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AdvanSix Announces Second Quarter 2022 Financial Results

·17 min read

Sales of $584 million, up 33% versus prior year

Earnings Per Share of $2.23; Adjusted Earnings Per Share of $2.30, up 40% versus prior year

Cash Flow from Operations of $96 million, up 85% versus prior year

Announced 16% increase in quarterly dividend to $0.145 per share

PARSIPPANY, N.J., August 05, 2022--(BUSINESS WIRE)--AdvanSix (NYSE: ASIX) today announced its financial results for the second quarter ending June 30, 2022. Overall, the Company generated robust quarterly sales, earnings and cash flow.

Second Quarter 2022 Summary

  • Sales up approximately 33% versus prior year driven by 26% favorable impact of market-based pricing, 6% higher raw material pass-through pricing, and 5% contribution from acquisitions, partially offset by 4% lower volume

  • Net Income of $65.2 million, an increase of $21.0 million versus the prior year

  • Adjusted EBITDA of $105.4 million, an increase of $25.7 million versus the prior year

  • Cash Flow from Operations of $95.9 million, an increase of $43.9 million versus the prior year

  • Capital Expenditures of $17.8 million, an increase of $7.5 million versus the prior year

  • Free Cash Flow of $78.1 million, an increase of $36.5 million versus the prior year

  • Repurchased 87,251 shares for approximately $3 million

"Our robust second quarter results, featuring top and bottom line growth sequentially and year-over-year, reflect the continued strength and advantage of our business model and diverse product portfolio," said Erin Kane, president and CEO of AdvanSix. "In the quarter, strong commercial performance to meet customer demand more than offset higher inflation as well as lower sales volume primarily due to unfavorable weather conditions driving a reduction of in-season fertilizer demand. Our healthy cash flow performance reflects the quality of our earnings while supporting continued reinvestment in the business and return of cash to shareholders including opportunistic share repurchases and a 16 percent increase in our quarterly cash dividend. Our integration of U.S. Amines is progressing very well as expected, adding additional value to our portfolio."

Summary second quarter 2022 financial results for the Company are included below:

($ in Thousands, Except Earnings Per Share)

2Q 2022

2Q 2021

Sales

$583,736

$437,682

Net Income

65,157

44,131

Diluted Earnings Per Share

$2.23

$1.53

Adjusted Diluted Earnings Per Share (1)

$2.30

$1.64

Adjusted EBITDA (1)

105,426

79,700

Adjusted EBITDA Margin % (1)

18.1%

18.2%

Cash Flow from Operations

95,891

51,945

Free Cash Flow (1)(2)

78,131

41,644

(1) See "Non-GAAP Measures" included in this press release for non-GAAP reconciliations

(2) Net cash provided by operating activities less capital expenditures

Sales of $583.7 million in the quarter increased approximately 33% versus the prior year. Market-based pricing was favorable by 26% compared to the prior year driven by strong commercial execution to capture higher pricing across our ammonium sulfate and nylon product lines, partially offset by lower pricing in chemical intermediates, primarily acetone. Raw material pass-through pricing was favorable by 6% following a net cost increase in benzene and propylene (inputs to cumene which is a key feedstock to our products). The acquisition of U.S. Amines contributed approximately 5% to sales in the quarter. Sales volume decreased approximately 4% driven primarily by unfavorable weather conditions driving a reduction of in-season fertilizer demand, and lower production output compared to the prior year.

Sales by product line and approximate percentage of total sales are included below:

($ in Thousands)

2Q 2022

2Q 2021

Sales

% of Total

Sales

% of Total

Nylon

$

132,105

23%

$

111,710

25%

Caprolactam

87,169

15%

81,792

19%

Chemical Intermediates

158,611

27%

144,201

33%

Ammonium Sulfate

205,851

35%

99,979

23%

$

583,736

100%

$

437,682

100%

Adjusted EBITDA of $105.4 million in the quarter increased $25.7 million versus the prior year primarily due to higher market-based pricing, net of increased raw material costs, particularly natural gas and sulfur, partially offset by lower sales volume, inflation, and higher utilities cost driven by natural gas prices.

Adjusted earnings per share of $2.30 increased $0.66 versus the prior year driven primarily by the factors discussed above.

Cash flow from operations of $95.9 million in the quarter increased $43.9 million versus the prior year primarily due to higher net income and the favorable impact of changes in working capital. Capital expenditures of $17.8 million in the quarter increased $7.5 million versus the prior year.

