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What changed in AdvanSix Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AdvanSix Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+355 added−328 removedSource: 10-K (2024-02-16) vs 10-K (2023-02-17)

Top changes in AdvanSix Inc.'s 2023 10-K

355 paragraphs added · 328 removed · 259 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

101 edited+27 added−11 removed54 unchanged
Biggest changeOur 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 globally, fragmented industry.
Biggest changeSecond, we operate one of the world’s largest single-site caprolactam and ammonium sulfate production facilities, which is a competitive advantage in our globally, fragmented industry. Our scale provides operating and purchasing leverage and the opportunity to achieve stronger business performance than our competitors in several ways.
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.
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, plant nutrients and chemical intermediates, guided by our core values of Safety, Integrity, Accountability and Respect.
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.
We believe it is important that each employee feels a sense of belonging and is 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.
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, to implement and expand upon unconscious bias education and to share diversity and inclusion practices.
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. In addition, our recent acquisition of U.S.
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. In addition, our acquisition of U.S.
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 certain of our products such as acetone and amines, which may implicate List II or other considerations under the Drug Enforcement Act.
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 certain of our products, such as acetone and amines, may implicate List II or other considerations under the Drug Enforcement Act.
Our compensation and benefit programs are designed to support our business strategy through four key objectives: • Attract and retain best-in-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.
Our compensation and benefit programs are designed to support our business strategy through four key objectives: • Attract and retain best-in-class talent; • Drive and pay for performance that creates superior results and sustainable stockholder value; • Manage risk through oversight and sound management; and 10 • Nurture a culture of employee health and wellness.
Our agronomists provide the latest scientific information on the importance of sulfur nutrition for crops and 3 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.
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.
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.
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 directors, employees, contractors, and other stakeholders.
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.
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 and inclusive work climate.
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.
Generally, prices for Nylon 6 resin and caprolactam reflect supply and demand trends 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 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.
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 primarily produce caprolactam and ammonium sulfate.
We continuously seek to improve our health, safety and environmental performance. We have expended funds to comply with environmental laws and regulations and expect to continue to do so.
We continuously seek to improve our health, safety and environmental ("HSE") performance. We have expended funds to comply with environmental laws and regulations and expect to continue to do so.
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. Michael Preston, 51 Senior Vice President and Chief Financial Officer Prior to joining the Company, Mr.
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. Michael Preston, 52 Senior Vice President and Chief Financial Officer Prior to joining the Company, Mr.
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. 12
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. 13
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.
Competition Competition across our product offerings is based on a variety of factors including price, reliability of supply, quality, product innovation, 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.
Notably, we continued our program of 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 created a program for inclusive leadership, ensuring our leaders understand and have the tools to create an inclusive environment where all can thrive.
Notably, we continued our program of 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 created a program in 2022 for inclusive leadership, ensuring our leaders understand 9 and have the tools to create an inclusive environment where all can thrive.
Finally, our long-term customer relationships and contracts enable us to maintain high plant utilization rates, which, along with our size and scale, serves to retain and attract customers who prioritize security of supply. Diverse Revenue Sources from the Sale of Fertilizer, Acetone and Other Chemical Intermediates.
Finally, our long-term customer relationships and contracts enable us to maintain high plant utilization rates, which, along with our size and scale, serves to retain and attract customers who prioritize security of supply. Diverse Revenue Sources from the Sale of Ammonium Sulfate Fertilizer, Acetone and Other Chemical Intermediates.
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.
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 variation as a result of global changes in supply and demand.
From 2015 through 2018, she served as vice president, human resources of the Honeywell UOP business. Christopher Gramm, 53 Vice President, Controller Prior to joining the Company, Mr. Gramm served as vice president and controller of the aerospace and corporate government compliance divisions at Honeywell. He joined Honeywell in 1997 as a senior staff accountant.
From 2015 through 2018, she served as vice president, human resources of the Honeywell UOP business. Christopher Gramm, 54 Vice President, Controller Prior to joining the Company, Mr. Gramm served as vice president and controller of the aerospace and corporate government compliance divisions at Honeywell. He joined Honeywell in 1997 as a senior staff accountant.
In 2021, strong end use demand, combined with industry operational upsets and supply chain disruptions, created an environment for robust performance in Nylon 6. Nylon end-uses are sensitive to consumer demand, which was softer overall through 2022, particularly in consumer durables and residential end markets.
In 2021, strong end-use demand, combined with industry operational upsets and supply chain disruptions, created an environment for robust performance in Nylon 6. Nylon end-uses are sensitive to consumer demand, which was softer overall through 2023, particularly in consumer durables and residential end markets.
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, 2022, ammonium sulfate fertilizer accounts for approximately 6% of the global market for nitrogen fertilizer and over 40% of the global market for sulfur fertilizer.
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, 2023, ammonium sulfate fertilizer accounts for approximately 6% of the global market for nitrogen fertilizer and over 40% of the global market for sulfur fertilizer.
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 all we do.
As an organization, we maintain a relentless focus on continuous improvement and our vision 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 all we do.
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. Kelly J. Slieter, 48 Senior Vice President and Chief Human Resources Officer Prior to joining the Company, Ms.
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. Kelly J. Slieter, 49 Senior Vice President and Chief Human Resources Officer Prior to joining the Company, Ms.
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.
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 as a talent pipeline.
We produce a high-quality granular grade of ammonium sulfate to meet the growing demand of our customers. We also directly supply packaged ammonium sulfate to customers, primarily in North and South America, and diversified and optimized our offerings to include spray-grade adjuvants to support crop protection, as well as other specialty fertilizers and products for industrial use.
We produce a high-quality granular grade of ammonium sulfate to meet the growing demand of our customers. We also directly supply packaged ammonium sulfate to customers, primarily in North and South America, and have diversified and optimized our offerings to include spray-grade adjuvants to support crop protection, as well as other specialty fertilizers and products for industrial use. Chemical Intermediates.
Amines enables further diversification into agrochemical intermediates, water treatment and pharmaceuticals. Global Reach. Our cost position, business model, and sales and marketing capabilities enable us to compete globally where nylon resin, caprolactam, ammonium sulfate and chemical intermediates are consumed. In 2022, approximately 17% of our sales were outside the United States.
Amines in 2022 enables further diversification into agrochemical intermediates, water treatment and pharmaceuticals. Global Reach. Our cost position, business model, and sales and marketing capabilities enable us to compete globally where nylon resin, caprolactam, ammonium sulfate and chemical intermediates are consumed. In 2023, approximately 18% of our sales were outside the United States.
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.
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 fibers, compounds and other nylon products.
Each of these product lines represented the following approximate percentage of total sales: Years Ended December 31, 2022 2021 2020 Nylon 25% 25% 24% Caprolactam 16% 19% 19% Chemical Intermediates 26% 32% 32% Ammonium Sulfate 33% 24% 25% 100% 100% 100% 1 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, 2022: For information concerning revenues and assets by geographic region, see “Note 3.
Each of these product lines represented the following approximate percentage of total sales: Years Ended December 31, 2023 2022 2021 Nylon 23% 25% 25% Caprolactam 19% 16% 19% Ammonium Sulfate 29% 33% 24% Chemical Intermediates 29% 26% 32% 100% 100% 100% 1 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, 2023: For information concerning revenues and assets by geographic region, see “Note 3.
Kintiroglou, 44 Senior Vice President, General Counsel and Corporate Secretary Prior to being named to his current role, Mr. Kintiroglou was the deputy general counsel of AdvanSix since the spin-off in 2016.
Kintiroglou, 45 Senior Vice President, General Counsel and Corporate Secretary Prior to being named to his current role, Mr. Kintiroglou was the deputy general counsel of AdvanSix since the spin-off in 2016.
In addition, in this Form 10-K, the Company incorporates by reference certain information from parts of its Proxy Statement for the 2023 Annual Meeting of 11 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.
In addition, in this Form 10-K, the Company incorporates by reference certain information from parts of its Proxy Statement for the 2024 Annual Meeting of 12 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.
There are no family relationships among them or our Board members. 10 Name, Age Position Business Experience Erin N. Kane, 45 Chief Executive Officer and Director Prior to joining the Company, Ms. Kane served as vice president and general manager of Honeywell Resins and Chemicals since October 2014.
There are no family relationships among them or our Board members. 11 Name, Age Position Business Experience Erin N. Kane, 46 Chief Executive Officer and Director Prior to joining the Company, Ms. Kane served as vice president and general manager of Honeywell Resins and Chemicals since October 2014.
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 2022, caprolactam generated $320 million of sales. In 2022, 2021 and 2020, caprolactam sales were 16%, 19% and 19% 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 2023, caprolactam generated $298 million of sales. In 2023, 2022 and 2021, caprolactam sales were 19%, 16% and 19% of our total sales, respectively.
