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, ~~2021~~2022


☐			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(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 oý	Accelerated filer ýo	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 ~~28,051,056~~28,103,293 shares of common stock, $0.01 par value, outstanding at April ~~23, 2021.~~29, 2022.

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, ~~2021~~2022 and ~~2020~~ 2021(unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 (unaudited)	4
	Condensed Consolidated Balance Sheets a sas of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 ~~(unaudited)~~(unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 (unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2527
Item 4.	Controls and Procedures	2627

Part II.	OTHER INFORMATION	2628
Item 1.	Legal Proceedings	2628
Item 1A.	Risk Factors	2628
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2628
Item 6.	Exhibits	2830
	Signature	2931

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,
2021 2020
Sales $ 376,383 $ 302,713
Costs, expenses and other:
Costs of goods sold 317,899 272,008
Selling, general and administrative expenses 19,308 16,740
Interest expense, net 1,544 1,959
Other non-operating expense (income), net 230 (234)
Total costs, expenses and other 338,981 290,473
Income before taxes 37,402 12,240
Income tax expense 9,271 3,664
Net income $ 28,131 $ 8,576
Earnings per common share
Basic $ 1.00 $ 0.31
Diluted $ 0.98 $ 0.31
Weighted average common shares outstanding
Basic 28,093,764 27,942,486
Diluted 28,741,066 28,050,955


	Three Months Ended March 31,
	2022		2021
Sales	$	479,073	$	376,383
Costs, expenses and other:
Costs of goods sold	375,646		317,899
Selling, general and administrative expenses	21,210		19,308
Interest expense, net	563		1,544
Other non-operating (income) expense, net	(603)		230
Total costs, expenses and other	396,816		338,981

Income before taxes	82,257		37,402
Income tax expense	19,184		9,271
Net income	$	63,073	$	28,131

Earnings per common share
Basic	$	2.24	$	1.00
Diluted	$	2.15	$	0.98
Weighted average common shares outstanding
Basic	28,199,871		28,093,764
Diluted	29,371,051		28,741,066

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,
2021 2020
Net income $ 28,131 $ 8,576
Foreign exchange translation adjustment (70) (57)
Cash-flow hedges 483 (1,836)
Pension obligation adjustments 0 0
Other comprehensive income (loss), net of tax 413 (1,893)
Comprehensive income $ 28,544 $ 6,683


	Three Months Ended March 31,
	2022		2021
Net income	$	63,073	$	28,131
Foreign exchange translation adjustment	57		(70)
Cash-flow hedges	512		483

Other comprehensive income (loss), net of tax	569		413
Comprehensive income	$	63,642	$	28,544

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, 2021		December 31, 2020			March 31, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	14,124	$	10,606	Cash and cash equivalents	$	19,306	$	15,100
Accounts and other receivables – net	Accounts and other receivables – net	149,461		123,554		Accounts and other receivables – net	223,541		179,087
Inventories – net	Inventories – net	141,810		180,085		Inventories – net	163,396		149,570
Taxes receivable		340		12,289

Other current assets	Other current assets	4,342		6,969		Other current assets	6,220		6,097
Total current assets	Total current assets	310,077		333,503		Total current assets	412,463		349,854
Property, plant and equipment – net	Property, plant and equipment – net	763,605		765,469		Property, plant and equipment – net	782,783		767,964
Operating lease right-of-use assets	Operating lease right-of-use assets	113,458		114,484		Operating lease right-of-use assets	132,567		136,207
Goodwill	Goodwill	17,592		15,005		Goodwill	57,863		17,592
Intangible assets						Intangible assets	48,948		17,980
Other assets	Other assets	38,051		34,946		Other assets	22,497		22,402
Total assets	Total assets	$	1,242,783	$	1,263,407	Total assets	$	1,457,121	$	1,311,999

LIABILITIES	LIABILITIES					LIABILITIES
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	173,593	$	190,227	Accounts payable	$	200,524	$	211,511
Accrued liabilities	Accrued liabilities	39,724		41,152		Accrued liabilities	40,203		49,712

Income taxes payable						Income taxes payable	27,656		9,723
Operating lease liabilities – short-term	Operating lease liabilities – short-term	26,589		29,279		Operating lease liabilities – short-term	36,435		36,127
Deferred income and customer advances	Deferred income and customer advances	19,576		26,379		Deferred income and customer advances	2,434		2,749

Total current liabilities	Total current liabilities	259,482		287,037		Total current liabilities	307,252		309,822
Deferred income taxes	Deferred income taxes	127,973		125,575		Deferred income taxes	145,206		133,330
Operating lease liabilities – long-term	Operating lease liabilities – long-term	87,231		85,605		Operating lease liabilities – long-term	96,471		100,580
Line of credit – long-term	Line of credit – long-term	246,000		275,000		Line of credit – long-term	220,000		135,000

Postretirement benefit obligations	Postretirement benefit obligations	39,795		39,168		Postretirement benefit obligations	19,451		18,243
Other liabilities	Other liabilities	7,714		6,899		Other liabilities	10,350		13,834
Total liabilities	Total liabilities	768,195		819,284		Total liabilities	798,730		710,809

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

STOCKHOLDERS' EQUITY	STOCKHOLDERS' EQUITY					STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 200,000,000 shares authorized; 31,660,339 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		0		0
Treasury stock at par (3,609,283 shares at March 31, 2021; 3,593,912 shares at December 31, 2020)		(36)		(36)
Common stock, par value $0.01; 200,000,000 shares authorized; 31,900,305 shares issued and 28,103,293 outstanding at March 31, 2022; 31,755,430 shares issued and 28,139,954 outstanding at December 31, 2021						Common stock, par value $0.01; 200,000,000 shares authorized; 31,900,305 shares issued and 28,103,293 outstanding at March 31, 2022; 31,755,430 shares issued and 28,139,954 outstanding at December 31, 2021	319		318
Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2022 and December 31, 2021						Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at March 31, 2022 and December 31, 2021	—		—
Treasury stock at par (3,797,012 shares at March 31, 2022; 3,615,476 shares at December 31, 2021)						Treasury stock at par (3,797,012 shares at March 31, 2022; 3,615,476 shares at December 31, 2021)	(38)		(36)
Additional paid-in capital	Additional paid-in capital	186,652		184,732		Additional paid-in capital	193,321		195,931
Retained earnings	Retained earnings	303,374		275,243		Retained earnings	470,759		411,516
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(15,719)		(16,132)		Accumulated other comprehensive loss	(5,970)		(6,539)
Total stockholders' equity	Total stockholders' equity	474,588		444,123		Total stockholders' equity	658,391		601,190
Total liabilities and stockholders' equity	Total liabilities and stockholders' equity	$	1,242,783	$	1,263,407	Total liabilities and stockholders' equity	$	1,457,121	$	1,311,999

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,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	28,131	$	8,576	Net income	$	63,073	$	28,131
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	16,104		14,432		Depreciation and amortization	16,692		16,104
Loss on disposal of assets	Loss on disposal of assets	84		35		Loss on disposal of assets	359		84
Deferred income taxes	Deferred income taxes	2,237		11,204		Deferred income taxes	(519)		2,237
Stock based compensation		2,363		1,198
Stock-based compensation						Stock-based compensation	3,374		2,363
Accretion of deferred financing fees	Accretion of deferred financing fees	141		130		Accretion of deferred financing fees	155		141

Changes in assets and liabilities, net of business acquisitions:	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	(25,119)		(8,746)		Accounts and other receivables	(28,402)		(13,170)
Inventories	Inventories	38,986		13,644		Inventories	(1,889)		38,986
Taxes receivable		11,949		(7,654)