Dividend

The Company's Board of Directors declared a quarterly cash dividend of $0.145 per share on the Company's common stock. This represents a 16% increase from the previous quarter's dividend. The dividend is payable on August 30, 2022 to stockholders of record as of the close of business on August 16, 2022.

Outlook

  • Targeting significant earnings growth in 2022 supported by strength of our integrated business model and diverse end market exposure

  • Expect continued healthy North America demand for nylon and chemical intermediates

  • Expect favorable underlying agriculture industry fundamentals to continue; North America ammonium sulfate seasonality expected to drive 3Q22 higher export mix sequentially

  • Successful integration of U.S. Amines expected to deliver year one earnings accretion

  • Continue to expect Capital Expenditures to be $95 to $105 million in 2022

  • Continue to expect pre-tax income impact of planned plant turnarounds to be approximately $32 to $37 million in 2022

"Looking forward, we expect continued healthy North America demand for nylon and chemical intermediates as well as favorable agriculture, nitrogen and sulfur fertilizer industry fundamentals particularly into next year's planting season. While the macro environment continues to be dynamic, we have substantially increased the earnings power of this business. We are well-positioned to fuel future earnings and cash flow performance with continued contributions from high-return growth and cost savings projects, an improved portfolio mix with over $200 million in sales from differentiated products, and strong and disciplined capital deployment. Our core strategies continue to support expectations for AdvanSix's long-term, sustainable performance," concluded Kane.

Conference Call Information

AdvanSix will discuss its results during its investor conference call today starting at 9:00 a.m. ET. To participate on the conference call, dial (844) 855-9494 (domestic) or (412) 858-4602 (international) approximately 10 minutes before the 9:00 a.m. ET start, and tell the operator that you are dialing in for AdvanSix’s second quarter 2022 earnings call. The live webcast of the investor call as well as related presentation materials can be accessed at http://investors.advansix.com. Investors can hear a replay of the conference call from 12 noon ET on August 5 until 12 noon ET on August 12 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international). The access code is 4764025.

About AdvanSix

AdvanSix plays a critical role in global supply chains, innovating and delivering essential products for our customers in a wide variety of end markets and applications that touch people’s lives, such as building and construction, fertilizers, agrochemicals, plastics, solvents, packaging, paints, coatings, adhesives and electronics. Our reliable and sustainable supply of quality products emerges from the integrated value chain of our five U.S.-based manufacturing facilities. AdvanSix strives to deliver best-in-class customer experiences and differentiated products in the industries of nylon solutions, chemical intermediates, and plant nutrients, guided by our core values of Safety, Integrity, Accountability and Respect. More information on AdvanSix can be found at http://www.advansix.com.

Forward Looking Statements

This release contains certain statements that may be deemed "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, that address activities, events or developments that our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements may be identified by 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. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: general economic and financial conditions in the U.S. and globally, including the impact of the coronavirus (COVID-19) pandemic and any resurgences; the potential effects of inflationary pressures, labor market shortages and supply chain issues; instability or volatility in financial markets or other unfavorable economic or business conditions caused by geopolitical concerns, including as a result of the conflict between Russia and Ukraine; the scope, shape and pace of recovery of the pandemic including the impact of social and economic restrictions and other containment measures taken to combat virus transmission; the effect on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.; our ability to sell and provide our goods and services; 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; risks associated with employees working remotely or operating with a reduced workforce; risks associated with our indebtedness including compliance with financial and restrictive covenants, and our ability to access capital on reasonable terms, at a reasonable cost, or at all, due to economic conditions; the impact of scheduled turnarounds and significant unplanned downtime and interruptions of production or logistics operations as a result of mechanical issues or other unanticipated events such as fires, severe weather conditions, natural disasters, pandemics and geopolitical conflicts and related events; price fluctuations, cost increases and supply of raw materials; our operations and growth projects requiring substantial capital; growth rates and cyclicality of the industries we serve including global changes in supply and demand; failure to develop and commercialize new products or technologies; loss of significant customer relationships; adverse trade and tax policies; extensive environmental, health and safety laws that apply to our operations; hazards associated with chemical manufacturing, storage and transportation; litigation associated with chemical manufacturing and our business operations generally; inability to acquire and integrate businesses, assets, products or technologies; protection of our intellectual property and proprietary information; prolonged work stoppages as a result of labor difficulties or otherwise; cybersecurity, data privacy incidents and disruptions to our technology infrastructure; failure to maintain effective internal controls; our ability to declare and pay quarterly cash dividends and the amounts and timing of any future dividends; our ability to repurchase our common stock and the amount and timing of any future repurchases; disruptions in supply chain, transportation and logistics; potential for uncertainty regarding qualification for tax treatment of our spin-off; fluctuations in our stock price; and changes in laws or regulations applicable to our business. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our filings with the Securities and Exchange Commission (SEC), including the risk factors in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, as updated in subsequent reports filed with the SEC.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures intended to supplement, not to act as substitutes for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in this press release. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. Non-GAAP measures in this press release may be calculated in a way that is not comparable to similarly-titled measures reported by other companies.

