To My Fellow Stockholders,
It is certainly an exciting time at AdvanSix. As I reflect on our performance last year, I could not be prouder
of our 1,375 dedicated and talented teammates. In 2021, we once again differentiated our performance
by delivering outstanding results and supporting our customers, all while continuing to successfully
navigate the ongoing COVID-19 pandemic, significant industry supply chain disruptions, and an
inflationary cost environment.
2021 was a milestone year for AdvanSix, celebrating our fifth anniversary since the spin-off. We achieved
post-spin record annual sales, earnings and cash flow, executed our first acquisition, initiated a quarterly
dividend, entered into a new revolving credit facility and significantly reduced our debt levels to provide
optionality for further value creation. Our strong results reflect the resilience and strength of our
execution and business model as well as our leadership positions across our diverse product portfolio.
We are highly focused on executing what is in our control including driving superior operational and
commercial performance to meet the evolving needs of our customers, building capabilities to strengthen
our innovation and portfolio resiliency, and maturing our capital stewardship. We were excited to
announce earlier this year the acquisition of U.S. Amines, a leading North American producer of
intermediates used in agrochemicals, pharmaceuticals and other applications. U.S. Amines’ existing
portfolio of differentiated, margin-accretive products is a strong complement to our value chain and
supports further penetration into high-value end markets and applications.
Meaningful progress was made once again on our sustainability initiatives and performance. In 2021, we
launched our 100% Post Industrial Recycled content nylon resins and films and were proud to join with
other industry leaders in several global sustainability initiatives including signatory to the UN Global
Compact, our Chesterfield facility’s participation in Operation Clean Sweep, and active participation with
the EcoVadis corporate social responsibility assessment resulting in a 2021 Platinum Rating, following our
2020 Gold Rating. The Platinum Rating puts AdvanSix in the top 1% of all companies assessed. We were
also recognized as one of Newsweek’s Most Responsible Companies for 2022 and were ranked 30th
amongst the 100 Best ESG Companies of 2021 by Investor’s Business Daily. Our 2021 Sustainability Report
will include many of these highlights and other ongoing initiatives at AdvanSix as we promote an
economic, social and environmentally sustainable future.
We are gaining momentum for our next chapter and are executing against focused strategies aligned with
our ability to drive and achieve attractive total shareholder return over the long-term. I hope you are as
excited about our future as we are.
Thank you for your continued interest in AdvanSix and stay safe.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
or
☐ 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
(State or other jurisdiction of
incorporation or organization)
300 Kimball Drive, Suite 101 Parsippany, New Jersey
(Address of principal executive offices)
Registrant’s telephone number, including area code (973) 526-1800
Securities registered pursuant to Section 12(b) of the Act:
81-2525089
(I.R.S. Employer
Identification No.)
07054
(Zip Code)
Title of each class
Common Stock, par value $0.01 per share
Trading Symbol
ASIX
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes o No ☒
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 ☒ No ☐
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 ☒ No ☐
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 ☒
Accelerated filer o
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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of common stock held by non-affiliates of the registrant was approximately $821 million as of June 30,
2021. The market value held by non-affiliates excludes the value of those shares held by executive officers and directors of the
registrant.
There were 28,141,203 shares of common stock outstanding at February 4, 2022.
Documents Incorporated by Reference
Part III: Proxy Statement for Annual Meeting of Stockholders to be held June 15, 2022.
TABLE OF CONTENTS
PART I.
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III.
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions and Director Independence
Item 14. Principal Accounting Fees and Services
PART IV.
Item 15. Exhibits and Financial Statement Schedules
Item 16. Form 10-K Summary
Signatures
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Item 1. Business
PART I.
In this Annual Report on Form 10-K, unless the context otherwise dictates, “AdvanSix”, the “Company”, “we” or “our” means
AdvanSix Inc. and its consolidated subsidiaries.
Corporate History
On October 1, 2016, Honeywell International Inc. (“Honeywell”) completed the separation of AdvanSix. The separation was
completed by Honeywell distributing (the "Distribution") all of the then outstanding shares of common stock of AdvanSix on October
1, 2016 (the “Distribution Date”) through a dividend in kind of AdvanSix common stock, par value $0.01 per share, to holders of
Honeywell common stock as of the close of business on the record date of September 16, 2016 who held their shares through the
Distribution Date (the “Spin-Off”).
Description of Business
AdvanSix Inc. plays a critical role in global supply chains, innovating and delivering essential products for our customers in a wide
variety of end markets and applications that touch people’s lives, such as building and construction, fertilizers, plastics, solvents,
packaging, paints, coatings, adhesives and electronics. Our reliable and sustainable supply of quality products emerges from the
vertically integrated value chain of our three U.S.-based manufacturing facilities. AdvanSix strives to deliver best-in-class customer
experiences and differentiated products in the industries of nylon solutions, chemical intermediates and plant nutrients, guided by our
core values of Safety, Integrity, Accountability and Respect. Our four key product lines are as follows:
•
•
•
•
Nylon – We 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, packaging, including food packaging, and other industrial
applications. In addition, our Nylon 6 resin is used to produce nylon films which we sell to our customers primarily under the
Capran® brand name.
Caprolactam – Caprolactam is the key monomer used in the production of Nylon 6 resin. We internally polymerize
caprolactam into Aegis® Nylon 6 Resins, and we also market and sell the caprolactam that is not consumed internally to
customers who use it to manufacture polymer resins to produce nylon fibers, films and other nylon products. Our Hopewell
manufacturing facility is one of the world’s largest single-site producers of caprolactam as of December 31, 2021.
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.
Ammonium Sulfate – Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key plant
nutrients, as an herbicide adjuvant for crop protection, and in several industrial applications. Ammonium sulfate fertilizer is
derived from the caprolactam manufacturing process. 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 December 31, 2021. We market and sell
ammonium sulfate primarily to North American and South American distributors, farm cooperatives and retailers to fertilize
crops.
Each of these product lines represented the following approximate percentage of total sales:
Nylon
Caprolactam
Chemical Intermediates
Ammonium Sulfate
Years Ended December 31,
2020
24%
19%
32%
25%
100%
2021
25%
19%
32%
24%
100%
2019
27%
22%
28%
23%
100%
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The following charts illustrate the distribution of our sales by product line and by region, measured by the destination of each sale, for
the year ended December 31, 2021:
For information concerning revenues and assets by geographic region, see “Note 3. Revenue” to our Consolidated Financial
Statements included in this Form 10-K, which is incorporated herein by reference.
Our manufacturing process is vertically integrated. We use cumene, a chemical compound produced from benzene and propylene, to
manufacture phenol, acetone and AMS at our Frankford, Pennsylvania plant. The majority of the phenol we manufacture is further
processed at our Hopewell facility through an integrated series of unit operations, which also consume natural gas and sulfur, to
produce caprolactam and ammonium sulfate. In 2021, approximately 56% of the caprolactam we have produced at our facility in
Hopewell, Virginia has been shipped to our facility in Chesterfield, Virginia where it has been polymerized into Aegis® Nylon 6
resins.
Our integrated manufacturing process, scale and the quantity and range of our products make us one of the most reliable and efficient
manufacturers in our industry. We consistently focus on and invest in improving production yields from our various manufacturing
processes to build on our leading cost position. Our global logistics infrastructure enables a reliable intra-plant supply chain and
consistent and timely delivery to our customers. In addition, we strive to understand the product applications and end-markets into
which our products are sold, which helps us upgrade the quality, chemical properties and packaging of our products in ways which
enable us to attract price premiums and greater demand.
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2021 Sales By Product LineNylon: $423MCaprolactam: $316MChemical Intermediates: $545MAmmonium Sulfate: $401M2021 Sales By RegionUnited States: $1,383MLatAM/Canada: $226MEMEA: $48MAsia: $28M We serve approximately 400 customers globally located in approximately 50 countries. For the years ended December 31, 2021, 2020
and 2019, we had sales of $1,685 million, $1,158 million and $1,297 million with net income of $140 million, $46 million and $41
million, respectively. For the years ended December 31, 2021, 2020 and 2019, our international sales were $302 million, $267 million
and $240 million, respectively.
AdvanSix is a single operating segment and a single reportable segment, operating through three integrated U.S.-based manufacturing
sites located in Frankford, Pennsylvania and Hopewell and Chesterfield, Virginia. The Company's headquarters is located in
Parsippany, New Jersey.
Competitive Strengths
Low Cost Position Driven by Integrated Manufacturing Footprint, Large Scale, Favorable Geographical Location, and High
Utilization Rates. Our vertically integrated manufacturing facilities, scale, access to lower cost raw materials, and high plant
utilization rates help us maintain our position as the world’s lowest cost producer of caprolactam. First, we are vertically integrated
into several key feedstock materials necessary to produce caprolactam, particularly phenol, ammonia and oleum/sulfuric acid, which
we believe is a unique advantage in our industry. Our integration contributes to higher operating margins by lowering raw material
transportation, handling and storage costs. It also allows us to remain flexible, while optimizing sales from our diverse portfolio of
products. Second, we operate one of the world’s largest single-site caprolactam and ammonium sulfate production facilities, which is a
competitive advantage in our fragmented industry. Our scale provides operating leverage and the opportunity to achieve stronger
business performance than our competitors in several ways. Most fundamentally, it enables us to spread fixed and overhead costs
across more pounds of production, thereby enabling us to produce caprolactam at a lower per pound cost than our competitors, as well
as benefiting our procurement activities for raw materials and services. In addition, we believe that our size and scale serves to retain
and attract customers who prioritize security of supply. Third, the location of our manufacturing operations in the United States
affords us access to the world’s lowest cost natural gas, which is a key raw material needed to manufacture the ammonia used in the
production of caprolactam and ammonium sulfate as well as the source of energy for our manufacturing operations. By contrast, a
significant number of our competitors are in geographic locations where energy prices are currently substantially higher. Our footprint
also provides access to a number of higher value end markets across our product lines. Finally, our long-term customer relationships
and contracts enable us to maintain high plant utilization rates, which, along with our large scale, provide significant operating and
purchasing leverage.
Diverse Revenue Sources from the Sale of Fertilizer, Acetone and Other Chemical Intermediates. Due to our specific chemical
manufacturing processes, vertical integration and scale, we produce ammonium sulfate fertilizer, acetone and a wide range of other
chemical intermediates that enable us to diversify our revenue sources. Most significantly, for every pound of caprolactam produced,
we produce approximately four pounds of ammonium sulfate, a fertilizer used by farmers around the world. For the past two decades,
we have employed agronomists to educate growers and retailers in the Americas on the yield value of using ammonium sulfate
fertilizer on key crops including corn, wheat, coffee, sugar, cotton and rice. We have also diversified and optimized our ammonium
sulfate-based offerings to include spray-grade adjuvant to support crop protection, as well as other specialty fertilizers and products for
industrial use. Sales of ammonium sulfate in 2021 were $401 million and represented 24% of our total sales. We are among the most
significant suppliers of acetone to a variety of end-markets in North America. Sales of acetone in 2021 were approximately $294
million and represented 17% of our total sales. In addition to fertilizer and acetone, other products from our manufacturing process
include high-purity phenol, AMS, cyclohexanone, oximes, cyclohexanol, sulfuric acid, ammonia and carbon dioxide. The diversity of
our sales portfolio helps to mitigate, to some extent, the cyclicality in our end-markets. Currently, we not only have leading positions
across these diverse product lines, but are also aligned to several favorable macro trends that are supporting growth across the
portfolio including urbanization and aging infrastructure, digital transformation, global food production and resource scarcity, and a
shift to green and performance chemicals.
Global Reach. The global reach of our sales and marketing capabilities enables us to compete everywhere nylon resin, caprolactam,
ammonium sulfate and chemical intermediates are consumed. In 2021, approximately 18% of our sales were outside the United States.
Our freight and logistics capabilities and terminal locations position us well to serve global markets, including the dock and loading
facility at our Hopewell facility which serves ocean-going dry-bulk freight vessels. Our global reach enables us to arbitrage
geographic price variations to ensure we are receiving the highest value for our products.
Technical Know-How, Customer Intimacy and Application Development Capabilities. Intimate knowledge of our customers and
end-market applications, combined with our technical know-how, enables us to develop differentiated products that are often valued
higher by customers compared to commodity products. We have a Research and Development ("R&D") department consisting of
scientists and engineers with degrees in polymer and chemical synthesis, catalysis and chemical engineering, who work not only on
developing new products for nylon resins but also driving unique offerings for our chemical intermediates and ammonium sulfate
customers. Our R&D team has expanded our capabilities to test and scale production of copolymer Nylon 6/66 resin, which is used in
food packaging films and other applications. Our agronomists provide the latest scientific information on the importance of sulfur
nutrition for crops and how to optimize the benefits of ammonium sulfate fertilizer to our global customers through a variety of
channels including webinars, technical training sessions for retailers and direct grower meetings. Further, members of our technical
3
marketing team, representing each of our major product lines, present at various industry events and conferences to demonstrate our
breadth of product offerings and capabilities.
Business Strategies
Operational Excellence and Improving Through-Cycle Profitability. Through our vertical integration, size, access to low-cost raw
materials, and high utilization rates, we seek to build on our low-cost leadership position and expand operating margins by reducing
our Nylon 6 resin, caprolactam, ammonium sulfate and other chemical intermediate production costs. Our focus on operational
excellence and ongoing productivity improvements concentrate on the following:
•
•
•
•
•
Increasing production volume through asset reliability, flexibility and capacity;
Executing planned plant turnarounds and prioritizing replacement maintenance capital investments to mitigate risk and support
safe, stable and sustainable operations;
Investing in intermediate chemical buffer storage capacity to mitigate the unfavorable impact of routine maintenance and
unplanned interruptions;
Energy and direct material initiatives aimed at increasing plant productivity and lowering costs; and
Procurement processes, competitive bidding and supplier diversification to reduce raw material and indirect costs.
Enhancing Portfolio Resiliency. Our diverse portfolio serves us well particularly during times of uncertainty. Over the past several
years, we have invested in capabilities to strengthen our innovation, increase the value of our product portfolio and meet customer
specifications in certain high value industries including high-purity applications, high-value intermediates and differentiated nylon.
We have had successes across the portfolio including our oximes-based EZ-Blox® anti-skinning agent used in paints and coatings,
and our Nadone® cyclohexanone product line, which is a solvent used in various high-value applications. Growing off a small base,
we have also seen commercial success with our Nylon-based wire and cable offerings. Supporting our differentiated nylon portfolio,
our Chesterfield facility is capable of producing multiple grades of higher value Nylon 6 resin as well as copolymer Nylon 6/66 resin,
which are used in engineered plastics for the automotive industry, films for food packaging, as well as other higher value applications.
Our customers typically buy nylon resin and caprolactam for compounding or extruding with additives and other materials, to increase
strength or flexibility or to add color to make the resin more suitable for use in their end products such as textiles, packaging and
industrial materials. We leverage our R&D investments, customer intimacy and knowledge of product applications to develop new
resin products to better serve our customers and increase the value of our resin products portfolio. For example, engineered plastics
that utilize Nylon 6 and Nylon 66 resin are being increasingly used in automobiles to reduce weight as automobile manufacturers
strive to meet stricter fuel efficiency standards. We work with our customers serving this market to develop resin products specifically
tailored for these product applications. We are focused on working with customers to solve their needs with respect to sustainability
and have received commercial orders for our recently launched 100% Post-Industrial Recycled resins and films. Another focus of our
R&D initiatives includes nylon resin processing technologies that can produce existing high value resins at lower costs. Our R&D
team works with existing and potential customers to understand end-use applications, build application development capabilities and
protect the value proposition of our new products. In addition, as a result of recent efforts and enhancements in crystallizer technology
and operations, we are now producing more high-quality granular grade ammonium sulfate to meet the growing demand of our
customers.
Strong Capital Stewardship. We have developed and are executing against a multi-year pipeline of high-return growth and cost
savings capital projects. These efforts target improvement in production rate, cost, quality and yield. We are focused on improving our
return on invested capital and remain disciplined in our approach as we support long-term shareholder value. On an ongoing basis we
evaluate options to return cash to shareholders while also pursuing a highly-selective acquisition and alliance strategy to supplement
our organic sales by broadening our customer base, developing our technology and product portfolios, expanding our geographic reach
and enhancing our cash flow profile and margin stability. In 2021, we completed our first acquisition of certain assets of
Commonwealth Industrial Services, Inc. and we initiated a structural return of cash in the form of a quarterly dividend reflecting
confidence in our cash flow generation. The timing, declaration, amount and payment of dividends to stockholders, if any, will fall
within the sole discretion of our Board of Directors (the "Board").
Industry Overview
Nylon Solutions. 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. Generally,
Nylon 6 resin prices track the cyclicality of caprolactam prices, although prices set above the spread are achievable when nylon resin
manufacturers, like AdvanSix, formulate and produce differentiated nylon resin products. Our differentiated Nylon 6 products are
4
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, Post-Industrial Recycled resins and films and co-polymer offerings, in current and new customer
applications.
The global market for Nylon 6 resin and caprolactam has undergone significant change over the past decade. Following a peak in 2011
through the first half of 2016, nylon and caprolactam prices experienced a cyclical period of downturn as Chinese manufacturers
entered the market and increased global supply at a time when demand growth remained relatively stable. As a result of the increased
capacity and competitive intensity, industry margins for Nylon 6 resin and caprolactam compressed over this period to a low point in
mid-2016. In the second half of 2016, capacity reductions by our competitors occurred in North America and Europe improving
supply / demand fundamentals in North America with continued dynamic conditions globally. Industry spreads had fluctuated near
marginal producer cost since 2016, but, slowing global growth and soft end-market demand, combined with capacity increases and an
uncertain macro environment, pressured pricing and spreads during the second half of 2019 and throughout 2020. In 2021, strong end
use demand, combined with industry operational upsets and supply chain disruptions, created an environment for robust performance
in Nylon 6. Additionally, buyers have explored using Nylon 6 as a substitution for other resins where applications allow, based on the
need for reliable, secure long-term supply and performance needs.
Chemical Intermediates. Chemical intermediates are used as key inputs for a variety of end-market products including construction
materials, paints and coatings, packaging and consumer applications. The primary products are acetone, phenol, AMS and
cyclohexanone. Acetone and phenol represent approximately 55% and 15%, respectively, of our chemical intermediates sales. Prices
for acetone are influenced by its own supply and demand dynamics but can also be influenced by the underlying move in propylene
input costs. In the U.S., where we primarily sell our acetone, there were elevated levels of acetone imports during 2018 and 2019
given high industry operating rates globally, which pressured regional pricing and spreads. As a result of strong global acetone
demand driven by favorable COVID-related acetone derivative drivers (hand sanitizers and acrylic screens) in addition to the
implementation of acetone anti-dumping duties, acetone imports into the U.S. declined through 2020 and 2021, creating more
favorable supply and demand conditions for the product and improved pricing. Industry operating rates improved in the second half of
2021 supporting a balancing of supply and demand and moderation in acetone industry spreads relative to recent highs. Supply and
demand conditions for the remaining intermediates we sell are generally balanced or favorable.
Plant Nutrients. Ammonium sulfate fertilizer products are primarily sold in North and South America. Ammonium sulfate is used as a
fertilizer providing the key nutrients of sulfur and nitrogen for major agricultural crops globally such as corn, wheat, coffee, sugar,
cotton and rice. As of December 31, 2021, ammonium sulfate fertilizer accounts for approximately 6% of the global market for
nitrogen fertilizer and over 40% of the global market for sulfur fertilizer. Global prices for ammonium sulfate 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 the price of crops. Our ammonium sulfate
product is positioned with the added value proposition of sulfur nutrition to increase yields of key crops. In addition, due to its nutrient
density, the typical ammonium sulfate product delivers pound for pound the most readily available sulfur and nitrogen to crops than
other fertilizers. During 2020, we 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.
Competition
Competition across our product offerings is based on a variety of factors including price, reliability of supply, product innovation, and
quality. Other competitive factors include breadth of product line, R&D efforts and technical and managerial capability. While the
competitive position of our individual products varies, we believe we are a significant competitor in each major product class.
AdvanSix competes with integrated manufacturers, such as Highsun Group Holdings Ltd., BASF Corporation, Sinopec Limited,
DOMO Chemicals GmbH, LANXESS AG and Ube Industries, Ltd. We also compete with synthetic manufacturers of ammonium
sulfate, such as Pasadena Commodities International and Nutrien Ltd.; and stand-alone phenol and acetone producers, such as Ineos
and Altivia. A number of our products are sold in markets with many competitors, some of whom have substantial financial resources
and significant technological capabilities. Additionally, our competitors include companies with global operations as well as those
operating only within specific geographic regions.
Product Overview
Nylon and Caprolactam
We manufacture our Nylon 6 resin in our Chesterfield plant. We sell our Nylon 6 resin globally, primarily under the Aegis® brand
name. In addition, we sell our Nylon 6 resin to a nylon film producer from whom we purchase films to sell to our customers under the
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Capran® brand name. In 2021, our Nylon products generated $423 million of sales. In 2021, 2020 and 2019, Nylon sales were 25%,
24% and 27% of our total sales, respectively.
We produce caprolactam, the key monomer used in the production of Nylon 6 resin, at our Hopewell plant using phenol produced at
our Frankford plant and sulfur and natural gas obtained from third-party suppliers. In 2021, caprolactam generated $316 million of
sales. In 2021, 2020 and 2019, caprolactam sales were 19%, 19% and 22% of our total sales, respectively.
Chemical Intermediates
We produce and sell chemical intermediates to a range of customers for use in many different types of end-products. In 2021, our
chemical intermediates generated $545 million of sales, of which $443 million, or 81%, came from sales of acetone, phenol and
cyclohexanone, and $102 million, or 19%, came from sales of our other chemical intermediates. In 2021, 2020 and 2019, sales of
chemical intermediates were 32%, 32% and 28% of our total sales, respectively.
The phenol we produce at our Frankford plant is a key chemical intermediate used in our caprolactam manufacturing process.
Approximately 80% of the phenol we produce is used in production of caprolactam and other chemical intermediates at Hopewell, and
approximately 20% of our phenol is sold to customers for use in their product applications such as resins, epoxies and Bisphenol A.
All our acetone is sold to customers for use in end-products such as adhesives, paints, coatings, solvents, herbicides and engineered
plastic resins. Acetone is typically used by our customers as a key raw material in the production of a variety of other chemicals which
are then used in the applications listed above.
We also produce and sell cyclohexanone, AMS, oximes and cyclohexanol. We use some of these products in our manufacturing
process and sell some to customers for use in end-products such as resins, inks, paints, coatings and agricultural chemical
intermediates and electronic components.
Ammonium Sulfate
Ammonium sulfate fertilizer is produced simultaneously with caprolactam as part of our integrated caprolactam manufacturing
process at our Hopewell plant. We manufacture this product in a ratio of approximately four pounds of ammonium sulfate to one
pound of caprolactam. Our competitors typically produce approximately two pounds or less of ammonium sulfate for each pound of
caprolactam. We are targeting conversion of approximately 65% of the ammonium sulfate we produce in higher-value granular form.
We sell ammonium sulfate under the brand name Sulf-N®, and in 2021, our ammonium sulfate products generated $401 million of
sales. In 2021, 2020 and 2019, ammonium sulfate sales were 24%, 25% and 23% of our total sales, respectively.
Raw Materials
The primary raw material used in our manufacturing process is cumene, which is produced from benzene and propylene. We purchase
cumene from multiple suppliers to ensure stability of supply and optimal terms. Other important raw materials used in our
manufacturing process are natural gas and sulfur, which are used to produce caprolactam and ammonium sulfate. We purchase natural
gas and sulfur from a diverse set of suppliers.
Historically, we have been able to renew contracts with our suppliers and obtain sufficient quantities of cumene, sulfur, natural gas
and any other key raw materials. Global supply and demand can significantly impact the price of our key raw materials, and
historically prices have been cyclical. We mitigate our exposure to commodity price risk primarily through the use of medium and
long-term, formula-based price contracts with our suppliers and formula-based price agreements with customers.
Sales, Marketing and Distribution
We have a global sales force with long-standing customer relationships and deep expertise with our products, product applications and
end-markets. We predominantly sell directly to our customers, primarily under contracts but also through spot transactions under
purchase orders and through distributors.
Our products are supported by our global logistics capability that we employ to ensure reliable and timely delivery to our customers
while maximizing distribution resources and efficiency.
Customers
Globally, we serve approximately 400 customers in a wide variety of industries located in approximately 50 countries. In 2021, the
Company's 10 largest customers accounted for approximately 40% of total sales. Our largest customer is Shaw Industries Group Inc.
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("Shaw"), one of the world's largest consumers of caprolactam and Nylon 6 resin. We sell caprolactam and Nylon 6 resin to Shaw
under a long-term agreement. Sales to Shaw were 12% of our total sales for the year ended December 31, 2021, 14% for the year
ended December 31, 2020 and 22% for the year ended December 31, 2019. We typically sell to our other customers under master
services agreements, with primarily one-year terms, or by purchase orders. We have historically experienced low customer turnover.
Seasonality
We produce ammonium sulfate fertilizer continuously throughout the year as part of our manufacturing process, but quarterly sales
fluctuate based on the timing and length of the growing seasons in North and South America. North America ammonium sulfate prices
are typically strongest during second quarter fertilizer application and then typically decline seasonally with new season fill in the
third quarter. Due to the ammonium sulfate fertilizer sales cycle, we occasionally build up higher inventory balances because our
production is continuous and not tied to seasonal demand for fertilizers. Sales of most of our other products have generally been
subject to minimal, or no, seasonality.
Research & Development and Intellectual Property
We believe success in our industry is driven not only by operational excellence and cost position but also through technological
strength and innovation. Our R&D activities focus on improving our chemical manufacturing processes to increase efficiency,
capacity, productivity, and lowering our production and operating costs, as well as innovating and developing new product
applications.
We benefit from numerous patents and trademarks that we own. We sell our Nylon 6 resin under the Aegis® brand name, our nylon
films under the Capran® brand name and our ammonium sulfate fertilizer under the Sulf-N® brand name. Chemical intermediates are
sold under the brand names of Nadone®, Naxol® and EZ-Blox™. We also benefit from technology covered by trade secrets,
including know-how and other proprietary information relating to many of our products, processes and technologies. We do not
consider any individual patent, trademark or licensing or distribution rights related to a specific process or product to be of material
importance in relation to our overall business. In our judgment, our intellectual property rights are adequate for the conduct of our
business. We intend to continue taking steps as necessary to protect our intellectual property, including when appropriate, filing patent
applications for inventions that are deemed important to our business.
In 2021, we conducted R&D at technology centers with researchers at our sites in Frankford, Pennsylvania and Chesterfield, Virginia
where our former Colonial Heights R&D facility relocated in early 2020 enabling an improved configuration of our labs to drive
productivity, increased connectivity with our resin manufacturing and more effective collaboration with customers.
Regulation and Environmental Matters
We are subject to various federal, state, local and foreign government requirements regarding protection of human health and the
environment. Compliance with these laws and regulations results in higher capital expenditures and costs. We believe that, as a
general matter, our policies, practices and procedures are properly designed to prevent unreasonable risk of environmental impact, and
any resulting financial liability. Some risk of environmental impact is, however, inherent in some of our operations and products, as it
is with other companies engaged in similar businesses.
We are and have been engaged in the handling, manufacture, use and disposal of many substances classified as hazardous by one or
more regulatory agencies. It is possible that future knowledge or other developments, such as improved capability to detect substances
in the environment or increasingly strict environmental laws, standards and enforcement policies, could bring into question our current
or past handling, manufacture, use or disposal of these substances.