Accounts payable	Accounts payable	(13,781)		(9,752)		Accounts payable	(8,029)		(13,781)

Income taxes payable						Income taxes payable	17,933		—
Accrued liabilities	Accrued liabilities	912		2,912		Accrued liabilities	(11,718)		912
Deferred income and customer advances	Deferred income and customer advances	(6,803)		(6,626)		Deferred income and customer advances	(315)		(6,803)
Other assets and liabilities	Other assets and liabilities	1,886		366		Other assets and liabilities	(1,552)		1,886
Net cash provided by operating activities	Net cash provided by operating activities	57,090		19,719		Net cash provided by operating activities	49,162		57,090

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	(14,177)		(34,100)		Expenditures for property, plant and equipment	(21,019)		(14,177)
Acquisition of business	Acquisition of business	(9,523)		0		Acquisition of business	(98,589)		(9,523)

Other investing activities	Other investing activities	(231)		(385)		Other investing activities	(296)		(231)
Net cash used for investing activities	Net cash used for investing activities	(23,931)		(34,485)		Net cash used for investing activities	(119,904)		(23,931)

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	54,000		133,500		Borrowings from line of credit	148,500		54,000
Payments of line of credit	Payments of line of credit	(83,000)		(93,500)		Payments of line of credit	(63,500)		(83,000)
Payment of line of credit facility fees		0		(425)

Principal payments of finance leases	Principal payments of finance leases	(199)		(182)		Principal payments of finance leases	(237)		(199)
Dividend payments						Dividend payments	(3,517)		—
Purchase of treasury stock	Purchase of treasury stock	(443)		(925)		Purchase of treasury stock	(7,012)		(443)
Issuance of common stock	Issuance of common stock	1		2		Issuance of common stock	714		1

Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	(29,641)		38,470		Net cash provided by (used for) financing activities	74,948		(29,641)

Net change in cash and cash equivalents	Net change in cash and cash equivalents	3,518		23,704		Net change in cash and cash equivalents	4,206		3,518
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	10,606		7,050		Cash and cash equivalents at beginning of period	15,100		10,606
Cash and cash equivalents at the end of period	Cash and cash equivalents at the end of period	$	14,124	$	30,754	Cash and cash equivalents at the end of period	$	19,306	$	14,124

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	$	2,965	$	11,553	Capital expenditures included in accounts payable	$	7,335	$	2,965

Supplemental cash activities:	Supplemental cash activities:					Supplemental cash activities:
Cash paid for interest	Cash paid for interest	$	1,518	$	730	Cash paid for interest	$	408	$	1,518
Cash paid for income taxes	Cash paid for income taxes	$	35	$	109	Cash paid for income taxes	$	22	$	35

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			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						Treasury Stock								Amount	Additional Paid-In Capital						Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2020		31,627,139	$	316	$	184,732	$	275,243		$	(36)	$	(16,132)	$	444,123
Balance at December 31, 2021																Balance at December 31, 2021	31,755,430			$	318	$	195,931		$	411,516			$	(36)	$	(6,539)	$	601,190

Net Income	Net Income	—	—		—		28,131			—		—		28,131		Net Income	—	—		—		63,073			—		—		63,073
Comprehensive income	Comprehensive income															Comprehensive income
Foreign exchange translation adjustments	Foreign exchange translation adjustments	—	—		—		—			—		(70)		(70)		Foreign exchange translation adjustments	—	—		—		—			—		57		57
Cash-flow hedges	Cash-flow hedges	—	—		—		—			—		483		483		Cash-flow hedges	—	—		—		—			—		512		512
Pension obligation adjustments	Pension obligation adjustments	—	—		—		—			—		—		0		Pension obligation adjustments	—	—		—		—			—		—		—
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—	—		—		—			—		413		413		Other comprehensive income (loss), net of tax	—	—		—		—			—		569		569
Issuance of common stock	Issuance of common stock	33,200	1		—		—			—		—		1		Issuance of common stock	144,875	1		713		—			—		—		714
Purchase of treasury stock (15,371 shares)		—	—		(443)		—			—		—		(443)
Purchase of treasury stock (181,536 shares)																Purchase of treasury stock (181,536 shares)	—	—		(7,010)		—			(2)		—		(7,012)
Stock-based compensation	Stock-based compensation	—	—		2,363		—			—		—		2,363		Stock-based compensation	—	—		3,374		—			—		—		3,374
Balance at March 31, 2021		31,660,339	$	317	$	186,652	$	303,374		$	(36)	$	(15,719)	$	474,588
Dividends																Dividends	—	—		313		(3,830)			—		—		(3,517)
Balance at March 31, 2022																Balance at March 31, 2022	31,900,305	$	319	$	193,321	$	470,759		$	(38)	$	(5,970)	$	658,391

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


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

























































Balance at December 31, 2020	31,627,139	$	316	$	184,732	$	275,243	$	(36)	$	(16,132)	$	444,123

Net Income	—	—		—		28,131		—		—		28,131
Comprehensive income
Foreign exchange translation adjustments	—	—		—		—		—		(70)		(70)
Cash-flow hedges	—	—		—		—		—		483		483
Pension obligation adjustments	—	—		—		—		—		—		—
Other comprehensive income (loss), net of tax	—	—		—		—		—		413		413
Issuance of common stock	33,200	1		—		—		—		—		1
Purchase of treasury stock (15,371 shares)	—	—		(443)		—		—		—		(443)
Stock-based compensation	—	—		2,363		—		—		—		2,363
Balance at March 31, 2021	31,660,339	$	317	$	186,652	$	303,374	$	(36)	$	(15,719)	$	474,588

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," the "Company," "we" or "our") 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, agrochemicals, 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 35 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.

COVID-19

~~In March~~Since early 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 worldwide, and with certain jurisdictions experiencing ~~resurgences.~~resurgences, including as a result of variant strains. The ~~spread resulted in authorities implementing numerous~~pandemic and related containment measures, ~~to contain the virus,~~ such as travel bans and restrictions, ~~quarantines, shelter-in-place~~shelter in place orders and business ~~shutdowns. The pandemic and these containment measures~~shutdowns, have had a substantial impact on businesses around the world and on global, regional and national economies, including disruptions to supply chains, ~~reduced~~volatility in demand, production and sales across most industries, ~~declines and~~ volatility within global financial markets, inflationary pressures in commodity pricing and ~~decreased workforces causing increased unemployment.~~an increasingly dynamic workforce environment. The continuously evolving nature of this pandemic and the pace and shape of a full recovery may continue to have an impact on the United States and 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 continues to consider the impact of COVID-19 on the estimates and assumptions used for the financial statements. As 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~~Starting in the second half of 2020, and through the first quarter of ~~2021,~~2022, 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 on the 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, ~~2021,~~2022, and its results of operations for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 and cash flows for the three months ended March 31, ~~2021~~2022 and ~~2020.~~2021. 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, ~~2020~~2021 (the ~~"2020~~"2021 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

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

existed within a reporting year. In the event that differences in actual closing dates are material to year-over-year comparisons of quarterly or year-to-date results, we will provide the appropriate disclosures. Our actual closing dates for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 were April 2, 2022 and April 3, 2021, ~~and March 28, 2020,~~ respectively.

Liabilities to creditors to whom we have issued checks that remained outstanding at March 31, ~~2021~~2022 and December 31, ~~2020~~2021 aggregated ~~$1.0~~to $2.2 million and ~~$7.2~~$4.5 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 in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including through the use of trading plans intended to qualify under Rule 10b5-1 of the ~~Securities~~ Exchange ~~Act of 1934, as amended (the “Exchange Act”).~~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.

