and ~~2019,~~2020, we had no0 financial contracts related to forward commodity agreements.

Interest Rate Risk Management – The Company has entered into 2 interest rate swap agreements for a total notional amount of $100 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings. These interest rate swaps had a fair value of 0 at inception and were effective November 30, 2018 and July 31, 2019 with respective maturity dates of November 30, 2021 and February 21, 2023. In accordance with FASB Accounting Standards Codification (“ASC”) ~~ASC~~ 815, the Company designated the interest rate swaps as cash flow hedges of floating-rate borrowings. The interest rate swaps convert the Company’s interest rate payments on the first $100 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate. These interest rate swaps involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the life of the interest rate swap without an exchange of the underlying principal amount.

Liability Derivatives
March 31, 2020 December 31, 2019
Balance Sheet Classification Fair Value Balance Sheet Classification Fair Value
Derivatives designated as hedging instruments under ASC 815:
Interest Rate Contracts Accrued liabilities and Other liabilities (4,166) Accrued liabilities and Other liabilities (1,718)
Total Derivatives $ (4,166) $ (1,718)

1814

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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
























	Liability Derivatives
	March 31, 2021			December 31, 2020

	Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value

Derivatives designated as hedging instruments under ASC 815:

Interest Rate Contracts	Accrued liabilities and Other liabilities	$	(2,419)	Accrued liabilities and Other liabilities	$	(3,063)











Total Derivatives		$	(2,419)		$	(3,063)

The following table summarizes adjustments related to cash flow hedge included in Cash-flow hedges, in the Condensed Consolidated Statements of Comprehensive Income:

March 31,
~~2020~~2021

Loss on derivative instruments included in Accumulated other comprehensive income at December 31, ~~2019~~2020

~~(1,718)~~(3,063)

Fair value adjustment

~~(2,448)~~644

Loss on derivative instruments included in Accumulated other comprehensive income at March 31, ~~2020~~2021

~~(4,166)~~(2,419)

At March 31, ~~2020,~~2021, the Company expects to reclassify approximately ~~$2.0~~$1.7 million of net losses on derivative instruments from Accumulated other comprehensive income ("AOCI") to earnings during the next 12 months due to the payment of variable interest associated with the floating rate ~~debt.~~

~~14. Restructuring~~

~~On May 2, 2019,~~debt with the ~~Company approved~~remainder recognized in future periods through the closure of its Pottsville, Pennsylvania films plant as part of its broader strategic efforts to improve the Company’s competitive position in providing quality film products and services to its customers. The Company also announced a strategic alliance with Oben Holding Group S.A. (“Oben”), a third-party producer of films for the flexible packaging industry, leveraging the Company's sales channels and Nylon 6 supply with Oben's new state-of-the-art manufacturing facility. The Company ceased operations at the Pottsville, Pennsylvania plant in July 2019.

Restructuring costs consist of long-lived asset impairments, facility exit costs, employee separations and inventory write-downs. Facility exit costs include demolition, equipment relocation, contract terminations and project management costs. These costs are included in Costs of goods sold in the Condensed Consolidated Statements of Operations. The Company recorded a restructuring charge of $11.0 million in 2019. As of March 31, 2020, all related restructuring liabilities have been paid.

expiration date. The following table summarizes the ~~components~~reclassification of ~~restructuring activities and the remaining balances of accrued restructuring charges as of March 31, 2020:~~net losses on derivative instruments from AOCI into earnings:

Employee Separation Benefits Facility Exit Costs Total
Accrual balance at December 31, 2019 $ 127 $ 410 $ 537
Charges — — —
Cash payments (127) (410) (537)
Accrual balance at March 31, 2020 $ — $ — $ —


	Amount of Loss Recognized in Earnings
	Three Months Ended March 31,
	2021		2020
Derivatives:

Interest Rate Contracts	$	557	$	501

Total Derivatives	$	557	501

13. Acquisitions

We actively target potential acquisitions that build on our competitive advantage and core capabilities, create opportunities for broader expansion and value chain integration, portfolio diversification, increased exposure to attractive end markets and the potential for long-term value creation.

In January 2021, the Company acquired certain assets associated with ammonium sulfate packaging, warehousing and logistics services in Virginia from Commonwealth Industrial Services, Inc. for approximately $9.5 million. This acquisition will enable the Company to expand its product offerings by directly supplying packaged ammonium sulfate to customers, primarily in North and South America. It diversifies and optimizes our product offerings to include spray-grade adjuvant to support crop protection, as well as other specialty fertilizer and products for industrial use. The Company also expects the addition of packaging and warehousing capabilities to bolster logistics and operational efficiency in the Richmond, Virginia area plants. The Company did not make any acquisitions during the three months ended March 31, 2020.

In accordance with ASC 805, this transaction has been accounted for as a business combination. The Company used its best estimates and assumptions to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

at the acquisition date based on the information that was available as of the acquisition date. The transaction resulted in the Company acquiring tangible assets and a finite-lived intangible asset, comprised of customer relationships which reflects the value of the benefit derived from incremental revenue and related cash flows as a direct result of the customer relationships. This intangible asset is being amortized on a straight-line basis over its estimated useful life of 15 years. The residual amount of the purchase price in excess of the value of the tangible and definite-lived intangible assets was allocated to goodwill. Pro forma financial information related to the acquisition has not been included as the impact on the Company's consolidated results of operations was not considered material.

The preliminary measurements of fair value set forth herein are subject to change and such changes could be material. The Company expects to finalize the valuation as soon as practicable, but no later than one year from the acquisition date. The following table summarizes the current allocation of the purchase price consideration as of the acquisition date:




	Three Months Ended March 31, 2021
Accounts receivable	$	858
Inventories	712
Property, plant and equipment	1,875
Intangible assets	3,920
Accounts payable and accrued liabilities	(429)
Net tangible and intangible assets	6,936
Goodwill	2,587
Total purchase price	$	9,523

Cash paid to date, net of cash acquired	$	9,523
Due to seller	0
Total purchase price	$	9,523