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 1.15 in 2022, 0.48 in 2021 and 0.91 in 2020.
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 0.97 in 2023, 1.15 in 2022 and 0.48 in 2021.
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 ("HBCUs") and connections to internships, leadership development and mentoring opportunities.
In addition, AdvanSix supports 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 ("HBCUs") and connections to internships, leadership development and mentoring opportunities.
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. We are focused on working with customers to solve their needs with respect to sustainability and have received commercial orders for our 100% Post-Industrial Recycled resins and films.
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. We are focused on working with customers to solve their needs with respect to sustainability and have commercialized our 100% Post-Industrial Recycled resins and films.
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, agrochemicals, plastics, solvents, packaging, paints, coatings, adhesives and electronics.
Description of Business AdvanSix Inc. is a diversified chemistry company playing 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.
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 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.
Approximately 744 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.
Approximately 750 employees are covered under collective bargaining agreements that expire between 2024 and 2028. 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.
We have also diversified and optimized our ammonium sulfate-based offerings to include a spray-grade adjuvant to support crop protection, as well as other specialty fertilizers and products for industrial use. Sales of ammonium sulfate in 2022 were $629 million and represented 33% of our total sales.
We have also diversified and optimized our ammonium sulfate-based offerings to include a spray-grade adjuvant to support crop protection, as well as other specialty fertilizers and products for industrial use. Sales of ammonium sulfate in 2023 were $441 million and represented 29% of our total sales.
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.
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 noted in their respective charters: • Our Health, Safety, and Environmental Committee oversees policies and programs relating to health, safety, and environmental (HSE), matters including process safety, HSE management systems and compliance with HSE regulations and compliance. • Our Nominating and Governance Committee annually evaluates the effectiveness of our corporate governance framework and corporate social responsibility policies, goals and programs, including oversight of sustainability matters, community engagement and government affairs, as well as such other matters regarding the Company's role as a responsible corporate citizen. • 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. 8 Health and Safety At AdvanSix, safety is our number one core value — we “Live Safety” in all we do.
As noted in their respective charters: • Our Health, Safety, and Environmental Committee oversees policies and programs relating to HSE matters, including process safety, HSE management systems and compliance with HSE regulations and compliance. • Our Nominating and Governance Committee annually evaluates the effectiveness of our corporate governance framework and corporate social responsibility policies, goals and programs, including oversight of sustainability matters, community engagement and government affairs, as well as such other matters regarding the Company's role as a responsible corporate citizen. • 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 senior and executive management necessary to support the growth and success of the Company.
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.
Seasonality We produce ammonium sulfate fertilizer continuously throughout the year as part of our manufacturing process, but quarterly sales fluctuate reflecting both geographical and product sales mix considerations based on the timing and length of the growing seasons in North and South America.
We are among the most significant suppliers of acetone to a variety of end-markets in North America. Sales of acetone in 2022 were approximately $227 million and represented 12% 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.
We are among the most significant suppliers of acetone to a variety of end-markets in North America. Sales of acetone in 2023 were approximately $203 million and represented 13% of our total sales. In addition to ammonium sulfate and acetone, other products from our manufacturing process include high-purity phenol, AMS, cyclohexanone, oximes, cyclohexanol, sulfuric acid, ammonia and carbon dioxide.
The housing sector had seen an improving trend in recent years, however, residential construction markets slowed in 2022 reflecting the rise in interest rates. Nylon 6 has a stronger presence in commercial carpet applications, including hospitality and office, where the material is preferred for its durability and performance characteristics.
The housing sector had seen an improving trend in recent years, however, residential construction markets have slowed through 2023 reflecting the rise in interest rates. While Nylon 6 has a stronger presence in commercial carpet applications, including hospitality and office, where the material is preferred for its durability and performance characteristics, growth in both residential and commercial markets are challenged.
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, 2022, the Company employed approximately 1,458 people. Of this total, approximately 586 are salaried employees and approximately 872 are hourly employees.
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. 8 Employees As of December 31, 2023, the Company employed approximately 1,450 people. Of this total, approximately 570 are salaried employees and approximately 880 are hourly employees.
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.
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.
The primary products are acetone, phenol, AMS and cyclohexanone. With the acquisition of U.S. Amines in the first quarter of 2022, we have expanded our end markets to include agrochemical, water treatment and pharmaceutical applications with the addition of a range of alkyl and specialty amines. Acetone and phenol represent approximately 44% and 12%, respectively, of our chemical intermediates sales.
Amines in the first quarter of 2022, we have expanded our end markets to include agrochemical, water treatment and pharmaceutical applications with the addition of a range of alkyl and specialty amines. Acetone and phenol represent approximately 46% and 10%, respectively, of our chemical intermediates sales.
Our four key product lines are as follows : • Nylon – 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 including wire and cable.
Nylon 6 is a polymer resin which is a synthetic material used by our customers to produce fibers, filaments, engineered plastics and films that, in turn, are used in such end-products as carpets, automotive and electric components, sports apparel, food packaging and other industrial applications. ◦ Caprolactam – Caprolactam is the key monomer used in the production of Nylon 6 resin.
Approximately 88% of the phenol we produce is used in production of caprolactam and other chemical intermediates at Hopewell, and approximately 12% of our phenol is sold to customers for use in their product applications such as phenolic resins, epoxies and Bisphenol A.
The phenol we produce at our Frankford plant is a key chemical intermediate used in our caprolactam manufacturing process. The majority of the phenol we produce is used in production of caprolactam and other chemical intermediates at Hopewell. Any remaining phenol is sold to customers for use in their product applications such as phenolic resins, epoxies and Bisphenol A.
Four directors of our nine-member Board are women, and two directors of our nine-member Board are ethnically diverse. 9 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.
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 conduct R&D at technology centers with researchers at our manufacturing sites in Frankford, Pennsylvania and Chesterfield, Virginia. 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.
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.
Generally, industry operating rates in 2022 declined with a reduction in global downstream demand. During 2022 supply and demand of acetone was balanced in the U.S. with lower imports along with falling input propylene raw material costs, supporting favorable acetone industry margins. We also saw strong demand for Alpha-methyl styrene ("AMS") as a result of lower global production output.
Generally, industry operating rates in 2022 and 2023 declined further with a reduction in global downstream demand. During 2022 and 2023, supply and demand of acetone was balanced in the U.S. with lower imports along with falling input propylene raw material costs, supporting favorable acetone industry margins.
We have seen some recovery in commercial construction growth, which had lagged residential in recent years. Applications such as engineered plastics and packaging have potential to grow at faster rates given certain macrotrends. The global market for Nylon 6 resin and caprolactam has undergone significant change over the past decade.
Applications such as engineered plastics and packaging have potential to grow at faster rates given certain macrotrends. The global market for Nylon 6 resin and caprolactam has undergone significant change over the past decade.
In 2022, approximately 57% of the caprolactam we produced at our facility in Hopewell, Virginia was shipped to our facility in Chesterfield, Virginia where it was polymerized into Aegis® Nylon 6 resins. During 2022, AdvanSix acquired U.S. Amines, which has two manufacturing facilities located in Bucks, Alabama and Portsmouth, Virginia.
In 2023, approximately 55% of the caprolactam we produced at our facility in Hopewell, Virginia was shipped to our facility in Chesterfield, Virginia where it was polymerized into Aegis® Nylon 6 resins. During 2022, AdvanSix acquired U.S.
Our scale provides operating and purchasing 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.
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.
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.
We continue to pursue a highly-selective acquisition and alliance strategy to supplement our organic sales by broadening our customer base, developing our technology and product portfolios, and enhancing our cash flow profile and margin stability. On an ongoing basis we evaluate options to return cash to shareholders including significant remaining capacity under our current share repurchase authorization.
We believe that Nylon 6 end-market growth will continue to 4 generally track global GDP over the long-term. Carpet is the largest end-use for Nylon 6 in North America and has seen stable to declining demand growth in recent years reflecting shifts in consumer preferences to hard flooring versus soft and the previous substitution to lower-cost polyester.
Carpet is the largest end-use for Nylon 6 in North America and has seen stable to declining demand growth for a number of years reflecting shifts in consumer preferences to hard flooring versus soft and the previous substitution to lower-cost polyester.
Our R&D activities focus on improving our chemical manufacturing processes to increase efficiency, capacity and productivity, lower production and operating costs, and innovate and develop new product applications. We benefit from numerous patents and trademarks that we own.
Our R&D activities are regularly prioritized and funded with a stage gate approach with a primary emphasis on improving our chemical manufacturing processes to increase efficiency, capacity and productivity, lower production and operating costs, and innovating and developing new product applications. We benefit from numerous patents and trademarks that we own.
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.
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.
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.
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. 6 We also produce and sell AMS, cyclohexanone, oximes and cyclohexanol to customers for use in end-products such as resins, inks, paints, coatings and electronic components.
