Market Overview

AdvanSix Announces Second Quarter 2018 Financial Results

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Sales of $400 million, up 11% versus prior year

Cash Flow from Operations of $33 million, up 12% versus prior year

Earnings Per Share of $0.91, up 10% versus prior year

AdvanSix (NYSE:ASIX) today announced its financial results for
the second quarter ending June 30, 2018. The Company generated strong
results across a number of metrics including sales volume, income and
operating cash flow.

Second Quarter 2018 Highlights

  • Sales up 11% versus prior year, including 4% volume increase and 7%
    higher raw material pass-through pricing
  • Net Income of $28.4 million, an increase of $2.6 million versus the
    prior year
  • EBITDA of $53.0 million, a decrease of $1.7 million versus the prior
    year
  • Cash Flow from Operations of $33.2 million, an increase of $3.6
    million versus the prior year
  • Free Cash Flow of $10.4 million, a decrease of $4.6 million versus the
    prior year
  • Initiated share repurchases under current $75 million authorization

"AdvanSix delivered another strong quarter capping off a dynamic first
half of 2018. The performance this quarter, including a 4% sales volume
increase, continued to be supported by high plant utilization rates and
a favorable supply and demand environment. Our results demonstrate the
strength of our business model and our ability to perform in a rising
input and energy environment. In addition, we initiated share
repurchases in June reflecting our maturing capital allocation strategy
and confidence in continued cash flow generation," said Erin Kane,
president and CEO of AdvanSix.

Summary second quarter 2018 financial results for the Company are
included below:

   

Second Quarter 2018 Results

($ in Thousands, Except Earnings Per Share) 2Q 2018 2Q 2017
Sales $ 400,459 $ 361,441
Net Income 28,410 25,766
Earnings Per Share (Diluted) $ 0.91 $ 0.83
EBITDA (1) 52,969 54,619
EBITDA Margin % (1) 13.2 % 15.1 %
Cash Flow from Operations 33,154 29,586
Free Cash Flow (1)(2) 10,444 15,015
(1)   See "Non-GAAP Measures" included in this press release for non-GAAP
reconciliations
(2) Net cash provided by operating activities less capital expenditures

Sales volume in the quarter increased 4% versus the prior year primarily
due to increases in our ammonium sulfate, caprolactam, and chemical
intermediates product lines. Pricing overall increased 7% versus the
prior year due to raw material pass-through pricing following cost
increases in benzene and propylene (inputs to cumene which is a key
feedstock to our products). Market-based pricing was approximately flat
compared to the prior year. The pricing benefit of improved industry
supply and demand dynamics in our nylon, caprolactam and ammonium
sulfate product lines was offset by the unfavorable impact of elevated
North America acetone imports on our chemical intermediates product line.

Sales by product line represented the following approximate percentage
of our total sales:

  2Q 2018   2Q 2017
Nylon 27 % 29 %
Caprolactam 19 % 18 %
Ammonium Sulfate Fertilizers 21 % 21 %
Chemical Intermediates 33 % 32 %
 

EBITDA of $53.0 million in the quarter decreased $1.7 million versus the
prior year primarily due to increased manufacturing costs, including
purchases of feedstocks which are normally manufactured by the Company,
partially offset by the favorable impact of higher sales volume.
Earnings per share of $0.91 increased 10% versus the prior year driven
by the factors discussed above as well as lower interest expense and the
benefits of tax reform reducing our effective tax rate.

Cash flow from operations of $33.2 million in the quarter increased $3.6
million versus the prior year primarily due to higher net income,
including the benefit of tax reform, and the favorable impact of changes
in working capital, partially offset by a reduced benefit from deferred
taxes. Capital expenditures of $22.7 million in the quarter increased
$8.1 million versus the prior year.

Outlook

  • Current favorable nylon industry conditions expected to continue
  • Expect new season ammonium sulfate fill pricing up approximately 10%
    year-over-year; typical seasonality expected to drive sequential
    pricing decline in 3Q 2018
  • North America acetone imports leveling off but near-term pricing
    headwind remains
  • 3Q 2018 planned plant turnaround pre-tax income impact expected to be
    $25 to $28 million
  • Capital Expenditures expected to be $110 to $115 million for the full
    year 2018, including previously announced $20 to $30 million
    incremental investment toward high-return growth and cost savings
    project pipeline

"We remain focused on the flawless execution of our third quarter plant
turnaround, while driving performance in an improved market environment.
Our strategies focused on operational and commercial excellence,
improving mix, and executing against a maturing pipeline of high-return
capital projects position us well to drive long-term shareholder value,"
added Kane.

Conference Call Information

AdvanSix will discuss its results during its investor conference call
today starting at 9:00 a.m. ET. To participate on the conference call,
dial (844) 855-9494 (domestic) or (412) 858-4602 (international)
approximately 10 minutes before the 9:00 a.m. ET start, and tell the
operator that you are dialing in for AdvanSix's second quarter 2018
earnings call. The live webcast of the investor call as well as related
presentation materials can be accessed at http://investors.advansix.com.
Investors can hear a replay of the conference call from 12 noon ET on
August 3 until 12 noon ET on August 10 by dialing (877) 344-7529
(domestic) or (412) 317-0088 (international). The access code is
10121613.