AsDuring the first quarter of ~~March 31, 2021,~~2022, the Company ~~had~~ repurchased ~~3,609,283~~181,536 shares of common stock, including ~~519,521~~57,968 shares to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $7.0 million at a weighted average market price of $38.61 per share. As of March 31, 2022, the Company had repurchased 3,797,012 shares of common stock, including 583,682 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of ~~$102.2~~$109.4 million at a weighted average market price of ~~$28.30~~$28.81 per share. As of March 31, ~~2021, $59.6~~2022, $54.8 million remained available for share repurchases under the current authorization. During the period April 1, ~~2021~~2022 through April ~~23, 2021, 0~~29, 2022, no additional shares were repurchased under the currently authorized repurchase program.

2. Recent Accounting Pronouncements

Recent Accounting Pronouncements – The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). Any ASUs not ~~discussed below~~currently adopted 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.

~~ADVANSIX INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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

~~The Company adopted ASU 2019-12 effective January 1, 2021, which did not have a material impact on the Company’s consolidated financial position or results of operations upon adoption.~~

3. Revenues

Revenue Recognition

We serve approximately 400 customers annually in approximately 50 countries and across a wide variety of industries. For the three months ended March 31, ~~2021~~2022 and ~~2020~~2021, the Company's ten largest customers accounted for approximately ~~38%~~37% and ~~43%~~38% 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 long-standing customer relationships, which span decades. Our largest customer is Shaw Industries Group, Inc. (“Shaw”), a significant consumer of caprolactam and Nylon 6 resin, to whom we sell under a long-term agreement. For the three months ended March 31, 2022 and 2021, ~~and 2020, our~~the Company's sales to Shaw were ~~12%~~9% and ~~17%, respectively,~~12% of our total ~~sales.~~sales, respectively.

~~Each of the Company’s~~The Company's revenue by product ~~lines represented the following~~line, and related approximate percentage of total sales, for the three months ended March 31, ~~2021~~2022 and ~~2020:~~

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

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

Three Months Ended
March 31,
2021 2020
United States $ 300,672 $ 230,443
International 75,711 72,270
Total $ 376,383 $ 302,713

~~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, 2021:



~~Opening balance January 1, 2021~~	$	~~26,379~~
~~Additional cash advances~~	~~1,016~~
~~Less amounts recognized in revenues~~	~~(7,819)~~
~~Ending balance March 31, 2021~~	$	~~19,576~~

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

~~4. Earnings (Loss) Per Share~~

109

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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


	Three Months Ended March 31,
	2022			2021
Nylon	$	118,609	25%	$	83,789	22%
Caprolactam	70,005		15%	80,403		21%
Chemical Intermediates	135,690		28%	141,360		38%
Ammonium Sulfate	154,769		32%	70,831		19%
	$	479,073	100%	$	376,383	100%

The Company's revenues by geographic area, and related approximate percentage of total sales, for the three months ended March 31, 2022 and 2021 were as follows:


	Three Months Ended March 31,
	2022				2021
United States	$	403,018	84	%	$	300,672	80	%
International	76,055		16	%	75,711		20	%
Total	$	479,073	100	%	$	376,383	100	%

Deferred Income and Customer Advances

The Company defers revenues when cash payments are received in advance of our performance. Below is a roll-forward of Deferred income and customer advances for the three months ended March 31, 2022:



Opening balance January 1, 2022	$	2,749
Additional cash advances	640
Less amounts recognized in revenues	(955)
Ending balance March 31, 2022	$	2,434

The Company expects to recognize as revenue the March 31, 2022 ending balance of Deferred income and customer advances within one year or less.

4. Earnings Per Share

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~~2022 and ~~2020~~2021 were as follows:

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


	Three Months Ended March 31,
	2022		2021
Basic
Net income	$	63,073	$	28,131
Weighted average common shares outstanding	28,199,871		28,093,764
EPS – Basic	$	2.24	$	1.00
Diluted
Dilutive effect of equity awards and other stock-based holdings	1,171,180		647,302
Weighted average common shares outstanding	29,371,051		28,741,066
EPS – Diluted	$	2.15	$	0.98

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Diluted EPS is computed based upon the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents using the treasury stock method and the average market price of our common stock for the ~~year.~~period.

The diluted EPS calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price of the common shares during the period. The anti-dilutive common stock equivalents outstanding at the three months ended March 31, ~~2021~~2022 and ~~2020~~2021 were as follows:


	Three Months Ended March 31,
	2022	2021
Options and stock equivalents	120,316	861,376

Three Months Ended
March 31,
2021 2020
Options and stock equivalents 861,376 935.402
Dividend activity for the three months ended March 31, 2022 and 2021 was as follows:


	Three Months Ended March 31,
	2022		2021
Cash dividends declared per share	$	0.125	$	—
Aggregate dividends paid to shareholders	$	3,517	$	—

5. Accounts and Other Receivables – Net


		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Accounts receivables	Accounts receivables	$	147,717	$	122,357	Accounts receivables	$	220,010	$	175,584
Other	Other	3,221		2,668		Other	4,870		4,998
Total accounts and other receivables	Total accounts and other receivables	150,938		125,025		Total accounts and other receivables	224,880		180,582
Less – allowance for doubtful accounts	Less – allowance for doubtful accounts	(1,477)		(1,471)		Less – allowance for doubtful accounts	(1,339)		(1,495)
Total accounts and other receivables – net	Total accounts and other receivables – net	$	149,461	$	123,554	Total accounts and other receivables – net	$	223,541	$	179,087

6. Inventories


		March 31, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Raw materials	Raw materials	$	51,259	$	88,612	Raw materials	$	90,299	$	56,961
Work in progress	Work in progress	31,340		54,291		Work in progress	52,578		43,526
Finished goods	Finished goods	39,187		45,345		Finished goods	57,374		27,961
Spares and other	Spares and other	27,562		27,198		Spares and other	27,679		27,150
		149,348		215,446			227,930		155,598
Reduction to LIFO cost basis	Reduction to LIFO cost basis	(7,538)		(35,361)		Reduction to LIFO cost basis	(64,534)		(6,028)
Total inventories	Total inventories	$	141,810	$	180,085	Total inventories	$	163,396	$	149,570

Substantially all of the Company’s inventories at March 31, 2022 and December 31, 2021 are valued at the lower of cost or market using the last-in, first-out (“LIFO”) method. However, approximately 9% was valued at average cost using the first-in, first-out (“FIFO”) method at March 31, 2022.

The excess of replacement cost over the carrying value of total inventories subject to LIFO was $72.5 million and $29.4 million at March 31, 2022 and December 31, 2021, respectively.

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)~~

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

Three Months Ended
March 31,
2021 2020
Service cost $ 1,954 $ 2,005
Interest cost 518 544
Expected return on plan assets (731) (524)
Amortization of actuarial net losses 86 0
Net periodic benefit cost $ 1,827 $ 2,025

The Company made cash contributions to the defined benefit pension plan of $1.2 million during the three months ended March 31, 2021. The Company currently plans to make pension plan contributions during 2021 sufficient to satisfy funding requirements under the AdvanSix Retirement Earnings Plan in an aggregate amount of approximately $9.0 million to $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. 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.

