AdvanSix Announces Third Quarter 2016 Financial Results

November 10, 2016

Successful spin-off as an independent company

Sales of $324 million, down 4% versus prior year

Cash Flow from Operations of $25 million, up 5% versus prior year

Earnings Per Share of $0.54

MORRIS PLAINS, N.J.--(BUSINESS WIRE)-- AdvanSix (NYSE:ASIX) today announced its financial results for the third quarter ending September 30, 2016:

3Q 2016 Highlights

Continued volume growth across all three product lines, with sales volume up 4% versus the prior year
Capital Expenditures of $17.6 million, down $5.1 million versus the prior year
Free Cash Flow of $7.0 million, an increase of $6.3 million versus the prior year
Selling, General and Administrative expense of $11.7 million, or 3.6% of sales
Company successfully began regular way trading on October 3, 2016 on the NYSE

“AdvanSix delivered a solid quarter, highlighted by continued improvement in production output across our key manufacturing sites and resulting sales volume growth, while successfully spinning as an independently traded public company,” said AdvanSix President and CEO Erin Kane. “Our focus on safe operations, reliable supply to customers, and productivity discipline remained at the forefront, as we prepared for this key next chapter.”

3Q 2016 Results
($ Thousands, Except Earnings Per Share)	3Q 2015	3Q 2016	Change
Sales	335,874	323,953	(4%)
Income Before Taxes	32,095	27,802	(13%)
Net Income	20,411	16,460	(19%)
Earnings Per Share	$0.67	$0.54	(19%)
EBITDA ⁽¹⁾	40,082	38,109	(5%)
EBITDA Margin % ⁽¹⁾	11.9%	11.8%	(10) bps
Cash Flow from Operations	23,421	24,614	5%
Free Cash Flow ⁽¹⁾⁽²⁾	775	7,047	N/A

(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 volumes in the quarter increased by 4%, with continued strong operational performance year-over-year at each of our key manufacturing sites. While the volume increase in the quarter nearly mitigated the 5% unfavorable impact of market based pricing, revenues overall decreased to $324 million from $336 million in the third quarter of 2015 including lower raw materials pass-through pricing.

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

	3Q 2015		3Q 2016
Nylon Resins	28	%	29	%
Caprolactam	18	%	16	%
Ammonium Sulfate Fertilizers	24	%	22	%
Chemical Intermediates	30	%	33	%

EBITDA of $38.1 million decreased 5% from the prior year as improved production and sales volume and continued productivity were more than offset by the unfavorable impact of market based pricing. EBITDA margins were sustained year-over-year at nearly 12%.

Recent Trends and Outlook

Caprolactam capacity rationalization expected to rebalance supply and demand in North America, while global industry utilization rates remain low
Nitrogen fertilizer prices declining throughout 2016 with recent stabilization; Weak fundamentals ahead of 2016/2017 season
Capital Expenditures are expected to be approximately $90 million for the full year 2016

On October 31, 2016, the Company announced that its planned fourth quarter turnaround activities would be extended due to additional, unplanned maintenance of its ammonia plant within its Hopewell, VA facility. Solid progress is being made on the repairs and the Company continues to work with its customers and suppliers to mitigate the impact of the extended outage. All three sites are currently operating, and the Company expects to be at full rates on or around November 21, 2016. As a result of this incremental extended outage, the Company expects the impact to fourth quarter 2016 pre-tax income to be in the range of $20 to $25 million, inclusive of lost sales, reduced fixed cost absorption, additional raw material costs, and repair expenses. The fourth quarter plant turnaround activities had no adverse impact on third quarter 2016 financial results.

“Looking forward, we will operate conservatively as end market fundamentals remain dynamic across our major product lines,” continued Kane. “While the unplanned incremental cost of the fourth quarter outage is a key factor to our near term performance, we remain confident in our sustainable cost-advantaged position, and the resiliency and strength of our portfolio. With the strategic focus as an independent company, we are positioned to achieve margin expansion and free cash flow improvement over the long-term.”

Conference Call Information

AdvanSix will discuss its results and an update to its previously disclosed fourth quarter turnaround activities during its investor conference call today starting at 9:00 a.m. EST. To participate on the conference call, please dial (866) 807-9684 (domestic) or (412) 317-5415 (international) approximately ten minutes before the 9:00 a.m. EST start. Please mention to the operator that you are dialing in for AdvanSix’s third quarter 2016 earnings call. The live webcast of the investor call as well as related presentation materials can be accessed at http://investors.advan6.com. Investors can hear a replay of the conference call from 12:00 p.m. EST, November 10, until 12:00 p.m. EST, November 17, by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international). The access code is 10095033.

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 the Nylon 6 resin manufacturing process. More information on AdvanSix can be found at http://www.advan6.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. 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: 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, indebtedness incurred in connection with the spin-off, and operating as an independent, publicly traded company; fluctuations in our stock price; 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 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; adverse trade and tax policies; extensive environmental, health and safety laws that apply to our operations; litigation associated with chemical manufacturing; loss of significant customer relationships; protection of our intellectual property and proprietary information; and prolonged work stoppages as a result of labor difficulties. 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 Registration Statement on Form 10.

