Sales of $311 million, down 16% versus prior
year primarily due to raws pass-through pricing
Earnings Per Share of $0.28, up 56% versus
prior year
Cash Flow from Operations of $33 million, down
$17 million versus prior year
AdvanSix (NYSE:ASIX) today announced its financial
results for the third quarter ending September 30, 2019. Overall,
the Company generated higher earnings versus the prior year while
executing its strategic priorities in a challenging macro
environment.
Third Quarter 2019
Highlights
- Sales down approximately 16% versus prior year, including
approximately 11% lower raw material pass-through pricing, 3%
unfavorable impact of market-based pricing, and 2% lower
volume
- Net Income of $7.9 million, an increase of $2.4 million versus
the prior year
- EBITDA of $24.9 million, an increase of $5.0 million versus the
prior year
- EBITDA Margin of 8.0%, up 260 bps versus the prior year
- Cash Flow from Operations of $33.2 million, a decrease of $17.3
million versus the prior year
- Capital Expenditures of $35.2 million, an increase of $16.0
million versus the prior year
- Free Cash Flow of ($2.0) million, a decrease of $33.3 million
versus the prior year
- Repurchased 534,049 shares for approximately $13 million
“The end market environment remains challenging as we saw a
further slowdown in demand on a global basis through the third
quarter. Given our global low-cost position, we continue to benefit
from our strong utilization rates and operating leverage in the
face of slowing nylon demand, acetone oversupply conditions and
mixed fertilizer industry dynamics," said Erin Kane, president and
CEO of AdvanSix. "We are planning conservatively in the near term
based on the challenging macro environment and are taking proactive
measures to drive disciplined cost management, optimize working
capital performance and cash flow generation, while deploying
capital prudently.”
Summary third quarter 2019 financial results for the Company are
included below:
Third Quarter
2019 Results
($ in Thousands, Except Earnings Per
Share)
3Q 2019
3Q 2018
Sales
$310,633
$368,653
Net Income
7,921
5,480
Earnings Per Share (Diluted)
$0.28
$0.18
EBITDA (1)
24,949
19,971
EBITDA Margin % (1)
8.0%
5.4%
Cash Flow from Operations
33,173
50,514
Free Cash Flow (1)(2)
(2,012)
31,287
(1) See “Non-GAAP Measures” included in this press release for
non-GAAP reconciliations
(2) Net cash provided by operating activities less capital
expenditures
Sales of $310.6 million decreased approximately 16% versus the
prior year. Pricing overall decreased 14% versus the prior year,
including an 11% unfavorable impact from raw material pass-through
pricing following cost decreases in benzene and propylene (inputs
to cumene which is a key feedstock to our products). Market-based
pricing was unfavorable by approximately 3% compared to the prior
year reflecting challenging end market conditions in our acetone,
nylon and caprolactam product lines, partially offset by improved
ammonium sulfate performance. Sales volume in the quarter decreased
2% versus the prior year primarily due to unfavorable mix across
our nylon and ammonium sulfate product lines, driven in part by
operational performance, and continued challenging industry
dynamics in chemical intermediates, partially offset by improved
caprolactam volume due to stronger utilization rates and the larger
planned plant turnaround in the prior year period.
Sales by product line represented the following approximate
percentage of our total sales:
3Q 2019
3Q 2018
Nylon
25%
28%
Caprolactam
26%
18%
Ammonium Sulfate Fertilizers
20%
19%
Chemical Intermediates
29%
35%
EBITDA of $24.9 million in the quarter increased $5.0 million
versus the prior year primarily due to the net favorable
year-over-year impact of planned plant turnarounds (approximately
$25 million), partially offset by the unfavorable impact of
market-based pricing, lower volume and operational performance,
including fixed cost absorption and unfavorable product mix, and an
approximately $4 million unfavorable impact from an extended cumene
supply chain following the Philadelphia Energy Solutions (PES)
supplier fire.
Earnings per share of $0.28 increased 56% versus the prior year
driven by the factors discussed above and a lower share count
driven by continued repurchases. The lower share count contributed
an approximately $0.02 benefit versus the prior year.
Cash flow from operations of $33.2 million in the quarter
decreased $17.3 million versus the prior year primarily due to the
unfavorable impact of changes in working capital. Capital
expenditures of $35.2 million in the quarter increased $16.0
million versus the prior year primarily due to higher planned
turnaround maintenance spend and an increase in high-return growth
and cost savings projects.