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

The components of lease expense were as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020			2022		2021
Finance lease cost:	Finance lease cost:					Finance lease cost:
Amortization of right-of-use asset	Amortization of right-of-use asset	$	183	$	181	Amortization of right-of-use asset	$	236	$	183
Interest on lease liabilities	Interest on lease liabilities	8		15		Interest on lease liabilities	14		8
Total finance lease cost	Total finance lease cost	191		196		Total finance lease cost	250		191
Operating lease cost	Operating lease cost	11,571		11,044		Operating lease cost	10,339		11,571
Short-term lease cost	Short-term lease cost	1,913		1,873		Short-term lease cost	1,353		1,913

Total lease cost	Total lease cost	$	13,675	$	13,113	Total lease cost	$	11,942	$	13,675

As of March 31, ~~2021,~~2022, we have additional ~~operating~~finance leases that have not yet commenced for approximately ~~$24.4~~$0.5 million. These leases will commence during ~~2021~~2022 with lease terms of up to 65 years.

8. Goodwill and Intangible Assets

Intangible assets with finite lives acquired through a business combination are recorded at fair value, less accumulated amortization. Customer relationships and trade-names are amortized on a straight-line basis over their expected useful lives of 15 to 20 years and 5 years, respectively.

Goodwill

The change in the carrying amount of goodwill was as follows:


		Total
Balance at	December 31, 2021	$	17,592
Acquisition of U.S. Amines		40,271
Balance at	March 31, 2022	$	57,863

Finite-Lived Intangible Assets

Intangible assets subject to amortization were as follows:


	March 31, 2022						December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Customer relationships	$	34,220	$	(423)	$	33,797	$	3,920	$	(240)	$	3,680
Licenses	18,451		(4,382)		14,069		18,451		(4,151)		14,300
Trade names	1,100		(18)		1,082		—		—		—
Total	$	53,771	$	(4,823)	$	48,948	$	22,371	$	(4,391)	$	17,980

For the three months ended March 31, 2022 and March 31, 2021, the Company recorded amortization expense on intangible assets of $0.4 million and $0.3 million, respectively.

9. Commitments and Contingencies

The Company is subject to a number of lawsuits, investigations and disputes, some of which may involve substantial amounts claimed, arising out of the conduct of the Company or other third-parties in the normal and ordinary course of business. A liability is recognized for any contingency that is probable of occurrence and reasonably estimable. The Company continually assesses the likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses, ~~(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)

on an analysis of each matter with the assistance of legal counsel and, if applicable, other experts.

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

We assumed from Honeywell 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 manufacturing 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.

10. Income Taxes

The provision for income taxes was ~~$9.3~~$19.2 million and ~~$3.7~~$9.3 million for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively, resulting in an effective tax rate of ~~24.8%~~23.3% and ~~29.9%~~24.8%, respectively.

Under a provision included in the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, the Company filed a Federal net operating loss (NOL) carryback claim in July 2020 which generated a refund of previously paid taxes in the amount of $12.3 million. The refund was received in the first quarter of 2021.

The Company’s provision for income taxes in interim periods is computed by applying an estimated annual effective tax rate against Income (Loss) before taxes for the period in addition to recording any tax effects of discrete items for the quarter. The Company’s estimated annual effective tax rate applied against the three months ended March 31, 2022 and 2021 ~~and 2020 was higher compared to~~differed from the U.S. federal statutory rate, due primarily to state taxes and executive compensation deduction limitations which generally increase the tax rate, partially offset by tax ~~credits. Additionally, for interim reporting purposes,~~credits and the foreign-derived intangible income deduction which generally decrease the tax rate.

In February 2022, the Company ~~recorded Income~~acquired the stock of U.S. Amines, Ltd. Under purchase accounting rules, a net deferred tax ~~expense~~liability of ~~$0.1~~approximately $12.2 million ~~and $0.6 million as discrete items for the three months ended March 31, 2021 and 2020, respectively, resulting in an increase~~was recorded in the quarter related to the adjustment of the acquired assets and liabilities to fair value. See Note 13 "Acquisitions" for further details.

We are subject to income taxes in the United States and to a lesser extent several foreign jurisdictions. Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could increase our effective tax rate and reduce our cash flows from operating activities. The current U.S. administration has released various draft tax reform proposals that, if enacted, would generally increase U.S. federal income taxes on corporations. These proposals, if implemented, could have an unfavorable effect on our business, results of ~~0.3%~~operations and ~~4.5%, respectively. The discrete tax adjustments in~~financial condition. As such, we continue to monitor these legislative proposals to evaluate the ~~prior year period relate to tax deficiencies on the vesting of equity compensation and the loss of 2018 foreign-derived intangible income tax benefits related to the Federal NOL carryback claim.~~

On March 11, 2021, the American Rescue Plan Act ("ARPA") was signed into law. The 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 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 we do not anticipate that it will have a material impact on our financial statements throughout the remainder of 2021.~~business.

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. In ~~November 2018 and~~ July 2019, the Company entered into 2an interest rate swap ~~transactions~~transaction related to its credit agreement. The fair value of the interest rate ~~swaps~~swap at March 31, ~~2021~~2022 was a loss of approximately ~~$2.4~~$0.04 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 must be evaluated at least annually. Our annual evaluation occurred on March 31, ~~2021~~2022 and we ~~have~~ concluded that an impairment for goodwill did 0tnot occur.

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 and interest rate swap ~~agreements,~~agreement, 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 with significant concentrations of trade accounts receivable – net at March 31, ~~2021~~2022 or December 31, ~~2020.~~2021. 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, ~~2021~~2022 and ~~2020,~~2021, we had 0no financial contracts related to forward commodity agreements.

Interest Rate Risk Management – The Company has entered into 21 interest rate swap ~~agreements~~agreement for a total notional amount of ~~$100~~$50 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings. ~~These~~The interest rate ~~swaps~~swap had a fair value of 0 at inception and ~~were~~was effective ~~November 30, 2018 and~~ July 31, 2019 with ~~respective~~a maturity ~~dates~~date 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~~swap as a cash flow ~~hedges~~hedge of floating-rate borrowings. The interest rate ~~swaps convert~~swap converts the Company’s interest rate payments on the first ~~$100~~$50 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate. ~~These~~The interest rate ~~swaps involve~~swap involves 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.

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

March 31, 2022

December 31, 2021

Balance Sheet Classification

Fair Value

Balance Sheet Classification

Fair Value

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)

Interest Rate Contracts

Accrued liabilities and Other liabilities

(44)

Accrued liabilities and Other liabilities

(708)

Total Derivatives

(2,419)

(3,063)

Total Derivatives

(44)

(708)

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,
~~2021~~2022

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

~~(3,063)~~(708)

Fair value adjustment

~~644~~664

Loss on derivative instruments included in Accumulated other comprehensive ~~income~~loss at March 31, ~~2021~~2022

~~(2,419)~~(44)

At March 31, ~~2021,~~2022, the Company expects to reclassify approximately ~~$1.7~~$0.04 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 with the remainder recognized in future periods through the expiration date. The following table summarizes the reclassification of net losses on derivative instruments from AOCI into earnings:


		Amount of Loss Recognized in Earnings				Amount of Loss Recognized in Earnings
		Three Months Ended March 31,					Three Months Ended March 31,
		2021		2020					2022		2021
Derivatives:	Derivatives:							Derivatives:

Interest Rate Contracts	Interest Rate Contracts	$	557	$	501			Interest Rate Contracts	$	12	$	557

Total Derivatives	Total Derivatives	$	557	501				Total Derivatives	$	12	$	557

13. Acquisitions

~~We actively target~~In February 2022, the Company acquired U.S. Amines, Ltd. ("U.S. Amines"), a leading North American producer of alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals for an estimated purchase price of approximately $98 million, net of cash acquired. U.S. Amines employs approximately 50 people in the United States at manufacturing facilities in Bucks, AL and Portsmouth, VA.