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 which structurally pass through increases or decreases in raw material costs. 6 Sales, Marketing and Distribution We have a sales force with global reach, long-standing customer relationships and deep expertise with our products, product applications and end-markets.
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 which structurally pass through increases or decreases in raw material costs.
Amines acquisition during the first quarter of 2022, we also produce and sell alkyl and specialty amines which are used in agrochemical intermediates, water treatment and pharmaceutical applications. Ammonium Sulfate Ammonium sulfate fertilizer is produced simultaneously with caprolactam as part of our integrated manufacturing process at our Hopewell plant.
The majority of cyclohexanone we produce is used in our caprolactam manufacturing process with the remainder sold to customers. As a result of the U.S. Amines acquisition during the first quarter of 2022, we also produce and sell alkyl and specialty amines which are used in agrochemical intermediates, water treatment and pharmaceutical applications.
We held our second annual 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 second inclusive leadership cohort kicked off a full year of experiential learning in 2023. We held our third annual Days of Understanding at two of our largest manufacturing facilities throughout the summer months to encourage active engagement by leadership with all employees to listen to their experiences and gather feedback for improvement.
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.
Sales to Shaw were 11% of our total sales for the year ended December 31, 2023, and 12% for the years ended December 31, 2022 and 2021. 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.
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.
Nylon 6 resin prices generally track caprolactam prices, although prices set above the average commodity spread are achievable when nylon resin manufacturers, like AdvanSix, formulate and produce differentiated nylon resin products for current and new customer applications.
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.
Our global reach enables us to arbitrage geographic price variations to ensure we are receiving the highest value for our products. 3 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.
These include: • Core competencies for all employees to develop and apply; • Leadership competencies needed by all employees managing people; and • 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.
These include: • Core competencies for all employees to develop and apply; • Leadership competencies needed by all employees managing people; and • Functional competencies that are position specific and used to inform job progression.
Our 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 2 enable us to attract price premiums and greater demand.
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. In February 2022, we successfully completed our second acquisition with the U.S.
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. 7 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.
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.
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.
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. We conduct R&D at technology centers with researchers at our manufacturing sites in Frankford, Pennsylvania and Chesterfield, Virginia.
Our senior leadership team was comprised of approximately 45% women in 2022, including our Chief Executive Officer, Chief Human Resources Officer, Chief Information Officer and Vice President, Nylon Solutions Business Director.
Our senior leadership team was comprised of approximately 50% women in 2023, including our Chief Executive Officer, Chief Human Resources Officer, Chief Information Officer, Vice President Chemical Intermediates, Emerging Chemistries and Vice President, Nylon Solutions Business Director. Four directors of our eight-member Board are women, and two directors of our eight-member Board are ethnically diverse.
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.
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.
“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.
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 the communities in which we operate.
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.
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.
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 sell our Nylon 6 resin under the Aegis® 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.
Amines, an increase in capital expenditures, and return of cash to shareholders through share repurchases and an increase of our quarterly dividend. The timing, declaration, amount and payment of dividends to stockholders, if any, will be within the sole discretion of our Board of Directors (the "Board"). Industry Overview Nylon Solutions.
We initiated our competitive quarterly dividend in 2021 and increased it by 16% in 2022 and another 10% in 2023. The timing, declaration, amount and payment of dividends to stockholders, if any, will be within the sole discretion of our Board of Directors (the "Board"). Industry Overview Nylon Solutions.
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, 2022. We market and sell ammonium sulfate primarily to North American and South American distributors, farm cooperatives and retailers to fertilize crops.
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, 2023.
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.
Ammonium Sulfate Ammonium sulfate fertilizer is produced simultaneously with caprolactam as part of our integrated 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 co-product competitors typically produce approximately two pounds or less of ammonium sulfate for each pound of caprolactam.
Chemical Intermediates We produce and sell chemical intermediates to a range of customers for use in many different types of end-products.
In 2023, 2022 and 2021, ammonium sulfate sales were 29%, 33% and 24% of our total sales, respectively. Chemical Intermediates We manufacture, market and sell chemical intermediates to a range of customers for use in many different types of end-products.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFor 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, and increased inflation, we may encounter difficulty in achieving sustained market acceptance of past or future price increases; • In addition, in the event of continued high inflationary pressure, we may not be able to adjust our pricing or increase our productivity and reduce our costs sufficient to offset increased costs, which would reduce our margins and profitability; • Market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending, which in turn could cause decreases in demand for our products, decreased product prices and lower volumes and margins, potentially resulting in decreased sales and earnings; • 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 We are unable to predict the duration of economic conditions, whether current economic conditions may erode further over time, or the effects of such conditions on financial markets or our business and results of operations.
Biggest changeFor example: • Weak economic conditions, especially in our key value chains and end markets, could reduce demand for our products, impacting our sales and margins; • As a result of volatility in commodity prices, and increased inflation, we may encounter difficulty in achieving sustained market acceptance of past or future price increases; • In addition, in the event of continued high inflationary pressure, we may not be able to adjust our pricing or increase our productivity and reduce our costs sufficient to offset increased costs, which could reduce our margins and profitability; • Market conditions could result in our key customers experiencing financial difficulties and/or electing to limit spending, which in turn could cause decreases in demand for our products, decreased product prices and lower volumes and margins, potentially resulting in decreased sales and earnings; 14 • Under difficult market conditions, there can be no assurance that access to credit or the capital markets would be available to us or sufficient, and as such, we may not be able to successfully obtain additional financing on reasonable terms, or at all; and • 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.
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, many of which may be beyond our control.
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 and regulatory limitations, many of which may be beyond our control.
The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including: • 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; 22 • Changes in capital gains taxes and taxes on dividends affecting stockholders; and • General economic conditions and other external factors.
The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including: • 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.
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, operational disruptions, 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 competitiveness, plant operations, business, financial condition and results of operations.
The potential consequences of a material cybersecurity incident on our own systems or the systems of those with whom we do business include reputational consequences, safety risk, operational disruptions, 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 competitiveness, plant operations, business, financial condition and results of operations.
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.
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. 22 stockholder’s share of Honeywell’s earnings and profits and the U.S. stockholder’s basis in its Honeywell common stock.
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 our incurring unexpected liability in connection with such characterization and the associated effects of any toxicological or 20 health-related impact.
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 our incurring unexpected liability in connection with such characterization and the associated effects of any toxicological or health-related impact.
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.
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. 23 Certain provisions in our Amended and Restated Certificate of Incorporation and Amended and Restated By-laws and Delaware law may discourage takeovers.
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.
A decision by a government agency to deny or delay issuing a new or renewed material permit or approval, or to 21 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.
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 expected cash requirements.
If we raise funds through the issuance of additional common equity, ownership in AdvanSix would be diluted. We believe that we currently have adequate capital resources to meet our projected operating needs, capital expenditures and other expected cash requirements.
Although we 17 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.
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.
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 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 15 results of operations.
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 requirements will likely 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.
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.
We may not be successful in 17 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.
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 defending our anti-dumping petitions covering imports of acetone and ammonium sulfate with the International Trade Commission (see "Anti-Dumping Duty Petitions" under Item 7.
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 defending our anti-dumping petitions covering imports of acetone and ammonium sulfate with the International Trade Commission (see "Anti-Dumping Duty Petitions - Ammonium Sulfate" under "Recent Developments" in Item 7.
Volatility and uncertainty surrounding future economic conditions such as inflation, potential recessionary pressures or rising interest rates 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.
Volatility and uncertainty surrounding future economic conditions such as inflation, potential recessionary pressures or rising interest rates may at times make it challenging to identify risks that may affect our business, sources and uses of cash, financial condition and results of operations. If economic conditions deteriorate, our results of operations, financial condition and cash flows could be materially adversely affected.
These may restrict our and our subsidiaries’ ability to take some or all of the following actions: • 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.
These restrictive covenants may restrict our ability to take some or all of the following actions: • 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 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.
In 2022, our 10 largest customers accounted for approximately 39% 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.
In 2023, our 10 largest customers accounted for approximately 39% 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.
Any of these factors could create pressure on pricing and gross margins and could adversely impact our business.
Any of these factors 16 could create pressure on pricing and gross margins and could adversely impact our business.
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. Disruptions in transportation or significant changes in transportation costs could adversely impact our business financial condition and results of operations.
Further, if 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. Disruptions in transportation or significant changes in transportation costs could adversely impact our business, financial condition and results of operations.
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 the level of profitability we may expect or compete effectively.
If we are not able to successfully accommodate these factors to enable customer development success, we could be unable to achieve sufficient sales to reach the level of profitability we may expect or compete effectively.
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.
Due to concerns about risks associated with air, water, global warming and climate change, more stringent regulations may be imposed which could 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.