Goodwill deductible for tax purposes	$	2,587

1916

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 Financial Statements and the notes thereto contained elsewhere in this Form 10-Q, as well as the MD&A section included in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission (“SEC”) on February ~~21, 2020~~19, 2021 (the ~~“2019~~“2020 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 that can affect our performance in both the near- and long-term, including those set forth in, and incorporated by reference in Item 1A of Part II of this Form 10-Q as such factors may be revised or supplemented in subsequent filings with the SEC, 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 Form 10-Q 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 within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). When used in this Form 10-Q, words such as "expect," “anticipate,” "estimate," "outlook," "project," "strategy," "intend," "plan," "target," "goal," "may," "will," "should," and “believe,” ~~“will,” “estimate,” “expect,” “plan,” “intend”~~ and other variations or similar terminology and expressions identify forward-looking statements. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: general economic and financial conditions in the U.S. and globally, including the impact of the coronavirus (COVID-19) ~~pandemic;~~pandemic and any resurgences; the scope and duration of the pandemic and pace of recovery; the timing of the distribution and the efficacy of vaccines or treatments for COVID-19 that are currently available or may be available in the future; the severity of newly identified strains of COVID-19; governmental, business and individuals’ actions in response to the pandemic, including our business continuity and cash optimization plans that have been, and may in the future be, implemented; the impact of social and economic restrictions and other containment measures taken to combat virus transmission; the effect on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.; our ability to sell and provide our goods and services, including as a result of travel and other COVID-19-related restrictions; the ability of our customers to pay for our products; and any closures of our and our customers’ offices and facilities; risks associated with increased phishing, compromised business emails and other cybersecurity attacks and disruptions to our technology infrastructure; risks associated with employees working remotely or operating with a reduced workforce; risks associated with our indebtedness including compliance with financial and restrictive covenants, and our ability to access capital on reasonable terms, at a reasonable cost, or at all, due to economic conditions resulting from COVID-19 or otherwise; the impact of scheduled turnarounds and significant unplanned downtime and interruptions of production or logistics operations as a result of mechanical issues or other unanticipated events such as fires, severe weather conditions, natural disasters and pandemics including the COVID-19 pandemic; price fluctuations, cost increases and supply of raw materials; our operations and growth projects requiring substantial capital; growth rates and cyclicality of the industries we serve including global changes in supply and demand; failure to develop and commercialize new products or technologies; loss of significant customer relationships; adverse trade and tax policies; extensive environmental, health and safety laws that apply to our operations; hazards associated with chemical manufacturing, storage and transportation; litigation associated with chemical manufacturing and our business operations generally; inability to acquire and integrate businesses, assets, products or technologies; protection of our intellectual property and proprietary information; prolonged work stoppages as a result of labor difficulties or otherwise; cybersecurity, ~~and~~ data privacy ~~incidents;~~incidents and disruptions to our technology infrastructure; failure to maintain effective internal controls; disruptions in transportation and logistics; our inability to achieve some or all of the anticipated benefits of our spin-off including uncertainty regarding qualification for expected tax treatment; fluctuations in our stock price; and changes in laws or regulations applicable to our business. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of risks, uncertainties and other factors including those noted above and those detailed in Item 1A of Part I and elsewhere in our ~~2019~~2020 Form 10-K, ~~Item 1A of Part II in this Quarterly Report on Form 10-Q~~ and subsequent reports filed 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. We do not undertake to update or revise any of our forward-looking statements.

Business Overview

AdvanSix plays a critical role in global supply chains, innovating and delivering essential products for our customers in a wide variety of end markets and applications that touch people’s lives, such as building and construction, fertilizers, plastics, solvents, packaging, paints, coatings, adhesives and electronics. Our reliable and sustainable supply of quality products emerges from the vertically integrated value chain of our three U.S.-based manufacturing facilities. AdvanSix strives to deliver best-in-class customer experiences and differentiated products in the industries of nylon solutions, chemical intermediates, and plant nutrients, guided by our core values of Safety, Integrity, Accountability and Respect. Our four key product lines are as follows:

•Nylon – We ~~produce and sell caprolactam as a commodity product and produce and~~ sell our Nylon 6 resin globally, primarily under the Aegis® brand name. Nylon 6, is a polymer resin which is a synthetic material used by our customers to produce fibers, filaments, engineered plastics and films that, in turn, are used in such end-products as ~~both~~carpets, automotive and electric components, sports apparel, food packaging and other industrial applications. In addition, our Nylon 6 resin is used to produce nylon films which we sell to our customers primarily under the Capran® brand name.

•Caprolactam – Caprolactam is the key monomer used in the production of Nylon 6 resin. We internally polymerize caprolactam into Aegis® Nylon 6 Resins, and we also market and sell the caprolactam that is not consumed internally to customers who use it to manufacture polymer resins to produce nylon fibers, films and other nylon products. Our Hopewell manufacturing facility is one of the world’s largest single-site producers of caprolactam as of March 31, 2021.

•Chemical Intermediates – We manufacture, market and sell a ~~commoditized~~number of other chemical 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, solvents, herbicides and ~~differentiated resin product.~~engineered plastic resins. Other intermediate chemicals that we manufacture, market and sell include phenol, alpha-methylstyrene (“AMS”), cyclohexanone, oximes (methyl ethyl ketoxime, acetaldehyde oxime and 2-pentanone oxime), cyclohexanol, sulfuric acid, ammonia and carbon dioxide.

•Ammonium Sulfate – Our ~~results of~~ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key plant nutrients. Ammonium sulfate fertilizer is derived from the integrated operations ~~are primarily driven by production volume and~~at the ~~spread between the sales prices~~Hopewell manufacturing facility. Because of our ~~products~~Hopewell facility’s size, scale and technology design, we are the ~~costs~~world’s largest single-site producer of ammonium sulfate fertilizer as of March 31, 2021. We market and sell ammonium sulfate primarily to North American and South American distributors, farm cooperatives and retailers to fertilize crops.

Global demand for Nylon 6 resin spans a variety of end-uses such as textiles, engineered plastics, industrial filament, food and industrial films, and carpet. The market growth typically tracks global GDP growth over the long-term but varies by end-use. Generally, prices for Nylon 6 resin and caprolactam reflect supply and demand in the marketplace as well as the value of the ~~underlying~~basic raw materials ~~built into market-based~~used in the production of caprolactam, consisting primarily of benzene and, ~~value-based pricing~~

~~models.~~depending on the manufacturing process utilized, natural gas and sulfur. 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 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, formulate and produce differentiated nylon resin products. Our differentiated Nylon 6 products are typically valued at a higher level than commodity resin products.

We believe that Nylon 6 end-market growth will continue to generally track global GDP over the long-term. Applications such as ~~engineering~~engineered plastics and packaging have potential to grow at faster rates given certain macrotrends. Additionally, one of our strategies is to continue developing higher-value, differentiated Nylon 6 products, such as our wire and cable and co-polymer offerings, in current and new customer applications.

~~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. Other global factors driving ammonium sulfate fertilizer demand are general agriculture trends, including planted acres and the price of crops. Our ammonium sulfate product is positioned with the added value proposition of sulfur nutrition to increase yields of key crops. In addition, due to its nutrient density, the typical ammonium sulfate product delivers pound for pound the most readily available sulfur and nitrogen to crops than other fertilizers. We recently expanded our offering to directly supply packaged ammonium sulfate to customers, primarily in North and South America, and diversified and optimized our offerings to include spray-grade adjuvant to support crop protection, as well as other specialty fertilizers and products for industrial use.

We produce ammonium sulfate fertilizer continuously throughout the year as part of our manufacturing process, but quarterly sales experience seasonality 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 as several of our intermediate products are key feedstock materials for other products in our integrated manufacturing chain. While our integration, scale and range of product offerings make us one of the most efficient manufacturers in our industry, these attributes also expose us to increased risk associated with material disruptions at any one of our production facilities or logistics operations which could impact the overall manufacturing supply chain. Further, although we believe that our sources of supply for our raw materials, including cumene, natural gas and sulfur, are generally robust, it is difficult to predict the impact that shortages, increased costs and related supply chain logistics considerations may have in the future. In order to mitigate the risk of unplanned interruptions, we schedule several planned plant turnarounds each year to conduct routine and major maintenance across our facilities. We also utilize maintenance excellence and mechanical integrity programs, targeted buffer inventory of intermediate chemicals necessary for our manufacturing process, and co-producer swap arrangements, which are intended to mitigate the extent of any production losses as a result of planned and unplanned downtime; however, the mitigation of all or part of any such production impact cannot be assured.