In accordance with ASC 805, this transaction has been accounted for as a business combination. The Company used its best estimates and assumptions for items including, but not limited to, corporate name recognition, strong, long-lasting customer relationships and potential ~~acquisitions~~revenue growth from existing customers to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that ~~build~~was available as of the acquisition date. The transaction resulted in the Company acquiring tangible assets and finite-lived intangible assets, comprised of customer relationships (approximately $30 million) and trademarks (approximately $1 million) which reflect the value of the benefit derived from incremental revenue and related cash flows as a direct result of the customer relationships and name brand. These intangible assets are being amortized on a straight-line basis over their estimated useful lives of 20 years and 5 years, respectively. The residual amount of the purchase price in excess of the value of the tangible and definite-lived intangible assets

ADVANSIX INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

was allocated to goodwill. Factors considered when identifying goodwill included, but are not limited to, a complementary business model and formula pricing mechanisms with a business that is adjacent to our ~~competitive advantage~~ammonium sulfate adjuvant and ~~core capabilities, create opportunities for broader expansion and~~solvent businesses, the enhancement of the Company’s value chain ~~integration, portfolio diversification, increased exposure~~through internal supply of products and raw materials, a new unique platform in the agrochemicals space as well as a number of opportunities to ~~attractive end markets~~support further penetration into high-value applications. The U.S. Amines acquisition was not significant to our Condensed Consolidated Financial Statements, therefore, pro forma and post-acquisition results of operations have not been presented.

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 ~~potential for long-term value creation.~~valuation as soon as practicable, but no later than one year from the acquisition date.

In January 2021, the Company acquired certain assets associated with ammonium sulfate packaging, warehousing and logistics services in Virginia from Commonwealth Industrial Services, Inc. ("CIS") for approximately $9.5 million. This acquisition ~~will enable~~enables 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~~across its 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.~~goodwill

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:~~date for the transactions noted above:




	U.S. Amines (February 2022 - Preliminary)		CIS (January 2021)
Cash	$	22,887	$	—
Accounts receivable	15,117		858
Inventories	11,937		712
Other current assets	1,876		—
Property, plant and equipment	13,600		1,875
Intangible assets	31,400		3,920
Accounts payable	(1,487)		(429)
Accrued liabilities	(2,760)		—
Deferred income taxes	(12,243)		—
Net tangible and intangible assets	80,327		6,936
Goodwill	40,271		2,587
Total purchase price	$	120,598	$	9,523

Total purchase price	$	120,598	$	9,523
Less: Cash acquired	(22,887)		—
Total purchase price, net of cash received	97,711		9,523
Estimated working capital adjustment due from seller	878		—
Net cash paid	$	98,589	$	9,523

Goodwill deductible for tax purposes	$	—	$	2,587




	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~~

14. Subsequent Events

As announced on May 6, 2022, the Board declared a quarterly cash dividend of $0.125 per share on the Company's common stock, payable on May 31, 2022 to stockholders of record as of the close of business on May 17, 2022.

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, ~~2020~~2021 filed with the Securities and Exchange Commission (“SEC”) on February ~~19, 2021~~18, 2022 (the ~~“2020~~“2021 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,” 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 and any resurgences; the ~~scope~~potential effects of inflationary pressures, labor market shortages and ~~duration~~supply chain issues; instability or volatility in financial markets or other unfavorable economic or business conditions caused by geopolitical concerns, including as a result of the ~~pandemic~~conflict between Russia and Ukraine; the scope, shape and pace of ~~recovery; the timing~~recovery of the ~~distribution~~pandemic; the severity and ~~the efficacy of vaccines or treatments for COVID-19 that are currently available or may be available in the future; the severity~~transmissibility 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;~~conditions; 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, pandemics and ~~pandemics including the COVID-19 pandemic;~~geopolitical conflicts and related events; 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, data privacy incidents and disruptions to our technology infrastructure; failure to maintain effective internal controls; our ability to declare and pay quarterly cash dividends and the amounts and timing of any future dividends; our ability to repurchase our common stock and the amount and timing of any future repurchases; disruptions in supply chain, transportation and logistics; ~~our inability to achieve some or all of the anticipated benefits of our spin-off including~~potential for uncertainty regarding qualification for ~~expected~~ tax ~~treatment;~~treatment of our spin-off; 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 ~~2020~~2021 Form 10-K, 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, agrochemicals, 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~~five 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 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 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, VA manufacturing facility is one of the world’s largest single-site producers of caprolactam as of March 31, ~~2021.~~2022.

•Chemical Intermediates – We manufacture, market and sell a 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 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. With the acquisition of U.S. Amines Ltd. ("U.S. Amines"), we now produce alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals.

•Ammonium Sulfate – Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key plant nutrients. Ammonium sulfate fertilizer is derived from the integrated operations at the Hopewell manufacturing facility. Because of our Hopewell facility’s size, scale and technology design, we are the world’s largest single-site producer of ammonium sulfate fertilizer as of March 31, ~~2021.~~2022. 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 basic raw materials used in the production of caprolactam, consisting primarily of benzene and, 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. Nylon 6 resin prices track the cyclicality of caprolactam prices, although prices set above the average commodity 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 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.

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, the price of which is influenced by its own supply and demand dynamics but can also be influenced by the underlying move in propylene input costs. We continue to invest in and grow our differentiated product offerings in high-purity applications and high-value intermediates including our newly acquired U.S. Amines portfolio as well as our oximes-based EZ-Blox™ anti-skinning agent used in paints and Nadone® cyclohexanone, which is a solvent used in various high-value applications.

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~~as compared to 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~~however, quarterly sales experience seasonality reflecting both geographical and product sales mix considerations based on the timing and length of the growing seasons in North and South America. North America ammonium sulfate prices are typically strongest during second quarter fertilizer application, where we sell a higher mix of granular product domestically, and then typically decline seasonally with new season fill in the third ~~quarter.~~quarter, where we generally drive a higher mix of standard grade product sales into export markets. 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 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

As 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~~Starting in the second half of 2020, and through the first quarter of ~~2021,~~2022, 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.

Acquisition

In February 2022, the Company acquired U.S. Amines, a leading North American producer of alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals for an estimated purchase price of approximately

$98 million, net of cash acquired. U.S. Amines employs approximately 50 people in the United States at manufacturing facilities in Bucks, AL and Portsmouth, VA. This acquisition enhances the Company's value chain through internal supply of products and raw materials. The acquisition also provides a unique platform in the agrochemicals space as well as a number of opportunities to support further penetration into high-value applications including electronics, pharmaceuticals and water treatment. U.S. Amines has a complementary business model with long-tenured customer relationships and formula pricing mechanisms with a business that is adjacent to both our ammonium sulfate adjuvant and solvent businesses.

Dividends

As announced on February 18, 2022, the Board declared a quarterly cash dividend of $0.125 per share on the Company's common stock, payable on March 15, 2022 to stockholders of record as of the close of business on March 1, 2022.