Outlook
- Targeting strong nylon plant utilization rates despite further
global demand softness
- Expect mixed ammonium sulfate fertilizer environment to
continue through 2019/2020 planting season
- Expect acetone anti-dumping duties to be finalized by 1Q20
- Expect an unfavorable impact to pre-tax income, as a result of
PES supplier fire, of $8 to $10 million in 2019 (approximately $4
million in 3Q19, $4 to $6 million in 4Q19) and $10 to $15 million
in 2020
- Capital Expenditures tracking to approximately $150 million for
the full year 2019; Expect Capital Expenditures to be $90 to $110
million in 2020
- Expect pre-tax income impact of planned plant turnarounds to be
$33 to $38 million in 2020 (versus approximately $35 million in
2019)
"Our organization shows its resiliency by navigating through
challenging end market conditions and external factors, with a
focus to outperform on what we can control. We recently completed
our fourth quarter planned plant turnaround on time and on budget,
which will have an approximately $25 million unfavorable impact to
pre-tax income in the fourth quarter. Despite a more uncertain
macro environment, we continue to position the Company for
long-term performance by executing on our strategic priorities
including safe, stable and sustainable operations, differentiated
product growth and disciplined capital allocation,” 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 (334) 777-6978 (domestic) or (800) 367-2403
(international) approximately 10 minutes before the 9:00 a.m. ET
start, and tell the operator that you are dialing in for AdvanSix’s
third quarter 2019 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 November 1 until 12 noon ET on November 8 by dialing (719)
457-0820 (domestic) or (888) 203-1112 (international). The access
code is 5001686.
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,
many of which are beyond our control and difficult to predict,
which may cause the actual results or performance of the Company to
be materially different from any future results or performance
expressed or implied by such forward-looking statements. Such risks
and uncertainties include, but are not limited to: 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; general economic and financial conditions in
the U.S. and globally; growth rates and cyclicality of the
industries we serve including global changes in supply and demand;
risks associated with our indebtedness including with respect to
restrictive covenants; failure to develop and commercialize new
products or technologies; loss of significant customer
relationships; adverse trade and tax policies; extensive
environmental, health and safety laws that apply to our operations;
hazards associated with chemical manufacturing, storage and
transportation; litigation associated with chemical manufacturing
and our business operations generally; inability to acquire and
integrate businesses, assets, products or technologies; protection
of our intellectual property and proprietary information; prolonged
work stoppages as a result of labor difficulties; cybersecurity and
data privacy incidents; failure to maintain effective internal
controls; disruptions in transportation and logistics; our
inability to achieve some or all of the anticipated benefits of our
spin-off including uncertainty regarding qualification for expected
tax treatment; fluctuations in our stock price; and changes in laws
or regulations applicable to our business. You are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date of this release. Such forward-looking
statements are not guarantees of future performance, and actual
results, developments and business decisions may differ from those
envisaged by such forward-looking statements. We identify the
principal risks and uncertainties that affect our performance in
our filings with the Securities and Exchange Commission, including
our Annual Report on Form 10-K for the year ended December 31,
2018.
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)
September 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
10,048
$
9,808
Accounts and other receivables – net
109,292
160,266
Inventories – net
162,479
137,182
Other current assets
8,433
3,807
Total current assets
290,252
311,063
Property, plant and equipment – net
731,643
672,210
Operating lease right-of-use assets
136,122
—
Goodwill
15,005
15,005
Other assets
38,795
36,348
Total assets
$
1,211,817
$
1,034,626
LIABILITIES
Current liabilities:
Accounts payable
$
219,225
$
231,720
Accrued liabilities
29,839
30,448
Operating lease liabilities –
short-term
35,656
—
Deferred income and customer advances
1,948
22,556
Total current liabilities
286,668
284,724
Deferred income taxes
112,579
103,783
Operating lease liabilities –
long-term
100,752
—
Line of credit – long-term
266,000
200,000
Postretirement benefit obligations
22,581
21,080
Other liabilities
6,011
4,701
Total liabilities
794,591
614,288
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 200,000,000
shares authorized; 30,600,708 shares issued and 27,481,162
outstanding at September 30, 2019;
30,555,715 shares issued and 29,345,001
outstanding at December 31, 2018
306
306
Preferred stock, par value $0.01;
50,000,000 shares authorized and 0 shares issued and outstanding at
September 30, 2019 and December 31, 2018
—
—
Treasury stock at par (3,119,546 shares at
September 30, 2019; 1,210,714 shares at December 31, 2018)
(31)
(12)
Additional paid-in capital
189,242