About AdvanSix

AdvanSix is a leading manufacturer of Nylon 6, a polymer resin which is
a synthetic material used by our customers to produce engineered
plastics, fibers, filaments and films that, in turn, are used in such
end-products as automotive and electronic components, carpets, sports
apparel, fishing nets and food and industrial packaging. As a result of
our backward integration and the configuration of our manufacturing
facilities, we also sell caprolactam, ammonium sulfate fertilizer,
acetone and other intermediate chemicals, all of which are produced as
part of our Nylon 6 integrated manufacturing chain. More information on
AdvanSix can be found at http://www.advansix.com.

Forward Looking Statements

This release contains certain statements that may be deemed
"forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical fact, that address activities, events or
developments that our management intends, expects, projects, believes or
anticipates will or may occur in the future are forward-looking
statements. Forward-looking statements may be identified by words like
"expect," "anticipate," "estimate," "outlook", "project," "strategy,"
"intend," "plan," "target," "goal," "may," "will," "should" and
"believe" or other variations or similar terminology. Although we
believe forward-looking statements are based upon reasonable
assumptions, such statements involve known and unknown risks,
uncertainties and other factors, which may cause the actual results or
performance of the company to be materially different from any future
results or performance expressed or implied by such forward-looking
statements. Such risks and uncertainties include, but are not limited
to: general economic and financial conditions in the U.S. and globally;
growth rates and cyclicality of the industries we serve; the impact of
scheduled turnarounds and significant unplanned downtime and
interruptions of production or logistics operations as a result of
mechanical issues or other unanticipated events such as fires, severe
weather conditions, and natural disasters; price fluctuations and supply
of raw materials; our operations requiring substantial capital; failure
to develop and commercialize new products or technologies; loss of
significant customer relationships; adverse trade and tax policies;
extensive environmental, health and safety laws that apply to our
operations; hazards associated with chemical manufacturing, store and
transportation; litigation associated with chemical manufacturing and
our business operations generally; inability to acquire and integrate
businesses, assets, products or technologies; protection of our
intellectual property and proprietary information; prolonged work
stoppages as a result of labor difficulties; cybersecurity and data
privacy incidents; failure to maintain effective internal controls; our
inability to achieve some or all of the anticipated benefits of the
spin-off from Honeywell including uncertainty regarding qualification
for expected tax treatment and indebtedness incurred in connection with
the spin-off; fluctuations in our stock price; and tax reform or other
changes in laws or regulations applicable to our business. You are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this release. Such
forward-looking statements are not guarantees of future performance, and
actual results, developments and business decisions may differ from
those envisaged by such forward-looking statements. We identify the
principal risks and uncertainties that affect our performance in our
filings with the Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended December 31, 2017 and our
subsequent Quarterly Reports on Form 10-Q.

Non-GAAP Financial Measures

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

 
AdvanSix Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except share and per share amounts)
   
June 30, 2018 December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 16,714 $ 55,432
Accounts and other receivables – net 155,724 196,003
Inventories – net 122,129 129,208
Other current assets 5,869   7,130  
Total current assets 300,436 387,773
 
Property, plant and equipment – net 619,267 612,612
Goodwill 15,005 15,005
Other assets 36,443   34,884  
Total assets $ 971,151   $ 1,050,274  
 
LIABILITIES
Current liabilities:
Accounts payable $ 176,589 $ 227,711
Accrued liabilities 28,208 35,013
Income taxes payable 3,258 1
Deferred income and customer advances 2,425 17,194
Line of credit – short-term 18,300
Current portion of long-term debt   16,875  
Total current liabilities 228,780 296,794
 
Deferred income taxes 99,121 92,276
Line of credit – long-term 191,700
Long-term debt 248,339
Postretirement benefit obligations 29,212 33,396
Other liabilities 4,261   3,144  
Total liabilities 553,074 673,949
 
STOCKHOLDERS' EQUITY

Common stock, par value $0.01; 200,000,000 shares authorized;
30,524,738
shares issued and 30,445,636 outstanding at June 30, 2018;
30,482,966
shares issued and outstanding at December 31, 2017

305 305

Preferred stock, par value $0.01; 50,000,000 shares authorized and
0
shares issued and outstanding at June 30, 2018 and December
31, 2017

Treasury stock at par (79,102 shares at June 30, 2018; 0 shares at
December
31, 2017)

(1 )
Additional paid-in capital 264,849 263,081
Retained earnings 161,578 121,985
Accumulated other comprehensive loss (8,654 ) (9,046 )
Total stockholders' equity 418,077   376,325  
Total liabilities and stockholders' equity $ 971,151   $ 1,050,274  
 
 
AdvanSix Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share and per share amounts)
 
     

Three Months Ended
June 30,

     