Recent Developments

COVID-19

In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a global pandemic with numerous countries around the world declaring national emergencies, including the United States. Since early 2020, COVID-19 has continued to spread rapidly, with most countries and territories worldwide having confirmed cases, and with ~~confirmed cases.~~certain jurisdictions experiencing resurgences. The spread ~~has~~ resulted in authorities implementing numerous measures to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place orders and business shutdowns. The pandemic and these containment measures have had ~~and are expected to continue to have,~~ a substantial ~~negative~~ impact on businesses around the world and on global, regional and national economies, including disruptions to supply chains, reduced demand, production and ~~production~~ sales across most industries, declines and volatility within global financial markets, and decreased workforces causing increased unemployment. The continuously evolving ~~responses~~nature of this pandemic and the pace of recovery may continue to ~~combat the pandemic, such as governmental restrictions on non-essential business and travel,~~ have ~~had~~ an ~~increasingly negative~~ impact on the United States and global economy. The U.S. Department of Homeland Security has designated our industry as "essential critical infrastructure" during the response to COVID-19 for both public health and safety as well as community well-being.

The Company takes its obligation seriously to produce materials that support the broader population, all while maintaining a prioritized focus on the health and safety of its employees and the communities in which it operates and assuring the continuity of its business operations. As a global provider of products that are key inputs for our customers’ processes serving a variety of end-markets, a pandemic presents obstacles that can adversely affect our supply chain effectiveness and efficiencies, our manufacturing operations and customer demand for our products and, ultimately, our financial results. We believe we are well positioned to respond to and mitigate the potential impacts of the rapidly evolving market dynamics.economies.

InAs previously disclosed, the Company experienced a material impact on its second quarter 2020 results of operations associated with lower demand, particularly in nylon, caprolactam and phenol, and a decrease in overall sales volume related to global markets and the economic impact of COVID-19. During the second half of 2020, and through the first quarter of ~~2020,~~2021, demand improved to pre-COVID-19 levels with states, regions and countries in various phases of re-opening and continued administration of vaccines for COVID-19, although there is no assurance demand recovery will continue given the ~~Company began executing its business continuity plans with dedicated teams chartered to proactively implement measures to mitigate COVID-19 impacts while continuing to operate all~~potential for surges in infection rates and newly identified strains of its manufacturing facilities to meet customer demand. In connection with COVID-19, the Company took many actions to protect its employees, customers, suppliers, shareholders and surrounding communities including, but not limited to: (i) 100% thermal screening process at all manufacturing facilities with restrictions on non-essential visitors; (ii) telecommuting across all sites, where possible; (iii) prohibiting all non-essential domestic and international business travel; (iv) establishing social distancing while limiting the number of employees in control rooms, labs and meetings; and (v) maintaining policies and practices consistent with CDC and government guidelines, including upgraded personal protective equipment and face coverings at all manufacturing facilities.COVID-19. The Company ~~has protocols in place including on-site medical personnel~~will continue to ~~actively~~ monitor ~~employees~~developments and ~~contractors. In addition, the Company has trained a contingent workforce to operate the plants~~execute our operational and safety mitigation plans as ~~part of its business continuity planning.~~previously disclosed.

~~Operations at~~As the Company’s manufacturing locations in Frankford, PA, Hopewell, VA and Chesterfield, VA continued to run at robust production rates through the first quarter 2020. We believe our competitive strengths are serving us well during this time including our vertically integrated asset base and global low-cost advantage as well as driving disciplined cost and cash management across the organization with further reductions of capital expenditures and discretionary spending. Moving into the second quarter of 2020, the Company is supporting safe and stable operations while continuing to serve its customers by adjusting output to changes in mix and demand. In addition, the previously scheduled second quarter 2020 planned plant turnaround was de-risked with a majority of the work shifted into the third quarter of 2020 in order to limit the number of contractors on site and ensure operational continuity in the current environment. From an industry perspective, global auto and building and construction demand reductions are expected to impact the nylon and chemical intermediates product lines in the near-term. Textile declines in Asia are also impacting nylon supply and demand conditions, while food packaging demand for nylon remains robust. Ammonium Sulfate and acetone demand have not been significantly impacted by COVID-19 to date. Ammonium Sulfate has continued to have steady demand into the domestic planting season, while North American acetone industry supply and demand has improved following affirmative final anti-dumping duties and robust demand into isopropyl alcohol (IPA), used for hand sanitizer and other disinfectants, methyl methacrylate (MMA), and other solvents. As a result of COVID-19, demand reduction for transportation fuels and resultant inventory builds have reduced refinery utilization rates, which the Company is monitoring as it relates to potential impacts on its supply chain and availability of key raw materials.

The Company’s Condensed Consolidated Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s first quarter 2020 results of operations.

~~The~~ situation surrounding COVID-19 remains fluid and unpredictable, and the potential for a material impact on the Company increases the longer the social and economic restrictions remain in place, which impact the overall level of consumer and business activity in the United States and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity. For further information regarding the impact COVID-19 could have on our business, financial condition, results of operations and liquidity, see below in the MD&A under “Liquidity and Capital Resources” and Part II, Item 1A - “Risk Factors.”

~~Credit Agreement~~

On February 19, 2020, the Company entered into Amendment No. 2 to the Credit Agreement to amend the consolidated leverage ratios in order to provide the Company with additional operating flexibility. For a discussion of Amendment No. 2 to the Credit Agreement, please refer to "Note 8. Long-term Debt and Credit Agreement" to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.

~~Anti-Dumping Duty Petitions~~

On February 19, 2019, the Company announced that it filed anti-dumping duty petitions covering imports of acetone with the International Trade Commission (“ITC”) and U.S. Department of Commerce. The petitions allege that dumped acetone imports

into the United States from Belgium, Saudi Arabia, Singapore, South Africa, South Korea, and Spain have caused material injury to the domestic industry. On April 4, 2019, the ITC voted to continue the anti-dumping duty investigations concerning imports of acetone from all such nations other than Saudi Arabia. During the third quarter of 2019, the U.S. Department of Commerce announced its preliminary affirmative determination regarding anti-dumping duties for Singapore, Spain, Belgium, South Africa and South Korea. During the fourth quarter of 2019, the U.S. Department of Commerce issued final duties on acetone from Singapore and Spain, and the ITC issued final determination of material injury to the industry by reason of imports from Singapore and Spain. On February 7, 2020, the U.S Department of Commerce issued final duties on acetone from Belgium, South Africa and South Korea. The ITC completed its investigation process and issued final determination of material injury to the industry by reason of imports from Belgium, South Africa and South Korea on March 17, 2020. Duties are imposed for five years as of final determination.