AdvanSix Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

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

June 30, 2022

December 31, 2021

ASSETS

Current assets:

Cash and cash equivalents

$

17,297

$

15,100

Accounts and other receivables – net

246,371

179,087

Inventories – net

155,447

149,570

Other current assets

16,798

6,097

Total current assets

435,913

349,854

Property, plant and equipment – net

785,974

767,964

Operating lease right-of-use assets

130,146

136,207

Goodwill

58,192

17,592

Intangible assets

50,766

17,980

Other assets

22,266

22,402

Total assets

$

1,483,257

$

1,311,999

LIABILITIES

Current liabilities:

Accounts payable

$

272,261

$

211,511

Accrued liabilities

43,449

49,712

Income taxes payable

32

9,723

Operating lease liabilities – short-term

38,995

36,127

Deferred income and customer advances

1,607

2,749

Total current liabilities

356,344

309,822

Deferred income taxes

148,263

133,330

Operating lease liabilities – long-term

91,377

100,580

Line of credit – long-term

146,500

135,000

Postretirement benefit obligations

10,659

18,243

Other liabilities

10,905

13,834

Total liabilities

764,048

710,809

STOCKHOLDERS' EQUITY

Common stock, par value $0.01; 200,000,000 shares authorized; 31,961,956 shares issued and 28,077,693 outstanding at June 30, 2022; 31,755,430 shares issued and 28,139,954 outstanding at December 31, 2021

320

318

Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at June 30, 2022 and December 31, 2021

Treasury stock at par (3,884,263 shares at June 30, 2022; 3,615,476 shares at December 31, 2021)

(39

)

(36

)

Additional paid-in capital

192,392

195,931

Retained earnings

532,246

411,516

Accumulated other comprehensive loss

(5,710

)

(6,539

)

Total stockholders' equity

719,209

601,190

Total liabilities and stockholders' equity

$

1,483,257

$

1,311,999

AdvanSix Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

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

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Sales

$

583,736

$

437,682

$

1,062,809

$

814,065

Costs, expenses and other:

Costs of goods sold

476,835

356,884

852,482

674,783

Selling, general and administrative expenses

20,841

21,682

42,051

40,990

Interest expense, net

769

1,379

1,332

2,923

Other non-operating (income) expense, net

172

(211

)

(431

)

19

Total costs, expenses and other

498,617

379,734

895,434

718,715

Income before taxes

85,119

57,948

167,375

95,350

Income tax expense

19,962

13,817

39,145

23,088

Net income

$

65,157

$

44,131

$

128,230

$

72,262

Earnings per common share

Basic

$

2.31

$

1.57

$

4.55

$

2.57

Diluted

$

2.23

$

1.53

$

4.37

$

2.51

Weighted average common shares outstanding

Basic

28,168,207

28,131,981

28,183,951

28,112,978

Diluted

29,262,709

28,920,177

29,316,792

28,830,727

AdvanSix Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Cash flows from operating activities:

Net income

$

65,157

$

44,131

$

128,230

$

72,262

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

17,534

16,629

34,226

32,733

Loss on disposal of assets

441

349

800

433

Deferred income taxes

3,077

5,575

2,558

7,812

Stock-based compensation

2,005

3,744

5,379

6,107

Accretion of deferred financing fees

154

141

309

282

Changes in assets and liabilities, net of business acquisitions:

Accounts and other receivables

(23,743

)

(15,878

)

(52,145

)

(29,048

)

Inventories

4,901

1,706

3,012

40,692

Accounts payable

70,159

20,602

62,130

6,821

Income taxes payable

(27,624

)

(9,691

)

Accrued liabilities

2,897

3,663

(8,821

)

4,575

Deferred income and customer advances

(827

)

(16,626

)

(1,142

)

(23,429

)

Other assets and liabilities

(18,240

)

(12,091

)

(19,792

)

(10,205

)

Net cash provided by operating activities

95,891

51,945

145,053

109,035

Cash flows from investing activities:

Expenditures for property, plant and equipment

(17,760

)

(10,301

)

(38,779

)

(24,478

)

Acquisition of business

1,133

(97,456

)

(9,523

)

Other investing activities

(925

)

(251

)

(1,221

)

(482

)