Among other environmental laws and regulations, we are subject to the Comprehensive Environmental Response, Compensation and
Liability Act; the Resource Conservation and Recovery Act and similar state, foreign and global laws for management and
remediation of hazardous materials; the Clean Air Act and the Clean Water Act, for protection of air and water resources; the Toxic
Substance Control Act (“TSCA”), for regulation of chemicals in commerce and reporting of potential known adverse effects. There
are also numerous other federal, state, local and foreign laws and regulations governing materials transport and packaging, under
which we may be designated as a potentially responsible party liable for cleanup costs associated with current operating sites and
various hazardous waste sites.
Our business may be impacted by potential climate change legislation, regulation or international treaties or accords in the foreseeable
future. We will continue to monitor emerging developments in this area.
Our accounting policy for environmental expenditures is discussed in “Note 2. Summary of Significant Accounting Policies” to the
audited Consolidated Financial Statements included in this Form 10-K. We continuously seek to improve our health, safety and
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environmental performance. We have expended funds to comply with environmental laws and regulations and expect to continue to do
so.
Our Frankford and Hopewell facilities are regulated facilities under the Maritime Transportation Security Act of 2002 (“MTSA”) due
to the nature of our operations and the proximity of the facilities to adjacent waterways. As a result, we are required to comply with
numerous regulations administered by the Department of Homeland Security, including the development and implementation of
compliant security procedures and protocols. Additionally, sales of acetone, which is a List II Chemical under the TSCA, are regulated
by the Drug Enforcement Act. This classification subjects us to audits by the Drug Enforcement Administration and ongoing
restrictions on our sales activities with respect to acetone.
See “Risk Factors – Extensive environmental, health and safety laws and regulations applicable to our operations, including initiatives
related to discharges into the air and water, hazardous waste, sustainability, global warming and climate change, may result in
substantial costs and unanticipated loss or liability, which could adversely affect our business, financial condition and results of
operations” in Item 1A.
Human Capital Management
As a company, we recognize that our people are our greatest asset and the foundation of our success. We feel a deep sense of
responsibility to provide a safe, inclusive and engaging workplace for all our employees and contractors, and strive for a zero-incident
safety culture. Our core values of Safety, Integrity, Accountability and Respect guide our day-to-day activities and inform our broader
business strategy as we drive safe, stable and sustainable operations through an ownership mentality aligned to shareholder value
creation. Our Board, along with management and cross-functional teams, work closely to evaluate and proactively address human
capital management topics such as safety, inclusion and diversity, employee development, employee benefits and employee
engagement.
Employees
As of December 31, 2021, the Company employed approximately 1,375 people. Of this total, approximately 565 are salaried
employees and approximately 810 are hourly employees. Approximately 705 employees are covered under collective bargaining
agreements that expire between 2023 and 2025. The Company strives to maintain positive and productive relationships with all of its
employees, including the unions representing those employees.
Oversight and Management
Our Board and Board committees provide oversight on various human capital management matters. As noted in their respective
charters:
•
Our Health, Safety, Environmental and Sustainability Committee oversees policies and programs relating to compliance with
health, safety, environmental, and sustainability matters, including process safety, supply chain security, asset reliability,
product stewardship, community engagement and government affairs, as well as such other matters regarding the Company’s
role as a responsible corporate citizen.
Our Nominating and Governance Committee annually evaluates the effectiveness of our governance framework and social
responsibility policies, goals and programs.
Our Audit Committee exercises oversight of enterprise risk assessments and risk management including with respect to
current and emerging labor and human capital management risks and seeks to mitigate exposure to those risks.
Our Compensation and Leadership Development Committee is responsible for oversight of the performance, development
and retention of management necessary to support the growth and success of the Company.
•
•
•
Health and Safety
At AdvanSix, safety is our number one core value — we “Live Safety” in all we do. “Live Safety” is an interdependent concept
meaning that employees care not only for their own safety, but for the safety of their teammates and communities in which we operate.
AdvanSix is a Responsible Care® company with a focus on personal and process safety and advancing as a sustainable enterprise.
Responsible Care® is the environmental, health, safety and security performance initiative of the American Chemistry Council (ACC).
AdvanSix has demonstrated its commitment to the Responsible Care® Guiding Principles, which encourage ethical leadership,
product safety, a culture which reduces and manages process safety risk, reduction of pollution and waste, and continuous
improvement in environmental, health, safety and security performance.
As an organization, we maintain a relentless focus on continuous improvement and our expectation is zero injuries for employees and
contractors. Our CARE program — Courage to Act, Respond and Engage — was launched in 2019 and inspires us to Live Safety in
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all we do. We use the industry standard Total Case Incident Rate ("TCIR") to measure our ongoing safety performance and compare
with benchmarks. TCIR is defined as the number of occupational injuries and illnesses per 100 employees. Our TCIR was 0.48 in
2021, 0.91 in 2020 and 0.86 in 2019.
In the first quarter of 2020, the Company began executing its business continuity plans with dedicated teams chartered to proactively
implement measures to mitigate COVID-19 impacts while continuing to operate all of its manufacturing facilities to meet customer
demand. In response to COVID-19, the Company took many actions to protect its employees, customers, suppliers, shareholders and
surrounding communities including, but not limited to: (i) 100% thermal screening process at all facilities and restrictions on non-
essential visitors; (ii) telecommuting across all sites, where possible; (iii) prohibiting all non-essential domestic and international
business travel; (iv) establishing social distancing while limiting the number of employees in control rooms, labs and in-person
meetings; and (v) maintaining policies and practices consistent with CDC and government guidelines including upgraded personal
protective equipment, face coverings at all facilities, and exposure management protocols. Our telecommuting policies have been
designed to allow for continued operation of non-production business-critical functions, including financial reporting systems and
internal controls. The Company has protocols in place at all sites, including on-site medical personnel at manufacturing facilities to
actively monitor employees and contractors who report symptoms of or exposure to COVID-19. In addition, the Company has trained
a contingent workforce to operate the plants as part of its business continuity planning. The Company continued its execution of these
measures at all sites through the end of 2021 and intends to continue to do so through the duration of the pandemic.
Equity, Diversity and Inclusion
At AdvanSix, we strive for an inclusive work environment that fosters respect for all our coworkers, customers, suppliers and business
partners. We value the diversity reflected in the various backgrounds, experiences, and ideas of our employees, contractors, and other
stakeholders. Our Equity, Diversity and Inclusion purpose statement reflects our journey to be our customers' trusted partner for
Advantaged Chemistries by caring, innovating and advancing together. To achieve that togetherness, we strive to represent the
communities in which we operate, celebrate our differences, inspire belonging, and be tenacious in our pursuit of bringing out the best
in people both individually and collectively. Our Code of Conduct outlines our commitment to provide employees a workplace that is
free from discrimination or harassment (specifically related to gender, race, disability, ethnicity, nationality, religion and sexual
orientation) or personal behavior not conducive to a productive work climate. We believe it is important that each employee feels a
sense of belonging and valued as part of the organizational culture we are cultivating, and we feel it is important that each employee
sees diverse representation across our AdvanSix team.
AdvanSix joined hundreds of companies in signing the CEO Action for Diversity and Inclusion pledge in 2019, which centers around
three main commitments: to have complex discussions about diversity and inclusion, implement and expand upon unconscious bias
education and share diversity and inclusion practices. We supported this commitment through 2021 as we engaged in honest and
transparent conversations with our employees. AdvanSix also seeks to improve gender equality in the manufacturing industry, starting
with supporting science, technology, engineering and math (STEM) education and work in related fields. A group of employees
formed Supporting Women in Manufacturing (SWiM), an AdvanSix Employee Resource Group, with the goal of promoting women in
manufacturing, female leadership and growth in STEM-related fields. SWiM seeks to raise awareness on these matters through
programs, events and discussions, including networking, professional development, outreach, volunteering and internal programs
highlighting leadership and career paths in multiple disciplines. AdvanSix is committed to pay equity for its employees and regularly
performs reviews of its compensation practices to evaluate and maintain pay equity in several respects, including by gender, ethnicity
and race.
At a national level, AdvanSix not only participates as a board member, but is a patron level supporter of the American Institute of
Chemical Engineers’ ("AIChE") “Doing a World of Good” initiative that actively supports five high priority pillars within the
chemical engineering field that align closely with sustainability and ESG principles including equity, diversity and inclusion. In
addition, AdvanSix has supported and participated in the Future of STEM Scholars Initiative ("FOSSI"), a national, industry-wide
program which provides scholarships to students pursuing STEM degrees at Historically Black Colleges and Universities ("HBCU")
and connections to internships, leadership development and mentoring opportunities. During 2021, we welcomed our first class of
FOSSI scholars all of whom are in attendance at HBCUs.
During 2021, we introduced a number of key actions to advance equity, diversity and inclusion within the organization including focus
group discussions, review of our talent pipeline and overall development programs. Notably, we further enhanced our recruiting
processes by implementing a program mandating a diverse candidate slate with the goal to increase our organization’s workforce
diversity and improve outreach in the local communities where we operate. In addition, we continued unconscious bias training at
leadership and managerial levels enterprise-wide to enhance our recruitment efforts and the evaluation process of candidates. We
conducted Days of Understanding at our largest manufacturing facility throughout the month of June to encourage active engagement
by leadership with all employees to listen to their experiences and gather feedback for improvement.
Our senior leadership team was comprised of over 50% women in 2021, including our Chief Executive Officer, Chief Human
Resources Officer, Chief Information Officer, Vice President, Nylon Solutions and Vice President, Business Development. Four
directors of our ten-member Board are women, and two directors of our ten-member Board are ethnically diverse.
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Employee Development
AdvanSix seeks to attract the best talent from a diverse range of sources in order to meet the needs of our business now and in the
future. We have established strong relationships with community colleges, universities, professional associations and industry groups
with a focus on technical positions and development in order to attract talent including by utilizing co-op, internship programs and
university relations as a talent pipeline. Early career development and continual learning is part of our employee engagement strategy.
To support the advancement of our employees, we promote development through training that broadens work-related skills and
believe that the most effective model combines an “experience, exposure, and education” approach. We acknowledge that learning is a
career-long endeavor and place the greatest emphasis on learning by doing, supported by feedback, training, and self-reflection.
AdvanSix promotes development through training that broadens work-related skills. These include:
•
•
•
Core competencies for all employees to develop and apply
Leadership competencies needed by all employees managing people
Functional competencies that are position specific and used to inform job progression
We support the continued development of our employees through semi-annual performance and development reviews, including
annual enterprise-wide talent development assessments. We conduct safety and environmental training modules for new employees as
part of Health, Safety and Environmental ("HSE") orientation, along with job-specific training aligned to roles. We have instituted an
initiative to empower our First Line Supervisors ("FLS") to be HSE leaders within our organization including serving as decision
makers and chief communicators on shift, while developing, coaching and mentoring their shift teammates. On an annual basis, senior
leadership recognizes the FLS who demonstrates excellence with this initiative with an FLS of the Year Award. During 2021, we held
a Technical Career Progression event in order to recognize those employees who have displayed technical capability and regularly
deliver in three key areas — results, behaviors and capability.
A highly trained and engaged workforce is essential for AdvanSix to be our customers’ trusted partner, and those partnerships are built
by delivering best-in-class experiences that result in satisfied customers and support shareholder return.
Employee Benefits
Our compensation programs are designed to align employee compensation with Company performance and to provide appropriate
incentives in order to attract, retain and motivate our employees. We believe that in order to maintain the strength of our workforce, it
is critical to monitor and assess the current business environment and labor market to refine our compensation and benefits programs
and other resources available to our employees. We seek to offer compensation that is competitive and consistent with employee
positions, skill levels, experience and geographic location. In addition to offering competitive base salaries, AdvanSix structures its
compensation programs to balance incentive earnings for both short-term and long-term performance.
Our compensation and benefit programs are designed to support our business strategy through four key objectives:
Attract and retain world-class talent;
Drive and pay for performance that creates superior results and sustainable stockholder value;
•
•
• Manage risk through oversight and sound management; and
•
Nurture a culture of employee health and wellness.
Information about our Executive Officers
The executive officers of AdvanSix, listed as follows, are appointed annually by the Board. Ms. Kane, Mr. Preston and Mr. Gramm
were each first appointed as an executive officer in 2016, Mr. Blindenbach was first appointed as an executive officer in 2019, and Ms.
Slieter and Mr. Kintiroglou were each appointed as executive officers in 2020.
There are no family relationships among them or our Board members.
Name, Age
Position
Business Experience
10
Erin N. Kane, 44
Chief Executive
Officer and
Director
Michael Preston, 50
Senior Vice
President and
Chief Financial
Officer
Achilles B. Kintiroglou,
43
Kelly J. Slieter, 47
Senior Vice
President,
General
Counsel and
Corporate
Secretary
Senior Vice
President and
Chief Human
Resources
Officer
Prior to joining the Company, Ms. Kane served as vice president and general manager
of Honeywell Resins and Chemicals since October 2014. She joined Honeywell in 2002
as a Six Sigma Blackbelt of Honeywell’s Specialty Materials business. In 2004, she was
named product marketing manager of Honeywell’s Specialty Additives business. From
2006 until 2008, Ms. Kane served as global marketing manager of Honeywell’s
Authentication Technologies business, and in 2008 she was named global marketing
manager of Honeywell’s Resins and Chemicals business. In 2011, she was named
business director of chemical intermediates of Honeywell’s Resins and Chemicals
business. Prior to joining Honeywell, Ms. Kane held Six Sigma and process engineering
positions at Elementis Specialties and Kvaerner Process. Ms. Kane serves on the Boards
of Directors of AdvanSix Inc., the Chemours Company, and the American Chemistry
Council. She served on the Board of Directors of the AIChE from 2019 through 2021.
Ms. Kane brings to the Board her extensive leadership experience as well as knowledge
of AdvanSix’s business, industry, health, safety and environmental processes, and
operations.
Prior to joining the Company, Mr. Preston held various finance roles with Honeywell
for over 15 years. Mr. Preston served as vice president and chief financial officer for
Honeywell’s UOP division from 2013 to 2016. Prior to this role, Mr. Preston was vice
president of business analysis & planning from 2012 to 2013. Mr. Preston also held
several finance leadership roles within Honeywell, including chief financial officer of
the Fluorine Products business, director of financial planning & analysis for the
Performance Materials and Technologies segment, and director of business analysis &
planning for Honeywell corporate. Mr. Preston began his career with Honeywell in
September of 2001 as manager of investor relations. Prior to joining Honeywell, he
spent seven years in investor relations consulting. Mr. Preston is a Chartered Financial
Analyst (CFA) Charterholder and is a member of the CFA Institute and CFA Society
New York.
Prior to being named to his current role, Mr. Kintiroglou was the deputy general counsel
of AdvanSix since the spin-off in 2016. Before joining AdvanSix, he was a corporate
and securities partner at Day Pitney LLP and a corporate and finance associate at
Pillsbury Winthrop Shaw Pittman LLP and Pitney Hardin LLP.
Prior to joining the Company, Ms. Slieter served as vice president of human resources
of Honeywell International Inc. since 2018. She joined Honeywell in 1997 as an intern
and subsequently served in various human resources roles through 2003, including as
M&A integration leader and as HR manager for multiple business units. From 2003 to
2004, she served as human resources manager at Bristol-Myers Squibb Company. From
2004 to 2005, she served as organization development manager for Tyco International.
Ms. Slieter rejoined Honeywell in 2005 and served in roles with increasing
responsibility through 2015, including, director of HR functional excellence, corporate;
director of organization development & learning for the Automation & Control
Solutions business; director of human resources for Honeywell Building Solutions; and
senior director, human resources corporate. From 2015 through 2018, she served as vice
president, human resources of the Honeywell UOP business.
11
Christopher Gramm, 52 Vice President,
Controller
Willem L. Blindenbach,
53
Senior Vice
President,
Integrated
Supply Chain
Prior to joining the Company, Mr. Gramm served as vice president and controller of the
aerospace and corporate government compliance divisions at Honeywell. From August
2014 to November 2015, Mr. Gramm served as vice president of finance for the
integrated supply chain of the aerospace division at Honeywell. Beginning in March
2011, he was vice president and controller of the aerospace division at Honeywell. Over
the course of the period from 1997 to March 2011, Mr. Gramm held several positions at
Honeywell, including controller and chief financial officer of various divisions focused
on areas including specialty materials and resins and chemicals. He joined Honeywell in
1997 as a senior staff accountant. Before joining Honeywell, Mr. Gramm was a manager
at Corning Life Sciences.
Prior to joining the Company, Mr. Blindenbach served as Vice President of Mobil
International Company Operations Manager, EMEA since 2018. He joined ExxonMobil
in 1994 and served in several roles with increasing responsibility including Sales
Engineer, Technical Support Supervisor, Pernis Plant Operations Manager, Europe
Project Advisor, Europe Supply Manager, and Global Operations Project Advisor. From
2006 to 2007, he served as Executive Advisor to the President of ExxonMobil Lubes
and Fuels. From 2007 to 2009, Mr. Blindenbach served as Manager, Supply and
Distribution for EMEA. From 2010 to 2011, he served as Vice President, ExxonMobil
Lubricants, Trading and Supply Manager, Global Basestocks. From 2011 to 2012, he
served as Manager of Global Product Integrity. From 2012 to 2013, he served as Project
Executive. From 2013 to 2014, he served as Manager of Midstream Business. From
2014 through 2017, he served as Manager, Manufacturing, Lubes, Americas.
Other Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those
reports are available free of charge on our website (www.AdvanSix.com) under the heading Investors (see SEC Filings) immediately
after they are filed with, or furnished to, the Securities and Exchange Commission ("SEC"). In addition, in this Form 10-K, the
Company incorporates by reference certain information from parts of its Proxy Statement for the 2022 Annual Meeting of
Stockholders, which will also be available free of charge on our website. Information contained on, or that may be accessed through,
our website does not and will not constitute part of this Form 10-K. Our filings with the SEC are also available on the SEC website at
www.sec.gov.
We are a Delaware corporation that was incorporated on May 4, 2016. Our principal executive offices are located at 300 Kimball
Drive, Suite 101, Parsippany, NJ 07054. Our telephone number is (973) 526-1800. Our website address is www.AdvanSix.com.
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Item 1A. Risk Factors
Cautionary Statement Concerning Forward-Looking Statements
All statements other than statements of historical fact included in this Form 10-K including, without limitation, statements under “Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other parts of this Form 10-K
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-K, 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. Such forward-looking statements are based on the beliefs of management, as well as assumptions made by, and
information currently available to, our management. They are not guarantees of future performance and actual results could differ
materially from those contemplated by the forward-looking statements as a result of certain factors detailed in our filings with the
SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their
entirety by this paragraph. We do not undertake to update or revise any of our forward-looking statements. Our forward-looking
statements are also subject to risks and uncertainties that can affect our performance in both the near- and long-term. These forward-
looking statements should be considered in light of the information included in this Form 10-K, including, in particular, the factors
discussed below. These factors may be revised or supplemented in subsequent reports on Forms 10-Q and 8-K.
Risk Factors
You should carefully consider all information in this Form 10-K and each of the risks described below, which we believe are the
principal risks we face. Any of the following risks could materially and adversely affect our business, financial condition and results of
operations and the actual outcome of matters as to which forward-looking statements are made in this Form 10-K.
Risks Relating to Our Business
Difficult and volatile conditions in the overall economy, particularly in the United States but also globally, and in the capital, credit
and commodities markets could adversely affect our business, financial condition and results of operations.
Our business, financial condition and results of operations could be adversely affected by difficult global economic conditions and
significant volatility in the capital, credit and commodities markets and in the overall economy. Adverse events affecting the health of
the economy, including inflationary pressures, supply chain issues, labor market shortages, trade conflicts including, export and import
restrictions, tariffs and other trade barriers, the COVID-19 pandemic or other pandemics and the threat of war, sovereign debt and
economic crises, terrorism and protectionism could have a negative impact on the health of the global economy. These developments,
or the perception that any of them could occur, may have a material adverse effect on global economic conditions or on the stability of
global financial markets which may affect us and our customers. For example:
• Weak economic conditions, especially in our key markets, could reduce demand for our products, impacting our sales and
margins;
•
•
As a result of volatility in commodity prices, we may encounter difficulty in achieving sustained market acceptance of past or
future price increases;
Under difficult market conditions, there can be no assurance that access to credit or the capital markets would be available or
sufficient, and as such, we may not be able to successfully obtain additional financing on reasonable terms, or at all;
• Market conditions and credit availability could adversely affect the financial situation of raw material suppliers and their
ability to deliver key materials, thus impacting our ability to run our production facilities at the intended rates; and
• Market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending,
which in turn could cause fluctuations in demand for our products, product prices, volumes and margins potentially resulting
in decreased sales and earnings.
We are unable to predict the duration of economic conditions or their effects on financial markets or our business and results of
operations. Economic volatility and uncertainty surrounding future economic conditions may at times make it challenging to identify
risk that may affect our business, sources and uses of cash, financial conditions and results of operations. If economic conditions
deteriorate, our results of operations, financial condition and cash flows could be materially adversely affected.
The industries in which we operate experience cyclicality which can cause significant fluctuations in our cash flows and may
adversely affect our business, financial condition and results of operations.
Our historical operating results reflect the cyclical nature of the industries in which we operate including with respect to our Nylon 6
resin, caprolactam, nitrogen fertilizer, phenol and acetone products. We experience cycles of fluctuating supply and demand for each
of our products resulting in changes in selling prices and margins. Periods of high demand, tight supply and increasing operating
margins tend to result in increases in capacity and production until supply exceeds demand, generally followed by periods of
oversupply and declining prices. While we strive to maintain or increase our profitability by reducing costs through improving
13
production efficiency, by emphasizing higher margin products and by controlling transportation, selling and administration expense,
we cannot assure you that these efforts will be sufficient to offset fully the effect of possible decreases in pricing on our operating
results. As a result of potential cyclicality, we cannot assure you that pricing or profitability in the future will be comparable to any
historical period, including the most recent period shown in our operating results. Structural changes in industry and customer trends
for our products could adversely affect our business, financial condition and results of operations.
Any significant unplanned downtime or material disruption impacting any of our production facilities or logistics operations, or
any third party on which we rely, may adversely affect our business, financial condition and results of operations.
We seek to run our complex production facilities on a nearly continuous basis for maximum efficiency and we rely on the integrity of
our logistics operations for the uninterrupted operations of our business. While we have made significant annual capital improvements
at our manufacturing plants, operational issues have occurred in the past and may occur in the future, which could cause damage to our
manufacturing and production equipment and ancillary facilities. Unplanned interruptions in our production capabilities may adversely
affect our production costs, product lead times and earnings during the affected period.
Although our integrated manufacturing, scale and the quantity and range of our product offerings make us one of the most efficient
manufacturers in our industry, the significant level of integration across our manufacturing facilities exposes us to increased risk
associated with unplanned downtime or material disruptions at any one of our production facilities which could impact our supply
chain and our manufacturing process.
We seek to mitigate the risk of unplanned downtime through regularly scheduled maintenance for both major and minor repairs at all
of our production facilities. We utilize maintenance excellence and mechanical integrity programs and maintain what we believe is an
appropriate buffer inventory of intermediate chemicals necessary for our manufacturing process, both of which are intended to
mitigate the extent of any production losses as a result of unplanned downtime. However, unplanned interruptions have occurred in the
past and may occur in the future, and we may not have enough intermediate chemical inventory at any given time to offset production
losses. Our business interruption insurance coverage may not cover all costs or losses associated with unplanned downtime, or such
insurance may not continue to be available in amounts or on terms acceptable to us. Moreover, taking our production facilities offline
for regularly scheduled repairs can be an expensive and time-consuming operation with risk that discoverable items and delays during
the repair process may cause additional unplanned downtime. Any such unplanned downtime at any of our production facilities may
adversely affect our business, financial condition and results of operations.
Our production facilities and logistics operations, as well as those of our suppliers or other third parties on which we rely, are also
subject to the risk of catastrophic loss and material disruptions due to unanticipated events, such as unexpected repairs or other
operational and logistical problems, severe weather conditions, personal injury or major accidents, prolonged power failures, chemical
spills, fires, explosions, acts of terrorism, earthquakes, pandemics or other natural disasters, that we or such third party may
experience. While we seek to mitigate our risk of unplanned interruptions, we have experienced such unplanned interruptions in the
past with respect to both our operations and the operations of third parties as described in our periodic reports filed with the SEC, and
there is no assurance that we or other third parties on which we rely will not experience unplanned interruptions in the future.
Depending on the nature, extent and length of any operational interruption from any such event, the results could adversely affect our
business, financial condition and results of operations.
Raw material price fluctuations and the ability of key suppliers to meet delivery requirements can increase the cost of our products
and services, impact our ability to meet commitments to customers and cause us to incur significant liabilities.
The cost of raw materials, including cumene, natural gas and sulfur, is a key element in the cost of our products. Our inability to offset
material price inflation through increased prices to customers, formula-based or long-term fixed price contracts with suppliers,
productivity actions or commodity hedges could adversely affect our business, financial condition and results of operations.
Although we believe that our sources of supply for raw materials are generally robust, it is difficult to predict the impact that shortages
of raw materials or price increases may have in the future. Our ability to manage inventory and meet delivery requirements may be
constrained by our suppliers’ inability to scale production and adjust delivery of long lead-time products during periods of fluctuating
demand. Our inability to satisfy our supply needs would jeopardize our ability to fulfill obligations under contracts, which could, in
turn, result in reduced sales and profits, contract penalties or terminations and damage to customer relationships.
When possible, we have purchased, and we plan to continue to purchase, raw materials, including cumene, natural gas and sulfur,
through negotiated medium- or long-term contracts. To the extent we have been able to achieve favorable terms in our existing
negotiated contracts, we may not be able to renew such contracts at the current terms or at all, and this may adversely impact our
results of operations. To the extent the markets for our raw materials significantly change, we may be bound by the terms of our
existing supplier contracts and obligated to purchase raw materials at disadvantaged terms as compared to other market participants.
Our operations and growth projects require substantial capital and we may not be able to obtain additional capital that we need in
the future on favorable terms or at all.
Our industry is capital intensive, and we may require additional capital in the future to finance our growth and development, upgrade
and improve our manufacturing capabilities, satisfy regulatory and environmental compliance obligations, implement further
marketing and sales activities, fund ongoing R&D activities, and meet general working capital needs. Our capital requirements will
depend on many factors, including acceptance of and demand for our products, the extent to which we invest in new technology, new
products and R&D projects and the status and timing of these developments. Our capital projects and other growth investments may
have lengthy deadlines during which market conditions may deteriorate between the capital expenditure’s approval date and the
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conclusion of the project, negatively impacting projected returns on our investments. Delays or cost increases related to capital and
other spending programs, including those relating to plant improvements and development of new technologies, could materially
adversely affect our ability to achieve forecasted operating results. In addition, we may need to seek additional capital in the future,
and debt or equity financing may not be available to us on terms we find acceptable, if at all. If we incur additional debt or raise equity
through the issuance of our preferred stock, the terms of the debt or our preferred stock may give the holders rights, preferences and
privileges senior to those of holders of our common stock, particularly in the event of liquidation. If we raise funds through the
issuance of additional common equity, ownership in AdvanSix would be diluted. We believe that we have adequate capital resources
to meet our projected operating needs, capital expenditures and other cash requirements. However, we may need additional capital
resources in the future, and if we are unable to obtain sufficient resources for our operating needs, capital expenditures and other cash
requirements for any reason, our business, financial condition and results of operations could be adversely affected.