~~2019 Operational Events~~

On June 24, 2019, the Company announced that it was assessing the potential business impact of the fire that occurred at Philadelphia Energy Solutions' (“PES”) refinery in Philadelphia. PES was one of multiple suppliers to the Company of cumene, a feedstock material used to produce phenol, acetone and other chemical intermediates. The PES disruption did not have a material impact on second quarter 2019 financial results. The Company incurred approximately $4 million and $6 million of unfavorable impact to pre-tax income in the third and fourth quarters, respectively, of 2019, including incremental raw material and logistics costs as well as a modest unfavorable impact from fixed cost absorption. As the PES refinery remains shutdown, the Company submitted a business interruption insurance claim and is assessing long-term optionality for cumene supply and logistics, while optimizing expected base feedstock and logistics cost increases as it realigns its supply chain into 2020. The Company anticipates an approximately $5 to $10 million unfavorable impact to pre-tax income in 2020, approximately flat to $5 million favorable compared to full-year 2019.

On May 2, 2019, the Company approved the closure of its Pottsville, Pennsylvania films plant as part of its broader strategic efforts to improve the Company’s competitive position in providing quality film products and services to its customers. The Company has also announced a strategic alliance with Oben Holdings Group S.A. (“Oben”), a third-party producer of films for the flexible packaging industry, leveraging the Company's sales channels and Nylon 6 resin supply with Oben's new state-of-the-art manufacturing facility. The Company ceased operations at the Pottsville, Pennsylvania plant in July 2019. We recognized a restructuring charge of $11 million during 2019 and do not expect to incur any additional restructuring charges related to the closure. See “Note 14. Restructuring” to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q for further information.

On March 11, 2019, the Company announced that it declared force majeure on its phenol product line as a result of shortages and delivery delays of its key raw material, cumene. The Company's cumene deliveries were reduced due to weather related logistics disruptions in the Gulf Coast area and supplier operational constraints. As a result of this force majeure event, phenol production at the Company's Frankford, Pennsylvania facility and caprolactam production at its Hopewell, Virginia facility were reduced. The Company incurred an approximately $6.9 million unfavorable impact to pre-tax income in the first quarter of 2019, including the unfavorable impact of fixed cost absorption and incremental logistics costs. In addition, the Company incurred an approximately $1.4 million unfavorable impact to pre-tax income in the first quarter of 2019 and an approximately $2.3 million unfavorable impact to pre-tax income in the second quarter of 2019 due to lost sales. The Company is no longer on force majeure with phenol customers.

Results of Operations

(Dollars in thousands, unless otherwise noted)

Sales


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Sales	Sales	$	302,713	$	314,895	Sales	$	376,383	$	302,713
% change compared with prior year period	% change compared with prior year period	(3.9)%				% change compared with prior year period	24.3%

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


			Three Months Ended March 31, ~~2020~~2021
Volume			~~6.5%~~8.4%
Price			~~(10.4)%~~15.9%
			~~(3.9)%~~24.3%

Sales ~~decreased~~increased in the three months ended March 31, ~~2020~~2021 compared to the prior year period by ~~$12.2~~$73.7 million (approximately 4%24%) due primarily to lower sales prices (approximately 10%) driven by market-based pricing decreases (approximately 12% unfavorable impact) across our nylon, caprolactam and ammonium sulfate product lines, partially offset by(i) higher formula-based ~~pass-through~~pass through pricing (approximately ~~1% favorable impact), following~~11%) as a result of net cost ~~increase~~increases in benzene and propylene (inputs to ~~cumene~~Cumene which is a key feedstock ~~material for~~to our products)~~. Volume increased by approximately 7% due to higher standard ammonium sulfate exports and improved volume~~, (ii) net favorable market-based pricing (approximately 5%) reflecting strength in chemical intermediates, particularly acetone and ~~oximes.~~(iii) higher sales volume across all product lines led by caprolactam (approximately 8%).

Costs of Goods Sold

Three Months Ended
March 31,
2020 2019
Costs of goods sold $ 272,008 $ 266,880
% change compared with prior year period 1.9%
Gross Margin percentage 10.1% 15.2%


	Three Months Ended March 31,
	2021		2020
Costs of goods sold	$	317,899	$	272,008
% change compared with prior year period	16.9%
Gross Margin percentage	15.5%		10.1%

Costs of goods sold increased in the three months ended March 31, ~~2020~~2021 compared to the prior year period by ~~$5.1~~$45.9 million (approximately 2%17%) due primarily to (i) increased prices of raw materials (approximately 11%), (ii) higher sales volumes as discussed above (approximately 6%3%) and (ii) the receipt of approximately $6.6 million of insurance proceeds in the prior year that did not repeat (approximately 2%). These increases were partially offset by (i) lower prices of raw materials, particularly sulfur and natural gas (approximately 4%) and (ii) improved operational performance, primarily lower spending due to productivity improvements from the installation of more efficient natural gas boilers and the closure of our operations in Pottsville, PA(iii) an unfavorable non-cash LIFO inventory reserve adjustment (approximately 2%).

Gross margin percentage ~~decreased~~increased by approximately 5% in the three months ended March 31, ~~2020~~2021 compared to the prior year period due primarily to ~~lower market-based~~higher market pricing (approximately ~~10%~~4%) driven by chemical intermediates, particularly acetone, and ~~insurance proceeds received in the prior year~~increased sales volume across all product lines (approximately 2%4%), partially offset by ~~the impact of formula-based pass-through pricing (approximately 4%) and improved operational performance~~an unfavorable non-cash LIFO inventory reserve adjustment (approximately 2%) ~~as discussed above.~~.

Selling, General and Administrative Expenses


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Selling, general and administrative expenses	Selling, general and administrative expenses	$	16,740	$	19,413	Selling, general and administrative expenses	$	19,308	$	16,740
Percent of sales		5.5%		6.2%
Percentage of Sales						Percentage of Sales	5.1%		5.5%

Selling, general and administrative expenses ~~decreased~~increased by ~~$2.7~~$2.6 million in the three months ended March 31, ~~2020~~2021 compared to the prior year period due primarily to ~~decreased~~increased incentive and stock-based compensation ~~and IT~~ costs.

Income Tax Expense


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Tax expense		$	3,664	$	6,824
Income tax expense						Income tax expense	$	9,271	$	3,664
Effective tax rate	Effective tax rate	29.9%		25.3%		Effective tax rate	24.8%		29.9%

As noted in Note ~~11.~~10. "Income Taxes" to, the ~~Condensed Consolidated Financial Statements included~~Company filed a Federal net operating loss (NOL) carryback claim under the CARES Act in ~~Part 1, Item 1~~July 2020 which generated a refund of ~~this Form 10-Q,~~previously paid taxes in the amount of $12.3 million. The ~~Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), enacted on March 27, 2020, includes~~refund was received in the first quarter of 2021.