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.
Consolidated Balance Sheets
(Unaudited; in thousands, except share and per share amounts)

	September 30,			December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	37,964		$	-
Accounts and other receivables – net		148,583			127,545
Inventories		136,650			150,231
Other current assets		5,051			4,443
Total current assets		328,248			282,219

Property, plant, equipment – net		551,578			527,542
Goodwill		15,005			15,005
Other assets		28,043			16,220
Total assets	$	922,874		$	840,986

Liabilities
Current liabilities:
Accounts payable	$	190,228		$	192,733
Accrued liabilities		15,425			25,114
Deferred income and customer advances		1,705			25,207
Total current liabilities		207,358			243,054

Deferred income taxes		130,678			114,910
Long-term debt		308,230			-
Postretirement benefit obligations		34,935			-
Other liabilities		4,205			3,952
Total liabilities		685,406			361,916

Equity
Common stock, par value $0.01 ; 200,000,000 shares authorized and 30,482,966 shares issued and outstanding		305			-
Preferred stock, par value $0.01 ; 50,000,000 shares authorized and 0 shares issued and outstanding		-			-
Additional paid in capital		242,254			-
Retained earnings		-			-
Invested equity		-			482,809
Accumulated other comprehensive loss		(5,091	)		(3,739	)
Total equity		237,468			479,070
Total liabilities and equity	$	922,874		$	840,986


AdvanSix Inc.
Consolidated Statements of Operations
(Unaudited; in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Sales	$	323,953		$	335,874		$	932,201		$	1,013,544

Costs, expenses and other:
Costs of goods sold		285,091			289,985			804,471			900,194
Selling, general and administrative expenses		11,695			14,609			33,949			39,204
Other non-operating, net		(635	)		(815	)		(1,792	)		(2,014	)
		296,151			303,779			836,628			937,384

Income before taxes		27,802			32,095			95,573			76,160
Income taxes		11,342			11,684			36,712			27,722
Net income	$	16,460		$	20,411		$	58,861		$	48,438

Earnings per common share
Basic	$	0.54		$	0.67		$	1.93		$	1.59
Diluted	$	0.54		$	0.67		$	1.93		$	1.59

Weighted average common shares outstanding
Basic		30,482,966			30,482,966			30,482,966			30,482,966
Diluted		30,482,966			30,482,966			30,482,966			30,482,966


AdvanSix Inc.
Consolidated Statements of Cash Flows
(Unaudited; in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
		2016			2015			2016			2015
Cash flows from operating activities:
Net income	$	16,460		$	20,411		$	58,861		$	48,438
Adjustments to reconcile net income to net cash (used for) provided by
operating activities:
Depreciation and amortization		10,307			7,987			29,964			27,376
Loss on sale of assets		630			78			1,246			1,035
Deferred income taxes		4,510			2,671			29,206			7,629
Changes in assets and liabilities:
Accounts and other receivables		(5,344	)		28,834			(20,117	)		40,175
Inventories		(2,346	)		(20,936	)		13,581			16,539
Accounts payable		3,698			(8,682	)		(161	)		(34,513	)
Accrued liabilities		(2,788	)		(1,110	)		(9,690	)		(3,183	)
Deferred income and customer advances		(966	)		(413	)		(23,501	)		(28,640	)
Other assets and liabilities		453			(5,419	)		(12,922	)		(5,008	)
Net cash provided by operating activities		24,614			23,421			66,467			69,848

Cash flows from investing activities:
Expenditures for property, plant and equipment		(17,567	)		(22,646	)		(56,859	)		(67,898	)
Other investing activities		(133	)		(219	)		(461	)		(563	)
Net cash (used for) investing activities		(17,700	)		(22,865	)		(57,320	)		(68,461	)

Cash flow from financing activities:
Proceeds from long term debt		270,000			-			270,000			-
Payment of debt issuance costs		(1,770	)		-			(1,770	)		-
Borrowings under revolving credit facility		40,000			-			40,000			-
Payment of revolving credit facility fees		(1,016	)		-			(1,016	)		-
Distribution to Honeywell in connection with the Spin-Off		(269,347	)		-			(269,347	)		-
Net increase (decrease) in invested equity		(6,817	)		(556	)		(9,050	)		(1,181	)
Other financing activities		-			-			-			(206	)
Net cash provided by (used for) financing activities		31,050			(556	)		28,817			(1,387	)

Net increase/(decrease) in cash and cash equivalents		37,964			-			37,964			-
Cash and cash equivalents at beginning of period		-			-			-			-
Cash and cash equivalents at the end of period	$	37,964		$	-		$	37,964		$	-


AdvanSix Inc.
Non-GAAP Measures
(Unaudited; in thousands)

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

	Three Months Ended September 30,						Nine Months Ended September 30,
		2016			2015			2016			2015

Net Cash Provided by Operating Activities	$	24,614		$	23,421		$	66,467		$	69,848
Expenditures for Property, Plant and Equipment		(17,567	)		(22,646	)		(56,859	)		(67,898	)
Free Cash Flow ⁽¹⁾	$	7,047		$	775		$	9,608		$	1,950

(1) Free Cash Flow is defined as Net Cash provided by Operating Activities less Capital Expenditures

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 September 30,				Nine Months Ended September 30,
		2016		2015		2016		2015

Net Income	$	16,460	$	20,411	$	58,861	$	48,438
Income Taxes		11,342		11,684		36,712		27,722
Depreciation and Amortization		10,307		7,987		29,964		27,376
EBITDA ⁽²⁾	$	38,109	$	40,082	$	125,537	$	103,536

Sales	$	323,953	$	335,874	$	932,201	$	1,013,544
EBITDA Margin ⁽³⁾		11.8%		11.9%		13.5%		10.2%

(2) EBITDA is 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 the non-GAAP measures exclude items that are not considered core to the Company’s operations.

View source version on businesswire.com: http://www.businesswire.com/news/home/20161110005621/en/

Media
Mari Abe, 415-633-3204
[email protected]
or
Investor Relations
Adam Kressel, 973-455-6888
[email protected]

Source: AdvanSix

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AdvanSix Announces Third Quarter 2016 Financial Results