Our results of operations may be materially adversely impacted by the coronavirus (COVID-19) pandemic and the measures
implemented to contain the spread of the virus.
The continued spread of the coronavirus (COVID-19) pandemic and the resulting containment measures have created significant
volatility, uncertainty and economic disruption globally and have had, and in the future may have, a material impact on the Company's
results of operations.
The U.S. Department of Homeland Security designated our industry as "essential critical infrastructure" during the response to
COVID-19 for both public health and safety as well as community well-being. The Company takes its obligation to produce materials
that support the broader population seriously, all while maintaining a prioritized focus on the health and safety of its employees and
the communities in which it operates, and assuring the continuity of its business operations. As a global provider of products that are
key inputs for our customers’ processes serving a variety of end-markets, a pandemic presents obstacles that can adversely affect our
supply chain effectiveness and efficiencies, our manufacturing operations and customer demand for our products and, ultimately, our
financial results. In the second quarter of 2020, we experienced lower demand resulting from the economic impact of COVID-19,
although demand improved to pre-COVID-19 levels in the second half of 2020. While the COVID-19 pandemic may impact the
Company's results of operations, financial position and liquidity, we are unable to predict the extent or nature of these impacts at this
time.
The extent of any impact from the COVID-19 pandemic on our business depends on numerous evolving factors and future
developments that cannot be accurately predicted at this time, including, but not limited to: the scope and duration of the pandemic,
including the spread of the virus and its variants, the extent of any resurgences, and the pace of recovery; the distribution, efficacy,
availability and public acceptance of vaccines, boosters or treatments for COVID-19; governmental, business and individuals’ actions
that have been and continue to be taken in response to the pandemic, including our business continuity and cash optimization plans
that have 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 impact on labor markets and our ability, and the ability of our suppliers and other third parties
on which we rely, to retain and hire employees; inflationary pressures; supply chain disruptions; 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; 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; and risks associated with employees working remotely or operating with a reduced workforce.
Due to difficult market conditions created by the pandemic, there can be no assurance that access to credit or the capital markets
would be available or sufficient, and as such, if needed, we may not be able to successfully obtain additional financing on reasonable
terms, at a reasonable cost, or at all. As a result, these market conditions may impact our ability to comply with financial covenants in
our credit facility, increase our cost of capital or make additional capital, including the refinancing of our credit facility, more difficult
or available only on terms less favorable to us, if at all. A sustained downturn may also result in the carrying value of our goodwill or
other assets exceeding their fair value, which may require us to recognize an impairment to those assets. In addition, impacted
financial markets and asset values may have the effect of increasing our pension funding obligations in order to ensure that our
qualified pension plans continue to be adequately funded, which may divert cash flow from other uses. The effects of the pandemic
may also impact our financial reporting systems and internal control over financial reporting, including our ability to ensure
information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for
timely decisions regarding required disclosure.
Any of these events could materially adversely impact our business, financial condition, results of operations, cash flow, liquidity and/
or stock price. The COVID-19 pandemic, as well as future pandemics, could also cause or contribute to the other risk factors identified
in this Form 10-K, as may be amended in our subsequent Quarterly Reports on Form 10-Q, which in turn could materially adversely
affect our business, financial condition, results of operations, cash flow, liquidity and/or stock price. Further, the COVID-19 pandemic
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may also affect our business, operations and financial results in a manner that is not presently known to us or that we currently do not
consider to present significant risks to our operations.
For additional information regarding the impact of COVID-19 on our business, financial condition, results of operations, cash flow
and liquidity, see the discussions under "Recent Developments - COVID-19" in “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
Our competitive position, as well as our failure to develop and commercialize new products or technologies to address our
customers’ needs and to effectively compete, could adversely affect our business, financial condition and results of operations.
Competition in the industries we serve is based on factors such as price, product quality and service. Additionally, the markets for our
products are characterized by significant competition, both regionally and internationally, new industry standards, evolving
distribution models, customer price sensitivity, and disruptive product and manufacturing process innovations. In addition to changes
in regulations, the impact of health, sustainability, and safety concerns could increase the costs incurred by our customers to use our
products and otherwise limit the use of these products, which could lead to decreased demand for these products. Any of these factors
could create pressure on pricing and gross margins and could adversely impact our business. As a result, our competitors may be able
to deliver greater innovation, respond more quickly to new or emerging technologies and changes in market demand, allocate more
resources to the development, marketing and sale of their products, successfully expand into emerging markets, improve their cost
structures, or price their products more aggressively than us.
Our continued ability to enhance our existing product offerings, as well as the successful development and commercialization of new
products and technologies, are drivers to our future strategy. The development and commercialization of new products and
technologies requires significant investment in R&D, capital expenditures, production and marketing. The sales and development
cycle for our products is subject to customary budgetary constraints, internal acceptance procedures, competitive product assessments,
scientific and development resource allocations, regulatory limitations, and other factors beyond our control. If we are not able to
successfully accommodate these factors to enable customer development success, we will be unable to achieve sufficient sales to reach
profitability and compete effectively. There is no assurance that we will be able to continue to identify, develop, market or, in certain
cases, secure regulatory approval for, new products in a timely manner or at all, as may be required to replace or enhance existing
products. We cannot be certain that costs incurred by investing in new products and technologies will result in an increase in our
revenues or profits. Our ability to keep pace with our competitors and the success of any new products and technologies is uncertain
and could adversely affect our business, financial condition and results of operations.
The loss of one or more of our significant customers could adversely affect our business, financial condition and results of
operations.
Our business depends on significant customers, many of whom have been doing business with us for decades. The loss of one or
several significant customers may have an adverse effect on our business, financial condition and results of operations. In 2021, our 10
largest customers accounted for approximately 40% of our total sales across all product lines. Our largest customer is Shaw, one of the
world’s largest consumers of Nylon 6 resin and caprolactam. We sell caprolactam and Nylon 6 resin to Shaw under a long-term
agreement. We typically sell to other customers under master services agreements, with primarily one-year terms, or by purchase
orders. If our sales to any of our significant customers were to decline, we may not be able to find other customers to purchase the
excess supply of our products. The loss of one or several of our significant customers, or a significant reduction in purchase volume by
any of them, or significant unfavorable changes to pricing or other terms in contracts with any of them, could have an adverse effect
on our business, financial condition and results of operations. We are also subject to credit risk associated with customer
concentration. If one or more of our largest customers were to become bankrupt or insolvent, or otherwise were unable to pay for our
products, we may incur significant write-offs of accounts that may have an adverse effect on our business, financial condition and
results of operations.
The occurrence or threat of extraordinary events, including terrorist attacks, may disrupt our operations and could adversely affect
our business, financial condition and results of operations.
Due to concerns related to terrorism, we are subject to various security laws including MTSA regulations. Our Frankford and
Hopewell facilities are regulated facilities under MTSA due to the nature of our operations and the proximity of the facilities to
adjacent waterways. Federal, state, local and foreign governments could implement new or impose more stringent regulations
affecting the security of our plants, terminals and warehouses or the transportation and use of fertilizers or other chemicals. These
regulations could result in higher operating costs or limitations on the sale of our products and could result in significant unanticipated
costs, lower sales and reduced profit margins. It is possible that federal, state, local and foreign governments could impose additional
limitations on the use, sale or distribution of chemicals we produce and sell, thereby limiting our ability to manufacture or sell those
products, or that illicit use of our products could result in potential exposure for us. The occurrence of extraordinary events, including
future terrorist attacks and the outbreak or escalation of hostilities, cannot be predicted, and their occurrence can be expected to
continue to negatively affect the economy in general, and the markets for our products in particular. The resulting damage from an
attack on our assets could include loss of life and property damage. In addition, available insurance coverage may not be sufficient to
cover all of the damage incurred or, if available, may be prohibitively expensive.
Hazards and compliance costs associated with chemical manufacturing, storage and transportation could adversely affect our
business, financial condition and results of operations.
There are hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and
wastes. These hazards could lead to an interruption or suspension of operations and could have an adverse effect on the productivity
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and profitability of a particular manufacturing facility, or on us as a whole. While we endeavor to provide adequate protection for the
safe handling of these materials, issues could be created by various events, including natural disasters, severe weather events, acts of
sabotage, human error, and performance by third parties, and as a result, we could face potential hazards such as piping and storage
tank leaks and ruptures, mechanical failure, employee exposure to hazardous substances and chemical spills and other discharges or
releases of toxic or hazardous substances or gases.
These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead
to government fines, work stoppage injunctions, lawsuits by injured persons, damage to our public reputation and brand and
diminished product acceptance. If such actions are determined to be adverse to us or there is an associated economic impact to our
business, we may have inadequate insurance or cash flow to offset any associated costs. Such outcomes could adversely affect our
business, financial condition and results of operations.
Our business, financial condition and results of operations could be adversely affected by litigation and other commitments and
contingencies.
We face risks arising from various unasserted and asserted litigation matters, including, but not limited to, product liability and claims
for third-party property damage or personal injury stemming from alleged environmental or other torts or otherwise. We have noted a
nationwide trend in purported class actions against chemical manufacturers generally seeking relief such as medical monitoring,
property damages, off-site remediation and punitive damages arising from alleged environmental or other torts without claiming
present personal injuries. We also have noted a trend in public and private nuisance suits being filed on behalf of states, counties, cities
and utilities alleging harm to the general public.
Various factors or developments can lead to changes in current estimates of liabilities such as a final adverse judgment, significant
settlements or changes in applicable law. An adverse outcome or unfavorable development in any one or more of these matters could
be material to our financial results and could adversely impact the value of any of our brands associated with any such matters.
In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating
to current and past operations, including those related to divested businesses, and issue guarantees of third-party obligations.
Additionally, we may be required to indemnify Honeywell for amounts related to liabilities allocated to, or assumed by, us in
connection with our spin-off. If we are required to make any such payments, the payments could be significant and could exceed the
amounts we have accrued with respect thereto, adversely affecting our business, financial condition and results of operations.
Any acquisition, strategic relationship, joint venture or investment could disrupt our business and harm our financial condition.
Our inability to successfully acquire and integrate other businesses, assets, products or technologies or realize the financial and
strategic goals that were contemplated at the time of any transaction could adversely affect our business, financial condition and
results of operations.
We actively evaluate acquisitions, strategic relationships, joint ventures, collaborations, and strategic investments in businesses,
products or technologies that we believe could complement or expand our business, broaden our technology and intellectual property
or otherwise offer growth or cost-saving opportunities. Any of these transactions may be complex, time consuming and expensive, and
may present numerous challenges and risks. In 2021, we completed the acquisition of certain assets of Commonwealth Industrial
Services, Inc., and in February 2022, we announced the signing of a definitive agreement to acquire U.S. Amines, Ltd.
Lack of control over the actions of our business partners in any strategic relationship, joint venture or collaboration, could significantly
delay the introduction of planned products or otherwise make it difficult or impossible to realize the expected benefits of such
relationship. An investment in, or acquisition of, complementary businesses, products or technologies in the future could materially
decrease the amount of our available cash or require us to seek additional equity or debt financing. We may not be successful in
negotiating the terms of any potential acquisition, conducting thorough due diligence, financing the acquisition or effectively
integrating the acquired business, product or technology into our existing business and operations. Our due diligence may fail to
identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including
issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or
other accounting practices or employee or customer issues. Additionally, in connection with any acquisitions we complete, we may
not achieve the synergies or other benefits we expected to achieve, and we may incur unanticipated expenses, write-downs,
impairment charges or unforeseen liabilities that could negatively affect our business, financial condition and results of operations,
have difficulty incorporating the acquired businesses, disrupt relationships with current and new employees, customers and vendors,
incur significant debt or have to delay or not proceed with announced transactions. Further, contemplating or completing an
acquisition and integrating an acquired business, product or technology could divert management and employee time and resources
from other matters.
Failure to protect our intellectual property could adversely affect our business, financial condition and results of operations.
Intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names and trade dress, are
important to our business. We will endeavor to protect our intellectual property rights in key jurisdictions in which our products are
produced or used. However, we may be unable to obtain protection for our intellectual property in such key jurisdictions. Although we
own and have applied for numerous patents and trademarks, we may have to rely on judicial enforcement of our patents and other
proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented, and rendered
unenforceable or otherwise compromised. If we must take legal action to protect, defend or enforce our intellectual property rights,
any suits or proceedings could result in significant costs and diversion of our resources and our management’s attention, and we may
not prevail in any such suits or proceedings. A failure to protect, defend or enforce our intellectual property could have an adverse
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effect on our business, financial condition and results of operations. Similarly, third parties may assert claims against us and our
customers and distributors alleging our products infringe upon third-party intellectual property rights. Such claims could result in
significant costs and diversion of our resources and our management’s attention and we may not prevail in any resulting suits or
proceedings.
We also rely materially upon unpatented proprietary technology, know-how and other trade secrets to maintain our competitive
position. While we institute and maintain policies, internal security measures, and agreements to protect our trade secrets and other
intellectual property, any failure to protect this intellectual property could negatively affect our future performance and growth.
We may be required to make significant cash contributions to our defined benefit pension plan.
We sponsor a defined benefit pension plan under which certain eligible AdvanSix employees who were employed by Honeywell prior
to the spin-off earn pension benefits as if they remained employed by Honeywell. Significant changes in actual investment return on
pension assets, discount rates, retirement rates and other factors could require unplanned cash pension contributions in future periods.
Changes in discount rates and actual asset returns different from our anticipated asset returns can result in significant non-cash
actuarial gains or losses. With regard to cash pension contributions, funding requirements for our pension plans are largely dependent
upon interest rates, actual investment returns on pension assets and the impact of legislative or regulatory changes related to pension
funding obligations. Our pension contributions may be material and could adversely impact our financial condition, cash flow and
results of operations. We made pension contributions of approximately $17.5 million in 2021, which satisfied our pension funding
requirements for such period, and we plan to make pension contributions in future periods sufficient to satisfy funding requirements.
Some of our workforce is represented by labor unions and our business could be harmed in the event of a prolonged work
stoppage.
Approximately 705 of our employees are covered under collective bargaining agreements that expire between 2023 and 2025, which
represents approximately 51% of our employee-base as of December 31, 2021. From time to time, we engage in negotiations to renew
collective bargaining agreements as those contracts are scheduled to expire. While we generally have positive relationships with our
labor unions, we cannot predict how stable our union relationships will be or whether we will be able to successfully negotiate
successor agreements without impacting our financial condition. In addition, the presence of unions may limit our flexibility in dealing
with our workforce. We may experience work stoppages, which could negatively impact our ability to manufacture our products on a
timely basis and, ultimately, our business, financial condition and results of operations.
We depend on the recruitment and retention of qualified personnel, and our failure to attract and retain such personnel could
adversely affect our business, financial condition and results of operations.
Due to the complex nature of our manufacturing business, our future performance is highly dependent upon the continued services of
our key engineering personnel, scientists and our senior management team, the development of additional management personnel and
the hiring of new qualified engineering, manufacturing, marketing, sales and management personnel for our operations. Competition
for qualified personnel in our industry is intense, and we may not be successful in attracting or retaining qualified personnel. The loss
of key employees, our inability to attract new, qualified employees or adequately train employees, or any delay in hiring key
personnel, could negatively affect our business, financial condition and results of operations.
Cybersecurity threats and incidents continue to increase in frequency and sophistication. A successful cybersecurity attack could
disrupt our business operations, result in the loss of critical and confidential information belonging to us, our customers and other
business partners, and adversely impact our reputation, financial condition and results of operations.
Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to
information technology (“IT”) systems to sophisticated and targeted measures known as advanced persistent threats, directed at
AdvanSix, its plants and operations, its products, its customers and/or its third-party service providers including cloud providers. The
techniques used to obtain unauthorized access to networks, or to sabotage IT systems, change frequently and generally are not
recognized until launched against a target. We may be unable to anticipate these techniques or to implement adequate preventative
measures. While we have experienced, and expect to continue to experience, these types of threats and incidents, none of them to date
have been material to the Company. Our information technology infrastructure, including cybersecurity controls, deploys
comprehensive measures to deter, prevent, detect, respond and mitigate these threats including access controls, data encryption,
vulnerability assessments, continuous monitoring of our IT networks and systems and maintenance of backup and protective systems.
We track cyber performance metrics and conduct training of our employees on protective measures regarding information security,
data privacy, cyber-attacks and recognizing phishing attempts. Despite these efforts, cybersecurity incidents, depending on their nature
and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or
proprietary information (our own or that of third parties) and the disruption of our plant operations and business generally or the
disruption of the operations and businesses of our vendors or customers. Additionally, we use third-party vendors that may store
sensitive data, including confidential information about our employees, and these third parties are subject to their own cybersecurity
threats. While our standard vendor terms and conditions include certain safeguards, including requiring the use of appropriate security
measures to prevent unauthorized use or disclosure of our data, a breach at these third-party vendors may occur. The potential
consequences of a material cybersecurity incident of our own systems or the systems of those with whom we do business, include
reputational consequences, safety risk, physical damage to our assets, claims from and litigation with third parties, fines levied by
governmental authorities, diminution in the value of our investment in research, development and engineering, and increased
cybersecurity protection and remediation costs, which in turn could, individually or in the aggregate, adversely affect our
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competitiveness, plant operations, business, financial condition and results of operations. We maintain cyber liability insurance, but
this insurance may not be sufficient to cover the losses that may result from a cybersecurity incident.
Data privacy, information security and protection of confidential information may require significant resources and present
certain risks.
We maintain, have access to and process certain confidential or sensitive data, including proprietary business information, personal
data and other information, that may be subject to privacy and security laws, regulations and/or customer-imposed controls. Despite
our efforts to protect such information and data, we may be vulnerable to material security breaches, theft, misplaced or lost data, or
errors by employees or third-party providers that could potentially cause such information and data to be compromised, or lead to
improper use of our systems or networks, unauthorized access, use, disclosure, modification or destruction of information, and
operational disruptions. In addition, there are different and potentially conflicting data privacy laws in effect in the domestic and
foreign jurisdictions in which we operate, including the General and Data Protection Regulations implemented in the European Union,
and we must comply with all applicable laws and standards. Noncompliance with these laws can result in reputational damage, fines
and penalties, and enforcement proceedings and litigation, any of which may adversely affect our business, reputation, financial
condition and results of operations.
Disruptions in transportation or significant changes in transportation costs could adversely impact our business financial
condition and results of operations.
We rely heavily on third party transportation to deliver raw materials to our facilities and ship products to our customers. Transport
operators are exposed to various risks, such as extreme weather conditions, natural disasters, work stoppages, personnel shortages, and
operating hazards, as well as interstate and international transportation requirements. If we experience transportation problems, or if
there are other significant changes in the cost of these services, we may not be able to arrange efficient alternatives and timely means
to obtain raw materials or ship products to our customers. We also seek to maintain appropriate buffer inventory of intermediate
chemicals necessary for our manufacturing process, which are intended to mitigate the extent of any delays or disruptions in supply
chain logistics. However, our failure to obtain raw materials, ship products or maintain sufficient buffer inventory could materially and
adversely impact our business, financial condition and results of operations.
Exposure to risks and events beyond our control could adversely impact our business, financial condition and results of operations.
We are exposed to risks from various events that are beyond our control, which may have significant effects on our results of
operations. While we attempt to mitigate these risks through appropriate loss prevention measures, insurance, business contingency
planning and other means, we may not be able to anticipate all risks or to reasonably or cost-effectively manage those risks that we do
anticipate. We maintain property, cyber liability, business interruption and casualty insurance but such insurance may not cover all
risks, loss, damages or expenses associated with our business and is subject to limitations, including deductibles and limits on the
liabilities covered. Consequently, our operations could be adversely affected by circumstances or events in ways that are significant
and/or long lasting. The risks and uncertainties identified herein are not the only risks that we have. Additional risks and uncertainties
not presently known to us or that we currently believe to be immaterial also may adversely affect us. If any known or unknown risks
and uncertainties develop into actual events, these developments could have a material adverse effect on our business, financial
condition and results of operations.
Risks Relating to Our Indebtedness
We are subject to certain risks associated with our indebtedness.
We are a borrower of funds under a credit facility. Our ability to make payments on and to refinance our indebtedness, including the
debt incurred, as well as any future debt that we may incur, will depend on our ability to generate cash in the future from operations or
financings. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors
that are beyond our control. In addition, the terms of our indebtedness include a number of restrictive covenants that impose
significant operating and financial restrictions on us and our subsidiaries and limit our ability to engage in actions that may be in our
long-term best interests. These may restrict our and our subsidiaries’ ability to take some or all of the following actions:
•
•
•
•
•
•
•
•
•
•
•
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Incur or guarantee additional indebtedness or sell disqualified or preferred stock;
Pay dividends on, make distributions in respect of, repurchase or redeem capital stock;
Make investments or acquisitions;
Sell, transfer or otherwise dispose of certain assets;
Create liens;
Enter into sale/leaseback transactions;
Enter into agreements restricting the ability to pay dividends or make other intercompany transfers;
Consolidate, merge, sell or otherwise dispose of all or substantially all of our or our subsidiaries’ assets;
Enter into transactions with affiliates;
Prepay, repurchase or redeem certain kinds of indebtedness;
Issue or sell stock of our subsidiaries; and/or
Significantly change the nature of our business.
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These restrictions may impact our current and future operations, how we conduct our business and pursue our strategy, as well as our
ability to incur debt that we may need to fund initiatives associated with our strategy, ongoing operations, competitive industry
dynamics and new business opportunities. A breach of any of these covenants, if applicable, could result in an event of default under
the terms of this indebtedness. If an event of default occurs, the lenders would have the right to accelerate the repayment of such debt
and the event of default or acceleration may result in the acceleration of the repayment of any other debt to which a cross-default or
cross-acceleration provision applies. Substantially all domestic tangible and intangible assets of the Company and its subsidiaries are
pledged as collateral to secure the obligation under our credit facility and, in the event we were unable to repay any amount of this
indebtedness when due and payable, the lenders could proceed against the pledged collateral. In the event our creditors accelerate the
repayment of our borrowings, we may not have sufficient assets to repay such indebtedness, which could adversely affect our
business, financial condition and results of operations.
Furthermore, our credit facility currently uses LIBOR as a benchmark for establishing the interest rate. Certain USD LIBOR rates
ceased to be published as of December 31, 2021 while the remaining USD LIBOR rates will cease to be published on June 30, 2023,
as announced by LIBOR's regulators and administrators. In response to the phase-out of LIBOR, regulators have suggested reforming
or replacing LIBOR with other benchmark rates. The consequences of these developments with respect to LIBOR cannot be entirely
predicted but could cause volatility or disruption in the overall financial market, result in an increase in the cost of our variable rate
debt or adversely affect our cost of funding, any of which could adversely affect our financial condition and results of operations.
Additionally, while our credit facility contains a provision providing for an alternative rate calculation in the event LIBOR is
unavailable, this provision may not adequately address the actual changes to LIBOR or successor rates.
Risks Relating to Legal and Regulatory Matters
Extensive environmental, health and safety laws and regulations applicable to our operations, including initiatives related to
discharges into the air and water, hazardous waste, sustainability, global warming and climate change, may result in substantial
costs and unanticipated loss or liability, which could adversely affect our business, financial condition and results of operations.
Various federal, state, local and foreign governments regulate the discharge of materials into the environment and can impose
substantial fines and criminal sanctions for violations and require installation of costly equipment or operational changes to limit
emissions and/or decrease the likelihood of accidental hazardous substance releases. If we are found to be in violation of these laws or
regulations, we may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience
interruptions in our operations. See “Item 1. Business - Regulation and Environmental Matters” for more information on the
environmental laws and regulations to which we are subject.
Primarily because of past operations at our current manufacturing locations and other locations used in our operations as currently
conducted, we may be subject to potentially material liabilities related to the remediation of environmental hazards and to claims of
personal injuries or property damages that may have been or may be caused by hazardous substance releases and exposures or other
hazardous conditions. Lawsuits, claims and costs involving these matters may arise in the future. In addition, changes in laws,
regulations and enforcement of policies, the discovery of previously unknown contamination or other information related to individual
sites, the establishment of stricter state or federal toxicity standards with respect to certain contaminants or the imposition of new
clean-up requirements or remedial techniques could require us to incur additional costs in the future that would have a negative effect
on our business, financial condition and results of operations.
Additionally, there are substantial uncertainties as to the nature, stringency and timing of any future regulations or changes in
regulations, including discharges into the air and water, handling and disposal of hazardous wastes, remediation of soil and
groundwater, and greenhouse gas (“GHG”) and water nutrient regulations. Due to the concerns about risks associated with air, water,
global warming and climate change, more stringent regulations may require us to incur additional capital expenditures or make
changes to our operating activities that would increase our operating costs, reduce our efficiency, limit our output, increase our costs
for or limit the availability of energy, raw materials or transportation or otherwise adversely affect our business, financial condition
and results of operations. If enacted, more stringent GHG limitations are likely to have a significant impact on us because our
production facilities emit GHGs such as carbon dioxide and nitrous oxide and because natural gas, a fossil fuel, is a primary raw
material used in our production process. To the extent that GHG or other restrictions are not imposed in countries where our
competitors operate or are less stringent than regulations that may be imposed in the United States, our competitors may have cost or
other competitive advantages over us. In addition, increasing regulation of fuel emissions could substantially increase the distribution
and supply chain costs associated with our products. Consequently, legislative and regulatory programs to reduce emissions of GHG
could have an adverse effect on our business, financial condition and results of operations.
Further, there has been public discussion that climate change may be associated with more extreme weather conditions, such as
increased frequency and severity of storms, droughts, and floods. Extreme weather conditions have and in the future may interfere
with our operating activities, disrupt our maritime logistics and intraplant supply chain, increase our costs of operations or reduce the
efficiency of our operations, and potentially increase costs for insurance coverage in the aftermath of such conditions. Long-term,
higher average global temperatures could result in changes in natural resources, growing seasons, precipitation patterns, weather
patterns, species distributions, water availability, sea levels, and biodiversity. These impacts could cause changes in supplies of raw
materials used to maintain our production capacity and could lead to possible increased sourcing costs in the future. We continually
assess our manufacturing plants for risks and opportunities to increase our preparedness for climate change. We are continuing to
evaluate sea level rise and storm surge at our plants to understand potential impacts and response actions that may need to be taken.
Significant physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the
transportation or process-related services provided by companies or suppliers with whom we have a business relationship.
20
There is also a risk that one or more of our key raw materials or one or more of our products may be found to have, or be characterized
as having, a toxicological or health-related impact on the environment or on our customers or employees, which could potentially
result in us incurring liability in connection with such characterization and the associated effects of any toxicological or health-related
impact. If such a discovery or characterization occurs, we may incur increased costs to comply with new regulatory requirements, or
the relevant materials or products, including products of our customers that incorporate our materials or products, may be recalled or
banned. Changes in laws and regulations, or their interpretations, and our customers’ perception of such changes or interpretations
may also affect the marketability of certain of our products. Additionally, sales of acetone, which is a List II Chemical under TSCA,
are regulated by the Drug Enforcement Act. This classification subjects us to periodic audits by the Drug Enforcement Administration
and ongoing restrictions on our acetone sales activities.
Heightened public focus on climate change, sustainability, and environmental issues has also led to increased government regulation
and may cause certain of our key stakeholders to require that we meet certain standards, including customers or suppliers who may
impose environmental standards on us as a part of doing business with them, all of which could increase the costs incurred by our
customers to use our products and otherwise limit the use of these products, which could lead to decreased demand for these products.
Our operations are dependent on numerous required permits and approvals.