2420

~~various modifications to current~~

The Company’s effective tax ~~law and is intended to provide economic relief in response~~rate for the three months ended March 31, 2021 was higher compared to the ~~COVID-19 pandemic. One provision included in the CARES Act allows for a five-year carryback of Federal net operating losses (NOLs) generated in~~U.S. federal statutory rate, due primarily to state taxes and executive compensation deduction limitations, partially offset by tax years beginning in 2018, 2019 and 2020. At this point, the Company anticipates filing its 2019 federal corporate income tax return with a net operating loss, on a tax basis, which now may be carried back to earlier years to request a refund of previously paid taxes. As such, we have recorded the estimated impact of the federal NOL carryback in the quarterly financial results, which includes an $8.0 million reclassification from Deferred income taxes to Taxes receivable. However, we have not yet filed our 2019 federal income tax return and continue to evaluate the impact of the CARES Act on our tax positions, which may result in a change to our estimate.

credits. The Company’s effective tax rate for the three months ended March 31, 2020 was higher compared to the U.S. federal statutory rate, due primarily to state taxes, executive compensation deduction limitations, tax deficiencies on the vesting of equity compensation ~~in the quarter~~ and the ~~expected~~ loss of 2018 foreign-derived intangible income tax benefits related to the ~~anticipated~~ Federal NOL carryback claim, ~~allowed under the CARES Act,~~partially offset ~~partially~~ by ~~the research~~ tax credit. The Company’s effective tax rate for the three months ended March 31, 2019 was higher compared to the U.S. federal statutory rate due primarily to state taxes and executive compensation deduction limitations offset partially by excess tax benefits related to vesting of restricted stock units and the research tax credit.credits.

The Company’s effective tax rate for the three months ended March 31, ~~2020~~2021 was ~~higher~~lower than the prior year period due primarily to ~~the decrease in the benefits from~~higher tax deficiencies on the vesting of equity compensation in the ~~first quarter of 2020 compared to 2019~~prior year period and the ~~expected~~ loss of ~~the~~ 2018 ~~foreign-derived~~foreign derived intangible income ~~deduction as a result of~~tax benefits resulting from the ~~anticipated federal~~Federal NOL carryback ~~claim recorded as discrete items in 2020.~~under the CARES Act.

Net Income

Three Months Ended
March 31,
2020 2019
Net income $ 8,576 $ 20,174


	Three Months Ended March 31,
	2021		2020
Net income	$	28,131	$	8,576

As a result of the factors described above, Net income was ~~$8.6~~$28.1 million for the three months ended March 31, ~~2020~~2021 as compared to ~~$20.2~~$8.6 million in the corresponding prior year period.

Non-GAAP Measures

(Dollars in thousands, unless otherwise noted)

The following tables set forth the non-GAAP financial measures of EBITDA and EBITDA Margin. EBITDA is defined as Net income before Interest, Income taxes and Depreciation and amortization. EBITDA Margin is equal to EBITDA divided by Sales. The following tables also present each of these measures as further adjusted. 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 U.S. GAAP. Non-GAAP financial measures should be read only in conjunction with the comparable U.S. GAAP financial measures. The Company's non-GAAP measures may not be comparable to other companies' non-GAAP measures.

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


	Three Months Ended March 31,
	2021		2020
Net income	$	28,131	$	8,576
Interest expense, net	1,544		1,959
Income tax expense	9,271		3,664
Depreciation and amortization	16,104		14,432
EBITDA (non-GAAP)	55,050		28,631



Sales	$	376,383	$	302,713

EBITDA Margin (non-GAAP)	14.6%		9.5%

Three Months Ended
March 31,
2020 2019
Net income $ 8,576 $ 20,174
Interest expense, net 1,959 1,107
Income taxes 3,664 6,824
Depreciation and amortization 14,432 13,915
EBITDA (non-GAAP) $ 28,631 $ 42,020
Sales $ 302,713 $ 314,895
EBITDA margin (non-GAAP) 9.5% 13.3%

Liquidity and Capital Resources

(Dollars in thousands, unless otherwise noted)

Liquidity

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 short-term operating objectives as well as our longer-term strategic plans, subject to the risks and uncertainties outlined below, in our "Note Regarding Forward-Looking Statements" above, and in the risk factors previously disclosed in our ~~2019~~2020 Form ~~10-K, as updated in Part II, Item 1A below.~~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 cash flows are affected by capital requirements and production volume, which may be materially impacted by unanticipated events such as unplanned downtime, material disruptions at our production facilities as well as the prices of our raw materials and general economic and industry ~~trends.~~trends, as well as customer demand, which in the second quarter of 2020, was materially impacted by the circumstances surrounding COVID-19. The Company applies a proactive and disciplined approach to working capital management to optimize cash flow and to enable capital allocation options in support of the Company’s strategy. We utilize supply chain financing and trade receivables discount arrangements with third-party financial institutions which optimize terms and conditions related to accounts receivable and accounts payable in order to enhance liquidity and enable us to efficiently manage our working capital needs. Although we continue to optimize supply chain financing and trade receivable programs in the ordinary course, our utilization of these arrangements, both prior to and during the COVID-19 pandemic, has not had a material impact on our liquidity. 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, and capital expenditures ~~including high return~~reflecting disciplined capital deployment and following the completion of several high-return growth and cost savings investments. Capital expenditures are deployed for various ongoing investments ~~share repurchases, employee benefit obligations, interest payments, strategic acquisitions~~ and ~~debt management. We~~initiatives to improve reliability, yield and quality, expand production capacity and comply with HSE regulations. While the COVID-19 pandemic has created and continues to create significant volatility in funding markets, we believe that our future cash from operations, together with cash on hand and our access to credit and capital markets, will provide adequate resources to fund our expected operating and financing ~~needs.~~needs and obligations. 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 ~~2019~~2020 Form 10-K, ~~as updated in Part II, Item 1A below,~~ as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.

As of the end of the first quarter of ~~2020,~~2021, the Company had approximately ~~$31~~$14 million of cash on hand with approximately ~~$87~~$178 million of additional capacity available under the revolving credit facility. As a precautionary measure in the current environment, the Company is currently maintaining higher cash balances of approximately $75 million, which includes funds from draws in April under the Revolving Credit Facility for its working capital needs and other general corporate purposes. The Company’s Consolidated Leverage Ratio financial covenant of its credit facility allows it to net up to $75 million of cash with debt. The ~~previously announced~~ Second Amendment to the credit facility also ~~provides~~provided leverage ratio covenant flexibility in 2020. In addition, the Company is evaluating liquidity potential under the credit facility’s uncommitted accordion feature. The Company continues to evaluate the potential impact of the CARES Act. The CARES Act is intended to provide economic relief resulting from the COVID-19 pandemic and includes, but is not limited to, provisions for taxes, employment related costs, deferral of pension funding obligations and options for liquidity. In response to the current environment, the Company has taken several actions to improve liquidity and optimize cash flow in 2020.through 2021. Capital expenditures are ~~now~~ expected to be approximately $70 million to $80 million in 2021 compared to ~~$90~~$83 million in 2020, ~~which represents a reduction~~reflecting disciplined capital deployment and following the completion of ~~$10 million from our previously announced estimate~~several high-return growth and ~~a decrease of $60 to $70 million versus 2019, as we continue to assess opportunities to maximize free cash flow~~cost savings investments.