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 19 indebtedness when due and payable, the lenders could proceed against the pledged collateral.
Substantially all domestic tangible and intangible assets of the Company 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.
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.
The risks and uncertainties identified herein are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial also may adversely affect us.
Such classifications subjects us to compliance audits by the relevant federal and state agencies and place ongoing restrictions on our sales activities.
Such classifications subject us to compliance audits by the relevant federal and state agencies and place ongoing restrictions on our sales activities.
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.
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 we may face additional uncertainty with regard to U.S. government trade policy.
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.
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.
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.
Unplanned interruptions at our production facilities 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.
“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.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations”). Historically, we have sought to mitigate these risks through geographical mix management so that the imposition of duties does not materially affect our business results, but such duties could have an adverse effect on the sales of our key product lines and affect our business performance in the future.
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.
Ultimately, 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.
While we have made significant annual capital improvements at our manufacturing plants, operational issues have occurred for us in the past and may occur in the future, which could cause damage to our manufacturing and production equipment and ancillary facilities.
While we have made significant annual capital improvements at our manufacturing plants and utilize maintenance excellence and mechanical integrity programs, operational issues have occurred for us in the past and may occur in the future, which could cause damage to our manufacturing and production equipment and ancillary facilities.
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.
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 regardless of our efforts to mitigate the possibility of any such breach.
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.
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.
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.
While we attempt to mitigate these risks through appropriate loss prevention measures, we may not be able to anticipate all risks, or to mitigate or reasonably and cost-effectively manage those risks that we do anticipate.
Approximately 744 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, 2022. From time to time, we engage in negotiations to renew collective bargaining agreements as those contracts are scheduled to expire.
Approximately 750 of our employees are covered under collective bargaining agreements that expire between 2024 and 2028, which represents approximately 52% of our employee base as of December 31, 2023. From time to time, we engage in negotiations to renew collective bargaining agreements as those contracts are scheduled to expire.
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. 21 Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively prevent fraud.
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.
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.
Business - Regulation and Environmental Matters” for more information on the environmental laws and regulations to which we are subject. 20 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.
Data privacy, information security and protection of confidential information may require significant resources and present certain risks. 18 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.
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.
Adverse events affecting the health of the economy, including inflation and potential recessionary pressures, rising interest rates, 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.
Adverse events affecting the health of the economy, including inflation and potential recessionary pressures, rising interest rates, supply chain issues, labor market shortages, trade conflicts including export and import restrictions, tariffs and other trade barriers, the COVID-19 pandemic and any resurgences or other pandemics, the threat of war and geopolitical concerns, including as a result of the conflict between Russia and Ukraine, the conflict in Israel and Gaza and the possible expansion of such conflicts, sovereign debt and economic crises, terrorism and protectionism could have a negative impact on the health of the global economy.
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.
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.
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.
While we have experienced, and expect to continue to experience, these types of threats, our information technology infrastructure, including cybersecurity controls, is designed to deploy comprehensive measures to deter, prevent, detect, respond to 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 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.
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.
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.
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. Certain U.S. and non-U.S. financial institutions experienced crisis in 2023, resulting in disruption in the financial markets.
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.
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.
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 and profitability of a particular manufacturing facility, or on us as a whole.
These hazards could lead to an interruption or suspension of operations and could have an adverse effect on the productivity and profitability of a particular manufacturing facility, or on us as a whole.
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.
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.
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.
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 limit our ability to engage in actions that may be in our long-term best interests.
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.
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.
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 have occurred in the past and which could impact our supply chain and our manufacturing process.
As a result of the scale and quantity and range of our product offerings, as well as the significant level of integration across our manufacturing facilities, we are also exposed to increased risk associated with unplanned downtime or material disruptions at any one of our production facilities, which have occurred in the past and which may occur in the future, and which could impact our supply chain and our manufacturing process.
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.
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. 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 .
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.
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.
We maintain cyber liability insurance, but this insurance may not be sufficient to cover the losses that may result from a cybersecurity incident.
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.
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.
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. 18 Cybersecurity threats and incidents continue to increase in frequency and sophistication.
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. 14 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.
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.
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. 13 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.
Risks Relating to Our Business 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.
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 connection with our spin-off, if the October 1, 2016 distribution by Honeywell of all of the then outstanding shares of AdvanSix common stock 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 addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive. 16 Hazards and compliance costs associated with chemical manufacturing, storage and transportation could adversely affect our business, financial condition and results of operations.
In addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive. 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.
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 $20 million in 2022, which exceeded our pension funding requirements for such period, and we plan to make pension contributions in future periods sufficient to satisfy funding requirements.
Our pension contributions may be material and could adversely impact our financial condition, cash flow and results of operations. We made no pension contributions during 2023, but may make pension contributions in future periods to satisfy funding requirements. We may be required to record significant charges from impairment to goodwill, intangibles, and other long-lived assets. We are required under U.S.
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.
Due to concerns related to terrorism, we are subject to various security laws including Maritime Transportation Security Act of 2002 (“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.
Removed
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.
Added
Our historical operating results reflect the cyclical nature of the industries in which we operate including with respect to our Nylon 6 resin, caprolactam, ammonium sulfate 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.
Removed
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.
Added
We are unable to predict the duration of economic conditions, whether current economic conditions may erode further over time, or the effects of such conditions on financial markets or our business and results of operations.
Removed
Our results of operations may be materially adversely impacted by the coronavirus (COVID-19) pandemic, including resurgences, and the measures implemented to contain the spread of the virus.
Added
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.
Removed
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.
Added
Such events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or the financial services industry generally, or concerns about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could significantly impair our access to funding sources or other credit arrangements in amounts adequate to finance our current and future business operations or could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all.
Removed
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.
Added
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.
Removed
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.
Added
In April 2023, a labor strike was initiated by the Hopewell South bargaining unit, affecting approximately 340 workers at the Company’s manufacturing facility in Hopewell, Virginia, which was later resolved in May 2023 when the bargaining unit voted to ratify a new five-year collective bargaining agreement.
Removed
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.
Added
Competition for qualified personnel in our industry is intense, and we may not be successful in attracting or retaining qualified personnel.
Removed
The extent of any impact from the COVID-19 pandemic, as well as any resurgences, variants or other similar U.S. or global public health crisis, 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; 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 related restrictions; the ability of our customers to pay for our products; 15 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.
Added
Generally Accepted Accounting Principles (“GAAP”) to test our goodwill for impairment annually or more frequently if indicators for potential impairment exist.
Removed
Any of these events could materially adversely impact our business, financial condition, results of operations, cash flow, liquidity and/or stock price.
Added
Indicators that are considered include significant changes in performance relative to expected operating results, significant changes in the use of the assets, significant negative industry or economic trends, or a significant decline in the Company’s stock price and/or market capitalization for a sustained period of time.
Removed
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.
Added
In addition, we periodically review our intangible and other long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
Removed
Further, the COVID-19 pandemic, resurgences or other public health crisis 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.
Added
Factors that may be considered a change in circumstances indicating that the carrying value of our intangible and other long-lived assets may not be recoverable include slower growth rates, the loss of a significant customer, burdensome new laws, or divestiture of a business or asset for less than its carrying value.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+2 added−2 removed3 unchanged
Biggest changeThe Company has discussed this matter with PAMS and responded to various information requests, and negotiations to resolve the matter 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.
Biggest changeAlthough the outcome of these matters 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. 26 PART II.
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 23 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 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.
Removed
The Philadelphia Air Management Services (“PAMS”) notified the Company in November 2021 that alleged violations involving emission control equipment at the Company’s manufacturing facility in Philadelphia, Pennsylvania, which in each case were self-reported by the Company and subsequently corrected, may potentially subject the Company to penalties.
Added
The United States Environmental Protection Agency (“EPA”) and the Company entered into an Administrative Compliance Order on Consent in February 2023 in connection with alleged violations involving the Company’s risk management program at its manufacturing facility in Hopewell, Virginia and is negotiating a second Administrative Compliance Order associated with the same program.
Removed
Mine Safety Disclosures Not applicable. 24 PART II.
Added
The Company is currently implementing an EPA-approved work plan to improve its risk management program at Hopewell in connection with the orders. The Company and EPA also anticipate entering into an Administrative Compliance Order in connection with alleged violations involving the Company’s stormwater and other discharges. These EPA allegations may potentially subject the Company to penalties.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

10 edited+2 added−1 removed3 unchanged
Biggest changeSince commencement of dividends, the Company has declared dividends as follows: Date of Announcement Date of Record Date Payable Dividend per Share Total Approximate Dividend Amount ($M) 2/17/2023 3/3/2023 3/17/2023 $0.145 $4.0 11/4/2022 11/15/2022 11/29/2022 $0.145 $4.0 8/5/2022 8/16/2022 8/30/2022 $0.145 $4.1 5/6/2022 5/17/2022 5/31/2022 $0.125 $3.5 2/18/2022 3/1/2022 3/15/2022 $0.125 $3.5 9/28/2021 11/9/2021 11/23/2021 $0.125 $3.5 The timing, declaration, amount and payment of future dividends to stockholders, if any, will be within the discretion of our Board.