Six Months Ended
June 30,

2018   2017 2018   2017
Sales $ 400,459 $ 361,441 $ 759,697 $ 738,145
 
Costs, expenses and other:
Costs of goods sold 342,958 299,298 664,278 613,193

Selling, general and administrative
expenses

17,919 18,095 37,132 34,865
Other non-operating expense (income), net 1,582   2,965   5,128   4,763
362,459 320,358 706,538 652,821
 
Income before taxes 38,000 41,083 53,159 85,324
Income taxes 9,590   15,317   13,156   32,265
Net income $ 28,410   $ 25,766   $ 40,003   $ 53,059
 
Earnings per common share
Basic $ 0.93 $ 0.85 $ 1.31 $ 1.74
Diluted $ 0.91 $ 0.83 $ 1.28 $ 1.71
 

Weighted average common shares
outstanding

Basic 30,481,627 30,482,966 30,485,095 30,482,966
Diluted 31,305,168 30,986,854 31,294,323 30,977,472
 
 
AdvanSix Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
 
     

Three Months Ended
June 30,

     

Six Months Ended
June 30,

2018   2017 2018   2017
Cash flows from operating activities:
Net income $ 28,410 $ 25,766 $ 40,003 $ 53,059

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

Depreciation and amortization 13,371 11,663 25,913 22,959
Loss on disposal of assets 1,025 655 1,336 1,189
Deferred income taxes 5,104 8,794 6,845 20,500
Stock based compensation 2,599 1,935 4,880 3,619
Accretion of deferred financing fees 109 148 1,589 296
Changes in assets and liabilities:
Accounts and other receivables 10,821 28,350 43,913 (7,945 )
Inventories 2,506 (19,450 ) 7,079 (2,509 )
Accounts payable (16,974 ) (13,981 ) (33,442 ) (14,157 )
Income taxes payable 2,441 (203 ) 3,257 4,949
Accrued liabilities 2,826 2,596 (6,805 ) (227 )
Deferred income and customer advances (14,701 ) (18,122 ) (14,769 ) (23,982 )
Other assets and liabilities (4,383 ) 1,435   (2,578 ) 3,041  
Net cash provided by operating activities 33,154   29,586   77,221   60,792  
 
Cash flows from investing activities:
Expenditures for property, plant and equipment (22,710 ) (14,571 ) (53,423 ) (47,785 )
Other investing activities (252 ) (3,941 ) (1,254 ) (4,062 )
Net cash used for investing activities (22,962 ) (18,512 ) (54,677 ) (51,847 )
 
Cash flows from financing activities:
Payment of long-term debt (266,625 )
Borrowings from line of credit 15,000 108,500 261,000 276,000
Payments of line of credit (35,000 ) (108,500 ) (51,000 ) (276,000 )
Payment of line of credit fees (1,362 )
Principal payments under capital lease (87 ) (28 ) (162 ) (70 )
Purchase of treasury shares (2,743 )   (3,113 )  
Net cash used for financing activities (22,830 ) (28 ) (61,262 ) (70 )
 
Net change in cash and cash equivalents (12,638 ) 11,046 (38,718 ) 8,875
Cash and cash equivalents at beginning of period 29,352   12,028   55,432   14,199  
Cash and cash equivalents at the end of period $ 16,714   $ 23,074   $ 16,714   $ 23,074  
 
Supplemental non-cash investing activities:
Capital expenditures included in accounts payable $ 7,704 $ 16,980
 
AdvanSix Inc.
Non-GAAP Measures
(Dollars in thousands)
Reconciliation of Net Cash Provided by Operating Activities to
Free Cash Flow
   

Three Months Ended
June 30,

Six Months Ended
June 30,

2018   2017 2018   2017
 
Net cash provided by operating activities $ 33,154 $ 29,586 $ 77,221 $ 60,792
Expenditures for property, plant and equipment (22,710 ) (14,571 ) (53,423 ) (47,785 )
Free cash flow (1) $ 10,444   $ 15,015   $ 23,798   $ 13,007  
 

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

and equipment

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

Reconciliation of Net Income to EBITDA

 
 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

2018   2017 2018   2017
 
Net income $ 28,410 $ 25,766 $ 40,003 $ 53,059
Interest expense, net 1,598 1,873 4,688 3,412
Income taxes 9,590 15,317 13,156 32,265
Depreciation and amortization 13,371   11,663   25,913   22,959  
EBITDA (2) $ 52,969   $ 54,619   $ 83,760   $ 111,695  
 
Sales $ 400,459   $ 361,441   $ 759,697   $ 738,145  
EBITDA margin (3) 13.2 % 15.1 % 11.0 % 15.1 %
 
(2) EBITDA is a non-GAAP measure defined as Net Income before
Interest, Income Taxes, Depreciation and Amortization
(3) EBITDA margin is defined as EBITDA divided by Sales
The Company believes these non-GAAP financial measures provide
meaningful supplemental information as they are used by the
Company's management to evaluate the Company's operating
performance, enhance a reader's understanding of the financial
performance of the Company, and facilitate a better comparison among
fiscal periods and performance relative to its competitors, as these
non-GAAP measures exclude items that are not considered core to the
Company's operations.
 

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