As noted in ~~light of current and anticipated economic conditions. The Company is also driving disciplined cost management across the organization including all discretionary spending. As a result of its actions,~~Note 10. "Income Taxes," the Company ~~is targeting an approximately $10 to $15 million full-year cost reduction versus the prior year. While it continues to evaluate benefits of~~filed a Federal net operating loss (NOL) carryback claim under the CARES Act in July 2020 which generated a refund of previously paid taxes in the amount of $12.3 million received in the first quarter of 2021. Additionally, the Company

~~anticipates~~ deferred approximately $8$6.5 million ~~of cash tax savings in 2020 and an approximately $6 million cash benefit in 2020 from the deferral~~ of social security ~~taxes. For social security~~ taxes ~~that have been deferred,~~in 2020 under the CARES Act in which 50% ~~will be~~is due by December 31, 2021 ~~with~~and the remainder is due by December 31, 2022.

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 have a material adverse effect on our consolidated financial position and results of operations.

We expect that our primary cash requirements for the remainder of ~~2020~~2021 will be to fund costs associated with ongoing operations, capital expenditures, and amounts related to other contractual obligations.

The Company made cash contributions to the defined benefit pension plan of ~~$1.7~~$1.2 million during the three months ended March 31, ~~2020.~~2021. The Company currently plans to make pension plan contributions during ~~2020~~2021 sufficient to satisfy ~~pension~~ funding requirements under the AdvanSix Retirement Earnings Plan in an aggregate amount of approximately $5$9.0 million to ~~$10 million but will continue to evaluate provisions of the CARES Act regarding deferral of pension funding obligations.~~$11.0 million. We anticipate making additional contributions in future years sufficient to satisfy pension funding requirements in those periods.

On May 4, 2018, the Company announced that its Board of Directors (the “Board”) authorized a share repurchase program of up to $75 million of the Company’s common stock. On February 22, 2019, the Company announced that the Board authorized a share repurchase program of up to an additional $75 million of the Company’s common stock, which was in addition to the remaining capacity available under the May 2018 share repurchase program. 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 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.

As of March 31, ~~2020,~~2021, the Company had repurchased ~~3,582,278~~3,609,283 shares of common stock, including ~~492,516~~519,521 shares withheld to cover tax withholding obligations in connection with the vesting of ~~equity~~ awards, for an aggregate of ~~$101.6~~$102.2 million at a weighted average market price of ~~$28.36~~$28.30 per share. As of March 31, ~~2020,~~2021, $59.6 million remained available for ~~repurchase~~share repurchases under the current authorization. During the first quarter of 2021 and the period from April 1, ~~2020~~2021 through April ~~24, 2020,~~23, 2021, no additional shares were repurchased under the currently authorized repurchase program.

Credit Agreement

On ~~February 21, 2018 (the “First Amendment Date”),~~September 30, 2016, the Company as the borrower, entered into ~~Amendment No. 1 (the “First Amendment”) to the~~a Credit Agreement ~~among the Company, the guarantors, the lenders party thereto and~~with Bank of America, ~~N.A.,~~ as administrative agent (the "Original Credit Agreement"), which was amended on February 21, 2018 pursuant to Amendment No. 1 to the Original Credit Agreement ~~after giving effect to the First Amendment, the “First~~(the "First 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 First Amendment,Agreement), and a senior secured revolving credit facility in a principal amount of $155 million. Pursuant to the First 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 First Amendment Date, the Company borrowed $242 million under the Revolving Credit Facility. The proceeds of such loans, as well as cash~~further amended on hand, were used to repay the outstanding Term Loan under the Original Credit Agreement. The Revolving Credit Facility under the First Amended and Restated Credit Agreement has a 5-year term with a scheduled maturity date of February 21, 2023. The First Amendment resulted in an increase in the Revolving Credit Facility to replace the Term Loan and provided increased borrowing flexibility and reduced overall borrowing costs with an approximate 50 basis point reduction in the interest rate spread.

On February 19, 2020 ~~the Company entered into~~pursuant to, Amendment No. 2 ~~(the “Second Amendment”)~~ to the First Amended and Restated Credit Agreement (after giving effect to the Second Amendment, the “Second Amended and Restated Credit Agreement”).

The Second ~~Amendment amended the Consolidated Leverage Ratio financial covenant of the~~Amended and Restated Credit Agreement ~~and~~ requires the Company to maintain a Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of (i) 3.50 to 1.00 or less for the fiscal quarter ending March 31, 2020, (ii) 4.50 to 1.00 or less for the fiscal quarter ending June 30, 2020, (iii) 4.25 to 1.00 or less for the fiscal quarter ending September 30, 2020, (iv) 3.50 to 1.00 or less for the fiscal quarter ending December 31, 2020, (v) 3.25 to 1.00 or less for the fiscal quarter ending March 31, 2021 through and including the fiscal quarter ending December 31, 2021, and (vi) 3.00 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 connection with certain acquisitions). The Consolidated Interest Coverage Ratio financial covenant ~~of the First Amended and Restated Credit Agreement was not changed and continues to require~~requires the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Second Amended and Restated Credit Agreement) of not less than 3.00 to 1.00. If the Company does not comply with the covenants in the Second 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. The Company was in compliance with all related covenants at March 31, 2021.

In addition, the Second Amendment also amended certain administrative provisions associated with the LIBOR Successor Rate (as defined in the Second Amended and Restated Credit Agreement).

The obligations under the Second Amended and Restated Credit Agreement are secured by a pledge of assets and liens on substantially all of the assets of AdvanSix.

The Second 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, as well as financial covenants that require the Company to maintain interest coverage and leverage ratios at levels specified in the Second 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 March 31, ~~2020.~~2021 and through the date of the filing of this Quarterly Report on Form 10-Q.

The situation surrounding COVID-19 remains fluid and unpredictable, and the potential for a material impact on the Company increases the longer the social and economic restrictions remain in place or are reinstituted, which ~~impact~~impacts the overall level of consumer and business activity in the United States and globally. For this reason, the Company cannot reasonably estimate with any degree of certainty the future impact COVID-19 may have on the Company’s results of operations, financial position, and liquidity. For further information regarding risk and the impact COVID-19 could have on our business, financial condition, results of operations and liquidity, including our ability to comply with financial covenants in our credit facility and our access to, and cost of, capital, see "Risk Factors" in Item 1A of Part ~~II, Item 1A. "Risk Factors."~~I of the 2020 Form 10-K.

As of March 31, ~~2020, $87~~2021, $178 million was available for use out of the total of $425 million under the Revolving Credit Facility.

As of December 31, ~~2019,~~2020, we had a balance of ~~$297~~$275 million under the Revolving Credit Facility. During the ~~first~~ three months ~~of 2020,~~ended March 31, 2021, we ~~borrowed~~repaid an incremental net amount of ~~$40~~$29 million to bring the balance under the Revolving Credit Facility to ~~$337~~$246 million as of March 31, ~~2020. Going forward, we~~2021. We expect that Cash provided by operating activities will fund future interest payments on the Company's outstanding indebtedness.