Biggest changeDividends paid during 2023 and announced on the date of this filing are as follows: Date of Announcement Date of Record Date Payable Dividend per Share Total Approximate Dividend Amount ($M) 2/16/2024 3/4/2024 3/18/2024 $0.160 $4.3 11/3/2023 11/14/2023 11/28/2023 $0.160 $4.3 8/4/2023 8/15/2023 8/29/2023 $0.160 $4.4 5/5/2023 5/16/2023 5/30/2023 $0.145 $4.0 2/17/2023 3/3/2023 3/17/2023 $0.145 $4.0 27 The timing, declaration, amount and payment of future dividends to stockholders, if any, will be within the discretion of our Board.
The changes for the periods shown in the graph assume that $100 had been invested in AdvanSix stock and each index on December 31, 2017, and that all dividends, if any, were reinvested. The share price performance in the graph is not necessarily indicative of future price performance.
The changes for the periods shown in the graph assume that $100 had been invested in AdvanSix stock and each index on December 31, 2018, and that all dividends, if any, were reinvested. The share price performance in the graph is not necessarily indicative of future price performance.
The share repurchase program has no expiration date and may be modified, suspended or discontinued at any time.
The repurchase program has no expiration date and may be modified, suspended or discontinued at any time.
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.
Repurchases may be made from time to time on the open market in accordance with Rule 10b-18 of the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors.
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. 25 The Company paid dividends of approximately $15.1 million and $3.5 million for the years ended December 31, 2022 and 2021, with no dividends declared during 2020.
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.
During the period January 1, 2023 through February 3, 2023, the Company repurchased an additional 12,710 shares at a weighted average market price of $39.96 per share under the current authorized repurchase program. Dividends The Company commenced the declaration of dividends on September 28, 2021.
During the period January 1, 2024 through February 2, 2024, the Company repurchased an additional 64,678 shares at a weighted average market price of $26.39 per share under the current authorized repurchase program. Dividends The Company commenced the declaration of dividends on September 28, 2021 and has declared and paid dividends on a quarterly basis.
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.
As of February 2, 2024, 26,700,024 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.
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”.
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 2, 2024, there were 16,728 holders of record of our common stock and the closing price of our common stock on the New York Stock Exchange was $25.18 per share.
The below table sets forth the repurchases of Company common stock, by month, for the quarter ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan October 2022 155,500 $ 33.50 155,500 $ 33,394,158 November 2022 111,403 38.07 111,403 29,153,293 December 2022 17,298 40.56 17,298 $ 28,451,601 Total 284,201 $ 35.72 284,201 As of December 31, 2022, the Company had repurchased a total of 4,531,073 shares of common stock, including 592,976 shares withheld to cover tax withholding obligations in connection with the vesting of equity awards, for an aggregate of $136.1 million at a weighted average market price of $30.04 per share.
The below table sets forth the repurchases of Company common stock, by month, for the quarter ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan October 2023 111,987 $ 28.97 111,987 $ 73,375,668 November 2023 120,010 26.09 120,010 70,245,038 December 2023 74,530 27.31 74,530 $ 68,209,639 Total 306,527 $ 27.44 306,527 As of December 31, 2023, the Company had repurchased a total of 5,848,475 shares of common stock, including 854,340 shares withheld to cover tax withholding obligations in connection with the vesting of equity awards, for an aggregate of $182.0 million at a weighted average market price of $31.12 per share.
COMPARISON OF CUMULATIVE TOTAL RETURN December 31, 2017 December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 AdvanSix Inc. 100 58 47 48 113 92 S&P Small Cap 600 100 92 112 125 159 133 S&P Small Cap 600 Materials 100 78 94 115 136 128 Item 6. [Reserved]
COMPARISON OF CUMULATIVE TOTAL RETURN December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 AdvanSix Inc. 100 82 82 195 159 127 S&P Small Cap 600 100 123 137 173 145 169 S&P Small Cap 600 Materials 100 121 148 175 164 197 Item 6. [Reserved]
Removed
On February 3, 2023, there were 17,673 holders of record of our common stock and the closing price of our common stock on the New York Stock Exchange was $43.86 per share. As of February 3, 2023, 27,433,810 shares of our common stock and 0 shares of our preferred stock were outstanding.
Added
The Company has increased its quarterly dividend by 10% ($0.145 to $0.160) and 16% ($0.125 to $0.145) during the third quarter of 2023 and 2022, respectively.
Added
The Company paid dividends of approximately $16.7 million, $15.1 million and $3.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

86 edited+50 added−32 removed41 unchanged
Biggest changeGAAP financial measure: Twelve Months Ended December 31, 2022 2021 2020 Net income $ 171,886 $ 139,791 $ 46,077 Non-cash stock-based compensation 10,279 11,299 4,902 Non-cash amortization from acquisitions 1,815 239 — Non-recurring M&A costs 277 172 — Benefit from income taxes relating to reconciling items (1,996) (1,798) (735) Adjusted Net Income (non-GAAP) 182,261 149,703 50,244 Interest expense, net 2,781 5,023 7,792 Income tax expense - adjusted 55,901 47,123 9,691 Depreciation and amortization - adjusted 67,538 65,101 60,832 Adjusted EBITDA (non-GAAP) 308,481 266,950 128,559 Sales $ 1,945,640 $ 1,684,625 $ 1,157,917 Adjusted EBITDA Margin* (non-GAAP) 15.9% 15.8% 11.1% *Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Sales The following is a reconciliation between the non-GAAP financial measures of Adjusted Earnings Per Share to its most directly comparable U.S.
Biggest changeGAAP financial measure: 33 Twelve Months Ended December 31, 2023 2022 2021 Net Income $ 54,623 $ 171,886 $ 139,791 Non-cash stock-based compensation 8,313 10,279 11,299 Non-recurring, unusual or extraordinary income* (4,472) — — Non-cash amortization from acquisitions 2,126 1,815 239 Non-recurring M&A costs — 277 172 Benefit from income taxes relating to reconciling items (661) (1,996) (1,798) Adjusted Net Income (non-GAAP) 59,929 182,261 149,703 Interest expense, net 7,485 2,781 5,023 Income tax expense - Adjusted 15,261 55,901 47,123 Depreciation and amortization - Adjusted 70,884 67,538 65,101 Adjusted EBITDA (non-GAAP) $ 153,559 $ 308,481 $ 266,950 Sales $ 1,533,599 $ 1,945,640 $ 1,684,625 Adjusted EBITDA Margin** (non-GAAP) 10.0% 15.9% 15.8% * Includes a pre-tax gain of approximately $11.4 million related to the Company's exit from the Oben alliance, the unfavorable impact to pre-tax income of approximately $4.5 million associated with a licensee of certain legacy ammonium sulfate fertilizer technology assets closing its facility, and the unfavorable impact to pre-tax income of approximately $2.4 million from the exit of certain low-margin oximes products. **Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Sales The following is a reconciliation between the non-GAAP financial measures of Adjusted Earnings Per Share to its most directly comparable U.S.
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.
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, Risk Factors, as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.
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”).
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 senior secured revolving credit facility in an aggregate principal amount of $500 million (the “Revolving Credit Facility”).
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.
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; 29 however, the mitigation of all or part of any such production impact cannot be assured.
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”).
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 36 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”).
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.
A valuation allowance is provided when it is more likely than not that a portion or all 40 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.
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 unplanned disruptions at any one of our production facilities or logistics operations which could impact the overall manufacturing supply 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.
Capital Expenditures 35 Our operations are capital intensive, requiring ongoing investments that have consisted, and are expected to continue to consist, primarily of capital expenditures required to maintain and improve equipment reliability, expand production capacity, further improve mix, yield and cost position and comply with environmental and safety regulations and support sustainability initiatives.
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 capacity, further improve mix, yield and cost position and comply with environmental and safety regulations and support sustainability initiatives.
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.
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, the prices of our raw materials, general economic and industry trends and customer demand.
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.
Although we have ongoing environmental remedial obligations at certain of our facilities, in the past three years, the associated remediation costs have not been material, and we do not expect our known remediation costs to have a material adverse effect on the Company's consolidated financial position and results of operations.
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.
Management believes that the application of these 38 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.
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 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 34 our short-term funding requirements for the next twelve months and beyond.
At December 31, 2022, 2021 and 2020, 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.
At December 31, 2023, 2022 and 2021, 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.
This amount is related to what has been accrued as probable and reasonably estimable as of December 31, 2022. 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.