We hold numerous environmental and other governmental permits and approvals authorizing operations at each of our facilities. In
addition, any expansion or major modification of our operations is dependent upon securing the necessary environmental or other
permits or approvals. A decision by a government agency to deny or delay issuing a new or renewed material permit or approval, or to
revoke or substantially modify an existing material permit or approval, could have an adverse effect on our ability to continue
operations at the affected facility, or facilities, and on our business, financial condition and results of operations.
We are subject to risks related to adverse trade policies inherent in international sales and associated regulations in certain
important markets for our products.
We have exposure to risks inherent in international sales, including difficulties and costs associated with complying with a wide
variety of complex laws, treaties and regulations including customs and international trade laws; unexpected changes in political or
regulatory environments; earnings and cash flows that may be subject to tax withholding requirements or the imposition of tariffs,
exchange controls or other restrictions; political and economic instability; import and export restrictions, tariffs, and other trade
barriers or retaliatory actions; fluctuations in foreign currency exchange rates; government takeover or nationalization of business; and
government mandated price controls. These considerations limit the countries in which we can do business, the persons or entities with
whom we can do business, the products which we can buy or sell, and the terms under which we can do business. As a U.S.-based
producer, we are impacted by anti-dumping investigations which have had, and may continue to impose, significant anti-dumping
duties on our products. Such duties place us at a significant competitive disadvantage in the applicable markets. In each case, we
diligently evaluate our commercial and legal options to defend these investigations and their subsequent sunset reviews and take steps
we feel are prudent to protect our interests, including our filing anti-dumping petitions covering imports of acetone with the
International Trade Commission in February 2019 (see "Anti-Dumping Duty Petitions" under Item 7. “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”). Historically, we have successfully mitigated these risks through
geographical mix management so that the imposition of duties does not materially affect our business results. However, such duties
could have an adverse effect on the sales of key product lines and affect our business performance in the future.
There can be no assurance that, in the future, any governmental or international trade body will not institute trade policies or remedies
that are adverse to exports from the United States, and given the change in the U.S. presidential administration, we may face additional
uncertainty with regard to U.S. government trade policy. In recent years, the U.S. imposed tariffs on certain U.S. imports, and China
and other countries responded with retaliatory tariffs on certain U.S. exports. Any significant changes in international trade policies,
practices or trade remedies, especially those instituted in our target markets or markets where our major customers are located, such as
the United States-Mexico-Canada Agreement which became effective in July 2020, could potentially increase the price of our products
relative to our competitors or decrease our customers’ demand for our products, which in turn may adversely affect our business,
financial condition and results of operations.
Failure to maintain effective internal controls could adversely impact our ability to meet our reporting requirements.
We are required, under the Sarbanes-Oxley Act of 2002, to maintain effective internal control over financial reporting and disclosure
controls and procedures. This includes performing system and process evaluations and testing of our internal control over financial
reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal
control over financial reporting, as required by the Sarbanes-Oxley Act, with auditor attestation of the effectiveness of our internal
controls. If we are not able to comply with these requirements, or if we or our independent registered public accounting firm identify
deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our
common shares could decline and we could be subject to penalties or investigations by the NYSE, the SEC or other regulatory
authorities, which would require additional financial and management resources.
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively
prevent fraud. Internal controls over financial reporting may not prevent or detect misstatements because of inherent limitations,
including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal
controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail
21
to maintain the effectiveness of our internal controls, including any failure to implement required new or improved controls, or if we
experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting
obligations, and there could be a material adverse effect on our stock price.
The ongoing process of implementing internal controls requires significant attention from management and we cannot be certain that
these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future.
Difficulties encountered in their implementation could harm our results of operations or cause us to fail to meet our reporting
obligations. If we fail to obtain the quality of services necessary to operate effectively or incur greater costs in obtaining these
services, our profitability, financial condition and results of operations may be materially and adversely affected.
Our spin-off could result in significant tax liability.
Completion of our spin-off was conditioned on Honeywell’s receipt of a written opinion of Cravath, Swaine & Moore LLP to the
effect that the October 1, 2016 distribution by Honeywell of all of the then outstanding shares of AdvanSix common stock should
qualify for non-recognition of gain and loss under Section 355 of the Code. The opinion of counsel did not address any U.S. state,
local or foreign tax consequences of the spin-off. The opinion was based on numerous assumptions and on certain representations as to
factual matters from, and certain covenants by Honeywell and us. The opinion cannot be relied on if any of the assumptions,
representations or covenants is incorrect, incomplete or inaccurate or is violated in any material respect. The opinion of counsel is not
binding on the Internal Revenue Service (“IRS”) or the courts, and there can be no assurance that the IRS or a court will not take a
contrary position. Honeywell did not request a ruling from the IRS regarding the U.S. Federal income tax consequences of the spin-
off.
If the distribution were determined not to qualify for non-recognition of gain and loss under Section 355(e) of the Code, our U.S.
stockholders could be subject to tax. In this case, each U.S. stockholder who received our common stock in the distribution would
generally be treated as having received a distribution in an amount equal to the fair market value of our common stock received, which
would generally result in (1) a taxable dividend to the U.S. stockholder to the extent of that U.S. stockholder’s pro rata share of
Honeywell’s current and accumulated earnings and profits; (2) a reduction in the U.S. stockholder’s basis (but not below zero) in its
Honeywell common stock to the extent the amount received exceeds the stockholder’s share of Honeywell’s earnings and profits; and
(3) a taxable gain from the exchange of Honeywell common stock to the extent the amount received exceeds the sum of the U.S.
stockholder’s share of Honeywell’s earnings and profits and the U.S. stockholder’s basis in its Honeywell common stock. A
discussion of the material U.S. federal income tax consequences of the spin-off can be found in our Form 10.
If, due to any of our representations being untrue or our covenants being breached, it were determined that the distribution did not
qualify for non-recognition of gain and loss under Section 355 of the Code, we could be required to indemnify Honeywell for the
resulting taxes and related expenses. Any such indemnification obligation could adversely affect our business, financial condition and
results of operations.
Risks Relating to Our Common Stock and the Securities Market
Our stock price may fluctuate significantly and investments in our stock could lose value.
The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control,
including:
•
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Actual or anticipated fluctuations in our results of operations due to factors related to our business;
Success or failure of our business strategies;
Competition and industry capacity;
Changes in interest rates and other factors that affect earnings and cash flow;
Our level of indebtedness, our ability to make payments on or service our indebtedness and our ability to obtain financing as
needed;
Our ability to pay dividends or repurchase our common stock;
Our ability to retain and recruit qualified personnel;
Our quarterly or annual earnings, or those of other companies in our industry;
Announcements by us or our competitors of significant acquisitions or dispositions;
Changes in accounting standards, policies, guidance, interpretations or principles;
Changes in earnings estimates by securities analysts or our ability to meet those estimates;
The operating and stock price performance of other comparable companies;
Investor perception of our company and our industry;
Overall market fluctuations and volatility unrelated to our operating performance;
Results from any material litigation or government investigation;
Changes in laws and regulations (including tax laws and regulations) affecting our business;
Changes in capital gains taxes and taxes on dividends affecting stockholders; and
General economic conditions and other external factors.
22
General or industry-specific market conditions, stock market performance or macroeconomic and geopolitical factors unrelated to our
performance may also affect our stock price. For these reasons, investors should not rely on recent or historical trends to predict future
stock prices, financial condition, results of operations or cash flows. Volatility in our stock price could expose us to litigation, which
could result in substantial costs and the diversion of management time and resources. In addition, repurchases pursuant to our share
repurchase program could affect our stock price and increase its volatility. The existence of a share repurchase program could also
cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity
for our stock. There can be no assurance that any share repurchases will enhance stockholder value because the market price of our
common stock may decline below the levels at which we repurchased shares of common stock. Although our share repurchase
program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program’s
effectiveness. Furthermore, the program does not obligate the Company to repurchase any dollar amount or number of shares of
common stock, and may be suspended or discontinued at any time and any suspension or discontinuation could cause the market price
of our stock to decline.
We cannot guarantee the timing, declaration, amount or payment of any dividends, and the terms of our indebtedness could limit
our ability to pay dividends on our common stock.
The timing, declaration, amount and payment of dividends to stockholders, if any, will fall within the sole discretion of our Board.
Among the items considered when establishing a dividend policy will be the capital intensive nature of our business and opportunities
to retain future earnings for use in the operation of our business and to fund future growth. Additionally, the terms of our indebtedness
limit our ability to pay cash dividends. There can be no assurance that we will continue to pay a dividend in the future.
Stockholder percentage ownership in AdvanSix may be diluted in the future.
A stockholder’s percentage ownership in AdvanSix may be diluted in the future because of common stock-based equity awards that
we have granted and expect to grant in the future to our directors, officers and other employees. In addition, we may issue equity to
raise capital to finance our ongoing operations or as all or part of the consideration paid for acquisitions and strategic investments that
we may make in the future.
Certain provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws and Delaware
law may discourage takeovers.
Several provisions of our Amended and Restated Certificate of Incorporation, Amended and Restated By-laws and Delaware law may
discourage, delay or prevent a merger or acquisition that is opposed by our Board. These include, among others, provisions that do not
permit our stockholders to act by written consent, establish advance notice requirements for stockholder nominations and proposals,
limit the persons who may call special meetings of stockholders, and limit our ability to enter into business combination transactions
with certain stockholders. These and other provisions of our Amended and Restated Certificate of Incorporation, Amended and
Restated By-laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened
acquisition or change in control of AdvanSix, including unsolicited takeover attempts, even though the transaction may offer our
stockholders the opportunity to sell their shares of our common stock at a price above the prevailing market price.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our principal executive offices are located in leased space at 300 Kimball Drive, Suite 101, Parsippany, NJ 07054. We also own three
production facilities located in Frankford, Pennsylvania, Chesterfield, Virginia and Hopewell, Virginia. In addition, upon spin-off, we
entered into site sharing and services agreements with Honeywell under which Honeywell leased space to us at Honeywell’s facility in
Pottsville, Pennsylvania and its R&D center in Colonial Heights, Virginia. Our Pottsville and Colonial Heights site sharing and
services agreements were terminated in late 2019 and our former Colonial Heights R&D facility relocated to our AdvanSix site in
Chesterfield in early 2020, enabling an improved configuration of our labs to drive productivity, increased connectivity with our resin
manufacturing and more effective collaboration with customers.
We consider the manufacturing facilities and technology centers and the other properties that we own or lease to be in good condition
and generally suitable for the purposes for which they are used. Our manufacturing facilities are maintained through ongoing capital
investments, regular maintenance and equipment upgrades. We believe our facilities are adequate for our current operations.
Item 3. Legal Proceedings
From time to time, we are involved in litigation relating to claims arising out of the ordinary course of our business operations. We are
not a party to, and, to our knowledge, there are 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.
23
The United States Environmental Protection Agency (“EPA”) notified the Company in December 2016 that alleged violations,
involving the enhanced leak detection and repair program and emission testing requirements, at the Company’s manufacturing facility
in Hopewell, Virginia, in each case that were self-reported by the Company, may potentially subject the Company to stipulated
penalties under the 2013 consent decree among the Company, the U.S. and the Commonwealth of Virginia. The Company has
discussed this matter with the EPA and negotiations to resolve it are ongoing. Although the outcome of the matter cannot be predicted
with certainty, we do not believe that it will have a material adverse effect on our consolidated financial position, results of operations
or operating cash flows.
Item 4. Mine Safety Disclosures
Not applicable.
24
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is traded on the New York Stock Exchange under the symbol “ASIX”. On February 4, 2022, there were 18,830
holders of record of our common stock and the closing price of our common stock on the New York Stock Exchange was $40.55 per
share.
As of February 4, 2022, 28,141,203 shares of our common stock and 0 shares of our preferred stock were outstanding.
On May 4, 2018, the Company announced that the Board of Directors (the "Board") authorized a share repurchase program of up to
$75 million of the Company’s common stock. On February 22, 2019, the Company announced that the Board authorized a share
repurchase program of up to an additional $75 million of the Company's common stock, which was in addition to the remaining
capacity available under the May 2018 share repurchase program. Repurchases may be made, from time to time, on the open market,
including through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and timing of these
repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors. The 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 December 31, 2021:
Period
October 2021
November 2021 (1)
December 2021
Total
Total Number of Shares
Purchased (1)
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
— $
1,274
—
1,274 $
—
49.14
—
49.14
— $
—
— $
—
59,581,679
59,581,679
59,581,679
(1)
Total number of shares purchased includes 1,274 shares withheld to cover tax withholding obligations in connection with the vesting of equity awards.
As of December 31, 2021, the Company had repurchased a total of 3,615,476 shares of common stock, including 525,714 shares
withheld to cover tax withholding obligations in connection with the vesting of equity awards, for an aggregate of $102.4 million at a
weighted average market price of $28.31 per share.
During the period January 1, 2022 through February 4, 2022, no additional shares were repurchased under the currently authorized
repurchase program.
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.
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.
We generally expect to declare and pay dividends on a quarterly basis; however, the timing, declaration, amount and payment of
future dividends to stockholders, if any, will depend on our financial condition, earnings, capital requirements and debt service
obligations and 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
practices and other factors that our Board deems relevant. Our credit agreement contains customary covenants limiting the ability of
the Company and its subsidiaries to, among other things, pay cash dividends. There can be no assurance that payment of a dividend
will occur in the future.
The Company paid dividends of approximately $3.5 million for the year ended December 31, 2021, with no dividends declared during
2020 and 2019.
Performance Graph
25
The following graph compares the cumulative total stockholder return on the Company’s common stock to the total returns on the
Standard & Poor’s ("S&P") Small Cap 600 Stock Index and the S&P Small Cap 600 Materials Index. The changes for the periods
shown in the graph assume that $100 had been invested in AdvanSix stock and each index on December 31, 2016, and that all
dividends, if any, were reinvested. The share price performance in the graph is not necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
December 31,
2016
December 31,
2017
December 31,
2018
December 31,
2019
December 31,
2020
December 31,
2021
AdvanSix Inc.
S&P Small Cap 600
S&P Small Cap 600 Materials
100
100
100
190
113
110
110
104
85
90
127
103
90
142
126
214
180
150
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Dollars in thousands, except per share data or unless otherwise noted)
The following section, referred to as the "MD&A" presents management's discussion and analysis of the Company's financial
condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and the notes thereto
contained in this Form 10-K. This section of this Form 10-K generally discusses our financial condition and results of operations as of
and for the years ended December 31, 2021 and 2020 and year-to-year comparisons between 2021 and 2020. Discussions of our
financial condition and results of operations as of and for the year ended December 31, 2019 and year-to-year comparisons between
2020 and 2019 that are not included in this Form 10-K can be found under the heading “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2020, filed with the SEC on February 19, 2021.
Business Overview
26
We produce and sell caprolactam as a commodity product and produce and sell our Nylon 6 resin as both a commoditized and
differentiated resin product. Our results of operations are primarily driven by production volume and the spread between the sales
prices of our products and the costs of the underlying raw materials built into market-based and value-based pricing models. The
global prices for nylon resin typically track a spread over the price of caprolactam, which in turn tracks as a spread over benzene
because the key feedstock materials for caprolactam, phenol or cyclohexane, are derived from benzene. This price spread has
historically experienced cyclicality as a result of global changes in supply and demand. Generally, Nylon 6 resin prices track the
cyclicality of caprolactam prices, although prices set above the spread are achievable when nylon resin manufacturers, like AdvanSix,
formulate and produce differentiated nylon resin products. Our differentiated Nylon 6 products are typically valued at a higher level
than commodity resin products.
We believe that Nylon 6 end-market growth will continue to generally track global GDP over the long-term. Applications such as
engineered plastics and packaging have potential to grow at faster rates given certain macrotrends. Additionally, we continue to
execute against our strategic focus on developing and commercializing select higher-value, differentiated Nylon 6 products, such as
our wire and cable, Post-Industrial Recycled resins and films 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, which is used by our customers in the production of adhesives, paints,
coatings and solvents. Prices for acetone are influenced by its own supply and demand dynamics but can also be influenced by the
underlying move in propylene input costs. We continue to invest in and grow our differentiated product offerings in high-purity
applications and high-value intermediates including our oximes-based EZ-Blox® anti-skinning agent used in paints and Nadone®
cyclohexanone, which is a solvent used in various high-value applications.
Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key crop nutrients. Global prices for
ammonium sulfate fertilizer are influenced by several factors including the price of urea, which is the most widely used source of
nitrogen-based fertilizer in the world. Other global factors driving ammonium sulfate fertilizer demand are general agriculture trends,
including the price of crops. Our ammonium sulfate product is positioned with the added value proposition of sulfur nutrition to
increase yields of key crops. In addition, due to its nutrient density, the typical ammonium sulfate product delivers pound for pound
the most readily available sulfur and nitrogen to crops than other fertilizers.
We 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. For a description of our principal risks, see
“Risk Factors" in Item 1A.
Recent Developments
COVID-19
In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a global pandemic with numerous
countries around the world declaring national emergencies, including the United States. Since early 2020, COVID-19 has continued to
spread, with confirmed cases worldwide, and with certain jurisdictions experiencing resurgences, including as a result of variant
strains. The spread resulted in authorities implementing numerous measures to contain the virus, such as travel bans and restrictions,
quarantines, shelter-in-place orders and business shutdowns. The pandemic and these containment measures have had a substantial
impact on businesses around the world and on global, regional and national economies, including disruptions to supply chains,
volatility in demand, production and sales across most industries, volatility within global financial markets, inflationary pressures in
commodity pricing and 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.
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. Starting in the second half of 2020, and through the end of 2021, demand improved to pre-COVID-19
27
levels with states, regions and countries in various phases of re-opening and continued administration of vaccines for 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.
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.
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.
Acquisitions
On February 18, 2022, the Company announced the signing of a definitive agreement to acquire U.S. Amines, Ltd., a leading North
American producer of alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals, for an
estimated net purchase price of approximately $100 million. The transaction is expected to close in the first quarter of 2022, subject to
customary closing conditions.
In January 2021, the Company acquired certain assets associated with ammonium sulfate packaging, warehousing and logistics
services in Virginia from Commonwealth Industrial Services, Inc. for approximately $9.5 million. This acquisition 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 and
products for industrial use.
Credit Agreement
On October 27, 2021, the Company completed a refinancing of its existing senior secured revolving credit facility under that certain
Credit Agreement, dated as of September 30, 2016, among the Company, the guarantors, the lenders party thereto and Bank of
America, N.A., as administrative agent (as amended by Amendment No. 1 on February 21, 2018 and Amendment No. 2 on
February 19, 2020), by entering into a new Credit Agreement (the “Credit Agreement”), among the Company, the lenders party
thereto, the swing line lenders party thereto, the letter of 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”). For a discussion of the Credit Agreement and Revolving Credit Facility, please refer to "Note 9. Long-term Debt and Credit
Agreement."
Anti-Dumping Duty Petitions
Acetone
On February 19, 2019, the Company announced that it filed anti-dumping duty petitions covering imports of acetone with the
International Trade Commission (“ITC”) and U.S. Department of Commerce ("Commerce"). The petitions allege that dumped acetone
imports into the United States from Belgium, Saudi Arabia, Singapore, South Africa, South Korea, and Spain have caused material
injury to the domestic industry. On April 4, 2019, the ITC voted to continue the anti-dumping duty investigations concerning imports
of acetone from all such nations other than Saudi Arabia. During the third quarter of 2019, Commerce announced its preliminary
affirmative dumping determination regarding imports from Singapore, Spain, Belgium, South Africa and South Korea. On October 21,
2019, Commerce published its final affirmative determination of dumping regarding imports from Singapore and Spain, and on
December 10, 2019, the ITC issued its final determination of material injury to the industry by reason of imports from Singapore and
Spain. Effective December 20, 2019, Commerce imposed anti-dumping orders and applicable duties on imports of acetone from
Singapore and Spain for a five-year period. On February 13, 2020, Commerce published its final affirmative determination of
dumping regarding imports from Belgium, South Africa and South Korea and on March 17, 2020, the ITC issued its final
determination of material injury to the industry by reason of imports from Belgium, South Africa and South Korea. Effective March
31, 2020, Commerce imposed anti-dumping orders and applicable duties on imports of acetone from Belgium, South Africa and South
Korea for a five-year period. The anti-dumping orders are subject to annual administrative review, if requested, which may change the
level of duties applicable to imports in future periods. On May 26, 2020, LG Chem, Ltd., and LG Chem America, Inc. filed a motion
with the U.S. Court of International Trade contesting the final determination made by Commerce concerning imports from South
Korea, and on June 19, 2020, the Company filed a motion to intervene. The anti-dumping orders applicable to imports from all other
sources were not appealed. On August 13, 2021, the U.S. Court of International Trade affirmed its final determination and LG Chem
did not file any further appeal.
28
Ammonium Sulfate
In January 2017, Commerce published its final affirmative determination in the anti-dumping duty investigation of imports of
ammonium sulfate from the People's Republic of China ("PRC") and in March 2017, the ITC issued its final determination of material
injury by reason of imports from the PRC. Effective March 9, 2017, Commerce imposed anti-dumping and countervailing duty orders
and applicable duties on imports of ammonium sulfate from the PRC for a five-year period. The anti-dumping and countervailing duty
orders are subject to annual administrative review, if requested, which may change the level of duties applicable to imports in future
periods. In February 2022, Commerce and the ITC initiated five-year reviews of the anti-dumping and countervailing duty orders to
determine whether to extend the orders for another five years. Determinations are expected in the fourth quarter of 2022.
Philadelphia Energy Solutions’ Shut Down
The Company has assessed the business impact of the fire that shut down Philadelphia Energy Solutions’ (“PES”) refinery in
Philadelphia, Pennsylvania. PES was one of multiple suppliers to the Company of cumene, a feedstock material used to produce
phenol, acetone and other chemical intermediates. As of year-end 2021, the Company has incurred an approximately $35 million
unfavorable impact to pre-tax income since the refinery shut down and, during 2020, submitted a business interruption insurance
claim, while realigning its supply chain to ensure the continuity of its cumene supply. While the Company has received $3.9 million of
insurance proceeds through December 31, 2021, it continues to pursue the claim, which is ongoing.
Consolidated Results of Operations for the Years Ended December 31, 2021, 2020 and 2019
(Dollars in thousands)
Sales
Sales
% change compared with prior period
The change in sales is attributable to the following:
Volume
Price
2021 compared with 2020
2021
2020
2019
$ 1,684,625
$ 1,157,917
$ 1,297,393
45.5 %
(10.8) %
(14.4) %
2021 versus 2020
2020 versus 2019
7.4 %
38.1 %
45.5 %
0.6 %
(11.4) %
(10.8) %
Sales increased in 2021 compared to 2020 by $526.7 million (approximately 45%) due primarily to (i) favorable market-based pricing
(approximately 20%), (ii) higher formula-based pass-through pricing (approximately 18%) as a result of net cost increases in benzene
and propylene and (iii) higher sales volume (approximately 7%) driven primarily by improved end market demand and tight industry
supply conditions across all product lines.
Cost of Goods Sold
Cost of goods sold
% change compared with prior period
Gross margin %
2021 compared with 2020
2021
2020
2019
$ 1,410,503
$ 1,024,169
$ 1,161,921
37.7 %
16.3 %
(11.9) %
11.6 %
(13.3) %
10.4 %
Costs of goods sold increased in 2021 compared to 2020 by $386.3 million (approximately 38%) due primarily to (i) increased prices
of raw materials (approximately 31%), (ii) higher sales volume (approximately 4%), (iii) increased plant spend and sales freight to
support higher sales volume (approximately 3%) and (iv) an unfavorable non-cash LIFO inventory reserve adjustment (approximately
1%). The noted increase was partially offset by the collection of insurance proceeds related to the 2019 shut-down of cumene supplier
Philadelphia Energy Solutions (approximately 1%).
29
Gross margin percentage increased by approximately 5% in 2021 compared to 2020 due primarily to (i) the net impact of formula-
based pass-through pricing and increased market pricing (approximately 4%) and (ii) higher sales volume (approximately 2%),
partially offset by increased plant spend and sales freight to support higher sales volume (approximately 2%).
Selling, General and Administrative Expenses
Selling, general and administrative expense
% of sales
2021
82,985
$
2020
70,870
$
2019
75,375
$
4.9 %
6.1 %
5.8 %
2021 compared with 2020
Selling, general and administrative expenses increased in 2021 compared to 2020 by $12.1 million, or approximately 17%, due
primarily to increased incentive and stock-based compensation costs and increased functional support costs, as compared to cost
control measures implemented in response to the COVID-19 pandemic in the prior year.
Interest Expense, Net
Interest Expense, net
2021 compared with 2020
2021
2020
2019
$
5,023 $
7,792 $
5,454
Interest expense, net, decreased in 2021 compared to 2020 by $2.8 million, or approximately 36%, due primarily to lower average
borrowings, partially offset by lower amounts of interest capitalized associated with capital projects.
Other Non-operating Expense, Net
Other non-operating expense, net
2021 compared with 2020
2021
2020
2019
$
998 $
53 $
1,295
The increase in Other non-operating expense, net in 2021 compared to 2020 was due primarily to an increase in deferred
compensation expense in the current year.
Income Tax Expense
Income tax expense
Effective tax rate
2021
45,325
$
$
24.5 %
2020
8,956
16.3 %
$
2019
12,001
22.5 %
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 effective income tax rate for 2021 was higher compared to the U.S. Federal statutory rate of 21% due primarily to
state taxes and executive compensation deduction limitations partially offset by research tax credits and the foreign-derived intangible
income deduction.
The Company's effective income tax rate for 2020 was lower compared to the U.S. Federal statutory rate of 21% due primarily to the
impact of research tax credits as well as an energy tax credit described in more detail in “Note 4. Income Taxes”. This was partially
offset by state taxes, executive compensation deduction limitations and a shortfall on the vesting of equity compensation.
The Company's effective income tax rate for 2019 was slightly higher compared to the U.S. Federal statutory rate of 21% due
primarily to state taxes and executive compensation deduction limitations, partially offset by the vesting of restricted stock units and
research tax credits.
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 impact our effective tax rate and
cash flows from operating activities. The current U.S. administration has released various draft tax reform proposals and, as such, we
continue to monitor these legislative proposals to evaluate the impact on our business.
30
As of December 31, 2021, 2020 and 2019, there were no unrecognized tax benefits recorded by the Company. Although there are no
unrecognized income tax benefits, when applicable, the Company’s policy is to report interest expense and penalties related to
unrecognized income tax benefits in the income tax provision.
For additional discussion of income taxes and the effective income tax rate, see “Note 4. Income Taxes” in the Notes accompanying
the audited Consolidated Financial Statements included in Item 8 of this Form 10-K.
Net Income
Net income
2021 compared with 2020
2021
2020
2019
$
139,791 $
46,077 $
41,347
As a result of the factors described above, net income was $139.8 million in 2021 as compared to $46.1 million in 2020.
Non-GAAP Measures
The following tables set forth the non-GAAP financial measures of EBITDA and EBITDA margin. EBITDA is defined as Net income
before Interest, Income taxes and Depreciation and amortization. EBITDA margin is equal to EBITDA divided by Sales. The
following tables also present each of these measures as further adjusted. The Company believes these non-GAAP financial measures
provide meaningful supplemental information as they are used by the Company’s management to evaluate the Company’s operating
performance, enhance a reader’s understanding of the financial performance of the Company, and facilitate a better comparison among
fiscal periods and performance relative to its competitors, as the non-GAAP measures exclude items that are not considered core to the
Company’s operations.
These non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the
financial information presented in accordance with U.S. GAAP. Non-GAAP financial measures should be read only in conjunction
with the comparable U.S. GAAP financial measures. The Company’s non-GAAP measures may not be comparable to other
companies’ non-GAAP measures.