Cash Flow Summary


		Three Months Ended March 31,							Three Months Ended March 31,
		2020		2019			2021		2020
Cash provided by (used for):	Cash provided by (used for):					Cash provided by (used for):
Operating activities	Operating activities	$	19,719	$	42,076	Operating activities	$	57,090	$	19,719
Investing activities	Investing activities	(34,485)		(40,099)		Investing activities	(23,931)		(34,485)
Financing activities	Financing activities	38,470		(3,982)		Financing activities	(29,641)		38,470
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	23,704	$	(2,005)	Net change in cash and cash equivalents	$	3,518	$	23,704

Cash provided by operating activities ~~decreased~~increased by ~~$22.4~~$37.4 million for the three months ended March 31, ~~2020~~2021 versus the prior year period due primarily to a ~~$11.6~~$19.6 million ~~decrease~~increase in net income, ~~an $11.5~~a $19.6 million ~~unfavorable~~cash improvement from Taxes receivable (including a $12.3 million cash tax refund received in the first quarter of 2021), a $4.8 million favorable cash impact from working capital (comprised of Accounts receivables, Inventories, Accounts payable and Deferred income) year-over-year with a $6.7 million unfavorable cash impact from working capital for the three months ended March 31, ~~2020 versus~~2021 compared to a ~~$6.7~~$11.5 million ~~favorable~~unfavorable cash impact ~~from working capital~~ in the prior year period and a $1.7 million favorable impact from non-cash Depreciation and amortization expense. These favorable impacts were partially offset by a ~~change in the timing of payments for~~$9.0 million unfavorable cash impact from Deferred taxes and $2.0 million unfavorable cash impact from Accrued ~~liabilities of $10.1 million versus the same period in the prior year.~~liabilities.

Cash used for investing activities decreased by ~~$5.6~~$10.6 million for the three months ended March 31, ~~2020~~2021 versus the prior year period due to a decrease in cash paid for capital ~~expenditures.~~expenditures of approximately $19.9 million offset by cash paid for the acquisition of Commonwealth Industrial Services for approximately $9.5 million.

Cash ~~provided by~~used for financing activities increased by ~~$42.5~~$68.1 million for the three months ended March 31, ~~2020~~2021 versus the prior year period due primarily to net ~~borrowings~~repayments of ~~$40.0~~$29.0 million for the three months ended March 31, ~~2020~~2021 compared to net borrowings of ~~$20.0~~$40.0 million during the prior year period ~~offset by $0.9 million in cash outflows for share repurchases during the three months ended March 31, 2020 compared to $23.9 million in cash outflows during the prior year period, both of which are~~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 output, further improve mix, yield and cost position, and comply with environmental and safety regulations.

The following table summarizes ongoing and expansion capital expenditures:


	Three Months Ended March 31, ~~2020~~2021
Capital expenditures in Accounts payable at December 31, ~~2019~~2020	$	~~21,594~~6,178
Purchases of property, plant and equipment	~~24,059~~10,964
Less: Capital expenditures in Accounts payable at March 31, ~~2020~~2021	~~(11,553)~~(2,965)
Cash paid for capital expenditures	$	~~34,100~~14,177

For ~~2020,~~2021, we expect our total capital expenditures to be approximately $70 million to $80 million compared to ~~$90~~$83 million ~~which represents a reduction~~in 2020 reflecting disciplined capital deployment and following the completion of ~~$10 million from our previously announced estimate~~several high-return growth and ~~a decrease of $60 to $70 million versus 2019, as we continue to assess opportunities to maximize free cash flow in light of current and anticipated economic conditions.~~cost savings investments. Capital expenditures are deployed for various ongoing investments and initiatives to improve reliability, yield and quality, expand production capacity and comply with HSE regulations.

Critical Accounting Policies

The preparation of our Condensed Consolidated Financial Statements in accordance with U.S. GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider these accounting policies to be critical to the understanding of our Condensed Consolidated Financial Statements. For a full description of our critical accounting policies, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our ~~2019~~2020 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 March 31, ~~2020,~~2021, the Company did not have any off-balance sheet arrangements as ~~defined~~described in Instruction 8 to Item ~~303(a)(4)(ii)~~303(b) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the Company's ~~2019~~2020 Form 10-K. 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 2. Recent Accounting Pronouncements” to the Condensed Consolidated Financial Statements included in Part I. Item 1 of this Form 10-Q.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

Our exposure to risk based on changes in interest rates relates primarily to our Second Amended and Restated Credit Agreement. The Second 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 Second Amended and Restated Credit Agreement.

The Company has entered into two interest rate swap agreements for a total notional amount of $100 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings.

These interest rate swaps had a fair value of zero at inception and were effective November 30, 2018 and July 31, 2019 with respective maturity dates of November 30, 2021 and February 21, 2023. These interest rate swaps have been designated as cash flow hedges and convert the Company’s interest rate payments on the first $100 million of variable-rate, 1-month LIBOR-based

debt to a fixed interest rate. As a result of these interest rate swaps, interest payments on approximately ~~30%~~41% of our total borrowings, as of March 31, ~~2020,~~2021, have been swapped from floating rate to fixed rate for the life of the swaps, without an exchange of the underlying principal amount.

A hedge effectiveness assessment was completed by comparing the critical terms of the hedged items with the hedging instruments, and also by reviewing the credit standing of the counterparties. As of March 31, ~~2020,~~2021, it was determined that the

critical terms continued to exactly match, and that the counterparties still had the ability to honor their obligations. As a result, the hedges continue to be deemed effective.

Based on current borrowing levels at March 31, ~~2020,~~2021, net of the interest rate swap, a 25-basis point fluctuation in interest rates for the three months ended March 31, ~~2020~~2021 would have resulted in an increase or decrease to our interest expense of approximately ~~$0.6~~$0.4 million.

See “Note ~~13.~~12. Derivative and Hedging Instruments” to the Condensed Consolidated Financial Statements, included in Part I. Item 1 of this Form 10-Q, for a discussion relating to credit and market, commodity price and interest rate risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under 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, including the Chief Executive Officer and Chief Financial Officer, as appropriate, 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 March 31, ~~2020,~~2021, 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 March 31, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. The Company has not experienced any material impact to the Company’s internal control over financial reporting due to the fact that certain of the Company’s employees responsible for financial reporting are working remotely during the COVID-19 pandemic. The Company continually monitors and assesses the potential impact of the COVID-19 pandemic on the Company’s internal control over financial reporting to mitigate any impact to design and operating effectiveness.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in litigation relating to claims arising outside of the ordinary course of our business operations. We are not a party to, and, to our knowledge, there are ~~not threats of any~~no pending claims or actions against us, the ultimate disposition of which ~~would~~could be expected to have a material adverse effect on our consolidated financial position, results of operations or operating cash flows.

~~Environmental Matters Involving Potential Monetary Sanctions in Excess of $100,000~~

The United States Environmental Protection Agency (“EPA”) notified the Company in December 2016 that alleged violations, involving the enhanced leak detection and repair program and emission testing requirements, at the Company’s manufacturing facility in Hopewell, Virginia, in each case that were self-reported by the Company, may potentially subject the Company to stipulated penalties under the 2013 consent decree among the Company, the U.S. and the Commonwealth of Virginia. The

Company has discussed this matter with the EPA and negotiations to resolve it are ongoing. Although the outcome of the matter cannot be predicted with certainty, we do not believe that it will have a material adverse effect on our consolidated financial position, results of operations or operating cash flows.