This amount is related to what has been accrued as probable and reasonably estimable as of December 31, 2023. 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.
As of December 31, 2022 and 2021, 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.
As of December 31, 2023 and 2022, 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.
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, 2022, 2021 and 2020.
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, 2023, 2022 and 2021.
We expect that our primary cash requirements for 2023 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 2022, 2021 and 2020 and anticipated capital expenditures for 2023.
We expect that our primary cash requirements for 2024 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 2023, 2022 and 2021 and anticipated capital expenditures for 2024.
Discussions of our financial condition and results of operations as of and for the year ended December 31, 2020 and year-to-year comparisons between 26 2021 and 2020 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, 2021, filed with the SEC on February 18, 2022.
Discussions of our financial condition and results of operations as of and for the year ended December 31, 2021 and year-to-year comparisons between 28 2022 and 2021 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, 2022, filed with the SEC on February 18, 2022.
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.
Management believes that the following represent 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.
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, 2022 and 2021 and year-to-year comparisons between 2022 and 2021.
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, 2023 and 2022 and year-to-year comparisons between 2023 and 2022.
The Company had approximately $1 million of letter of credit agreements outstanding under the Revolving Credit Facility at December 31, 2022. There was no amount associated with bilateral letters of credit outside the Revolving Credit Facility.
The Company had approximately $1 million of letter of credit agreements outstanding under the Revolving Credit Facility at December 31, 2023. There was no amount associated with bilateral letters of credit outside the Revolving Credit Facility.
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 2023, 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 2023.
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 2024, 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 2024.
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.
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 as compared to other fertilizers.
Department of Commerce (“Commerce”) published its final affirmative determinations in the anti-dumping and countervailing duty investigations of imports of ammonium sulfate from the People's Republic of China (the "PRC"), and in March 2017, the ITC issued its final determinations of material injury by reason of dumped and subsidized imports from the PRC.
Department of Commerce (“Commerce”) published its final affirmative determinations in the anti-dumping and countervailing duty investigations of imports of ammonium sulfate from the People's Republic of China (the "PRC"), and in March 2017, the International Trade Commission ("ITC") issued its final determinations of material injury by reason of dumped and subsidized imports from the PRC.
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.
Global prices for ammonium sulfate fertilizer are influenced by several factors including the price of urea, which is the most widely used source of nitrogen-based fertilizer in the world. Other global factors driving ammonium sulfate fertilizer demand are general agriculture trends, including planted acres and the price of crops.
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.
Repurchases may be made from time to time on the open market in accordance with Rule 10b-18 of the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors.
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).
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 an Adjusted Term SOFR 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).
At December 31, 2022, the Company had approximately $31 million of cash on hand with approximately $384 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.
At December 31, 2023, the Company had approximately $30 million of cash on hand with approximately $329 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.
We were in compliance with all of our covenants at December 31, 2022 and through the date of the filing of this Annual Report on Form 10-K. We had a borrowed balance of $135 million under the Revolving Credit Facility as of December 31, 2021.
We were in compliance with all of our covenants at December 31, 2023 and through the date of the filing of this Annual Report on Form 10-K. We had a borrowed balance of $115 million under the Revolving Credit Facility at December 31, 2022.
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.
Although we continue to optimize supply chain financing and trade receivable programs in the ordinary course, our utilization of these arrangements 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.
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, 2022 and approximate $6.1 million per year, subject to changes in variable interest rates and additional obligations.
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, 2023 and approximate $9.7 million per year, subject to changes in variable interest rates and additional obligations.
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 $1.8 million in aggregate for 2023 through 2027.
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 2024 through 2028.
The Company is evaluating these provisions of the law. As of December 31, 2022 and 2021, 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.
As of December 31, 2023 and 2022, 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.
While current macroeconomic conditions 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.
While various macroeconomic conditions have created and could continue to create volatility in funding markets, we believe that our future cash from operations, together with cash on hand and our access to credit and capital markets, will provide adequate resources to fund our expected operating and financing needs and obligations.
Amines for a purchase price of approximately $97 million, net of cash acquired. The acquisition included intangible assets of $34 million consisting primarily of customer relationships, which reflects the value of the benefit derived from incremental revenue and related cash flows that are a direct result of the customer relationships in the amount of approximately $33 million.
The acquisition 39 included intangible assets of $34 million consisting primarily of customer relationships, which reflects the value of the benefit derived from incremental revenue and related cash flows that are a direct result of the customer relationships in the amount of approximately $33 million.
We repaid an incremental net amount of $20 million during 2022 bringing the balance under the Revolving Credit Facility to $115 million, and available credit for use of $384 million as of December 31, 2022. We expect that Cash provided by operating activities will fund future interest payments on the Company's outstanding indebtedness.
We borrowed an incremental net amount of $55 million during 2023 bringing the balance under the Revolving Credit Facility to $170 million, and available credit for use of $329 million as of December 31, 2023. We expect that Cash provided by operating activities will fund future interest payments on the Company's outstanding indebtedness.
GAAP financial measure: 31 Twelve Months Ended December 31, 2022 2021 2020 Net Income $ 171,886 $ 139,791 $ 46,077 Adjusted Net Income (non-GAAP) 182,261 149,703 50,244 Denominator Weighted-average number of common shares outstanding - basic 27,969,436 28,152,876 28,048,726 Dilutive effect of equity awards and other stock-based holdings 1,061,671 892,310 108,336 Weighted-average number of common shares outstanding - diluted 29,031,107 29,045,186 28,157,062 EPS - Basic $ 6.15 $ 4.97 $ 1.64 EPS - Diluted $ 5.92 $ 4.81 $ 1.64 Adjusted EPS - Basic (non-GAAP) $ 6.52 $ 5.32 $ 1.79 Adjusted EPS - Diluted (non-GAAP) $ 6.28 $ 5.15 $ 1.78 Liquidity and Capital Resources 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.
GAAP financial measure: Twelve Months Ended December 31, 2023 2022 2021 Numerator Net Income $ 54,623 $ 171,886 $ 139,791 Adjusted Net Income (non-GAAP) 59,929 182,261 149,703 Denominator Weighted-average number of common shares outstanding - basic 27,302,254 27,969,436 28,152,876 Dilutive effect of equity awards and other stock-based holdings 705,376 1,061,671 892,310 Weighted-average number of common shares outstanding - diluted 28,007,630 29,031,107 29,045,186 EPS - Basic $ 2.00 $ 6.15 $ 4.97 EPS - Diluted $ 1.95 $ 5.92 $ 4.81 Adjusted EPS - Basic (non-GAAP) $ 2.20 $ 6.52 $ 5.32 Adjusted EPS - Diluted (non-GAAP) $ 2.14 $ 6.28 $ 5.15 Liquidity and Capital Resources 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 previously disclosed in in Item 1A, Risk Factors.
The resulting impact on the pension benefit obligation would be a decrease of $2.7 million and an increase of $2.6 million, respectively.
The resulting impact on the pension benefit obligation would be a decrease of $2.9 million and an increase of $3.1 million, respectively.
On February 17, 2023, 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 previously approved share repurchase program.
The unplanned interruption did not have a material impact on fourth quarter 2023 results. Share Repurchase Authorization On February 17, 2023, 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 previously approved share repurchase program.
Cash used for investing activities increased by $121.7 million for the year ended December 31, 2022 versus the prior year period due primarily to cash paid for the acquisition of U.S.
Cash used for investing activities decreased by $78.4 million for the year ended December 31, 2023 versus the prior year period due primarily to cash paid for the acquisition of U.S.
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. As a result of the U.S.
Our differentiated product offerings include high-purity applications and high-value intermediates including our U.S. Amines portfolio as well as our oximes-based EZ-Blox™ anti-skinning agent used in paints and Nadone® cyclohexanone, which is a solvent used in various high-value applications.
Cash Flow Summary for the Years Ended December 31, 2022, 2021 and 2020 Our cash flows from operating, investing and financing activities for the years ended December 31, 2022, 2021 and 2020, as reflected in the audited Consolidated Financial Statements included in this Form 10-K, are summarized as follows: Years Ended December 31, 2022 2021 2020 (Dollars in thousands) Cash provided by (used for): Operating activities $ 273,601 $ 218,849 $ 111,847 Investing activities (189,273) (67,562) (84,103) Financing activities (68,443) (146,793) (24,188) Net change in cash and cash equivalents $ 15,885 $ 4,494 $ 3,556 2022 compared with 2021 Net cash provided by operating activities increased by $54.8 million for the year ended December 31, 2022 versus the prior year due primarily to (i) a $59.4 million favorable impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) year-over-year, with a $38.6 million favorable cash impact for the year ended December 31, 2022 compared to a $20.8 million unfavorable cash impact in the prior year period and (ii) a $32.1 million increase in net income.