Results of Operations

(Dollars in thousands, unless otherwise noted)

Sales


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Sales	Sales	$	376,383	$	302,713		Sales	$	479,073	$	376,383
% change compared with prior year period	% change compared with prior year period	24.3%					% change compared with prior year period	27.3%

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


			Three Months Ended March 31, ~~2021~~2022
Volume			~~8.4%~~(4.0)%
Price			~~15.9%~~29.4%
Acquisition			1.9%
			~~24.3%~~27.3%

Sales increased in the three months ended March 31, ~~2021~~2022 compared to the prior year period by ~~$73.7~~$102.7 million (approximately ~~24%~~27%) due primarily to (i) ~~higher formula-based pass through~~net favorable market-based pricing (approximately ~~11%~~26%) reflecting strength in our ammonium sulfate and nylon product lines, (ii) favorable raw material pass-through pricing (approximately 3%) as a result of net cost increases in benzene and propylene (inputs to ~~Cumene~~cumene which is a key feedstock to our products)~~, (ii) net favorable market-based pricing (approximately 5%) reflecting strength in chemical intermediates, particularly acetone~~ and (iii) acquisitions (approximately 2%), partially offset by decreased sales volume (approximately 4%) driven primarily by higher sales ~~volume across all product lines led by caprolactam (approximately 8%).~~in the first quarter of 2021 through a reduction of finished goods inventory in the prior year period to meet customer demand recovery.

Costs of Goods Sold


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Costs of goods sold	Costs of goods sold	$	317,899	$	272,008		Costs of goods sold	$	375,646	$	317,899
% change compared with prior year period	% change compared with prior year period	16.9%					% change compared with prior year period	18.2%
Gross Margin percentage	Gross Margin percentage	15.5%		10.1%			Gross Margin percentage	21.6%		15.5%

Costs of goods sold increased in the three months ended March 31, ~~2021~~2022 compared to the prior year period by ~~$45.9~~$57.7 million (approximately ~~17%~~18%) due primarily to (i) increased prices of raw materials, particularly natural gas and sulfur (approximately ~~11%~~18%), (ii) ~~higher~~an increase in plant spend (approximately 2%) and (iii) the impact of the U.S. Amines acquisition (approximately 2%), partially offset by decreased sales volumes as discussed above (approximately 3%2%) and ~~(iii) an unfavorable~~the favorable impact of a prior year non-cash LIFO ~~inventory~~ reserve adjustment (approximately 2%).

Gross margin percentage increased by approximately 5%6% in the three months ended March 31, ~~2021~~2022 compared to the prior year period due primarily to ~~higher~~the net impact of (i) formula-based pass-through pricing and increased market pricing (approximately 4%7%) ~~driven by chemical intermediates, particularly acetone,~~ and ~~increased sales volume across all product lines~~(ii) the favorable impact of a prior year non-cash LIFO reserve adjustment (approximately 4%1%), partially offset by ~~an unfavorable non-cash LIFO inventory reserve adjustment~~(i) higher plant spend (approximately 2%1%) and (ii) lower sales volume (approximately 1%).

Selling, General and Administrative Expenses


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Selling, general and administrative expenses	Selling, general and administrative expenses	$	19,308	$	16,740		Selling, general and administrative expenses	$	21,210	$	19,308
Percentage of Sales	Percentage of Sales	5.1%		5.5%			Percentage of Sales	4.4%		5.1%

Selling, general and administrative expenses increased by ~~$2.6~~$1.9 million in the three months ended March 31, ~~2021~~2022 compared to the prior year period due primarily to increased ~~incentive and stock-based compensation costs.~~functional support costs as compared to the prior year.

Income Tax Expense


		Three Months Ended March 31,				Three Months Ended March 31,
		2021		2020				2022		2021
Income tax expense	Income tax expense	$	9,271	$	3,664		Income tax expense	$	19,184	$	9,271
Effective tax rate	Effective tax rate	24.8%		29.9%			Effective tax rate	23.3%		24.8%

~~As noted in Note 10. "Income Taxes", the~~The Company 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. The refund was received in the first quarter of 2021.

The Company’s effective tax rate for the three months ended March 31, 2022 and 2021 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. 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 compensationcredits and the ~~loss of 2018~~deduction for foreign-derived intangible ~~income tax benefits related to the Federal NOL carryback claim, partially offset by tax credits.~~income.

The Company’s effective tax rate for the three months ended March 31, ~~2021~~2022 was slightly lower than the prior year period due primarily to ~~higher tax deficiencies on the vesting of equity~~a decrease in expected executive compensation deduction limitations and an increase in the ~~prior year period and~~expected tax benefit from the ~~loss of 2018 foreign derived~~deduction for foreign-derived intangible income in 2022 compared to 2021.

In February 2022, the Company acquired the stock of U.S. Amines, Ltd. Under purchase accounting rules, a net deferred tax ~~benefits resulting~~liability of approximately $12.2 million was recorded in the quarter related to the adjustment of the acquired assets and liabilities to fair value. See Note 13 "Acquisitions" for further details.

We are subject to income taxes in the United States and to a lesser extent several foreign jurisdictions. Changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which we operate could increase our effective tax rate and reduce our cash flows from operating activities. The current US administration has released various draft tax reform proposals that, if enacted, would generally increase U.S. federal income taxes on corporations. These proposals, if implemented, could have an unfavorable effect on our business, results of operations and financial condition. As such, we continue to monitor these legislative proposals to evaluate the ~~Federal NOL carryback under the CARES Act.~~impact on our business.

Net Income

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


	Three Months Ended March 31,
	2022		2021
Net income	$	63,073	$	28,131

As a result of the factors described above, Net income was ~~$28.1~~$63.1 million for the three months ended March 31, ~~2021~~2022 as compared to ~~$8.6~~$28.1 million in the corresponding prior year period.

Non-GAAP Measures

(Dollars in thousands, unless otherwise noted)

The following tables set forth the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and ~~EBITDA Margin.~~Adjusted Earnings Per Share. Adjusted EBITDA is defined as Net income before Interest, Income taxes, ~~and~~ Depreciation and ~~amortization.~~amortization, Non-cash stock-based compensation, Non-recurring, unusual or extraordinary expenses, Non-cash amortization from acquisitions and One-time merger and acquisition costs. Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by Sales. The following tables may 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~~management believes do not ~~considered core to~~reflect the Company’s ongoing 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 Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin to their most directly comparable U.S. GAAP financial measure:


	Three Months Ended March 31,
	2022		2021
Net income	$	63,073	$	28,131
Non-cash stock-based compensation	3,374		2,363
Non-recurring, unusual or extraordinary expenses	—		—
Non-cash amortization from acquisitions	201		44
One-time M&A costs	277		172
Benefit from income taxes relating to reconciling items	(556)		(408)
Adjusted Net Income (non-GAAP)	66,369		30,302
Interest expense, net	563		1,544
Income tax expense - adjusted	19,740		9,679
Depreciation and amortization - adjusted	16,491		16,060
Adjusted EBITDA (non-GAAP)	103,163		57,585



Sales	$	479,073	$	376,383

Adjusted EBITDA Margin* (non-GAAP)	21.5%		15.3%

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

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%
The following is a reconciliation between the non-GAAP financial measures of Adjusted Earnings Per Share to its most directly comparable U.S. GAAP financial measure:

2122


	Three Months Ended March 31,
	2022		2021

Net Income	$	63,073	$	28,131
Adjusted Net Income (non-GAAP)	66,369		30,302


Weighted-average number of common shares outstanding - basic	28,199,871		28,093,764
Dilutive effect of equity awards and other stock-based holdings	1,171,180		647,302
Weighted-average number of common shares outstanding - diluted	29,371,051		28,741,066

EPS - Basic	$	2.24	$	1.00
EPS - Diluted	$	2.15	$	0.98
Adjusted EPS - Basic (non-GAAP)	$	2.35	$	1.08
Adjusted EPS - Diluted (non-GAAP)	$	2.26	$	1.05

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 ~~2020~~2021 Form 10-K. Our principal source of liquidity is our cash flow generated from operating activities, which is expected to provide us with the ability to meet the majority of our short-term funding requirements. Our 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, 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, dividends and liquidity reflecting disciplined capital ~~deployment and following the completion of several high-return growth and cost savings investments.~~deployment. Capital expenditures are deployed for various ongoing investments and initiatives to improve reliability, yield and quality, expand production capacity and comply with ~~HSE~~health, safety and environmental ("HSE") regulations. ~~While the COVID-19 pandemic has created and continues to create significant volatility in funding markets, we~~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 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 ~~2020~~2021 Form 10-K, as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.