The following is a reconciliation between the non-GAAP financial measures of EBITDA and EBITDA Margin to their most directly
comparable U.S. GAAP financial measure:
(Dollars in thousands, except per share amounts or unless otherwise noted)
Net income
Interest expense, net
Income tax expense (benefit)
Depreciation and amortization
EBITDA (non-GAAP)
One-time Pottsville restructuring charges (1)
EBITDA excluding one-time Pottsville restructuring charges (non-GAAP)
Years Ended December 31,
2021
2020
2019
$
139,791
$
46,077
$
41,347
5,023
45,325
65,340
255,479
—
7,792
8,956
60,832
123,657
—
5,454
12,001
56,826
115,628
(11,020)
$
255,479
$
123,657
$
126,648
Sales
$ 1,684,625
$ 1,157,917
$ 1,297,393
EBITDA margin % (non-GAAP)
15.2 %
10.7 %
8.9 %
EBITDA margin % excluding one-time Pottsville restructuring charges (non-
GAAP)
15.2 %
10.7 %
9.8 %
(1) 2019 one-time Pottsville restructuring charges reflect the closure of the Company's Pottsville, Pennsylvania films plant.
Liquidity and Capital Resources
31
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 and in the risk factors as previously disclosed in in Item 1A, Risk Factors. 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 for the next twelve months and beyond. 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, general economic and industry trends and customer demand. 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 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
reflecting disciplined capital deployment and following the completion of several high-return growth and cost savings investments.
Capital expenditures are deployed for various ongoing investments and initiatives to improve reliability, yield and quality, expand
production capacity and comply with HSE regulations. While the COVID-19 pandemic has created and continues to create volatility
in funding markets, we expect 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 Item 1A, as well as general economic, financial, competitive,
regulatory and other factors that are beyond our control.
At December 31, 2021, the Company had approximately $15 million of cash on hand with approximately $364 million of additional
capacity available under the revolving credit facility. The Company’s Consolidated Leverage Ratio financial covenant of its credit
facility allows it to net up to $75 million of cash with debt. Capital expenditures were approximately $57 million in 2021 compared to
$83 million in 2020, reflecting efficiencies in project execution in 2021 and the completion of several high-return growth and cost
savings investments in 2020.
As noted in Note 4. "Income Taxes," 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 of which 50%
was paid on January 3, 2022 and the remainder is due by January 3, 2023.
We assumed from Honeywell all 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 2022 will be to fund costs associated with ongoing operations, capital expenditures
and amounts related to contractual obligations. See below under “Capital Expenditures” for more information regarding our capital
expenditures in 2021, 2020 and 2019 and anticipated capital expenditures for 2022. Amounts related to contractual obligations are
related to principal repayments and interest payments on leases, long-term debt, purchase obligations, estimated environmental
compliance costs, and postretirement benefit obligations. We anticipate that our estimated environmental compliance costs will be
approximately $1.7 million in aggregate for 2022 through 2026. This amount is related to what has been accrued as probable and
reasonably estimable as of December 31, 2021. For information regarding material cash requirements from known contractual
obligations with respect to lease obligations, long-term debt principal repayments and purchase obligations please refer to "Note 8.
Leases", "Note 9. Long-term Debt and Credit Agreement" and "Note 13. Commitments and Contingencies", respectively, to the
Consolidated Financial Statements in Item 8 of this Form 10-K. Interest payments are estimated based on the interest rate applicable as
of December 31, 2021 and approximate $4.1 million per year, subject to changes in variable interest rates and additional obligations.
The Company made contributions to the defined benefit pension plan of $17.5 million during the year ended December 31, 2021
sufficient to satisfy pension funding requirements for 2021 under the AdvanSix Retirement Earnings Plan. Cash contributions of $1.2
32
million, $3.6 million and $12.7 million were made in the first three quarters of 2021, respectively. No cash contributions were made in
the fourth quarter of 2021. The Company plans to make $10.0 million to $15.0 million of cash contributions in 2022 and additional
contributions in future years sufficient to satisfy pension funding requirements in those periods.
The Company made cash contributions to the defined contribution plan of $5.9 million and $6.1 million for the years ended December
31, 2021 and 2020, respectively.
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 million of the Company's common stock, which was in addition to the remaining capacity available under the
May 2018 share repurchase program. Repurchases may be made, from time to time, on the open market, including through the use of
trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and timing of these repurchases will depend on
pricing, market and economic conditions, legal and contractual requirements and other factors. The share repurchase program has no
expiration date and may be modified, suspended or discontinued at any time. The par value of the shares repurchased is applied to
Treasury stock and the excess of the purchase price over par value is applied to Additional paid-in capital.
As of December 31, 2021, the Company had repurchased 3,615,476 shares of common stock, including 525,714 shares withheld to
cover tax withholding obligations in connection with the vesting of equity awards, for an aggregate of $102.4 million at a weighted
average market price of $28.31 per share. As of December 31, 2021, $59.6 million remained available for repurchase under the
currently authorized repurchase program. During 2021 and the period from January 1, 2022 through February 4, 2022, no additional
shares were repurchased under the currently authorized repurchase program.
At December 31, 2021, 2020 and 2019, the Company did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K or financing activities with special-purpose entities. 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 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.
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 2021 and $0 in 2020.
We generally expect to declare and pay dividends on a quarterly basis; however, the timing, declaration, amount and payment of
future dividends to stockholders, if any, will depend on our financial condition, earnings, capital requirements and debt service
obligations and 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. Our credit agreement contains customary covenants limiting the ability of the
Company and its subsidiaries to, among other things, pay cash dividends. There can be no assurance that payment of a dividend will
occur in the future.
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"), 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 had a five-year term with a
scheduled maturity date of February 21, 2023.
The Second Amended and Restated Credit Agreement required the Company to maintain a Consolidated Leverage Ratio (as defined in
the Second Amended and Restated Credit Agreement) of (i) 3.50 to 1.00 or less for the fiscal quarter ending March 31, 2020, (ii) 4.50
to 1.00 or less for the fiscal quarter ending June 30, 2020, (iii) 4.25 to 1.00 or less for the fiscal quarter ending September 30, 2020,
(iv) 3.50 to 1.00 or less for the fiscal quarter ending December 31, 2020, (v) 3.25 to 1.00 or less for the fiscal quarter ending March 31,
2021 through and including the fiscal quarter ending December 31, 2021, and (vi) 3.00 to 1.00 or less for the fiscal quarter ending
March 31, 2022 and each fiscal quarter thereafter (subject to the Company’s option to elect a Consolidated Leverage Ratio increase in
connection with certain acquisitions). The Consolidated Interest Coverage Ratio financial covenant required 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
33
1.00. If the Company did not comply with the covenants in the Second Amended and Restated Credit Agreement, the lenders could,
subject to customary cure rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility.
Borrowings under the Second Amended and Restated Credit Agreement bore interest at a rate equal to either the sum of a base rate
plus a margin ranging from 0.50% to 2.00% or the sum of a Eurodollar rate plus a margin ranging from 1.50% to 3.00%, with either
such margin varying according to the Company’s Consolidated Leverage Ratio (as defined in the Second Amended and Restated
Credit Agreement). The Company was also required to pay a commitment fee in respect of unused commitments under the credit
facility, if any, at a rate ranging from 0.20% to 0.50% per annum depending on the Company’s Consolidated Leverage Ratio.
In addition, the Second Amendment also amended certain administrative provisions associated with the LIBOR Successor Rate (as
defined in the Second Amended and Restated Credit Agreement).
The obligations under the Second Amended and Restated Credit Agreement were secured by a pledge of assets and liens on
substantially all of the assets of AdvanSix.
The Second Amended and Restated Credit Agreement contained customary covenants limiting the ability of the Company and its
subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into
transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets, as
well as financial covenants that require the Company to maintain interest coverage and leverage ratios at levels specified in the Second
Amended and Restated Credit Agreement. These covenants placed limits on how we conduct our business, and in the event of certain
defaults, our repayment obligations could be accelerated.
On October 27, 2021, the Company completed a refinancing of the Second Amended and Restated Credit Agreement by entering into
a new Credit Agreement (the “Credit Agreement”), among the Company, the lenders party thereto, the swing line lenders party
thereto, the letter of 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”).
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 has the option to establish a new class of term loans and/or increase the amount of the Revolving Credit Facility in an
aggregate principal amount for all such incremental term loans and increases of the Revolving Credit Facility of up to the sum of (x)
$175 million plus (y) an amount such that the Company’s Consolidated 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 Credit Agreement bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.25%
to 1.25% or the sum of a Eurodollar rate plus a margin ranging from 1.25% to 2.25%, with either such margin varying according to the
Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement). The Company is also required to pay a commitment
fee in respect of unused commitments under the Revolving Credit Facility, if any, at a rate ranging from 0.15% to 0.35% per annum
depending on the Company’s Consolidated Leverage Ratio. As of October 27, 2021, the applicable margin under the Credit
Agreement was 0.375% for base rate loans and 1.375% for Eurodollar loans and the applicable commitment fee rate was 0.175% per
annum. The Revolving Credit Facility also contains certain administrative provisions regarding alternative rates of interest for LIBOR,
as applicable.
Substantially all tangible and intangible assets of the Company and its domestic subsidiaries are pledged as collateral to secure the
obligations under the Credit Agreement.
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 Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things,
pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make
investments, make capital expenditures, merge or consolidate with others or dispose of assets. The Credit Agreement also contains
financial covenants that require the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement)
of not less than 3.00 to 1.00 and to maintain a Consolidated Leverage Ratio of (i) 4.00 to 1.00 or less for the fiscal quarter ending
December 31, 2021, through and including the fiscal quarter ending September 30, 2023 and (ii) 3.75 to 1.00 or less for each fiscal
quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in connection with certain
acquisitions). If the Company does not comply with the covenants in the Credit Agreement, the lenders may, subject to customary cure
rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility. We were in compliance with all
of our covenants at December 31, 2021 and through the date of the filing of this Annual Report on Form 10-K.
34
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. 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 this Annual Report on Form 10-K.
As of December 31, 2021, $364 million was available for use out of the total of $500 million under the Revolving Credit Facility.
As of December 31, 2020, we had a balance of $275 million under our prior credit facility. During the twelve months ended December
31, 2021, we repaid an incremental net amount of $140 million to bring the balance under the Revolving Credit Facility to $135
million as of December 31, 2021. We expect that Cash provided by operating activities will fund future interest payments on the
Company's outstanding indebtedness.
The Company had approximately $1 million of letter of credit agreements outstanding under the Revolving Credit Facility at
December 31, 2021. There was no amount associated with bilateral letters of credit outside the Revolving Credit Facility.
Cash Flow Summary for the Years Ended December 31, 2021, 2020 and 2019
Our cash flows from operating, investing and financing activities for the years ended December 31, 2021, 2020 and 2019, as reflected
in the audited Consolidated Financial Statements included in this Form 10-K, are summarized as follows:
(Dollars in thousands)
Cash provided by (used for):
Operating activities
Investing activities
Financing activities
Net change in cash and cash equivalents
2021 compared with 2020
Years Ended December 31,
2021
2020
2019
$
218,849 $
111,847 $
120,385
(67,562)
(84,103)
(153,125)
(146,793)
(24,188)
$
4,494 $
3,556 $
29,982
(2,758)
Net cash provided by operating activities increased by $107.0 million for the year ended December 31, 2021 versus the prior year due
primarily to a $93.7 million increase in net income and a $21.6 million cash improvement from Taxes receivable (including a $12.3
million cash tax refund received in the first quarter of 2021). These net favorable impacts were partially offset by a $7.7 million
unfavorable cash impact from Other assets and liabilities driven a decrease in pension liability of $10.0 million (primarily reflecting
the impact of cash pension contributions) partially offset by a $2.7 million increase in prepaid expenses. Cash from working capital
(comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) was
relatively neutral year-over-year, with a $20.8 million unfavorable cash impact for the year ended December 31, 2021 compared to a
$20.2 million unfavorable cash impact in the prior year period. Included within the year-over-year neutrality of working capital was a
$23.6 million unfavorable impact due to the strategic absence of our typical ammonium sulfate pre-buy cash advances during the
fourth quarter of 2021.
Cash used for investing activities decreased by $16.5 million for the year ended December 31, 2021 versus the prior year period due to
a decrease in cash paid for capital expenditures of approximately $26.1 million reflecting capital project efficiencies and timing of
project execution offset by cash paid for the acquisition of Commonwealth Industrial Services, Inc. of approximately $9.5 million.
Cash used for financing activities increased by $122.6 million for the year ended December 31, 2021 versus the prior year due to net
payments on the credit facility of $140.0 million for the year ended December 31, 2021 compared to net payments of $22.0 million
during the prior year. During the year ended December 31, 2021 the Company paid dividends of approximately $3.5 million and
entered into a new Revolving Credit Facility, as described above, with approximately $2.4 million in fees compared to fee payments
of $0.4 million during the prior year, both of which are described above.
Capital Expenditures
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.
35
The following table summarizes ongoing and expansion capital expenditures for the periods indicated.
Years Ended December 31,
2021
2020
2019
(Dollars in thousands)
Purchases of property, plant and equipment
$
56,811 $
82,918 $
150,322
Capital expenditures decreased $26.1 million from 2020 to 2021 reflecting process and execution efficiencies, as well as timing and
scope of replacement maintenance and high-return growth and cost savings projects.
For 2022, we expect our total capital expenditures to be approximately $95 million to $105 million. 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 (Dollars in thousands, unless otherwise noted)
The Company’s significant accounting policies are more fully described in "Note 2. Summary of Significant Accounting Policies" to
the Consolidated Financial Statements included in Item 8 of this Form 10-K. Management believes that the application of these
policies on a consistent basis enables the Company to provide the users of the financial statements with useful and reliable information
about the Company’s operating results and financial condition.
The preparation of our Consolidated Financial Statements in conformity with U.S. GAAP is based on the selection and application of
accounting policies that require management to make significant estimates and assumptions about the effects of matters that are
inherently uncertain and that affect the reported amounts, including, but not limited to, inventory valuations, impairment of goodwill,
stock-based compensation, long-term employee benefit obligations, income taxes and environmental matters. Management’s estimates
are based on historical experience, facts and circumstances available at the time and various other assumptions that are believed to be
reasonable. The Company reviews these matters and reflects changes in estimates as appropriate. Management believes that the
following represents some of the more critical judgment areas in the applications of the Company’s accounting policies which could
have a material effect on the Company’s financial position, results of operations or cash flows.
Inventories – Substantially all of the Company's inventories are valued at the lower of cost or market using the last-in, first-out
(“LIFO”) method. The Company includes spare and other parts in inventory which are used in support of production or production
facilities operations and are valued based on weighted average cost.
Inventories valued at LIFO amounted to $149.6 million and $180.1 million at December 31, 2021 and 2020. Had such LIFO
inventories been valued at current costs, their carrying values would have been approximately $6.0 million and $35.4 million higher at
December 31, 2021 and 2020.
Goodwill – The Company had goodwill of $17.6 million and $15.0 million as of December 31, 2021 and 2020, respectively. Goodwill
is subject to impairment testing annually as of March 31, or whenever events or changes in circumstances indicate that the carrying
amount may not be fully recoverable. Management first assesses qualitative factors as described in ASC 350 to determine whether it is
necessary to perform the quantitative goodwill impairment test. The Company completed its annual goodwill impairment test as of
March 31, 2021 and, based on the results of the Company's assessment of qualitative factors, it was determined that it was not
necessary to perform the quantitative goodwill impairment test.
Revenue Recognition – The Company recognizes revenue upon the transfer of control of goods or services to customers at amounts
that reflect the consideration expected to be received. AdvanSix primarily recognizes revenues when title and control of the product
transfers from the Company to the customer. Outbound shipping costs incurred by the Company are not included in revenues but are
reflected as freight expense in Costs of goods sold in the Consolidated Statements of Operations.
Sales of our products to customers are made under a purchase order, and in certain cases in accordance with the terms of a master
services agreement. These agreements typically contain formula-based pass-through pricing tied to key feedstock materials and
volume ranges, but often do not specify the goods, including the quantities thereof, to be transferred. Certain master services
agreements (including with respect to our largest customer) may contain minimum purchase volumes which can be satisfied by the
customer on a periodic basis by choosing from various products offered by the Company. In these cases, a performance obligation is
created when a customer submits a purchase order for a specific product at a specified price, typically providing for delivery within the
next 60 days. Management considers the performance obligation with respect to such purchase order satisfied at the point in time
when control of the product is transferred to the customer, which is indicated by shipment of the product and transfer of title and risk
of loss to the customer. Transfer of control to the customer occurs through various modes of shipment, including trucks, railcars, and
vessels, and follows a variety of commercially acceptable shipping or destination point terms pursuant to the arrangement with the
36
customer. Variable consideration is estimated for future volume rebates and early pay discounts on certain products and product
returns. The Company records variable consideration as an adjustment to the sale transaction price. Since variable consideration is
generally settled within one year, the time value of money is not significant.
The Company applies the practical expedient in Topic 606 and does not include disclosures regarding remaining performance
obligations that have original expected durations of one year or less, or amounts for variable consideration allocated to wholly-
unsatisfied performance obligations or wholly-unsatisfied distinct goods that form part of a single performance obligation, if any.
The Company also utilizes the practical expedient in Topic 606 and does not include an adjustment for the effects of a significant
financing component given the expected period duration of one year or less.
Stock-Based Compensation Plans – The principal awards issued under our stock-based compensation plans, which are described in
"Note 16. Stock-Based Compensation Plans" to the Consolidated Financial Statements included in Item 8 of this Form 10-K, are non-
qualified stock options, performance stock units and restricted stock units. The cost for such awards is measured at the grant date
based on the fair value of the award. The value of the portion of the award that is ultimately expected to vest, including the impact of
the Company's anticipated performance against certain metrics for performance stock units, is recognized as expense over the requisite
service periods (generally the vesting period of the equity award) and is included in selling, general and administrative expenses.
Estimates of future performance are utilized to determine the underlying expense for shares expected to vest. Forfeitures are estimated
at the time of grant to recognize expense for those awards that are expected to vest and are based on our historical forfeiture rates.
Pension Benefits – We have a defined benefit plan covering certain employees primarily in the U.S. The benefits are accrued over the
employees’ service periods. We use actuarial methods and assumptions in the valuation of defined benefit obligations and the
determination of net periodic pension income or expense. Differences between actual and expected results or changes in the value of
defined benefit obligations and fair value of plan assets, if any, are not recognized in earnings as they occur but rather systematically
over subsequent periods when net actuarial gains or losses are in excess of 10% of the greater of the fair value of plan assets or the
plan’s projected benefit obligation.
A 25 basis point increase in the discount rate would result in a decrease of approximately $0.1 million to the net periodic benefit cost
for 2022, while a 25 basis point decrease in the discount rate would result in an increase of approximately $0.1 million to the net
periodic benefit cost for 2022. The resulting impact on the pension benefit obligation would be a decrease of $3.5 million and an
increase of $3.7 million, respectively.
Income Taxes – We account for income taxes pursuant to the asset and liability method which requires us to recognize current tax
liabilities or receivables for the amount of taxes we estimate are payable or refundable for the current year and deferred tax assets and
liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying
amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all
of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.
We adopted the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s
consolidated financial statements. ASC 740 prescribes a comprehensive model for the financial statement recognition, measurement,
presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
The benefit of tax positions taken or expected to be taken in our income tax returns are recognized in the financial statements if such
positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken
or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as
“unrecognized benefits”. A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced)
for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position
that was not recognized as a result of applying the provisions of ASC 740. Interest costs and related penalties related to unrecognized
tax benefits are required to be calculated, if applicable. Our policy is to classify tax related interest and penalties, if any, as a
component of income tax expense. No interest or penalties related to unrecognized income tax benefits were recorded during the years
ended December 31, 2021, 2020 and 2019. As of December 31, 2021 and 2020, no liability for unrecognized tax benefits was required
to be reported. We do not expect any significant changes in our unrecognized tax benefits in the next year.
Use of Estimates – The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts in the Consolidated Financial Statements and related disclosures in
37
the accompanying Notes. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and
the effects of changes are reflected in the Consolidated Financial Statements in the period they are determined to be necessary.
Recent Accounting Pronouncements
See “Note 2. Summary of Significant Accounting Policies” to the Consolidated Financial Statements included in Item 8 of this Form
10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Our exposure to risk based on changes in interest rates relates primarily to our Revolving Credit Facility. The Revolving Credit
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 Revolving Credit Facility.
As of December 31, 2021, the Company had one interest rate swap agreement outstanding for a total notional amount of $50 million
to exchange floating for fixed rate interest payments for our LIBOR-based borrowings. The interest rate swap had a fair value of zero
at inception and was effective July 31, 2019 with a maturity date of February 21, 2023. The interest rate swap has been designated as a
cash flow hedge and converts the Company's interest rate payments on the first $50 million of variable-rate, 1-month LIBOR-based
debt to a fixed interest rate. As a result of this interest rate swap, interest payments on approximately 37% of our borrowings, as of
December 31, 2021, have been swapped from floating rate to fixed rate for the life of the 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 December 31, 2021, it was determined that the critical terms
continued to exactly match, and that the counterparties still had the ability to honor their obligations. As a result, the hedges continue
to be deemed effective.
Based on current borrowing levels at December 31, 2021, net of the interest rate swap, a 25-basis point fluctuation in interest rates for
the year ended December 31, 2021 would have resulted in an increase or decrease to our interest expense of approximately $0.2
million.
See “Note 12. Derivative and Hedging Instruments” to the Consolidated Financial Statements included in this Form 10-K, for a
discussion relating to credit and market, commodity price and interest rate risk management.
38
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
To the Board of Directors and Stockholders of AdvanSix Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of AdvanSix Inc. and its subsidiaries (the “Company”) as of
December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity
and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred
to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s
Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
39
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Revenue Recognition - Transfer of Control
As described in Notes 2 and 3 to the consolidated financial statements, the Company recorded $1,685 million in sales for the year
ended December 31, 2021. Sales of the Company’s products to customers are made under a purchase order, and in certain cases in
accordance with the terms of a master services agreement. A performance obligation is created when a customer submits a purchase
order for a specific product at a specified price. Management considers the performance obligation satisfied at the point in time when
control of the product is transferred to the customer, which is indicated by shipment of the product and transfer of title and risk of loss
to the customer. Transfer of control to the customer occurs through various modes of shipment, including trucks, railcars, and vessels,
and follows a variety of commercially acceptable shipping or destination point terms pursuant to the arrangement with the customer.
The principal considerations for our determination that performing procedures relating to revenue recognition – transfer of control is a
critical audit matter are the high degree of auditor subjectivity and effort in performing procedures and evaluating audit evidence
relating to the determination of the point in time when control of the product was transferred to the customer and thus revenue was
recognized.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the Company’s
revenue recognition process, including controls over the point in time when control of the product was transferred to the customer.
These procedures also included, among others (i) evaluating, on a sample basis, management’s determination of the point in time
when control of the product was transferred to the customer based on contractual terms in customer arrangements and the impact of
this determination on the timing of revenue recognition; (ii) testing, on a sample basis, the point in time when control of the product
was transferred to the customer by obtaining supporting purchase orders and shipping documents; and (iii) testing the completeness
and accuracy of data provided by management.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 18, 2022
We have served as the Company’s auditor since 2015.
40
ADVANSIX INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share amounts)
Sales
Costs, expenses and other:
Costs of goods sold
Selling, general and administrative expenses
Interest expense, net
Other non-operating expense, net
Total costs, expenses and other
Income before taxes
Income tax expense
Net income
Earnings per common share
Basic
Diluted
Weighted average common shares outstanding
Basic
Diluted
Years Ended December 31,
2021
2020
2019
$
1,684,625 $
1,157,917 $
1,297,393
1,410,503
1,024,169
1,161,921
82,985
5,023
998
70,870
7,792
53
75,375
5,454
1,295
1,499,509
1,102,884
1,244,045
185,116
45,325
55,033
8,956
$
139,791 $
46,077 $
53,348
12,001
41,347
$
$
4.97 $
4.81 $
1.64 $
1.64 $
1.47
1.43
28,152,876
28,048,726
28,122,288
29,045,186
28,157,062
28,898,836
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
41
ADVANSIX INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Net income
Foreign exchange translation adjustment
Cash-flow hedges
Pension obligation adjustments
Other comprehensive income (loss), net of tax
Comprehensive income
Years Ended December 31,
2021
2020
2019
$
$
139,791 $
(43)
1,789
7,847
9,593
149,384 $
46,077 $
(49)
(1,028)
(5,604)
(6,681)
39,396 $
41,347
(9)
(673)
(6,295)
(6,977)
34,370
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
42
ADVANSIX INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Accounts and other receivables – net
Inventories – net
Taxes receivable
Other current assets
Total current assets
Property, plant and equipment – net
Operating lease right-of-use assets
Goodwill
Other assets
Total assets
LIABILITIES
Current liabilities:
Accounts payable
Accrued liabilities
Operating lease liabilities – short-term
Deferred income and customer advances
Total current liabilities
Deferred income taxes
Operating lease liabilities – long-term
Line of credit – long-term
Postretirement benefit obligations
Other liabilities
Total liabilities
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 200,000,000 shares authorized; 31,755,430 shares issued and
28,139,954 outstanding at December 31, 2021; 31,627,139 shares issued and 28,033,227
outstanding at December 31, 2020
Preferred stock, par value $0.01; 50,000,000 shares authorized; 0 shares issued and outstanding at
December 31, 2021 and 2020
Treasury stock at par (3,615,476 shares at December 31, 2021; 3,593,912 shares at December 31,
2020)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Total stockholders' equity
Total liabilities and stockholders' equity
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
43
$
$
$
December 31,
2021
2020
15,100 $
178,140
149,570
947
6,097
349,854
10,606
123,554
180,085
12,289
6,969
333,503
767,964
136,207
17,592
40,382
1,311,999 $
765,469
114,484
15,005
34,946
1,263,407
221,234 $
49,712
36,127
2,749
309,822
133,330
100,580
135,000
18,243
13,834
710,809
190,227
41,152
29,279
26,379
287,037
125,575
85,605
275,000
39,168
6,899
819,284
318
—
(36)
195,931
411,516
(6,539)
601,190
316
—
(36)
184,732
275,243
(16,132)
444,123
$
1,311,999 $
1,263,407
ADVANSIX INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Loss on disposal of assets
Deferred income taxes
Stock-based compensation
Accretion of deferred financing fees
Restructuring charges
Changes in assets and liabilities, net of business acquisitions:
Accounts and other receivables
Inventories
Taxes receivable
Accounts payable
Accrued liabilities
Deferred income and customer advances
Other assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Expenditures for property, plant and equipment
Acquisition of business
Other investing activities
Net cash used for investing activities
Cash flows from financing activities:
Borrowings from line of credit
Payments of line of credit
Payment of line of credit facility fees
Principal payments of finance leases
Dividend payments
Purchase of treasury stock
Issuance of common stock
Net cash provided by (used for) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at the end of year
Supplemental non-cash investing activities:
Capital expenditures included in accounts payable
Supplemental cash activities:
Cash paid for interest
Cash paid for income taxes
Years Ended December 31,
2020
2019
2021
$
139,791 $
46,077 $
41,347
65,340
1,711
4,702
11,299
677
—
(53,772)
31,227
11,342
25,393
14,654
(23,630)
(9,885)
218,849
(56,811)
(9,523)
(1,228)
(67,562)
176,000
(316,000)
(2,442)
(735)
(3,518)
(652)
554
(146,793)
4,494
10,606
60,832
696
17,611
4,902
553
—
(18,990)
(8,375)
(10,242)
(1,337)
13,892
8,456
(2,228)
111,847
56,826
5,190
8,442
8,349
427
11,020
54,383
(35,567)
(707)
(20,333)
(4,561)
(2,860)
(1,571)
120,385
(82,918)
(150,322)
—
(1,185)
(84,103)
364,000
(386,000)
(425)
(710)
—
(1,055)
2
(24,188)
3,556
7,050
—
(2,803)
(153,125)
419,250
(322,250)
—
(4,839)
—
(62,196)
17
29,982
(2,758)
9,808
7,050
$
$
$
$
15,100 $
10,606 $
11,720 $
6,178 $
21,594
4,459 $
31,000 $
7,290 $
2,005 $
5,201
6,993
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
44
ADVANSIX INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total Equity
Balance at December 31, 2018
30,555,715
306
234,699
187,819
Net Income
Comprehensive income
—
—
Foreign exchange translation adjustments
Cash-flow hedges
Pension obligation adjustments
Other comprehensive income (loss), net
of tax
Issuance of common stock
Acquisition of treasury shares (2,298,407
shares)
—
—
—
—
868,183
Stock-based compensation
—
—
—
—
—
8
—
—
—
—
—
—
—
9
(62,173)
8,349
41,347
—
—
—
—
—
—
—
Balance at December 31, 2019
31,423,898
314
180,884
229,166
Net Income
Comprehensive income
—
—
Foreign exchange translation adjustments
Cash-flow hedges
Pension obligation adjustments
Other comprehensive income (loss), net
of tax
—
—
—
—
Issuance of common stock
203,241
Acquisition of treasury shares (84,791
shares)
Stock-based compensation
—
—
—
—
—
2
—
—
—
—
—
—
—
—
(1,054)
4,902
46,077
—
—
—
—
—
—
—
(12)
—
—
—
—
—
—
(23)
—
(35)
—
—
—
—
—
—
(1)
—
(2,474)
420,338
—
41,347
(9)
(673)
(9)
(673)
(6,295)
(6,295)
(6,977)
(6,977)
—
—
—
17
(62,196)
8,349
(9,451)
400,878
—
46,077
(49)
(1,028)
(5,604)
(49)
(1,028)
(5,604)
(6,681)
(6,681)
—
—
—
2
(1,055)
4,902
Balance at December 31, 2020
31,627,139 $
316 $
184,732 $
275,243 $
(36) $
(16,132) $
444,123
Net Income
Comprehensive income
Foreign exchange translation adjustments
Cash-flow hedges
Pension obligation adjustments
Other comprehensive income (loss), net of tax
—
—
—
—
—
Issuance of common stock
128,291
Acquisition of treasury shares ( 21,564 shares)
Stock-based compensation
Dividends
—
—
—
—
—
—
—
—
2
—
—
—
—
—
—
—
—
552
(652)
11,299
—
139,791
—
—
—
—
—
—
—
(3,518)
—
—
—
—
—
—
—
—
—
—
139,791
(43)
1,789
7,847
9,593
—
—
—
—
(43)
1,789
7,847
9,593
554
(652)
11,299
(3,518)
Balance at December 31, 2021
31,755,430 $
318 $
195,931 $
411,516 $
(36) $
(6,539) $
601,190
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
45
ADVANSIX INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts or unless otherwise noted)
Note 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, plastics, solvents, packaging, paints, coatings, adhesives and electronics. Our reliable and sustainable supply
of quality products emerges from the vertically integrated value chain of our three U.S.-based manufacturing facilities. AdvanSix
strives to deliver best-in-class customer experiences and differentiated products in the industries of nylon solutions, chemical
intermediates and plant nutrients, guided by our core values of Safety, Integrity, Accountability and Respect.