Cash Flow Summary for the Years Ended December 31, 2023, 2022 and 2021 Our cash flows from operating, investing and financing activities for the years ended December 31, 2023, 2022 and 2021, as reflected in the audited Consolidated Financial Statements included in this Form 10-K, are summarized as follows: 37 Years Ended December 31, 2023 2022 2021 (Dollars in thousands) Cash provided by (used for): Operating activities $ 117,550 $ 273,601 $ 218,849 Investing activities (110,897) (189,273) (67,562) Financing activities (7,870) (68,443) (146,793) Net change in cash and cash equivalents $ (1,217) $ 15,885 $ 4,494 2023 compared with 2022 Net cash provided by operating activities decreased by $156.1 million for the year ended December 31, 2023 versus the prior year due primarily to (i) a $117.3 million decrease in net income and (ii) a $63.1 million unfavorable impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) year-over-year, with a $14.7 million unfavorable cash impact for the year ended December 31, 2023 compared to a $48.3 million favorable cash impact in the prior year period due primarily to the timing of payments, the unfavorable impact of customer advances and favorable inventory fluctuation, and (iii) a $25.6 million unfavorable impact from Deferred income taxes.
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.
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.
As of December 31, 2022, $28.5 million remained available for repurchase under the previously authorized repurchase program. During 2022 and the period from January 1, 2023 through February 3, 2023, the Company repurchased an additional 12,710 shares at a weighted average market price of $39.96 per share under the previously authorized repurchase program.
As of December 31, 2023, $68.2 million remained available for repurchase under the currently authorized repurchase program. During the period from January 1, 2024 through February 2, 2024, the Company repurchased an additional 64,678 shares at a weighted average market price of $26.39 per share under the currently authorized repurchase program.
Inventories valued at LIFO amounted to $215.5 million and $149.6 million at December 31, 2022 and 2021. Had such LIFO inventories been valued at current costs, their carrying values would have been approximately $64.8 million and $6.0 million higher at December 31, 2022 and 2021.
Inventories valued at LIFO amounted to $195.6 million and $202.9 million at December 31, 2023 and 2022, respectively. Had such LIFO inventories been valued at current costs, their carrying values would have been approximately $95.2 million and $64.8 million higher at December 31, 2023 and 2022.
The Company completed its annual goodwill impairment test as of March 31, 2022 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.
Potential impairment is identified by comparing the fair value of a reporting unit to the carrying value, including goodwill. The Company completed its annual goodwill impairment test as of March 31, 2023 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.
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. 37 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.
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.
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.
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 refund was received in the first quarter of 2021. The Company's effective income tax rate for each of 2022 and 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.
Increases to the effective income tax rate, due primarily to state taxes and executive compensation limitations, were materially offset by research tax credits, excess tax benefits of equity compensation and the foreign-derived intangible income deduction. The Company's effective income tax rate for 2022 and 2021 was higher compared to the U.S.
Adjusted EBITDA is defined as Net income before Interest, Income taxes, Depreciation and amortization, Non-cash stock-based compensation, Non-recurring, unusual or extraordinary expenses, Non-cash amortization from acquisitions and one-time merger and acquisition costs. Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by Sales. The following tables may also present each of these measures as further adjusted.
Non-GAAP Measures The following tables set forth the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Earnings Per Share. Adjusted EBITDA is defined as Net income before Interest, Income taxes, Depreciation and amortization, Non-cash stock-based compensation, Non-recurring, unusual or extraordinary expenses, Non-cash amortization from acquisitions and one-time merger and acquisition costs.
Since commencement of dividends, the Company has declared dividends as follows: 33 Date of Announcement Date of Record Date Payable Dividend per Share Total Approximate Dividend Amount ($M) 2/17/2023 3/3/2023 3/17/2023 $0.145 $4.0 11/4/2022 11/15/2022 11/29/2022 $0.145 $4.0 8/5/2022 8/16/2022 8/30/2022 $0.145 $4.1 5/6/2022 5/17/2022 5/31/2022 $0.125 $3.5 2/18/2022 3/1/2022 3/15/2022 $0.125 $3.5 9/28/2021 11/9/2021 11/23/2021 $0.125 $3.5 The timing, declaration, amount and payment of future dividends to stockholders, if any, will be within the discretion of our Board.
Dividends paid during 2023 and announced on the date of this filing are as follows: Date of Announcement Date of Record Date Payable Dividend per Share Total Approximate Dividend Amount ($M) 2/16/2024 3/4/2024 3/18/2024 $0.160 $4.3 11/3/2023 11/14/2023 11/28/2023 $0.160 $4.3 8/4/2023 8/15/2023 8/29/2023 $0.160 $4.4 5/5/2023 5/16/2023 5/30/2023 $0.145 $4.0 2/17/2023 3/3/2023 3/17/2023 $0.145 $4.0 The timing, declaration, amount and payment of future dividends to stockholders, if any, will be within the discretion of our Board.
As of December 31, 2022, the Company had repurchased 4,531,073 shares of common stock, including 592,976 shares withheld to cover tax withholding obligations in connection with the vesting of equity awards, for an aggregate of $136.1 million at a weighted average market price of $30.04 per share.
As of December 31, 2023, the Company had repurchased 5,848,475 shares of common stock, including 854,340 shares withheld to cover tax withholding obligations in connection with the vesting of equity awards, for an aggregate of $182.0 million at a weighted average market price of $31.12 per share.
For 2023, we expect our total capital expenditures to be approximately $110 million to $120 million. 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.
Sulfate To Accelerate Increased Nutrition) program. 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.
As of December 31, 2022, the Company has incurred an approximately $43 million unfavorable impact to pre-tax income since the refinery shut down in 2019 and submitted a business interruption insurance claim. While the Company has received $4.6 million of insurance proceeds through December 31, 2022, it continues to pursue the claim, which is ongoing.
As of December 31, 2023, the Company has incurred an approximately $66 million unfavorable impact to pre-tax income since the refinery shut down in 2019 and submitted a business interruption insurance claim. During 2023, the Company entered into a settlement with one of its insurers and continues to pursue the claim with the other insurers, which is ongoing.
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.
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.
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. 34 As of October 27, 2021, the Company borrowed $150 million under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility are subject to customary borrowing conditions.
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.
The following table summarizes ongoing and expansion capital expenditures for the periods indicated. Years Ended December 31, 2022 2021 2020 (Dollars in thousands) Purchases of property, plant and equipment $ 89,449 $ 56,811 $ 82,918 Capital expenditures increased $32.6 million from 2021 to 2022 driven by a planned increase in replacement maintenance and HSE projects.
The following table summarizes ongoing and expansion capital expenditures for the periods indicated. Years Ended December 31, 2023 2022 2021 (Dollars in thousands) Purchases of property, plant and equipment $ 107,377 $ 89,449 $ 56,811 Capital expenditures increased $17.9 million from 2022 to 2023 reflecting increased spend due to replacement maintenance, growth and cost savings projects, and enterprise programs.
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 remaining 50% paid on January 3, 2023. 32 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.
We assumed from Honeywell all HSE liabilities and compliance obligations related to the past and future operations of our current business as of the spin-off, as well as all HSE liabilities associated with our three current manufacturing locations assumed from Honeywell that are 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.
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.
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.
The Company plans to make cash contributions of between nil to $5.0 million in 2023 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 $5.9 million for the years ended December 31, 2022 and 2021, respectively.
The Company made cash contributions to the defined contribution plan of $6.0 million and $5.9 million for the years ended December 31, 2023 and 2022, respectively.
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.
We also manufacture, market and sell a number of chemical intermediate products that are derived from the manufacturing processes within our integrated supply chain. Most significant is acetone, the price of which is influenced by its own supply and demand dynamics but can also be influenced by the underlying move in propylene input costs.
Amines acquisition and increased functional support costs partially offset by decreased incentive-based compensation expense. Interest Expense, Net 2022 2021 2020 Interest Expense, net $ 2,781 $ 5,023 $ 7,792 29 2022 compared with 2021 Interest expense, net, decreased in 2022 compared to 2021 by $2.2 million, or approximately 45%, due primarily to lower average borrowings.
These increases were partially offset by lower incentive-based compensation costs. Interest Expense, Net 2023 2022 2021 Interest Expense, net $ 7,485 $ 2,781 $ 5,023 2023 compared with 2022 Interest expense, net, increased in 2023 compared to 2022 by $4.7 million, or approximately 169%, due primarily to higher interest rates.
Gross margin percentage decreased by approximately 0.1% in 2022 compared to 2021 due primarily to the net impact of formula-based pass-through pricing and increased market pricing (approximately 8%) offset by sales volume (approximately 5%) and increased plant spend discussed above (approximately 3%).
Amines acquisition (approximately 1%). 31 Gross margin percentage decreased by approximately 5% in 2023 compared to 2022 due primarily to the net impact of lower market pricing and formula-based raw material pass-through pricing (approximately 5%).