As of the end of the first quarter of ~~2021,~~2022, the Company had approximately ~~$14~~$19.3 million of cash on hand with approximately ~~$178~~$279 million of additional capacity available under the revolving credit facility. The Company’s Consolidated Leverage Ratio financial covenant of its credit facility allows it to net up to $75 million of cash with debt. ~~The Second Amendment to the credit facility also provided leverage ratio covenant flexibility through 2021.~~ Capital expenditures are expected to be approximately ~~$70~~$95 million to ~~$80~~$105 million in 2022 compared to $57 million in 2021, ~~compared to $83 million in 2020,~~ reflecting ~~disciplined capital deployment~~the timing of maintenance and ~~following the completion of several high-return growth and cost savings investments.~~HSE spend.

~~As noted in Note 10. "Income Taxes," the~~

The Company 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 deferred approximately $6.5 million of social security taxes in 2020 under the CARES Act inof which 50% ~~is due by December 31, 2021~~was paid on January 3, 2022 and the remainder is due by ~~December 31, 2022.~~January 3, 2023.

We assumed from Honeywell all ~~health, safety and environmental (“HSE”)~~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 ~~2021~~2022 will be to fund costs associated with ongoing operations, capital expenditures, and amounts related to other contractual obligations.

The Company made no cash contributions to the defined benefit pension plan of ~~$1.2 million~~ during the three months ended March 31, ~~2021.~~2022. The Company currently plans to make pension plan contributions during ~~2021~~2022 sufficient to satisfy funding requirements under the AdvanSix Retirement Earnings Plan in an aggregate amount of approximately ~~$9.0~~$5 million to ~~$11.0~~$15 million. We contributed $5 million during April 2022 and anticipate making additional contributions in future ~~years~~periods sufficient to satisfy pension funding ~~requirements in those periods.~~requirements.

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 in accordance with Rule 10b-18 of the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors. The repurchase program has no expiration date and may be modified, suspended or discontinued at any time.

AsDuring the first quarter of ~~March 31, 2021,~~2022, the Company ~~had~~ repurchased ~~3,609,283~~181,536 shares of common stock, including ~~519,521~~57,968 shares to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $7.0 million at a weighted average market price of $38.61 per share. As of March 31, 2022, the Company had repurchased 3,797,012 shares of common stock, including 583,682 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of ~~$102.2~~$109.4 million at a weighted average market price of ~~$28.30~~$28.81 per share. As of March 31, ~~2021, $59.6~~2022, $54.8 million remained available for share repurchases under the current authorization. During the ~~first quarter of 2021 and the~~ period from April 1, ~~2021~~2022 through April ~~23, 2021,~~29, 2022, no additional shares were repurchased under the currently authorized repurchase program.

As of March 31, 2022, the Company did not have any off-balance sheet arrangements as described in Instruction 8 to Item 303(b) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the Company's 2021 Form 10-K (see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Liquidity and Capital Resources - Liquidity"). The Company has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Dividends

As announced on September 28, 2021, the Board declared a quarterly cash dividend of $0.125 per share on the Company's common stock, payable on November 23, 2021 to stockholders of record as of the close of business on November 9, 2021.

Dividends paid to common stockholders were approximately $3.5 million in each of the first quarter of 2022 and the fourth quarter of 2021.

The timing, declaration, amount and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. Holders of shares of our common stock will be entitled to receive dividends when, and if, declared by our Board at its discretion out of funds legally available for that purpose, subject to the terms of our indebtedness, the preferential rights of any preferred stock that may be outstanding, legal requirements, regulatory constraints, industry practice and other factors that our Board deems relevant.

Credit Agreement

On September 30, 2016, the Company as the borrower, entered into a Credit Agreement with Bank of America, as administrative agent (the "Original Credit Agreement"), which was amended on February 21, 2018 pursuant to Amendment No. 1 to the Original Credit Agreement (the "First Amended and Restated Credit ~~Agreement)~~Agreement"), and further amended on February 19, 2020 pursuant to, Amendment No. 2 to the First Amended and Restated Credit Agreement (after giving effect to the Second Amendment, the “Second Amended and Restated Credit Agreement”).

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

On October 27, 2021, the Company ~~to maintain~~completed a ~~Consolidated Leverage Ratio (as defined in the Second Amended and Restated Credit Agreement)~~refinancing 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 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 by entering into a new Credit Agreement (the “Credit Agreement”), among the Company, the lenders ~~may, subject to customary cure rights, require~~party thereto, the ~~immediate payment~~swing line lenders party thereto, the letter of ~~all amounts outstanding~~credit issuers party thereto and Truist Bank, as administrative agent, which provides for a new senior secured revolving credit facility in an aggregate principal amount of $500 million (the “Revolving Credit Facility”).

As of October 27, 2021, the Company borrowed $150 million under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility will be subject to customary borrowing conditions.

The Revolving Credit Facility has a scheduled maturity date of October 27, 2026. The 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 ~~was~~has the option to establish a new class of term loans and/or increase the amount of the Revolving Credit Facility in ~~compliance with~~an aggregate principal amount for all ~~related covenants at March 31, 2021.~~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 First Lien Secured Leverage Ratio (as defined in the Credit Agreement) would not be greater than 2.75 to 1.00, in each case, to the extent that any one or more lenders, whether or not currently party to the Credit Agreement, commits to be a lender for such amount or any portion thereof.

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%~~0.25% to ~~2.00%~~1.25% or the sum of a Eurodollar rate plus a margin ranging from ~~1.50%~~1.25% to ~~3.00%~~2.25%, 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,~~Revolving Credit Facility, if any, at a rate ranging from ~~0.20%~~0.15% to ~~0.50%~~0.35% per annum depending on the Company’s Consolidated Leverage Ratio. ~~The initial~~As of October 27, 2021, the applicable margin under the ~~Second Amended and Restated~~ Credit Agreement was ~~1.25%~~0.375% for base rate loans and ~~2.25%~~1.375% for Eurodollar ~~rate~~ loans and the applicable commitment fee rate was ~~0.35%~~0.175% per annum. The Revolving Credit Facility also contains certain administrative provisions regarding alternative rates of interest for LIBOR, as applicable.

~~In addition,~~Substantially all tangible and intangible assets of the ~~Second Amendment also amended certain administrative provisions associated with~~Company and its domestic subsidiaries are pledged as collateral to secure the ~~LIBOR Successor Rate (as defined in~~obligations under the ~~Second Amended and Restated~~ Credit ~~Agreement).~~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~~assets. The Credit Agreement also contains financial covenants that require the Company to maintain ~~interest coverage and leverage ratios at levels specified~~a Consolidated Interest Coverage Ratio (as defined in the ~~Second Amended~~Credit Agreement) of not less than 3.00 to 1.00 and ~~Restated Credit Agreement. These~~to maintain a Consolidated Leverage Ratio of (i) 4.00 to 1.00 or less for the fiscal quarter ending December 31, 2021, through and including the fiscal quarter ending September 30, 2023 and (ii) 3.75 to 1.00 or less for each fiscal quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in connection with certain acquisitions). If the Company does not comply with the covenants ~~may limit how we conduct our business, and~~ in the ~~event~~Credit Agreement, the lenders may, subject to customary cure rights, require the immediate payment of ~~certain defaults, our repayment obligations may be accelerated.~~all amounts outstanding under the Revolving Credit Facility. We were in compliance with all of our covenants at March 31, ~~2021~~2022 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~~if social and economic restrictions ~~remain in place or~~ are reinstituted ~~which~~or if related economic impacts ~~the overall level of consumer~~such as supply chain issues, labor market volatility and ~~business activity in the United States and globally.~~inflationary pressures persist. 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 I of the ~~2020~~2021 Form 10-K.