Net cash used for investing activities

(17,552

)

(10,552

)

(137,456

)

(34,483

)

Cash flows from financing activities:

Borrowings from line of credit

82,000

50,500

230,500

104,500

Payments of line of credit

(155,500

)

(101,500

)

(219,000

)

(184,500

)

Principal payments of finance leases

(244

)

(165

)

(481

)

(364

)

Dividend payments

(3,515

)

(7,032

)

Purchase of treasury stock

(3,407

)

(146

)

(10,419

)

(589

)

Issuance of common stock

318

45

1,032

46

Net cash used for financing activities

(80,348

)

(51,266

)

(5,400

)

(80,907

)

Net change in cash and cash equivalents

(2,009

)

(9,873

)

2,197

(6,355

)

Cash and cash equivalents at beginning of period

19,306

14,124

15,100

10,606

Cash and cash equivalents at the end of period

$

17,297

$

4,251

$

17,297

$

4,251

Supplemental non-cash investing activities:

Capital expenditures included in accounts payable

$

9,207

$

3,739

AdvanSix Inc.

Non-GAAP Measures

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

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Net cash provided by operating activities

$

95,891

$

51,945

$

145,053

$

109,035

Expenditures for property, plant and equipment

(17,760

)

(10,301

)

(38,779

)

(24,478

)

Free cash flow (1)

$

78,131

$

41,644

$

106,274

$

84,557

(1) Free cash flow is a non-GAAP measure defined as Net cash provided by operating activities less Expenditures for property, plant and equipment

The Company believes that this metric is useful to investors and management as a measure to evaluate our ability to generate cash flow from business operations and the impact that this cash flow has on our liquidity.

Reconciliation of Net Income to Adjusted EBITDA and Earnings Per Share to Adjusted Earnings Per Share

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Net income

$

65,157

$

44,131

$

128,230

$

72,262

Non-cash stock-based compensation

2,005

3,744

5,379

6,107

Non-recurring, unusual or extraordinary expenses

Non-cash amortization from acquisitions

551

65

752

109

One-time M&A costs

277

172

Benefit from income taxes relating to reconciling items

(439

)

(578

)

(995

)

(986

)

Adjusted Net Income

67,274

47,362

133,643

77,664

Interest expense, net

769

1,379

1,332

2,923

Income tax expense - adjusted

20,401

14,395

40,141

24,074

Depreciation and amortization - adjusted

16,982

16,564

33,474

32,624

Adjusted EBITDA

$

105,426

$

79,700

$

208,590

$

137,285

Sales

$

583,736

$

437,682

$

1,062,809

$

814,065

Adjusted EBITDA Margin (2)

18.1%

18.2%

19.6%

16.9%

(2) Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Sales

Three Months Ended
June 30,

Six Months Ended
June 30,

2022

2021

2022

2021

Net Income

$

65,157

$

44,131

$

128,230

$

72,262

Adjusted Net Income

67,274

47,362

133,643

77,664

Weighted-average number of common shares outstanding - basic

28,168,207

28,131,981

28,183,951

28,112,978

Dilutive effect of equity awards and other stock-based holdings

1,094,502

788,196

1,132,841

717,749

Weighted-average number of common shares outstanding - diluted

29,262,709

28,920,177

29,316,792

28,830,727

EPS - Basic

$

2.31

$

1.57

$

4.55

$

2.57

EPS - Diluted

$

2.23

$

1.53

$

4.37

$

2.51

Adjusted EPS - Basic

$

2.39

$

1.68

$

4.74

$

2.76

Adjusted EPS - Diluted

$

2.30

$

1.64

$

4.56

$

2.69

The Company believes the non-GAAP financial measures presented in this release 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 these non-GAAP measures exclude items that are not considered core to the Company’s operations.

AdvanSix Inc.

Appendix

(Pre-tax income impact, Dollars in millions)

Planned Plant Turnaround Schedule (3)

1Q

2Q

3Q

4Q

FY

2017

~$10

~$4

~$20

~$34

2018

~$2

~$10

~$30

~$42

2019

~$5

~$5

~$25

~$35

2020

~$2

~$7

~$20

~$2

~$31

2021

~$3

~$8

~$18

~$29

2022E

~$1

~$5

$26-31

$32-$37

(3) Primarily reflects the impact of fixed cost absorption, maintenance expense, and the purchase of feedstocks which are normally manufactured by the Company.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804006037/en/

Contacts

Media
Janeen Lawlor
(973) 526-1615
janeen.lawlor@advansix.com

Investors
Adam Kressel
(973) 526-1700
adam.kressel@advansix.com