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.
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 for current and new customer applications, such as our wire and cable and co-polymer offerings.
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.
We utilize supply chain financing and trade receivables discount arrangements with third-party financial institutions which optimize terms and conditions related to accounts receivable and accounts payable in order to enhance liquidity and enable us to efficiently manage our working capital needs.
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.
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.
The fair value for the customer relationships intangible asset was determined by management using the multi-period excess earnings method.
The fair value for the customer relationships intangible asset was determined by management using the multi-period excess earnings method. Management applied significant judgments and assumptions in determining the fair value of the customer relationships including gross margin rates, the discount rate, and customer attrition rate.
These net favorable impacts were partially offset by (i) a $20.2 million unfavorable cash impact from Taxes receivable (including a $12.3 million cash tax refund received in the first quarter of 2021), (ii) a $17.8 million unfavorable cash impact from Accrued liabilities driven by the timing of payments and (iii) a $13.1 million unfavorable cash impact from Other assets and liabilities including a decrease in pension liability of $5.5 million (primarily reflecting the impact of cash pension contributions), a decrease in a CARES Act liability of $3.2 million and a decrease in Deferred compensation of $3.2 million.
These net unfavorable impacts were partially offset by (i) a $20.5 million favorable cash impact from Other assets and liabilities driven primarily by a reduction in the net pension liability due to contributions to the defined benefit pension plan in the prior year, and (ii) the favorable cash impact of $17.7 million and $17.2 million from Taxes payable and Taxes receivable, respectively, driven by the timing of income tax payments.
We adopted the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s consolidated financial statements.
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.
Cost of Goods Sold 2022 2021 2020 Cost of goods sold $ 1,631,161 $ 1,410,503 $ 1,024,169 % change compared with prior period 15.6 % 37.7 % (11.9) % Gross margin % 16.2 % 16.3 % 11.6 % 2022 compared with 2021 Costs of goods sold increased in 2022 compared to 2021 by $220.7 million (approximately 16%) due primarily to (i) increased prices of raw materials (approximately 12%), (ii) the impact of the U.S.
Cost of Goods Sold 2023 2022 2021 Cost of goods sold $ 1,368,511 $ 1,631,161 $ 1,410,503 % change compared with prior period (16.1) % 15.6 % 37.7 % Gross margin % 10.8 % 16.2 % 16.3 % 2023 compared with 2022 Costs of goods sold decreased in 2023 compared to 2022 by $262.6 million (approximately 16%) due primarily to decreased prices of raw materials including natural gas, sulfur, benzene and propylene (inputs to cumene which is a key feedstock to our products) (approximately 17%) partially offset by the impact of the U.S.
Capital expenditures are deployed for various ongoing investments and initiatives to improve reliability, yield and quality, expand production capacity, as well as comply with HSE regulations and support sustainability initiatives.
On a recurring basis, our primary future cash needs will be centered on operating activities, working capital, capital expenditures, dividends and liquidity reflecting disciplined capital deployment. Capital expenditures are deployed for various ongoing investments and initiatives to improve reliability, yield and quality, expand production capacity, as well as comply with HSE regulations.
During the year ended December 31, 2022, the Company paid dividends of approximately $15.1 million.
The Company paid dividends of approximately $16.7 million, $15.1 million and $3.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company does not anticipate these provisions will have a material impact on our results of operations or financial condition, when effective. The IRA also includes significant extensions, expansions and enhancements related to climate and energy tax credits designed to encourage investment in the adoption and expansion of renewable and alternative energy sources.
The IRA also includes significant extensions, expansions and enhancements related to climate and energy tax credits designed to encourage 32 investment in the adoption and expansion of renewable and alternative energy sources. The Company continues to evaluate these energy credit provisions of the law in relation to our sustainability and environmental, social and governance initiatives.
Consolidated Results of Operations for the Years Ended December 31, 2022, 2021 and 2020 28 (Dollars in thousands ) Sales 2022 2021 2020 Sales $ 1,945,640 $ 1,684,625 $ 1,157,917 % change compared with prior period 15.5 % 45.5 % (10.8) % The change in sales is attributable to the following: 2022 versus 2021 2021 versus 2020 Volume (10.2) % 7.4 % Price 22.2 % 38.1 % Acquisition 3.5 % — % 15.5 % 45.5 % 2022 compared with 2021 Sales increased in 2022 compared to 2021 by $261.0 million (approximately 15%) due primarily to (i) favorable market-based pricing (approximately 20%) reflecting strength in our ammonium sulfate and nylon product lines, (ii) the acquisition of U.S.
Consolidated Results of Operations for the Years Ended December 31, 2023, 2022 and 2021 (Dollars in thousands ) Sales 2023 2022 2021 Sales $ 1,533,599 $ 1,945,640 $ 1,684,625 % change compared with prior period (21.2) % 15.5 % 45.5 % The change in sales is attributable to the following: 2023 versus 2022 2022 versus 2021 Volume 0.2 % (10.2) % Price (22.0) % 22.2 % Acquisition 0.6 % 3.5 % (21.2) % 15.5 % 2023 compared with 2022 Sales decreased in 2023 compared to 2022 by $412.0 million (approximately 21%) due to (i) net unfavorable market-based pricing (approximately 17%) primarily reflecting reduced ammonium sulfate pricing amid lower raw material input costs and a more stable global nitrogen fertilizer supply environment, as well as lower nylon pricing due to unfavorable supply and demand conditions and (ii) unfavorable raw material pass-through pricing (approximately 5%) as a result of a net cost decrease in benzene and propylene (inputs to cumene which is a key feedstock to our products).
Net Income 2022 2021 2020 Net income $ 171,886 $ 139,791 $ 46,077 2022 compared with 2021 As a result of the factors described above, net income was $171.9 million in 2022 as compared to $139.8 million in 2021. 30 Non-GAAP Measures The following tables set forth the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Earnings Per Share.
Net Income 2023 2022 2021 Net income $ 54,623 $ 171,886 $ 139,791 2023 compared with 2022 As a result of the factors described above, net income was $54.6 million in 2023 as compared to $171.9 million in 2022.
Goodwill – The Company had goodwill of $56.2 million and $17.6 million as of December 31, 2022 and 2021, 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.
Goodwill is subject to impairment testing annually and has historically been tested 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.
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.
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.
Management applied significant judgments and assumptions in determining the fair value of the customer relationships including gross margin rates, the discount rate, and customer attrition rate. 36 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.
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.
Amines for approximately $97.5 million, compared to cash paid of approximately $9.5 million for the acquisition of Commonwealth Industrial Services, and an increase in cash paid for capital expenditures of approximately $32.6 million driven by a planned increase in replacement maintenance and HSE projects Cash used for financing activities decreased by $78.4 million for the year ended December 31, 2022 versus the prior year due to net payments on the credit facility of $20.0 million for the year ended December 31, 2022 compared to net payments of $140.0 million during the prior year.
Cash used for financing activities decreased by $60.6 million for the year ended December 31, 2023 versus the prior year due to net borrowings on the credit facility of $55.0 million for the year ended December 31, 2023 compared to net payments of $20.0 million during the prior year.
Anti-Dumping Duty Petition - Ammonium Sulfate In January 2017, the U.S.
The ratified labor agreement affects approximately 130 workers at the Company’s manufacturing facility in Hopewell, Virginia. 30 Anti-Dumping Duty Petition - Ammonium Sulfate In January 2017, the U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−4 removed2 unchanged
Biggest changeAs a result, the hedges continue to be deemed effective. Based on current borrowing levels at December 31, 2022, net of the interest rate swap, a 25-basis point fluctuation in interest rates for the year ended December 31, 2022 would have resulted in an increase or decrease to our interest expense of approximately $0.2 million. See “Note 12.
Biggest changeBased on current borrowing levels at December 31, 2023, a 25-basis point fluctuation in interest rates for the year ended December 31, 2023 would have resulted in an increase or decrease to our interest expense of approximately $0.4 million. See “Note 12.
Derivative and Hedging Instruments” to the Consolidated Financial Statements included in Item 8 of this Form 10-K, for a discussion relating to credit and market, commodity price and interest rate risk management. 38
Derivative and Hedging Instruments” to the Consolidated Financial Statements included in Item 8 of this Form 10-K for a discussion relating to credit and market, commodity price and interest rate risk management. 41
Removed
As of December 31, 2022, 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.
Removed
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.
Removed
As a result of this interest rate swap, interest payments on approximately 43% of our borrowings, as of December 31, 2022, have been swapped from floating rate to fixed rate for the life of the swap, without an exchange of the underlying principal amount.
Removed
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, 2022, it was determined that the critical terms continued to exactly match, and that the counterparties still had the ability to honor their obligations.

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