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

~~As of December 31, 2020,~~ we had a balance of ~~$275~~$135 million under the Revolving Credit Facility. During the three months ended March 31, ~~2021,~~2022, we ~~repaid~~borrowed an incremental net amount of ~~$29~~$85 million to bring the balance under the Revolving Credit Facility to ~~$246~~$220 million as of March 31, ~~2021.~~2022. As of March 31, 2022, $279 million was available for use out of the total of $500 million under the Revolving Credit Facility. 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,
		2021		2020			2022		2021
Cash provided by (used for):	Cash provided by (used for):					Cash provided by (used for):
Operating activities	Operating activities	$	57,090	$	19,719	Operating activities	$	49,162	$	57,090
Investing activities	Investing activities	(23,931)		(34,485)		Investing activities	(119,904)		(23,931)
Financing activities	Financing activities	(29,641)		38,470		Financing activities	74,948		(29,641)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	3,518	$	23,704	Net change in cash and cash equivalents	$	4,206	$	3,518

Cash provided by operating activities ~~increased~~decreased by ~~$37.4~~$7.9 million for the three months ended March 31, ~~2021~~2022 versus the prior year period due primarily to a ~~$19.6~~$43.9 million ~~increase in net income, a $19.6 million 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~~unfavorable cash impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred ~~income)~~income and customer advances) year-over-year with a ~~$6.7~~$38.6 million unfavorable cash impact from working capital for the three months ended March 31, ~~2021~~2022 compared to a ~~$11.5~~$5.2 million ~~unfavorable~~favorable cash impact in the prior year period, which included a $12.3 million cash tax refund, and a ~~$1.7 million favorable impact from non-cash Depreciation and amortization expense. These favorable impacts were partially offset by a $9.0 million unfavorable cash impact from Deferred taxes and $2.0~~$12.6 million unfavorable cash impact from Accrued ~~liabilities.~~liabilities driven by the timing of payments. This was partially offset by a $34.9 million increase in net income and $17.9 million favorable cash impact from income taxes.

Cash used for investing activities ~~decreased~~increased by ~~$10.6~~$96.0 million for the three months ended March 31, ~~2021~~2022 versus the prior year period due primarily to ~~a decrease in~~ cash paid for ~~capital expenditures~~the acquisition of U.S. Amines for approximately $98.6 million compared to cash paid of approximately ~~$19.9~~$9.5 million ~~offset by cash paid~~ for the acquisition of Commonwealth Industrial Services, and increased cash payments for capital expenditures of approximately ~~$9.5 million.~~$6.8 million reflecting timing of project execution.

Cash ~~used for~~provided by financing activities increased by ~~$68.1~~$104.6 million for the three months ended March 31, ~~2021~~2022 versus the prior year period due primarily to net ~~repayments~~borrowings of ~~$29.0~~$85.0 million for the three months ended March 31, ~~2021~~2022 compared to net ~~borrowings~~repayments of ~~$40.0~~$29.0 million during the prior year period partially offset by payments for share repurchases of $6.6 million and cash paid for dividends of approximately $3.5 million 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, ~~2021~~2022
Capital expenditures in Accounts payable at December 31, ~~2020~~2021	$	~~6,178~~11,720
Purchases of property, plant and equipment	~~10,964~~16,634
Less: Capital expenditures in Accounts payable at March 31, ~~2021~~2022	~~(2,965)~~(7,335)
Cash paid for capital expenditures	$	~~14,177~~21,019

For ~~2021,~~2022, we expect our total capital expenditures to be approximately ~~$70~~$95 million to ~~$80~~$105 million compared to ~~$83~~$57 million in ~~2020~~2021, reflecting ~~disciplined capital deployment~~the timing of maintenance and ~~following the completion of several high-return growth and cost savings investments.~~HSE spend. 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 and Estimates

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 ~~2020~~2021 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, 2021, the Company did not have any off-balance sheet arrangements as described in Instruction 8 to Item 303(b) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the Company's 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 during the three-month period ended March 31, 2022 relates primarily to ~~our Second Amended and Restated~~the Revolving Credit ~~Agreement.~~Facility. The ~~Second Amended and Restated~~Revolving Credit ~~Agreement~~Facility 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~~As of March 31, 2022, the Company ~~has entered into two~~had one interest rate swap ~~agreements~~agreement outstanding for a total notional amount of ~~$100~~$50 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings.

~~These~~ The interest rate ~~swaps~~swap had a fair value of zero at inception and ~~were~~was effective ~~November 30, 2018 and~~ July 31, 2019 with ~~respective~~a maturity ~~dates~~date of ~~November 30, 2021 and~~ February 21, 2023. ~~These~~The interest rate ~~swaps have~~swap has been designated as a cash flow ~~hedges~~hedge and ~~convert~~converts the ~~Company’s~~Company's interest rate payments on the first ~~$100~~$50 million of variable-rate, 1-month LIBOR-based debt to a fixed interest rate. As a result of ~~these~~this interest rate ~~swaps,~~swap, interest payments on approximately ~~41%~~23% of our ~~total~~ borrowings, as of March 31, ~~2021,~~2022, have been swapped from floating rate to fixed rate for the life of the ~~swaps,~~swap, 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, ~~2021,~~2022, 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, ~~2021,~~2022, net of the interest rate swap, a 25-basis point fluctuation in interest rates for the three months ended March 31, ~~2021~~2022 would have resulted in an increase or decrease to our interest expense of approximately $0.4 million.

See “Note 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, ~~2021,~~2022, 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, ~~2021~~2022 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 no pending claims or actions against us, the ultimate disposition of which could be expected to have a material adverse effect on our consolidated financial position, results of operations or operating cash flows.

ITEM 1A. RISK FACTORS

There have been no material changes to our risk factors as previously disclosed in Item 1A of Part I of the Company’s ~~2020~~2021 Form 10-K, which are hereby incorporated by reference.

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 in accordance with Rule 10b-18 of the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors. 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, ~~2021.~~2022. During the quarter ended March 31, ~~2021, no~~2022, approximately 123,568 shares were purchased under our share repurchase program and ~~15,371~~57,968 shares were ~~repurchased as a result of~~withheld to cover 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 2021 — $ — — $ 59,581,679
February 2021 — — — 59,581,679
March 2021 (1)
15,371 28.81 — 59,581,679
Total 15,371 $ 28.81 —


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 2022		—	$	—	—	$	59,581,679
February 2022		73,368	37.52		73,368	56,828,553
March 2022	(1)	108,168	39.35		50,200	54,835,540
Total		181,536	$	38.61	123,568

(1) ~~All~~Total number of shares purchased ~~were as a result of~~includes 57,968 shares covering tax withholding obligations in connection with the vesting of equity ~~awards.~~awards

During the period April 1, ~~2021~~2022 through April ~~23, 2021,~~29, 2022, no shares were repurchased under the currently authorized repurchase program.

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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).



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.

2830

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: ~~April 30, 2021~~May 6, 2022	By:	/s/ Michael Preston
		Michael Preston
		Senior Vice President and Chief Financial Officer

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