We evaluated segment reporting in accordance with Accounting Standards Codification Topic (“ASC”) 280. We concluded that
AdvanSix is a single operating segment and a single reportable segment based on the operating results available which are evaluated
regularly by the chief operating decision maker (“CODM”) to make decisions about resource allocation and performance assessment.
AdvanSix operations are managed as one integrated process spread across three manufacturing sites, including centralized supply
chain and procurement functions. The production process is dependent upon one key raw material, cumene, as the input to the
manufacturing of all finished goods produced for sale through the sales channels and end-markets the Company serves. Production
rates and output volumes are managed across all three plants jointly to align with the overall Company operating plan. The CODM
makes operational performance assessments and resource allocation decisions on a consolidated basis, inclusive of all of the
Company’s products.
AdvanSix operates through three integrated U.S.-based manufacturing sites located in Frankford, Pennsylvania, and Hopewell and
Chesterfield, Virginia. The Company's headquarters is located in Parsippany, New Jersey.
Corporate History
On October 1, 2016, Honeywell International Inc. (“Honeywell”) completed the separation of AdvanSix. The separation was
completed by Honeywell distributing (the "Distribution") all of the then outstanding shares of common stock of AdvanSix on October
1, 2016 (the “Distribution Date”) through a dividend in kind of AdvanSix common stock, par value $0.01 per share, to holders of
Honeywell common stock as of the close of business on the record date of September 16, 2016 who held their shares through the
Distribution Date (the “Spin-Off”).
COVID-19
In March 2020, the World Health Organization categorized the novel coronavirus (COVID-19) as a global pandemic with numerous
countries around the world declaring national emergencies, including the United States. Since early 2020, COVID-19 has continued to
spread, with confirmed cases worldwide, and with certain jurisdictions experiencing resurgences, including as a result of variant
strains. The spread resulted in authorities implementing numerous measures to contain the virus, such as travel bans and restrictions,
quarantines, shelter-in-place orders and business shutdowns. The pandemic and these containment measures have had a substantial
impact on businesses around the world and on global, regional and national economies, including disruptions to supply chains,
volatility in demand, production and sales across most industries, volatility within global financial markets, inflationary pressures in
commodity pricing and 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 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 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. Starting in the second
half of 2020, and through the end of 2021, demand improved to pre-COVID-19 levels with states, regions and countries in various
phases of re-opening and continued administration of vaccines for COVID-19. The Company will continue to monitor developments
and execute our operational and safety mitigation plans as previously disclosed.
46
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
Unless the context otherwise requires, references in these Notes to the Consolidated Financial Statements to “we,” “us,” “our,”
“AdvanSix” and the “Company” refer to AdvanSix Inc. and its consolidated subsidiaries after giving effect to the Spin-Off. All
intercompany transactions have been eliminated.
Note 2. Summary of Significant Accounting Policies
Accounting Principles – The financial statements and accompanying Notes are prepared in accordance with accounting principles
generally accepted in the United States of America. The following is a description of AdvanSix’s significant accounting policies.
Principles of Consolidation – The Consolidated Financial Statements include the accounts of AdvanSix and all of its subsidiaries in
which a controlling financial interest is maintained. Our consolidation policy requires equity investments that we exercise significant
influence over but do not control the investee and are not the primary beneficiary of the investee’s activities to be accounted for using
the equity method. Investments through which we are not able to exercise significant influence over the investee and which we do not
have readily determinable fair values are accounted for under the cost method. All intercompany transactions and balances are
eliminated in consolidation.
Cash and Cash Equivalents – Cash and cash equivalents include cash on hand and on deposit and highly liquid, temporary cash
investments with an original maturity to the Company of three months or less. We reduce cash and extinguish liabilities when the
creditor receives our payment and we are relieved of our obligation for the liability when checks clear the Company’s bank account.
Liabilities to creditors to whom we have issued checks that remain outstanding aggregated $4.5 million at December 31, 2021 and are
included in Cash and cash equivalents and Accounts payable in the Consolidated Balance Sheets.
Fair Value Measurement – ASC 820, Fair Value Measurement defines fair value as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Financial
Accounting Standards Board's ("FASB") guidance classifies the inputs used to measure fair value into the following hierarchy:
Level 1
Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2
Unadjusted quoted prices in active markets for similar assets or liabilities, or
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or Inputs other than
quoted prices that are observable for the asset or liability
Level 3
Unobservable inputs for the asset or liability
Derivative Financial Instruments – We minimize our risks from interest and foreign currency exchange rate fluctuations through our
normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.
Derivative financial instruments are used to manage risk and are not used for trading or other speculative purposes. Derivative
financial instruments that qualify for hedge accounting must be designated and effective as a hedge of the identified risk exposure at
the inception of the contract. Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in
fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.
All derivatives are recorded on the balance sheet as assets or liabilities and measured at fair value. For derivatives designated as
hedges of the fair value of assets or liabilities, the changes in fair values of both the derivatives and the hedged items are recorded in
current earnings. For derivatives designated as cash flow hedges, the changes in fair value of the derivatives are recorded in
Accumulated other comprehensive income (loss) and subsequently recognized in earnings when the hedged items impact earnings.
Cash flows of such derivative financial instruments are classified consistent with the underlying hedged item. For derivative
instruments that are designated and qualify as a net investment hedge, the derivative’s gain or loss is reported as a component of Other
comprehensive income (loss) and recorded in Accumulated other comprehensive income (loss). The gain or loss will be subsequently
reclassified into net earnings when the hedged net investment is either sold or substantially liquidated.
Commodity Price Risk Management – The Company's exposure to market risk for commodity prices can result in changes in our
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 they do not include take-or-pay terms. Instead, each customer
agreement, the majority of which have a term of at least one year, is typically determined by monthly or quarterly volume estimates.
We may also enter into forward commodity contracts with third parties designated as hedges of anticipated purchases of several
47
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 December 31, 2021 and 2020, we had no
contracts with notional amounts related to forward commodity agreements.
Inventories – Substantially all of the Company's inventories are valued at the lower of cost or market using the last-in, first-out
(“LIFO”) method. The Company includes spare and other parts in inventory which are used in support of production or production
facilities operations and are valued based on weighted average cost.
Inventories valued at LIFO amounted to $149.6 million and $180.1 million at December 31, 2021 and 2020. Had such LIFO
inventories been valued at current costs, their carrying values would have been approximately $6.0 million and $35.4 million higher at
December 31, 2021 and 2020.
Property, Plant, Equipment – Property, plant, equipment asset values are recorded at cost, including any asset retirement
obligations, less accumulated depreciation. For financial reporting, the straight-line method of depreciation is used over the estimated
useful lives of 30 to 50 years for buildings and improvements and 5 to 40 years for machinery and equipment. Our machinery and
equipment includes (1) assets used in short production cycles or subject to high corrosion, such as instrumentation, controls and
insulation systems with useful lives up to 15 years, (2) standard plant assets, such as boilers and railcars, with useful lives ranging
from 15 to 30 years and (3) major process equipment that can be used for long durations with effective preventative maintenance and
repair, such as cooling towers, compressors, tanks and turbines with useful lives ranging from 5 to 40 years. Recognition of the fair
value of obligations associated with the retirement of tangible long-lived assets is required when there is a legal obligation to incur
such costs. Upon initial recognition of a liability, the cost is capitalized as part of the related long-lived asset and depreciated over the
corresponding asset’s useful life.
Repairs and maintenance, including planned major maintenance, are expensed as incurred. Costs which materially add to the value of
the asset or prolong its useful life are capitalized and the replaced assets are retired.
Long-Lived Assets – The Company evaluates the recoverability of the carrying amount of long-lived assets (including property, plant
and equipment and intangible assets with determinable lives) whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be fully recoverable. The Company evaluates events or changes in circumstances based on several factors
including operating results, business plans and forecasts, general and industry trends, and economic projections and anticipated cash
flows. An impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying
amount. Impairment losses are measured as the amount by which the carrying value of an asset exceeds its fair value and are
recognized in the Consolidated Statements of Operations. The Company also evaluates the estimated useful lives of long-lived assets
if circumstances warrant and revises such estimates based on current events.
Goodwill – The Company had goodwill of $17.6 million and $15.0 million as of December 31, 2021 and 2020, respectively. Goodwill
is subject to impairment testing annually as of March 31, or whenever events or changes in circumstances indicate that the carrying
amount may not be fully recoverable. Management first assesses qualitative factors as described in ASC 350 to determine whether it is
necessary to perform the quantitative goodwill impairment test. The Company completed its annual goodwill impairment test as of
March 31, 2021 and, based on the results of the Company's assessment of qualitative factors, it was determined that it was not
necessary to perform the quantitative goodwill impairment test.
Revenue Recognition – The Company recognizes revenue upon the transfer of control of goods or services to customers at amounts
that reflect the consideration expected to be received. AdvanSix primarily recognizes revenues when title and control of the product
transfers from the Company to the customer. Outbound shipping costs incurred by the Company are not included in revenues but are
reflected as freight expense in Costs of goods sold in the Consolidated Statements of Operations.
Sales of our products to customers are made under a purchase order, and in certain cases in accordance with the terms of a master
services agreement. These agreements typically contain formula-based pass-through pricing tied to key feedstock materials and
volume ranges, but often do not specify the goods, including the quantities thereof, to be transferred. Certain master services
agreements (including with respect to our largest customer) may contain minimum purchase volumes which can be satisfied by the
customer on a periodic basis by choosing from various products offered by the Company. In these cases, a performance obligation is
created when a customer submits a purchase order for a specific product at a specified price, typically providing for delivery within the
next 60 days. Management considers the performance obligation with respect to such purchase order satisfied at the point in time
when control of the product is transferred to the customer, which is indicated by shipment of the product and transfer of title and risk
of loss to the customer. Transfer of control to the customer occurs through various modes of shipment, including trucks, railcars, and
vessels, and follows a variety of commercially acceptable shipping or destination point terms pursuant to the arrangement with the
customer. Variable consideration is estimated for future volume rebates and early pay discounts on certain products and product
returns. The Company records variable consideration as an adjustment to the sale transaction price. Since variable consideration is
generally settled within one year, the time value of money is not significant.
48
The Company applies the practical expedient in Topic 606 and does not include disclosures regarding remaining performance
obligations that have original expected durations of one year or less, or amounts for variable consideration allocated to wholly-
unsatisfied performance obligations or wholly-unsatisfied distinct goods that form part of a single performance obligation, if any.
The Company also utilizes the practical expedient in Topic 606 and does not include an adjustment for the effects of a significant
financing component given the expected period duration of one year or less.
Environmental – The Company accrues costs related to environmental matters when it is probable that we have incurred a liability
related to a contaminated site and the amount can be reasonably estimated.
Deferred Income and Customer Advances – AdvanSix typically has an annual pre-buy program for ammonium sulfate that is
classified as deferred income and customer advances in the Consolidated Balance Sheets. Customers pay cash in advance to reserve
capacity for ammonium sulfate to guarantee product availability during peak planting season. The Company recognizes a customer
advance when cash is received for the advanced buy. Revenue is then recognized and the customer advance is relieved upon title
transfer of ammonium sulfate.
Trade Receivables and Allowance for Doubtful Accounts – Trade accounts receivables are recorded at the invoiced amount as a
result of transactions with customers. AdvanSix maintains allowances for doubtful accounts for estimated losses based on a customer’s
inability to make required payments. AdvanSix estimates anticipated losses from doubtful accounts based on days past due, as
measured from the contractual due date and historical collection history and incorporates changes in economic conditions that may not
be reflected in historical trends such as customers in bankruptcy, liquidation or reorganization. Receivables are written-off against the
allowance for doubtful accounts when they are determined uncollectible. Such determination includes analysis and consideration of
the particular conditions of the account, including time intervals since last collection, customer performance against agreed upon
payment plans, success of outside collection agencies activity, solvency of customer and any bankruptcy proceedings. The Company
adopted ASU 2016-13 effective January 1, 2020, using a modified retrospective approach, which did not have a material impact on the
Company's consolidated financial position or results of operations upon adoption.
Research and Development – AdvanSix conducts research and development (“R&D”) activities, which consist primarily of the
development of new products and product applications consisting primarily of labor costs and depreciation and maintenance costs.
R&D costs are charged to expense as incurred. Such costs are included in costs of goods sold and were $14.0 million, $11.8 million,
and $13.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Debt Issuance Costs – Debt issuance costs are capitalized as a component of Other assets and are amortized through interest expense
over the related term.
Stock-Based Compensation Plans – The principal awards issued under our stock-based compensation plans, which are described in
"Note 16. Stock-Based Compensation Plans" to the Consolidated Financial Statements included in Item 8 of this Form 10-K, are non-
qualified stock options, performance stock units and restricted stock units. The cost for such awards is measured at the grant date
based on the fair value of the award. The value of the portion of the award that is ultimately expected to vest, including the impact of
the Company's anticipated performance against certain metrics for performance stock units, is recognized as expense over the requisite
service periods (generally the vesting period of the equity award) and is included in selling, general and administrative expenses.
Estimates of future performance are utilized to determine the underlying expense for shares expected to vest. Forfeitures are estimated
at the time of grant to recognize expense for those awards that are expected to vest and are based on our historical forfeiture rates.
Dividend Equivalents – If a dividend is authorized by the Board for stockholders of common stock, holders of unvested RSUs and
unvested PSUs will have their accounts credited with dividend equivalents in the form and in an amount equal to the dividend that the
holder would have received had the shares underlying the RSUs and PSUs been distributed at the time that such dividend was paid.
Dividend equivalents are subject to the same vesting, forfeiture, performance and payment restrictions as the respective equity award
for which it is attributable. Since the dividend equivalents are forfeitable, there is no impact on the basic earnings per share
calculation.
Pension Benefits – We have a defined benefit plan covering certain employees primarily in the U.S. The benefits are accrued over the
employees’ service periods. We use actuarial methods and assumptions in the valuation of defined benefit obligations and the
determination of net periodic pension income or expense. Differences between actual and expected results or changes in the value of
defined benefit obligations and fair value of plan assets, if any, are not recognized in earnings as they occur but rather systematically
over subsequent periods when net actuarial gains or losses are in excess of 10% of the greater of the fair value of plan assets or the
plan’s projected benefit obligation.
49
Foreign Currency Translation – Assets and liabilities of subsidiaries operating outside the United States with a functional currency
other than U.S. dollars are translated into U.S. dollars using year-end exchange rates. Sales, costs and expenses are translated at the
average exchange rates in effect during the year. Foreign currency translation gains and losses are included as a component of
Accumulated other comprehensive income (loss) in our Consolidated Balance Sheets.
Income Taxes – We account for income taxes pursuant to the asset and liability method which requires us to recognize current tax
liabilities or receivables for the amount of taxes we estimate are payable or refundable for the current year and deferred tax assets and
liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying
amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all
of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.
We adopted the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s
consolidated financial statements. ASC 740 prescribes a comprehensive model for the financial statement recognition, measurement,
presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
The benefit of tax positions taken or expected to be taken in our income tax returns are recognized in the financial statements if such
positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken
or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as
“unrecognized benefits”. A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced)
for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position
that was not recognized as a result of applying the provisions of ASC 740. Interest costs and related penalties related to unrecognized
tax benefits are required to be calculated, if applicable. Our policy is to classify tax related interest and penalties, if any, as a
component of income tax expense. No interest or penalties related to unrecognized income tax benefits were recorded during the years
ended December 31, 2021, 2020 and 2019. As of December 31, 2021 and 2020, no liability for unrecognized tax benefits was required
to be reported. We do not expect any significant changes in our unrecognized tax benefits in the next year.
Leases – The Company enters into agreements to lease transportation equipment, storage facilities, office space, dock access and other
equipment. Operating leases have initial terms of up to 20 years with some containing renewal options subject to customary
conditions.
An arrangement is considered to be a lease if the agreement conveys the right to control the use of the identified asset in exchange for
consideration.
Operating leases, which are reported as Operating lease right-of-use assets, and Operating lease liabilities – short-term and Operating
lease liabilities – long-term are included in our Consolidated Balance Sheets. Finance leases are included as a component of Property,
plant and equipment – net, Accounts payable and Other liabilities in our Consolidated Balance Sheets.
The Company adopted ASU 2016-02, Leases (Topic 842) effective January 1, 2019 and has elected the following practical expedients
available in Topic 842:
•
•
•
•
the package of three expedients which allows the Company to not re-assess (i) whether any expired or existing contracts are,
or contain, leases, (ii) lease classification for any expired or existing leases, and (iii) initial direct costs for any expired or
existing leases;
the short-term lease practical expedient, which allows the Company to exclude leases with an initial term of 12 months or less
("short-term leases") from recognition in the unaudited Consolidated Balance Sheets;
the bifurcation of lease and non-lease components practical expedients, which did not require the Company to bifurcate lease
and non-lease components for real estate leases; and
the land easements practical expedient, which allows the Company to carry forward the accounting treatment for land
easements on existing agreements.
Earnings Per Share – Basic earnings per share is based on the weighted average number of common shares outstanding. Diluted
earnings per share is based on the weighted average number of common shares outstanding and all dilutive potential common shares
outstanding.
Treasury Stock – The Company has elected to account for treasury stock purchased under the constructive retirement method. For
shares repurchased in excess of par, the company will allocate the excess value to additional paid-in capital.
50
Use of Estimates – The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts in the Consolidated Financial Statements and related disclosures in
the accompanying Notes. Actual results could differ from those estimates. Estimates and assumptions are periodically reviewed and
the effects of changes are reflected in the Consolidated Financial Statements in the period they are determined to be necessary.
Reclassifications – Certain prior period amounts have been reclassified for consistency with the current period presentation. All
reclassified amounts have been immaterial.
Recent Accounting Pronouncements – The Company considers the applicability and impact of all Accounting Standards Updates
(“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not discussed below were assessed and determined to
be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.
On August 5, 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendments in the ASU remove certain
separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt
instrument into a debt component and an equity or derivative component. Therefore, the embedded conversion features no longer are
separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as
derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in-capital.
This will result in more convertible debt instruments being accounted for as a single liability measured at its amortized cost and more
convertible preferred stock being accounted for as a single equity instrument measured at its historical cost, as long as no other
features require bifurcation and recognition as derivatives. The ASU also amends the derivative scope exception guidance for
contracts in an entity’s own equity. The amendments remove three settlement conditions that are required for equity contracts to
qualify for the derivative scope exception. The guidance is effective for public business entities for fiscal years, and interim terms
within those fiscal years, beginning after December 15, 2021. Early adoption of the amendments in this update is permitted, but no
earlier than fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020. The Company
adopted ASU 2020-06 effective January 1, 2022, which did not have any impact on the Company's consolidated financial position or
results of operations upon adoption.
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 adopted ASU 2020-04 effective September 30, 2021, which did not have a material impact 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 FASB Accounting Standards Codification ("ASC") 740, Income
Taxes, associated with the incremental approach for intra-period tax allocation, accounting for basis differences when there are
ownership changes in foreign investments and interim-period income tax accounting for year-to-date losses that exceed anticipated
losses. In addition, the ASU improves the application of income tax related guidance and simplifies U.S. GAAP when accounting for
franchise taxes that are partially based on income, transactions with government resulting in a step-up in tax basis goodwill, separate
financial statements of legal entities not subject to tax, and enacted changes in tax laws in interim periods. Different transition
approaches, retrospective, modified retrospective, or prospective, will apply to each income tax simplification provision. The guidance
is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2020. Early adoption of the amendments in this update is permitted, including adoption in any interim period. The Company 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.
Note 3. Revenue
We serve approximately 400 customers annually in approximately 50 countries and across a wide variety of industries. For 2021, 2020
and 2019, the Company's ten largest customers accounted for approximately 40%, 43% and 47% of total sales, respectively.
We typically sell to customers under master services agreements, with primarily one-year terms, or by purchase orders. We have
historically experienced low customer turnover and have an average customer relationship of approximately 20 years. Our largest
customer is Shaw Industries Group Inc. ("Shaw"), a significant consumer of caprolactam and Nylon 6 resin. We sell caprolactam and
51
Nylon 6 resin to Shaw under a long-term agreement. Sales to Shaw were 12% of our total sales for the year ended December 31, 2021,
14% for the year ended December 31, 2020 and 22% for the year ended December 31, 2019.
The Company’s revenue by product line, and related approximate percentage of total sales for 2021, 2020 and 2019 were as follows:
Nylon
Caprolactam
Chemical Intermediates
Ammonium Sulfate
2021
$ 422,897
316,132
544,504
401,092
Years Ended December 31,
2020
2019
25%
19%
32%
24%
$ 284,701
216,268
369,130
287,818
24%
19%
32%
25%
$ 351,169
278,634
368,361
299,229
27%
22%
28%
23%
$ 1,684,625
100% $ 1,157,917
100% $ 1,297,393
100%
The Company’s revenues by geographic area, and related approximate percentage of total sales for 2021, 2020 and 2019 were as
follows:
United States
International
Total
Deferred Income and Customer Advances
2021
Years Ended December 31,
2020
2019
$ 1,382,501
302,124
82 % $ 890,776
267,141
18 %
77 % $ 1,057,498
239,895
23 %
82 %
18 %
$ 1,684,625
100 % $ 1,157,917
100 % $ 1,297,393
100 %
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 twelve
months ended December 31, 2021:
Deferred Income and Customer Advances
Opening balance January 1, 2021
Additional cash advances
Less amounts recognized in revenues
Ending balance December 31, 2021
2021
26,379
4,328
(27,958)
2,749
$
$
The Company expects to recognize as revenue the December 31, 2021 ending balance of Deferred income and customer advances
within one year or less.
Note 4. Income Taxes
Income before taxes
U.S.
Non-U.S.
Income taxes
Income tax expense (benefit) consists of:
Years Ended December 31,
2020
2021
2019
$
$
184,963 $
54,902 $
153
131
185,116 $
55,033 $
53,231
117
53,348
52
Current Provision:
Federal
State
Non-U.S.
Total current provision
Deferred Provision:
Federal
State
Non-U.S.
Total deferred provision
Total income tax expense (benefit)
Years Ended December 31,
2021
2020
2019
$
$
$
34,079 $
(10,289) $
6,504
35
1,605
20
40,618 $
(8,664) $
2,256 $
17,853 $
2,445
6
4,707
(240)
7
17,620
$
45,325 $
8,956 $
2,519
1,007
24
3,550
7,536
907
8
8,451
12,001
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:
U.S. federal statutory income tax rate
U.S. state income taxes
U.S. state income tax rate change
Energy credit
Forfeitures, cancellations and shortfalls of equity compensation
Executive compensation limitations
Research and other tax credits
Foreign derived intangible income deduction
Other, net
Years Ended December 31,
2021
2020
2019
21.0 %
3.0 %
0.8 %
— %
— %
1.0 %
(0.3) %
(0.9) %
(0.1) %
24.5 %
21.0 %
2.0 %
— %
(6.2) %
0.3 %
0.9 %
(2.6) %
— %
0.9 %
16.3 %
21.0 %
2.8 %
— %
— %
— %
1.5 %
(3.0) %
— %
0.2 %
22.5 %
The Company's effective income tax rate for 2021 was higher compared to the U.S. Federal statutory rate of 21% due primarily to
state taxes and executive compensation deduction limitations partially offset by research tax credits and the foreign-derived intangible
income deduction.
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. Although the carryback claim generated a $12.3 million refund, it also resulted in
the loss of prior year permanent tax benefits, the impact of which, is reflected in the above table under "Other, net" above.
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 for
the year ended December 31, 2021.
The Company's effective income tax rate for 2020 was lower compared to the U.S. Federal statutory rate of 21% due primarily to the
impact of research tax credits as well as an energy tax credit described in more detail below. This was partially offset by state taxes,
executive compensation deduction limitations and a shortfall on the vesting of equity compensation.