The Virginia Department of Environmental Quality (“Virginia DEQ”) provided notice to the Company in April 2020 of a consent order to address certain alleged violations involving monitoring, recordkeeping, emissions bypass and other related requirements at the Company’s manufacturing facility in Hopewell, Virginia, in each case that were self-reported by the Company, may potentially subject the Company to certain specified penalties under the Virginia Air Pollution Control Law and applicable regulatory requirements. The Company has discussed the matter with the Virginia DEQ and negotiations to resolve it are ongoing. We do not believe that the resolution of this matter will have a material adverse effect on our consolidated financial position, results of operations or operating cash flows.

ITEM 1A. RISK FACTORS

~~Except as discussed below, there~~There have been no material changes to our risk factors as previously disclosed in Item 1A of Part I of the Company’s ~~2019~~2020 Form 10-K, which are hereby incorporated by reference. The risk described below, and the risks described in the Company’s 2019 Form 10-K are not the only risks we face. Additional risks and uncertainties that are not presently known to us or are currently deemed to be immaterial also may materially adversely affect our business, financial condition or results of operations in the future. If any of the risks actually occur, our business, financial condition or results of operations could be materially impacted.

~~Our results of operations could be materially adversely impacted by the coronavirus (COVID-19) pandemic and the measures implemented to contain the spread of the virus.~~

The outbreak and continued spread of the coronavirus (COVID-19) pandemic and the resulting containment measures have created significant volatility, uncertainty and economic disruption globally. The extent of the impact from the COVID-19 pandemic on our business depends on numerous evolving factors and future developments that cannot be accurately predicted at this time, including: the scope and duration of the pandemic and pace of recovery; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic, including our business continuity and cash optimization plans that have and may be implemented; the impact of social and economic restrictions and other containment measures taken to combat virus transmission; the effect on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.; our ability to sell and provide our goods and services, including as a result of travel and other COVID-19-related restrictions; the ability of our customers to pay for our products; and any closures of our and our customers’ offices and facilities. Customers may also slow down decision-making, delay planned work or seek to terminate existing agreements.

Under difficult market conditions, there can be no assurance that access to credit or the capital markets would be available or sufficient, and as such, if needed, we may not be able to successfully obtain additional financing on reasonable terms or at all. Further, the difficult market conditions created by the pandemic may impact our ability to comply with financial covenants in our credit facility, increase our cost of capital or make additional capital, including the refinancing of our credit facility, more difficult or available only on terms less favorable to us. A sustained downturn may also result in the carrying value of our goodwill or other intangible assets exceeding their fair value, which may require us to recognize an impairment to those assets. A sustained downturn in the financial markets and asset values may have the effect of increasing our pension funding obligations in order to ensure that our qualified pension plans continue to be adequately funded, which may divert cash flow from other uses. The effects of the pandemic may also impact our financial reporting systems and internal control over financial reporting, including our ability to ensure information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Any of these events could materially adversely impact our business, financial condition, results of operations, cash flow, liquidity and/or stock price. The COVID-19 pandemic, as well as future pandemics or resurgences of COVID-19, could also cause or contribute to the other risk factors identified in our 2019 Form 10-K, which in turn could materially adversely affect our business, financial condition, results of operations, cash flow, liquidity and/or stock price. Further, the COVID-19 pandemic may also affect our business, operations and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On May 4, 2018, the Company announced that the Board authorized a share repurchase program of up to $75 million of the Company’s common stock. On February 22, 2019, the Company announced that the Board authorized a share repurchase program of up to an additional ~~$75~~$75 million of the Company's common stock, which authorization was in addition to the remaining capacity authorized under the May 2018 share repurchase program. 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 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 share repurchase program has no expiration date and may be modified, suspended or discontinued at any time.

The below table sets forth the repurchases of Company common stock, by month, for the quarter ended March 31, ~~2020:~~

2021. During the quarter ended March 31, 2021, no shares were purchased under our share repurchase program and 15,371 shares were repurchased as a result of tax withholding obligations in connection with the vesting of equity awards.

ISSUER PURCHASES OF EQUITY SECURITIES

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
January 2020 — $ — — $ 59,581,679
February 2020 (1) 561 15.32 — 59,581,679
March 2020 (1) 72,596 12.63 — 59,581,679
Total 73,157 $ 12.65 —


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
January 2021	—	$	—	—	$	59,581,679
February 2021	—	—		—	59,581,679
March 2021 (1)	15,371	28.81		—	59,581,679
Total	15,371	$	28.81	—

(1) All shares purchased were as a result of tax withholding obligations in connection with the vesting of equity awards.

During the period ~~from~~ April 1, ~~2020~~2021 through April ~~24, 2020,~~23, 2021, no ~~additional~~ shares were repurchased under the currently authorized repurchase program.On April 1, 2020, the Company withheld 7,031 shares covering tax withholding obligations in connection with the vesting of equity awards for an aggregate purchase amount of approximately $0.1 million, reducing the number of shares outstanding.

3327

ITEM 6. EXHIBITS


Exhibit	Description
3.1		Amended and Restated Certificate of Incorporation of AdvanSix Inc. (conformed copy) (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed on August 1, 2019).
3.2		Amended and Restated By-laws of AdvanSix Inc. (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q filed on August 1, 2019).
~~10.1~~		Amendment No. 2 to Credit Agreement, dated as of February 19, 2020, among AdvanSix Inc., the guarantors, the lenders signatory thereto and Bank of America, N.A., as the administrative agent (with annexed Amended and Restated Credit Agreement) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 21, 2020).
~~10.2~~		~~Offer of Employment Letter between AdvanSix Inc. and Achilles B. Kintiroglou, dated February 24, 2020. †~~
~~10.3~~		~~Employment Separation Agreement and Release between AdvanSix Inc. and Jonathan Bellamy, dated March 12, 2020. †~~
~~10.4~~	~~Offer of Employment Letter between AdvanSix Inc. and John M. Quitmeyer, dated April 1, 2020. †~~
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	Inline 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	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and included in Exhibit 101)

† Indicates management contract or compensatory plan.

3428

SIGNATURE

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.

Date: ~~May 1, 2020~~April 30, 2021

By:

/s/ Michael Preston

Michael Preston

Senior Vice President and Chief Financial Officer

3529


Year Ending December 31,	Operating Leases		Finance Leases
2020 (remainder)	$	33,059	$	562
2021	32,932		528
2022	22,814		195
2023	13,335		11
2024	11,468		8
Thereafter	61,561		—
Total lease payments	175,169		1,304
Less imputed interest	(47,049)		(61)
Total	$	128,120	$	1,243


	Employee Separation Benefits		Facility Exit Costs		Total
Accrual balance at December 31, 2019	$	127	$	410	$	537
Charges	—		—		—
Cash payments	(127)		(410)		(537)
Accrual balance at March 31, 2020	$	—	$	—	$	—