The Company's effective income tax rate for 2019 was slightly higher compared to the U.S. Federal statutory rate of 21% due
primarily to state taxes and executive compensation deduction limitations, partially offset by the vesting of restricted stock units and
research tax credits.
As of December 31, 2021, 2020 and 2019, there were no unrecognized tax benefits recorded by the Company (see below for further
information on unrecognized tax benefits). Although there are no unrecognized income tax benefits, when applicable, the Company’s
policy is to report interest expense and penalties related to unrecognized income tax benefits in the income tax provision.
53
The Company uses the flow-through method to account for investment tax credits, including certain energy credits. Under this
method, investment tax credits are recognized as a reduction to income tax expense in the year they are earned.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company is currently under a
federal tax examination for the tax years ended December 31, 2017 through December 31, 2019. There are no material examinations
by state tax authorities; however, tax years 2017 through 2021 generally remain open under the statute of limitations and are subject to
examination by the tax authorities.
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 impact our effective tax rate and
cash flows from operating activities. The current US administration has released various draft tax reform proposals, as such, we
continue to monitor these legislative proposals to evaluate the impact on our business.
Deferred tax assets (liabilities)
The tax effects of temporary differences which give rise to future income tax benefits and expenses are as follows:
Deferred tax assets:
Net Operating Loss
Accruals and Reserves
Inventory
Pension Obligation
Operating lease liability
Equity Compensation
Other
Total gross deferred tax assets
Less: Valuation Allowance
Total deferred tax assets
Deferred tax liabilities:
Property, plant & equipment
Intangibles
Operating lease asset
Other
Total deferred tax liabilities
Net deferred taxes
December 31,
2021
2020
$
51 $
7,040
5,934
2,500
32,902
2,584
421
51,432
—
107
4,966
4,439
8,028
27,358
1,793
900
47,591
—
$
51,432 $
47,591
$
(146,717) $
(140,735)
(3,721)
(32,782)
(1,542)
(3,744)
(27,262)
(1,417)
(184,762)
(173,158)
$
(133,330) $
(125,567)
The net deferred taxes are primarily related to U.S. operations. The federal net operating loss ("NOL") generated as of December 31,
2019 was carried back to previous tax periods under the CARES Act and the amount was fully utilized in the carryback claim. As of
2021, we recognized a state NOL carryforward in Illinois for $0.7 million which begins to expire in 2028. The Company fully utilized
its foreign NOL as of December 31, 2021. The Company has no material federal or state tax credit carryforwards remaining as of
December 31, 2021. We believe that the state NOL carryforward, tax credit carryforwards and other deferred tax assets are more likely
than not to be realized and we have not recorded a valuation allowance against the deferred tax assets.
The Company's accounting policy is to record the tax impacts of Global intangible low-taxed income as a period cost.
As of December 31, 2021 and 2020, there were no material undistributed earnings of the Company's non-U.S. subsidiaries and, as
such, we have not provided a deferred tax liability for undistributed earnings.
Unrecognized tax benefits
54
The following table sets forth the change in the Company's unrecognized tax benefits (UTBs) for year ended December 31, 2021 and
2020. There are no unrecognized tax benefits in 2019.
Unrecognized tax benefits - January 1
Gross amounts of decreases in UTBs for tax positions related to the prior year
Gross amounts of increases in UTBs for tax positions related to the prior year
Gross amounts of increases and decreases in UTBs for tax positions taken during the current period
Unrecognized tax benefits - December 31
December 31,
2021
2020
$
$
— $
—
—
—
— $
—
(3,804)
3,804
—
—
At the end of fiscal 2019, it was unclear whether we qualified for a certain energy tax credit. After performing a detailed review during
the second quarter of 2020, we concluded it was appropriate to recognize a tax benefit (credit) of $3.8 million. However, based on
information available at the time, we also recorded a corresponding unrecognized tax benefit reserve for the same amount. A portion
of this credit which was claimed on the 2019 U.S. federal income tax return of approximately $2.2 million was utilized in the
carryback claim under the CARES Act and the remaining was utilized in 2020. In the fourth quarter of 2020, based on a thorough
evaluation of new information and applicable technical guidance, the Company reassessed its position which resulted in the reversal of
the unrecognized tax benefit as reflected in the above table. As such, the full amount of the energy credit is reflected in the effective
income tax rate reconciliation table above for the year ended December 31, 2020.
Note 5. Accounts and Other Receivables – Net
Accounts receivables
Other
Total accounts and other receivables
Less – allowance for doubtful accounts
Total accounts and other receivables – net
December 31,
2021
2020
$
$
175,584 $
4,051
179,635
(1,495)
178,140 $
122,357
2,668
125,025
(1,471)
123,554
The roll-forward of allowance for doubtful accounts are summarized in the table below:
Balance at
Beginning of
Year
Charged to
Costs
Charged to
Other
Accounts (1)
Bad Debt
Write-Offs (1)
Balance at
End of Year
Year ended December 31, 2021
$
1,471 $
— $
Year ended December 31, 2020
Year ended December 31, 2019
(1) No Impact to Statement of Operations
Note 6. Inventories
Raw materials
Work in progress
Finished goods
Spares and other
Reduction to LIFO cost basis
Total inventories
Note 7. Property, Plant, Equipment – Net
2,323
7,467
33
274
55
— $
(559)
(396)
24 $
(326)
(5,022)
1,495
1,471
2,323
December 31,
2021
2020
$
56,961 $
43,526
27,961
27,150
155,598
(6,028)
88,612
54,291
45,345
27,198
215,446
(35,361)
$
149,570 $
180,085
Land and improvements
Machinery and equipment
Buildings and improvements
Construction in progress
Less – accumulated depreciation
Total property, plant, equipment – net
December 31,
2021
2020
$
6,566 $
6,396
1,476,896
1,430,192
209,604
44,414
201,728
47,000
1,737,480
1,685,316
(969,516)
(919,847)
$
767,964 $
765,469
Capitalized interest was $2,565, $5,580 and $6,359 for the years ended December 31, 2021, 2020 and 2019, respectively.
Depreciation expense was $61,405, $57,240 and $53,424 for the years ended December 31, 2021, 2020 and 2019, respectively.
Note 8. Leases
We determine if an arrangement is a lease at inception. Operating leases, which are reported as Operating lease right-of-use assets
("ROU"), Operating lease liabilities – short-term, and Operating lease liabilities – long-term are included in our Consolidated Balance
Sheets. Finance leases are included in Property, plant and equipment – net, Accounts payable, and Other liabilities in our Consolidated
Balance Sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing
rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit
rate when readily determinable. The operating lease ROU asset also includes any lease pre-payments made and excludes lease
incentives. Our lease terms may include options to extend or terminate the lease and, when it is reasonably certain that such an option
will be exercised, it is included in the determination of the corresponding assets and liabilities. Short-term leases are not recognized on
our Consolidated Balance Sheets. Lease expense for all operating lease payments is recognized on a straight-line basis over the lease
term.
We have lease agreements with lease and non-lease components, which are generally accounted for separately. Additionally, for
certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities. The
Company has entered into agreements to lease transportation equipment, storage facilities, office space, dock access and other
equipment. The operating leases have initial terms of up to 20 years with some containing renewal options subject to customary
conditions. The term and length of the various agreements, as well as the timing of any renewals, will impact the ROU asset
calculation and related liability.
The components of lease expense were as follows:
Years Ended December 31,
2021
2020
$
706 $
33
739
40,994
10,632
$
52,365 $
697
48
745
44,513
7,832
53,090
Finance lease cost:
Amortization of right-of-use asset
Interest on lease liabilities
Total finance lease cost
Operating lease cost
Short-term lease cost
Total lease cost
Supplemental cash flow information related to leases was as follows:
56
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Non-cash information:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases
Finance leases
Supplemental balance sheet information related to leases was as follows:
Operating Leases
Operating lease right-of-use assets
Operating lease liabilities – short term
Operating lease liabilities – long term
Total operating lease liabilities
Finance Leases
Property, plant and equipment – gross
Accumulated depreciation
Property, plant and equipment – net
Accounts payable
Other liabilities
Total finance lease liabilities
Weighted Average Remaining Lease Term
Operating leases
Finance leases
Weighted Average Discount Rate
Operating leases
Finance leases
Maturities of lease liabilities are as follows:
Year Ending December 31,
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less imputed interest
Total
Years Ended December 31,
2021
2020
$
40,888 $
44,445
31
735
51
710
41,132
1,352
16,082
16
Years Ended December 31,
2021
2020
$
136,207
$
114,484
$
$
$
$
36,127
100,580
136,707
2,663
(1,274)
1,389
600
741
$
$
$
1,341
$
8.2 years
2.8 years
5.32 %
2.75 %
29,279
85,605
114,884
1,978
(1,257)
721
509
215
724
9.8 years
1.5 years
6.07 %
4.65 %
Operating
Leases
Finance
Leases
$
42,414 $
37,776
27,043
18,397
8,974
44,181
178,785
(42,078)
$
136,707 $
628
435
205
76
47
—
1,391
(50)
1,341
As of December 31, 2021, we have additional operating leases that have not yet commenced for $3.4 million. These leases will
commence during 2022 with lease terms of up to 7 years.
57
Note 9. Long-term Debt and Credit Agreement
The Company’s debt at December 31, 2021 consisted of the following:
Total term loan outstanding
Amounts outstanding under the Revolving Credit Facility
Total outstanding indebtedness
Less: amounts expected to be repaid within one year
Total long-term debt due after one year
$
$
—
135,000
135,000
—
135,000
At December 31, 2021, the Company assessed the Revolving Credit Facility (defined below) and determined that such amounts
approximated fair value. The fair values of the debt are based on quoted inactive market prices and are therefore classified as Level 2
within the valuation hierarchy.
Scheduled principal repayments under the Long-term Debt and Credit Agreement subsequent to December 31, 2021 are as follows:
—
2022
—
2023
—
2024
—
2025
$
2026
Thereafter
Total
Credit Agreement
135,000
—
135,000
$
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"), 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 had a five-year term with a
scheduled maturity date of February 21, 2023.
The Second Amended and Restated Credit Agreement required the Company to maintain a Consolidated Leverage Ratio (as defined in
the Second Amended and Restated Credit Agreement) of (i) 3.50 to 1.00 or less for the fiscal quarter ending March 31, 2020, (ii) 4.50
to 1.00 or less for the fiscal quarter ending June 30, 2020, (iii) 4.25 to 1.00 or less for the fiscal quarter ending September 30, 2020,
(iv) 3.50 to 1.00 or less for the fiscal quarter ending December 31, 2020, (v) 3.25 to 1.00 or less for the fiscal quarter ending March 31,
2021 through and including the fiscal quarter ending December 31, 2021, and (vi) 3.00 to 1.00 or less for the fiscal quarter ending
March 31, 2022 and each fiscal quarter thereafter (subject to the Company’s option to elect a Consolidated Leverage Ratio increase in
connection with certain acquisitions). The Consolidated Interest Coverage Ratio financial covenant required 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 did not comply with the covenants in the Second Amended and Restated Credit Agreement, the lenders could,
subject to customary cure rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility.
Borrowings under the Second Amended and Restated Credit Agreement bore interest at a rate equal to either the sum of a base rate
plus a margin ranging from 0.50% to 2.00% or the sum of a Eurodollar rate plus a margin ranging from 1.50% to 3.00%, with either
such margin varying according to the Company’s Consolidated Leverage Ratio (as defined in the Second Amended and Restated
Credit Agreement). The Company was also required to pay a commitment fee in respect of unused commitments under the credit
facility, if any, at a rate ranging from 0.20% to 0.50% per annum depending on the Company’s Consolidated Leverage Ratio.
In addition, the Second Amendment also amended certain administrative provisions associated with the LIBOR Successor Rate (as
defined in the Second Amended and Restated Credit Agreement).
The obligations under the Second Amended and Restated Credit Agreement were secured by a pledge of assets and liens on
substantially all of the assets of AdvanSix.
The Second Amended and Restated Credit Agreement contained customary covenants limiting the ability of the Company and its
subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into
transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets, as
58
well as financial covenants that require the Company to maintain interest coverage and leverage ratios at levels specified in the Second
Amended and Restated Credit Agreement. These covenants placed limits on how we conduct our business, and in the event of certain
defaults, our repayment obligations could be accelerated.
On October 27, 2021, the Company completed a refinancing of its existing senior secured revolving credit facility under the Second
Amended and Restated Credit Agreement by entering into a new Credit Agreement (the “Credit Agreement”), among the Company,
the lenders party thereto, the swing line lenders party thereto, the letter of 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”).
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 has the option to establish a new class of term loans and/or increase the amount of the Revolving Credit Facility in an
aggregate principal amount for all such incremental term loans and increases of the Revolving Credit Facility of up to the sum of (x)
$175 million plus (y) an amount such that the Company’s Consolidated 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 Credit Agreement bear interest at a rate equal to either the sum of a base rate plus a margin ranging from 0.25%
to 1.25% or the sum of a Eurodollar rate plus a margin ranging from 1.25% to 2.25%, with either such margin varying according to the
Company’s Consolidated Leverage Ratio (as defined in the Credit Agreement). The Company is also required to pay a commitment
fee in respect of unused commitments under the Revolving Credit Facility, if any, at a rate ranging from 0.15% to 0.35% per annum
depending on the Company’s Consolidated Leverage Ratio. As of October 27, 2021, the applicable margin under the Credit
Agreement was 0.375% for base rate loans and 1.375% for Eurodollar loans and the applicable commitment fee rate was 0.175% per
annum.
Substantially all tangible and intangible assets of the Company and its domestic subsidiaries are pledged as collateral to secure the
obligations under the Credit Agreement.
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 Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things,
pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make
investments, make capital expenditures, merge or consolidate with others or dispose of assets. The Credit Agreement also contains
financial covenants that require the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement)
of not less than 3.00 to 1.00 and to maintain a Consolidated Leverage Ratio of (i) 4.00 to 1.00 or less for the fiscal quarter ending
December 31, 2021, through and including the fiscal quarter ending September 30, 2023 and (ii) 3.75 to 1.00 or less for each fiscal
quarter thereafter (subject to the Company’s option to elect a consolidated leverage ratio increase in connection with certain
acquisitions). If the Company does not comply with the covenants in the Credit Agreement, the lenders may, subject to customary cure
rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility. We were in compliance with all
of our covenants at December 31, 2021 and through the date of the filing of this Annual Report on Form 10-K.
Note 10. Postretirement Benefit Obligations
Defined Contribution Benefit Plan
On January 1, 2017, the Company established a defined contribution plan which covers all eligible U.S. employees. Our plan allows
eligible employees to contribute a portion of their cash compensation to the plan on a tax-deferred basis to save for their future
retirement needs. The Company matches 50% of the first 8% of contributions for employees covered by a collective bargaining
agreement and matches 75% of the first 8% of the employee’s contribution election for all other employees. The plan’s matching
contributions vest after three years of service with the Company. The Company may also provide an additional discretionary
retirement savings contribution which is at the sole discretion of the Company. The Company made contributions to the defined
contribution plan of $5,874, $6,142 and $5,944 for the years ended December 31, 2021, 2020 and 2019, respectively.
Defined Benefit Pension Plan
Prior to the Spin-Off certain of our employees participated in a defined benefit pension plan (the “Shared Plan”) sponsored by
Honeywell which includes participants of other Honeywell subsidiaries and operations. We accounted for our participation in the
Shared Plan as a multi-employer benefit plan. Accordingly, we did not record an asset or liability to recognize the funded status of the
Shared Plan. The related pension expense was allocated based on annual service cost of active participants and reported within Costs
of goods sold and Selling, general and administrative expenses in the Statements of Operations.
59
As of the date of separation from Honeywell, these employees’ entitlement to benefits in Honeywell’s plans was frozen and they will
accrue no further benefits in Honeywell’s plans. Honeywell retained the liability for benefits payable to eligible employees, which are
based on age, years of service and average pay upon retirement.
Upon consummation of the Spin-Off, AdvanSix employees who were participants in a Honeywell defined benefit pension plan
became participants in the AdvanSix defined benefit pension plan (“AdvanSix Retirement Earnings Plan”). The AdvanSix Retirement
Earnings Plan has the same benefit formula as the Honeywell defined benefit pension plan. Moreover, vesting service, benefit accrual
service and compensation credited under the Honeywell defined benefit pension plan apply to the determination of pension benefits
under the AdvanSix Retirement Earnings Plan. Benefits earned under the AdvanSix Retirement Earnings Plan shall be reduced by the
value of benefits accrued under the Honeywell plans.
The following tables summarize the balance sheet impact, including the benefit obligations, assets and funded status associated with
the AdvanSix Retirement Earnings Plan.
Change in benefit obligation:
Benefit obligation at January 1,
Service Cost
Interest Cost
Actuarial losses (gains)
Benefits Paid
Benefit obligation at December 31,
89,137 $
7,817
2,071
(6,342)
(1,294)
91,389 $
69,281 $
8,021
2,175
10,507
48,450
6,855
2,084
12,364
(472)
69,281
(847)
89,137 $
2019
2020
2021
$
$
Change in plan assets:
Fair value of plan assets at January 1,
Actual return on plan assets
Benefits paid
Company Contributions
Fair value of plan assets at December 31,
Under-Funded status of plan
Amounts recognized in Balance Sheet consists of:
Accrued pension liabilities-current (1)
Accrued pension liabilities-noncurrent (2)
Total pension liabilities recognized
(1) Included in accrued liabilities on Balance Sheet
(2) Included in postretirement benefit obligations on Balance Sheet
$
$
$
$
48,444 $
6,572
(1,294)
17,530
71,252
35,979 $
5,212 $
(847)
8,100
48,444
26,789
5,462
(472)
4,200
35,979
20,137 $
40,693 $
33,302
1,894 $
18,243
20,137 $
1,525 $
39,168
40,693 $
892
32,410
33,302
Pension amount recognized in accumulated other comprehensive loss (income) associated with the Company's pension plan are as
follows for:
Transition obligation
Prior service cost
Net actuarial (gain) loss
Pension amounts recognized in other comprehensive loss (income)
Years Ended December 31,
2020
2021
2019
$
$
— $
—
1,071
1,071 $
— $
—
11,405
11,405 $
—
—
4,012
4,012
The components of net periodic benefit cost and other amounts recognized in other comprehensive income for our pension plan
include the following components:
60
Net periodic pension cost (benefit)
Service cost
Interest cost
Expected return on plan assets
Recognition of actuarial losses
Net periodic Pension Cost
Other changes in benefits obligations recognized in other comprehensive loss
(income)
Actuarial losses (gains)
Total recognized in other comprehensive income
Total net periodic pension cost (benefit) recognized in Other comprehensive
income
Years Ended December 31,
2020
2019
2021
$
7,817 $
2,071
(2,924)
345
7,309
8,021 $
2,175
(2,098)
—
8,098
(10,335)
(10,335)
7,393
7,393
6,855
2,084
(1,336)
—
7,603
8,238
8,238
$
(3,026) $
15,491 $
15,841
The estimated actuarial loss (gain) that will be amortized from accumulated other comprehensive income (loss) into net periodic
benefit cost in 2021 and 2020 was nil.
Significant actuarial assumptions used in determining the benefit obligations and net periodic benefit cost for our pension plan were as
follows:
Key actuarial assumptions used to determine benefit obligations at December 31,
2020
2021
2019
Effective discount rate for benefit obligation
Expected annual rate of compensation increase
Key actuarial assumptions used to determine the net periodic benefit cost for the years ended
December 31,
Effective discount rate for service cost
Effective discount rate for interest cost
Expected long-term rate of return
Expected annual rate of compensation increase
3.1%
2.4%
2.9%
2.4%
3.5%
2.4%
2021
2.9%
2.3%
6.8%
2.4%
2020
3.5%
3.2%
6.8%
2.4%
2019
4.6%
4.3%
7.0%
2.8%
The discount rate for our pension plan reflects the current rate at which the associated liabilities could be settled at the measurement
date of December 31 of a given year. To determine discount rates for our pension plan, we use a modeling process that involves
matching the expected cash outflows of our benefit plan to a yield curve constructed from a portfolio of high quality, fixed-income
debt instruments. We use the single weighted-average yield of this hypothetical portfolio as a discount rate benchmark.
The long-term expected rate of return on funded assets is developed by using forward-looking long-term return assumptions for each
asset class. Management incorporates the expected future investment returns on current and planned asset allocations using
information from external investment consultants as well as management judgment. A single rate is then calculated as the weighted
average of the target asset allocation percentages and the long-term return assumption for each asset class.
The accumulated benefit obligation for our pension plan was $79.6 million, $73.2 million and $54.4 million as of December 31, 2021,
2020 and 2019, respectively.
Benefit payments, including amounts to be paid from Company assets, and reflecting expected future service, as appropriate, are
expected to be paid during the following years:
2022
2023
2024
2025
2026
Thereafter
1,894
2,376
2,874
3,386
3,914
25,916
$
61
Our general funding policy for our pension plan is to contribute amounts at least sufficient to satisfy regulatory funding standards. The
Company made pension plan contributions sufficient to satisfy pension funding requirements under the AdvanSix Retirement Earnings
Plan as follows:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Total
Years Ended December 31,
2020
2019
2021
$
$
1,200 $
3,620
12,710
—
17,530 $
1,700 $
—
—
6,400
8,100 $
—
500
3,700
—
4,200
The Company plans to make pension plan contributions during 2022 sufficient to satisfy pension funding requirements of
$10.0 million to $15.0 million as well as 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.
The target asset allocation percent for the Company's pension plan assets is summarized as follows:
Cash and cash equivalents
US and non-US equity securities
Fixed income / real estate / other securities
Total Pension Assets
Years Ended December 31,
2021
2%
65%
33%
100%
2020
2%
65%
33%
100%
Fixed income and other securities include investment grade securities covering the Treasury, agency, asset-backed, mortgage-backed
and credit sectors of the U.S. Bond Market, as well as listed real estate companies and real estate investment trusts located in both
developed and emerging markets.
Fair Value Measurements
Investments valued using NAV per share
Emerging Markets Region Equities
International Region Equities
United States Equities
United States Bonds
Real Estate
Cash Fund
Fair Value at December 31,
2021
2020
2019
$
4,249 $
3,199 $
13,303
34,273
17,357
599
1,471
9,274
20,528
12,506
2,312
625
2,264
6,755
15,377
9,477
1,767
339
35,979
Total Pension Plan Assets at Fair Value
$
71,252 $
48,444 $
The pension plan assets are invested in collective investment trust funds as shown above. These investments are measured at fair value
using the net asset value per share practical expedient and have not been classified in the fair value hierarchy.
Note 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 July 2019, the Company entered into an interest rate swap transaction related to its credit agreement.
The fair value of the interest rate swaps at December 31, 2021, 2020 and 2019 was a loss of approximately $0.7 million, $3.1 million
and $1.7 million, respectively, and is considered a Level 2 liability.
62
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 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 Consolidated Balance Sheets also include Cash and cash equivalents, Accounts receivable and Accounts payable all
of which are recorded at amounts which approximate fair value.
The Company also has assets that are required to be recorded at fair value on a non-recurring basis. These assets are evaluated when
certain triggering events occur (including a decrease in estimated future cash flows) that indicate the asset should be evaluated for
impairment. Goodwill and indefinite lived intangible assets must be evaluated at least annually.
Note 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, 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
December 31, 2021 and December 31, 2020, respectively. 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 December 31, 2021 and 2020, we had zero contracts with notional amounts
related to forward commodity agreements.
Interest Rate Risk Management – As of December 31, 2021, the company had one interest rate swap agreement outstanding for a
total notional amount of $50 million to exchange floating for fixed rate interest payments for our LIBOR-based borrowings. The
interest rate swap had a fair value of zero at inception and was effective July 31, 2019 with a maturity date of February 21, 2023. The
interest rate swap has been designated as a cash flow hedge and converts the Company's interest rate payments on the first $50 million
of variable-rate, 1-month LIBOR-based debt to a fixed interest rate. As a result of this interest rate swap, interest payments on
approximately 37% of our borrowings, as of December 31, 2021, have been swapped from floating rate to fixed rate for the life of the
swap, without an exchange of the underlying principal amount.
63
Liability Derivatives
2021
2020
2019
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 $
(708)
Accrued liabilities
and Other liabilities $
(3,063)
Accrued liabilities
and Other liabilities $
(1,718)
Total Derivatives
$
(708)
$
(3,063)
$
(1,718)
The following table summarizes adjustments related to cash flow hedge included in “Cash flow hedges”, in the Consolidated
Statements of Comprehensive Income:
Loss on derivative instruments included in Accumulated other comprehensive loss at December 31, 2020
Fair value adjustment
Loss on derivative instruments included in Accumulated other comprehensive loss at December 31, 2021
December 31,
2021
$
$
(3,063)
2,355
(708)
At December 31, 2021, the Company expects to reclassify approximately $0.6 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:
Derivatives:
Interest Rate Contracts
Total Derivatives
Note 13. Commitments and Contingencies
Litigation
Amount of Loss Recognized in Earnings
Twelve Months Ended December 31,
2021
2020
$
1,836
$
1,836
2,240
2,240
The Company is subject to a number of lawsuits, investigations and disputes, some of which involve substantial amounts claimed,
arising out of the conduct of the Company or other third-parties in the normal and ordinary course of business. A liability is
recognized for any contingency that is probable of occurrence and reasonably estimable. The Company continually assesses the
likelihood of adverse judgments or outcomes in these matters, as well as potential ranges of possible losses (taking into consideration
any insurance recoveries), based on an analysis of each matter with the assistance of legal counsel and, if applicable, other experts.
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 Balance Sheets, results of operations or cash flows. Potential liabilities are subject to
change due to new developments, changes in settlement strategy or the impact of evidentiary requirements, which could cause the
Company to pay damage awards or settlements (or become subject to equitable remedies) that could have a material adverse effect on
the Company’s consolidated results of operations, balance sheet and/or operating cash flows in the periods recognized or paid.
We assumed from Honeywell all health, safety and environmental (“HSE”) liabilities and compliance obligations related to the past
and future operations of our current business, as well as all HSE liabilities associated with our three current manufacturing locations
and the other locations used in our current operations, including any cleanup or other liabilities related to any contamination that may
64
have occurred at such locations in the past. Honeywell retained all HSE liabilities related to former business locations or the operation
of our former businesses. Although we have ongoing environmental remedial obligations at certain of our facilities, in the past three
years, the associated remediation costs have not been material, and we do not expect our known remediation costs to be material for
2022.
Unconditional Purchase Obligations
In the normal course of business, the Company makes commitments to purchase goods with various vendors in the normal course of
business which are consistent with our expected requirements and primarily relate to cumene, oleum, sulfur and natural gas as well as
a long-term agreement for loading, unloading and the handling of a portion of our ammonium sulfate export volumes.
Future minimum payments for these unconditional purchase obligations as of December 31, 2021 are as follows (dollars in
thousands):
Year
2022
2023
2024
2025
2026
Thereafter
Amount
$
216,886
11,207
11,628
5,968
5,969
83,190
334,848
Note 14. Changes in Accumulated Other Comprehensive Income (Loss)
The components of accumulated other comprehensive income (loss) are as follows:
$
Balance at December 31, 2018
Other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss)
Income tax expense (benefit)
Current period change
Balance at December 31, 2019
Other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss)
Income tax expense (benefit)
Current period change
Balance at December 31, 2020
Other comprehensive income (loss)
Amounts reclassified from accumulated other
comprehensive income (loss)
Income tax expense (benefit)
Current period change
Balance at December 31, 2021
Note 15. Earnings Per Share
Currency
Translation
Adjustment
Postretirement
Benefit
Obligations
Adjustment
Changes in
Fair Value of
Effective Cash
Flow Hedges
Accumulated
Other
Comprehensive
Income (loss)
(5,011)
(9)
—
—
(9)
(5,020)
(49)
—
—
(49)
(5,069)
3,170
(8,238)
—
1,943
(6,295)
(3,125)
(7,393)
—
1,789
(5,604)
(8,729)
(43)
10,334
—
—
(43)
$
(5,112) $
—
(2,487)
7,847
(882) $
(633)
(1,589)
705
211
(673)
(1,306)
(3,586)
2,240
318
(1,028)
(2,334)
519
1,836
(566)
1,789
(545) $
(2,474)
(9,836)
705
2,154
(6,977)
(9,451)
(11,028)
2,240
2,107
(6,681)
(16,132)
10,810
1,836
(3,053)
9,593
(6,539)
The details of the earnings per share calculations for the years ended December 31, 2021, 2020 and 2019 are as follows:
65
Basic
Net Income
Years Ended December 31,
2021
2020
2019
$
139,791 $
46,077 $
41,347
Weighted average common shares outstanding
28,152,876
28,048,726
28,122,288
EPS – Basic
Diluted
Net Income
$
4.97 $
1.64 $
1.47
Years Ended December 31,
2021
2020
2019
$
139,791 $
46,077 $
41,347
Weighted average common shares outstanding – Basic
28,152,876
28,048,726
28,122,288
Dilutive effect of unvested equity awards
892,310
108,336
776,548
Weighted average common shares outstanding – Diluted
29,045,186
28,157,062
28,898,836
EPS – Diluted
$
4.81 $
1.64 $
1.43
Diluted EPS is computed based upon the weighted average number of common shares outstanding for the year 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.
The diluted EPS calculations exclude the effect of stock options when the options’ assumed proceeds exceed the average market price
of the common shares during the period. For the years ended December 31, 2021, 2020 and 2019, stock options of 400,205, 951,607
and 544,635, respectively, were anti-dilutive and excluded from the computations of dilutive EPS.
In September 2017, the Board of Directors (the "Board") adopted the AdvanSix Inc. Deferred Compensation Plan (the “DCP”),
effective January 1, 2018. Pursuant to the DCP, our directors may elect to defer their cash retainer fees and allocate their deferrals to
the AdvanSix stock unit fund. Each unit allocated under the stock unit fund represents the economic equivalent of one share of
common stock. Units are paid out in shares of AdvanSix common stock upon distribution. As of December 31, 2021, a total of 66,544
units were allocated to the AdvanSix stock unit fund under the DCP.
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 million of the Company's common stock, which was in addition to the remaining capacity available under the
May 2018 share repurchase program. Repurchases may be made, from time to time, on the open market, including through the use of
trading plans intended to qualify under Rule 10b5-1 of the Exchange Act of 1934, as amended (the "Exchange Act"). The size and
timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other
factors. The share repurchase program has no expiration date and may be modified, suspended or discontinued at any time. The par
value of the shares repurchased is applied to Treasury stock and the excess of the purchase price over par value is applied to
Additional paid in capital. During 2021, the Company had repurchased 21,564 shares of common stock to cover the tax withholding
obligations in connection with the vesting awards, for an aggregate of $651,875 at a weighted average market price of $30.23 per
share. The purchase of shares reduces the weighted average number of shares outstanding in the basic and diluted earnings per share
calculations.
Note 16. Stock-Based Compensation Plans
On September 8, 2016, prior to the Spin-Off, our Board adopted, and Honeywell, as our sole stockholder, approved, the 2016 Stock
Incentive Plan of AdvanSix Inc. and its Affiliates, and the material terms of performance-based compensation were approved by the
Company's stockholders for tax purposes at our 2017 annual meeting of stockholders (the "Original Plan"). The Original Plan was
amended and restated as the 2016 Stock Incentive Plan of AdvanSix Inc. and its Affiliates, as Amended and Restated, which was
approved by stockholders of the Company at the Annual Meeting of Stockholders held on June 23, 2020 (the “Equity Plan”). As a
result, no further grants will be made under the Original Plan. The Equity Plan provides for the grant of stock options, stock
66
appreciation rights, performance awards, restricted stock units, restricted stock, other stock-based awards and non-share-based awards.
The maximum aggregate number of shares of our common stock that may be issued under all stock-based awards granted under the
Equity Plan is 2,937,209, subject to adjustment in accordance with the terms of the Equity Plan. Under the Equity Plan, the shares
underlying all full-value awards, including those granted to non-employee directors, will be counted against the share reserve on a
1.85-for-one basis. Shares underlying stock option awards and SARs will be counted against the share reserve on a one-for-one basis.
Under the terms of the Equity Plan, there were approximately 1,400,000 shares of AdvanSix common stock available for future grants
of full-value awards at December 31, 2021.
Restricted Stock Units – The Company may grant RSUs to key management employees and directors that generally vest over periods
ranging from 1 to 3 years. In the event cash dividends are paid to shareholders of common stock, dividend equivalents accrue on all
unvested RSUs. Dividend equivalents are subject to the same termination and vesting terms as the underlying RSU. Upon vesting, the
RSUs and related dividend equivalents entitle the holder to receive one share of AdvanSix common stock for each RSU and dividend
equivalent at time of vesting and are payable in AdvanSix common stock upon vesting. The fair value of all stock-settled RSUs is
based upon the market price of the underlying common stock as of the grant date.
The following table summarizes information about RSU activity related to the Equity Plan:
Non-vested at December 31, 2018
Granted
Vested
Forfeited
Non-vested at December 31, 2019
Granted
Vested
Forfeited
Non-vested at December 31, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Number of
Restricted
Stock Units
(In Thousands)
Weighted
Average Grant
Date Fair Value
(Per Share)
994 $
131
(864)
(7)
254
331
(120)
(33)
432
153
(115)
(28)
442 $
18.90
29.42
16.78
32.93
30.97
13.11
24.28
32.11
18.94
29.64
23.51
11.07
22.11
As of December 31, 2021, there was approximately $4.4 million of total unrecognized compensation cost related to non-vested RSUs
granted under the Equity Plan which is expected to be recognized over a weighted-average period of 1.5 years.
The following table summarizes information about the income statement impact from RSUs for the years ended December 31, 2021,
2020 and 2019:
Compensation expense
Future income tax benefit recognized
Years Ended December 31,
2021
2020
2019
$
$
3,544 $
887 $
3,018 $
1,025 $
6,125
678
Stock Options – The exercise price, term and other conditions applicable to each option granted under the Equity Plan are generally
determined by the Compensation Committee of the Board. The exercise price of stock options is set on the grant date and may not be
less than the fair market value per share of our stock on that date. The fair value is recognized as an expense over the employee’s
requisite service period (generally the vesting period of the award). Options generally vest over periods ranging from 1 to 3 years.
The following table summarizes information about the income statement impact from stock options for the years ended December 31,
2021, 2020 and 2019.
67
Compensation expense
Future income tax benefit recognized
Years Ended December 31,
2021
2020
2019
$
$
1,410 $
1,030 $
1,520 $
441 $
1,989
745
The fair value related to stock options granted was determined using Black-Scholes option pricing model and the weighted average
assumptions are shown in the table below:
Key Black-Scholes Assumptions
Risk-free interest rate
Expected term (years)
Volatility
Dividend yield
Fair value per stock option
Years Ended December 31,
2021
0.8%
6
35.6%
—
$10.34
2020
1.2%
6
32.2%
—
$4.74
2019
2.5%
6
30.9%
—
$11.67
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. Volatility is
determined based on the average volatility of peer companies with similar option terms. The expected term is determined using a
simplified approach, calculated as the mid-point between the vesting period and the contractual term of the award. The risk-free
interest rate is determined based upon the yield of an outstanding U.S. Treasury note with a term equal to the expected term of the
option granted.
The following table summarizes information about stock option activity related to the Equity Plan:
Outstanding at December 31, 2018
Exercisable at December 31, 2018
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2019
Exercisable at December 31, 2019
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2021
Exercisable at December 31, 2021
Number of
Shares
(In Thousands)
298
57
196
1
(4)
—
491
156
306
—
(38)
—
759
326
160
20
(33)
—
906
443
Weighted
Average
Exercise Price
(Per Share)
$
$
$
$
33.24
33.23
33.34
26.66
31.75
—
33.28
30.83
14.29
—
35.53
—
25.44
32.16
29.21
27.55
21.29
—
26.13
29.42
Weighted
Average
Remaining
Contractual
Term (Years)
8.80
8.30
Aggregate
Intrinsic Value
$
$
—
—
8.22
7.45
$
$
7.42
6.84
$
$
—
—
—
—
7.42
6.54
$
$
19,123
7,895
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the Company’s
closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that
68
would have been received had all option holders exercised their in-the-money options at year-end. The amount changes based on the
fair market value of the Company’s stock.
As of December 31, 2021, there was $1.0 million of unrecognized stock-based compensation expense related to stock options that is
expected to be recognized over a weighted average period of approximately 0.9 years.
Performance Stock Units – The Company may issue PSUs to key senior management employees which, upon vesting, convert one-
for-one to AdvanSix common stock. In the event cash dividends are paid to shareholders of common stock, dividend equivalents will
accrue on all unvested PSUs. Dividend equivalents are subject to the same termination, vesting and performance terms as the
underlying PSU award. The actual number of shares an employee receives for each PSU and related dividend equivalent depends on
the Company’s performance against certain metrics, including cumulative Earnings Per Share and average annual Return on
Investment goals over three-year performance and vesting periods. Commencing with the 2021 awards, a market-based factor has the
potential to increase or decrease the performance award by 10%. This metric is calculated based upon how the Company's Total
Shareholder Return compares to that of its peer group over the vesting period. Each grantee is granted a target level of PSUs and may
earn between 0% and 200% of the target level depending on the Company’s performance against the financial goals.
The following table summarizes information about PSU activity related to the Equity Plan:
Non-vested at December 31, 2018
Granted
Vested
Forfeited
Non-vested at December 31, 2019
Granted
Vested
Forfeited
Non-vested at December 31, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Number of
Performance
Stock Units
(In Thousands)
Weighted Average
Grant Date Fair
Value
(Per Share)
145
88
—
(3)
230
248
(91)
(40)
347
128
(6)
(65)
404
$
$
32.73
33.34
—
35.04
30.03
13.99
26.66
35.72
20.77
29.21
9.47
32.25
20.04
The fair value of the PSUs is principally based on the fair market value of the Company’s stock at the grant date. The number of
underlying shares to be issued will be based on actual performance achievement over the performance period. The accrual of
compensation costs is based on our estimate of the probable expected value of the award. The fair value of each PSU grant is
amortized monthly into compensation expense on a straight-line basis over a vesting period of 36 months. Changes in expected
probable value are recorded as compensation expense on a catch-up basis in the month in which the change is identified. Any
remaining balance is amortized monthly into compensation expense on a straight-line basis over the remaining vesting period. The
Company assumes that forfeitures will be minimal, and estimates forfeitures at time of issuance, which results in a reduction in
compensation expense. As the payout of PSUs includes dividend equivalents, no separate dividend yield assumption is required in
calculating the fair value of the PSUs. The Company initiated a dividend during the fourth quarter of 2021.
As of December 31, 2021, there was approximately $6.2 million of total unrecognized compensation cost related to non-vested PSUs
granted under the Equity Plan which is expected to be recognized over a weighted-average period of 1.5 years.
The following table summarizes information about the income statement impact from PSUs for the year ended December 31, 2021,
2019.
and
2020
Compensation expense
Future income tax benefit recognized
Note 17. Acquisitions
69
Years Ended December 31,
2021
2020
2019
$
$
6,345 $
667 $
366 $
327 $
236
271
We actively target potential acquisitions that build on our competitive advantage and core capabilities and create opportunities for
broader expansion, value chain integration, portfolio diversification, increased exposure to attractive end markets and the potential for
long-term value creation.
In January 2021, the Company acquired certain assets associated with ammonium sulfate packaging, warehousing and logistics
services in Virginia from Commonwealth Industrial Services, Inc. for approximately $9.5 million. This acquisition 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 and
products for industrial use. The Company also expects the addition of packaging and warehousing capabilities to bolster logistics and
operational efficiency across its Richmond, Virginia area plants. The Company did not make any acquisitions during the three or
twelve months ended December 31, 2020 or 2019.
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 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 below the reporting thresholds of the
significance test.
The following table summarizes the allocation of the purchase price consideration as of the acquisition date:
Twelve months ended
December 31, 2021
Accounts receivable
Inventories
Property, plant and equipment
Intangible assets
Accounts payable and accrued liabilities
Net tangible and intangible assets
Goodwill
Total purchase price
Cash paid to date
Due to seller
Total purchase price
Goodwill deductible for tax purposes
Note 18. Subsequent Events
$
$
$
$
$
858
712
1,875
3,920
(429)
6,936
2,587
9,523
9,523
—
9,523
2,587
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.
On February 18, 2022, the Company announced the signing of a definitive agreement to acquire U.S. Amines, Ltd., a leading North
American producer of alkyl and specialty amines serving high-value end markets such as agrochemicals and pharmaceuticals, for an
estimated net purchase price of approximately $100 million. The transaction is expected to close in the first quarter of 2022, subject to
customary closing conditions.
70
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not Applicable.
Item 9A. 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 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 December 31, 2021, the end of the period covered by this report.
Management’s Report on Internal Control over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, and for its assessment of the effectiveness of internal control over
financial reporting. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Company assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In
making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control - Integrated Framework (2013).
Based on this assessment, management determined that the Company maintained effective internal control over financial reporting as
of December 31, 2021.
PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm, has audited the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2021, as stated in their report, which is included in "Item 8.
Financial Statements and Supplementary Data" of this Form 10-K.
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 December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over
financial reporting.
71
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
72
Item 10. Directors, Executive Officers and Corporate Governance
PART III.
Information relating to the directors and executive officers of the Company, as well as information relating to compliance with Section
16(a) of the Securities Exchange Act of 1934, as required by this Item 10, will be contained in our definitive Proxy Statement to be
filed with the SEC in connection with our 2022 annual meeting of stockholders pursuant to Regulation 14A not later than 120 days
after December 31, 2021 (the "2022 Proxy Statement"), and such information is incorporated herein by reference. Certain other
information relating to the Executive Officers of AdvanSix appears in Part I of this Annual Report on Form 10-K under the heading
"Information about our Executive Officers".
The members of the Audit Committee of our Board of Directors (the "Board") are: Paul E. Huck (Chair), Darrell K. Hughes, Daniel F.
Sansone and Farha Aslam. The Board has determined that each of Mr. Huck, Ms. Aslam and Mr. Sansone has been designated as an
audit committee financial expert as defined by applicable SEC rules and that each of Mr. Huck, Mr. Hughes, Mr. Sansone and Ms.
Aslam satisfies the accounting or related financial management expertise criteria established by the NYSE. All members of the Audit
Committee are independent as that term is defined in applicable SEC rules and NYSE listing standards.
AdvanSix’s corporate governance policies and procedures, including the Code of Business Conduct, Corporate Governance
Guidelines and Charters of the Committees of the Board are available, free of charge, on our website under the heading Investor
Relations (see Corporate Governance) at https://investors.advansix.com/corporate-governance/governance-documents, or by writing to
AdvanSix Inc., 300 Kimball Drive, Suite 101, Parsippany, New Jersey 07054, c/o Corporate Secretary. AdvanSix’s Code of Business
Conduct applies to all AdvanSix directors, officers (including the Chief Executive Officer, Chief Financial Officer and Controller) and
employees. Amendments to or waivers of the Code of Business Conduct granted to any of AdvanSix’s directors or executive officers
will be published on our website within four business days of such amendment or waiver.
Item 11. Executive Compensation
Information relating to executive compensation and the Compensation Committee, as required by this Item 11, will be contained in the
2022 Proxy Statement, and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Information relating to certain beneficial ownership of certain stockholders and management, as well as certain other information
required by this Item 12, will be contained in the 2022 Proxy Statement, and such information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions and Director Independence
Information relating to certain relationships and related transactions, as required by this Item 13, will be contained in the 2022 Proxy
Statement, and such information is incorporated herein by reference.
Item 14. Principal Accounting Fees and Services
Information relating to fees paid to and services performed by PricewaterhouseCoopers LLP and our Audit Committee’s pre-approval
policies and procedures with respect to non-audit services, as required by this Item 14, will be contained in the 2022 Proxy Statement,
and such information is incorporated herein by reference.
73
PART IV.
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019
Consolidated Balance Sheets at December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules
None
(a)(3) Exhibits
See the Exhibit Index of this Annual Report on Form 10-K
Item 16. Form 10-K Summary
The Company has elected not to include a Form 10-K summary under this Item 16.
Page Number
39
41
42
43
44
45
46
74
Exhibit No.
Description
EXHIBIT INDEX
2.1
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Separation and Distribution Agreement, dated as of September 22, 2016, between Honeywell International Inc.
and AdvanSix Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed
on September 28, 2016).
Amended and Restated Certificate of Incorporation of AdvanSix Inc. (incorporated by reference to Exhibit 3.1 to
the Company’s Quarterly Report on Form 10-Q filed on August 1, 2019).
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).
Description of Securities of the Registrant (incorporated by reference to Exhibit 4.1 to the Company's Annual
Report on Form 10-K filed on February 21, 2020).
Transition Services Agreement, dated as of September 28, 2016, between Honeywell International Inc. and
AdvanSix Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on
September 28, 2016).
Tax Matters Agreement, dated as of September 22, 2016, between Honeywell International Inc. and AdvanSix
Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September
28, 2016).
Employee Matters Agreement, dated as of September 22, 2016, between Honeywell International Inc. and
AdvanSix Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
September 28, 2016).
Chesterfield Site Sharing and Services Agreement, dated as of October 1, 2016, between Honeywell International
Inc. and AdvanSix Resins & Chemicals LLC (incorporated by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on October 3, 2016).
Colonial Heights Site Sharing and Services Agreement, dated as of October 1, 2016, between Honeywell
International Inc. and AdvanSix Resins & Chemicals LLC (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K filed on October 3, 2016).
Pottsville Site Sharing and Services Agreement, dated as of October 1, 2016, between Honeywell International
Inc. and AdvanSix Resins & Chemicals LLC (incorporated by reference to Exhibit 10.3 to the Company’s
Current Report on Form 8-K filed on October 3, 2016).
Credit Agreement, dated as of September 30, 2016, among AdvanSix Inc., each lender from time to time party
thereto, each swing line lender party thereto, each L/C issuer party thereto and Bank of America, N.A. as the
administrative agent (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
filed on October 3, 2016).
Amendment No. 1 to Credit Agreement, dated as of February 21, 2018, among AdvanSix Inc., the guarantors, the
lenders signatory thereto and Bank of America, N.A., as the administrative agent (with annexed Amended and
Restated Credit Agreement) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed on February 23, 2018).
Amendment No. 2 to Credit Agreement, dated as of February 19, 2020, among AdvanSix Inc., the guarantors, the
lenders signatory thereto and Bank of America, N.A., as the administrative agent (with annexed Amended and
Restated Credit Agreement) (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form
8-K filed on February 21, 2020).
10.10
Offer of Employment Letter between Honeywell International Inc. and Erin N. Kane, dated April 19, 2016
(incorporated by reference to Exhibit 10.9 to the Company’s Amendment No. 1 to Form 10 filed on July 25,
2016). †
75
Exhibit No.
Description
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
Offer of Employment Letter between Honeywell International Inc. and Michael Preston, dated May 13, 2016
(incorporated by reference to Exhibit 10.11 to the Company’s Amendment No. 1 to Form 10 filed on July 25,
2016). †
Offer of Employment Letter between Honeywell International Inc. and John M. Quitmeyer, dated May 25, 2016
(incorporated by reference to Exhibit 10.12 to the Company’s Amendment No. 1 to Form 10 filed on July 25,
2016). †
Offer of Employment Letter between Honeywell International Inc. and Jonathan Bellamy, dated May 16, 2016
(incorporated by reference to Exhibit 10.10 to the Company’s Amendment No. 1 to Form 10 filed on July 25,
2016). †
Offer of Employment Letter between AdvanSix Inc. and Christopher Gramm, dated as of August 19, 2016
(incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on October 3,
2016). †
Offer of Employment Letter between AdvanSix Inc. and Willem L. Blindenbach, dated as of October 2, 2019. †
2016 Stock Incentive Plan of AdvanSix Inc. and its Affiliates (incorporated by reference to Exhibit 10.6 to the
Company’s Current Report on Form 8-K filed on October 3, 2016). †
2016 Stock Incentive Plan of AdvanSix Inc. and its Affiliates, as Amended and Restated (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 23, 2020).
Form of Restricted Stock Unit Agreement for Non-Employee Directors under the AdvanSix Inc. 2016 Stock
Incentive Plan (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed on
October 3, 2016). †
Form of Restricted Stock Unit Agreement for Executive Officers under the AdvanSix Inc. 2016 Stock Incentive
Plan (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on May
11, 2017). †
Form of Performance Stock Unit Agreement under the AdvanSix Inc. 2016 Stock Incentive Plan (incorporated by
reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2017). †
Form of Stock Option Award Agreement under the AdvanSix Inc. 2016 Stock Incentive Plan (incorporated by
reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2017). †
AdvanSix Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 8-K filed on September 26, 2017). †
Executive Severance Pay Plan of AdvanSix Inc. (incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K filed on November 15, 2017). †
Form of Noncompete Agreement for Senior Executives (incorporated by reference to Exhibit 10.1 of the
Company’s Quarterly Report on Form 10-Q filed on August 3, 2018). †
Amended and Restated Caprolactam and Polymer Supply Agreement dated as of April 1, 2013, by and between
Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc. (incorporated by reference to Exhibit 10.4
to Amendment No. 1 to the Registration Statement of AdvanSix Inc. on Form 10 dated and filed with the SEC on
July 25, 2016). *
First Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of July 18,
2013, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc. (incorporated by
reference to Exhibit 10.5 to Amendment No. 1 to the Registration Statement of AdvanSix Inc. on Form 10 dated
and filed with the SEC on July 25, 2016). *
76
Exhibit No.
Description
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
21.1
23.1
Second Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of
November 15, 2013, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.
(incorporated by reference to Exhibit 10.6 to Amendment No. 1 to the Registration Statement of AdvanSix Inc.
on Form 10 dated and filed with the SEC on July 25, 2016). *
Third Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of
December 12, 2014, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.
(incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Registration Statement of AdvanSix Inc.
on Form 10 dated and filed with the SEC on July 25, 2016). *
Fourth Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of
January 13, 2016, by and between Honeywell Resins & Chemicals LLC and Shaw Industries Group, Inc.
(incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Registration Statement of AdvanSix Inc.
on Form 10 dated and filed with the SEC on July 25, 2016). *
Fifth Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated
as of March 1, 2017, by and between AdvanSix Resins & Chemicals LLC and Shaw Industries Group,
Inc. (incorporated by reference to Exhibit 10.21 to the Company's Annual Report on Form 10-K dated
and filed with the SEC on March 6, 2017). *
Sixth Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of March
1, 2017, by and between AdvanSix Resins & Chemicals LLC and Shaw Industries Group, Inc. (incorporated by
reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K dated and filed with the SEC on March
6, 2017). *
Seventh Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of
February 22, 2018, by and between AdvanSix Resins & Chemicals LLC and Shaw Industries Group, Inc.
(incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed with the SEC
on February 27, 2018) *
Eighth Amendment to the Amended and Restated Caprolactam and Polymer Supply Agreement dated as of
February 22, 2018, by and between AdvanSix Resins & Chemicals LLC and Shaw Industries Group, Inc.
(incorporated by reference to Exhibit 10.29 to the Company’s Annual Report on Form 10-K filed with the SEC
on February 27, 2018) *
Amended and Restated Caprolactam and Polymer Supply Agreement dated as of Jan 1, 2019, by and between
AdvanSix Resins Chemicals LLC and Shaw Industries Group, Inc. (incorporated by reference to Exhibit 10.31 to
the Company’s Annual Report on Form 10-K filed with the SEC on February 22, 2019) *
Offer of Employment Letter between AdvanSix Inc. and Achilles B. Kintiroglou, dated February 24, 2020
(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC
on May 1, 2020) †
Employment Separation Agreement and Release between AdvanSix Inc. and Jonathan Bellamy, dated March 12,
2020 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the
SEC on May 1, 2020) †
Offer of Employment Letter between AdvanSix Inc. and Kelly Slieter, dated May 25, 2020 (incorporated by
reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on July 31, 2020)
†
Credit Agreement, dated as of October 27, 2021, among AdvanSix Inc., the lenders party thereto and Truist Bank,
as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on October 29, 2021).
List of subsidiaries of AdvanSix Inc. (incorporated by reference to Exhibit 21.1 to Amendment No. 4 to the
Registration Statement of AdvanSix Inc. on Form 10 dated and filed with the SEC on August 31, 2016 and
effective as of September 8, 2016).
Consent of PricewaterhouseCoopers LLP.
77
Exhibit No.
Description
24.1
31.1
31.2
32.1
32.2
99.1
99.2
99.3
Power of Attorney (included on the signature page of this Annual Report on Form 10-K).
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification of the Company’s Principal Financial Officer.
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.
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.
Information Statement of AdvanSix Inc. (incorporated by reference to Exhibit 99.1 to Amendment No. 5 to the
Registration Statement of AdvanSix Inc. on Form 10 dated and filed with the SEC on September 7, 2016 and
effective as of September 8, 2016).
Pertinent pages from Honeywell International Inc.’s Proxy Statement, dated March 10, 2016, filed pursuant to
Rule 14a-6 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 99.2 to the Registration
Statement of AdvanSix Inc. on Form 10 dated and filed with the SEC on May 12, 2016).
Pertinent pages from the Annual Report of Honeywell International Inc. on Form 10-K for the fiscal year ended
December 31, 2015, filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (incorporated
by reference to Exhibit 99.3 to the Registration Statement of AdvanSix Inc. on Form 10 dated and filed with the
SEC on May 12, 2016).
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
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
104
†
*
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Indicates management contract or compensatory plan.
Confidential treatment has been granted for certain information contained in Exhibits 10.25 through 10.34, and the omitted portions have been filed
separately with the SEC.
78
Pursuant to the requirements of Section 13 or 15(d) 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.
Signatures
Date: February 18, 2022
ADVANSIX INC.
By: /s/ Michael Preston
Michael Preston
Senior Vice President and Chief Financial Officer
(on behalf of the registrant and as the registrant’s
Principal Financial Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Erin N.
Kane, Michael Preston, and Achilles Kintiroglou, or any of them, his or her attorneys-in-fact, for such person in any and all capacities,
to sign any amendments to this report and to file the same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that either of said attorneys-in-fact, or substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated:
/s/ Erin N. Kane
Erin N. Kane
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Michael L. Marberry
Michael L. Marberry
Independent Chairman of the Board
/s/ Farha Aslam
Farha Aslam
Director
/s/ Darrell K. Hughes
Darrell K. Hughes
Director
/s/ Gena C. Lovett
Gena C. Lovett
Director
/s/ Sharon S. Spurlin
Sharon S. Spurlin
Director
/s/ Paul E. Huck
Paul E. Huck
Director
/s/ Todd D. Karran
Todd D. Karran
Director
/s/ Daniel F. Sansone
Daniel F. Sansone
Director
/s/ Patrick S. Williams
Patrick S. Williams
Director
/s/ Michael Preston
Michael Preston
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Christopher Gramm
Christopher Gramm
Vice President and Controller
(Principal Accounting Officer)
February 18, 2022
79