234,699
Retained earnings
231,260
187,819
Accumulated other comprehensive loss
(3,551)
(2,474)
Total stockholders' equity
417,226
420,338
Total liabilities and stockholders'
equity
$
1,211,817
$
1,034,626
AdvanSix Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
(Dollars in thousands, except
share and per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Sales
$
310,633
$
368,653
$
970,743
$
1,128,350
Costs, expenses and other:
Costs of goods sold
280,123
343,434
850,131
1,007,712
Selling, general and administrative
expenses
19,261
18,057
58,683
55,189
Other non-operating expense (income),
net
1,815
1,453
4,871
6,581
Total costs, expenses and other
301,199
362,944
913,685
1,069,482
Income before taxes
9,434
5,709
57,058
58,868
Income tax expense
1,513
229
13,617
13,385
Net income
$
7,921
$
5,480
$
43,441
$
45,483
Earnings per common share
Basic
$
0.29
$
0.18
$
1.54
$
1.50
Diluted
$
0.28
$
0.18
$
1.49
$
1.46
Weighted average common shares
outstanding
Basic
27,608,985
30,160,991
28,192,760
30,375,873
Diluted
28,581,451
30,983,834
29,164,024
31,189,640
AdvanSix Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Cash flows from operating
activities:
Net income
$
7,921
$
5,480
$
43,441
$
45,483
Adjustments to reconcile net income to net
cash (used for) provided by operating activities:
Depreciation and amortization
14,222
12,992
42,094
38,905
Loss on disposal of assets
3,066
224
4,967
1,560
Deferred income taxes
(960)
1,971
9,149
8,816
Stock based compensation
2,001
2,626
7,575
7,506
Accretion of deferred financing fees
106
107
320
1,696
Restructuring charges
—
—
12,623
—
Changes in assets and liabilities:
Accounts and other receivables
18,393
2,965
51,136
46,878
Inventories
(24,245)
7,103
(26,739)
14,182
Accounts payable
17,742
19,510
(12,844)
(10,675)
Accrued liabilities
(2,699)
(2,898)
(4,470)
(9,703)
Deferred income and customer advances
(1,236)
(130)
(20,608)
(14,899)
Other assets and liabilities
(1,138)
564
(6,108)
(2,014)
Net cash provided by operating
activities
33,173
50,514
100,536
127,735
Cash flows from investing
activities:
Expenditures for property, plant and
equipment
(35,185)
(19,227)
(106,386)
(72,650)
Other investing activities
(918)
(402)
(2,203)
(1,656)
Net cash used for investing activities
(36,103)
(19,629)
(108,589)
(74,306)
Cash flows from financing
activities:
Payments of long-term debt
—
—
—
(266,625)
Borrowings from line of credit
106,500
23,500
316,750
284,500
Payments of line of credit
(95,500)
(33,500)
(250,750)
(84,500)
Payment of line of credit facility
fees
—
—
—
(1,362)
Principal payments of finance leases
(2,279)
(63)
(4,656)
(225)
Purchase of treasury stock
(12,800)
(17,330)
(53,067)
(20,443)
Issuance of common stock
—
—
16
—
Net cash provided by (used for) financing
activities
(4,079)
(27,393)
8,293
(88,655)
Net change in cash and cash
equivalents
(7,009)
3,492
240
(35,226)
Cash and cash equivalents at beginning of
period
17,057
16,714
9,808
55,432
Cash and cash equivalents at the end of
period
$
10,048
$
20,206
$
10,048
$
20,206
Supplemental non-cash investing
activities:
Capital expenditures included in accounts
payable
$
27,344
$
17,649
AdvanSix Inc.
Non-GAAP Measures
(Dollars in thousands)
Reconciliation of Net Cash
Provided by Operating Activities to Free Cash Flow
Three Months Ended
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Net cash provided by operating
activities
$
33,173
$
50,514
$
100,536
$
127,735
Expenditures for property, plant and
equipment
(35,185)
(19,227)
(106,386)
(72,650)
Free cash flow (1)
$
(2,012)
$
31,287
$
(5,850)
$
55,085
(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
September 30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Net income
$
7,921
$
5,480
$
43,441
$
45,483
Interest expense, net
1,293
1,270
3,727
5,958
Income taxes
1,513
229
13,617
13,385
Depreciation and amortization
14,222
12,992
42,094
38,905
EBITDA (2)
$
24,949
$
19,971
$
102,879
$
103,731
One-time Pottsville restructuring charges
(3)
—
—
12,623
—
EBITDA excluding one-time Pottsville
restructuring charges
$
24,949
$
19,971
$
115,502
$
103,731
Sales
$
310,633
$
368,653
$
970,743
$
1,128,350
EBITDA margin (4)
8.0%
5.4%
10.6%
9.2%
EBITDA margin excluding one-time
Pottsville restructuring charges
8.0%
5.4%
11.9%
9.2%
(2) EBITDA is a non-GAAP measure defined
as Net Income before Interest, Income Taxes, Depreciation and
Amortization
(3) One-time Pottsville restructuring
charges reflect the closure of the Company's Pottsville,
Pennsylvania films plant
(4) EBITDA margin is defined as EBITDA
divided by Sales
The Company believes the non-GAAP financial measures presented
in this release provide meaningful supplemental information as they
are used by the Company’s management to evaluate the Company’s
operating performance, enhance a reader’s understanding of the
financial performance of the Company, and facilitate a better
comparison among fiscal periods and performance relative to its
competitors, as these non-GAAP measures exclude items that are not
considered core to the Company’s operations.
AdvanSix Inc.
Appendix
(Pre-tax income impact,
Dollars in millions)
Planned
Plant Turnaround Schedule (5)
1Q
2Q
3Q
4Q
FY
2017
—
~$10
~$4
~$20
~$34
2018
~$2
~$10
~$30
—
~$42
2019
—
~$5
~$5
~$25
~$35
2020E
~$5
$25-$30
—
~$3
$33-$38
(5) Primarily reflects the impact of fixed
cost absorption, maintenance expense, and the purchase of
feedstocks which are normally manufactured by the Company
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191101005247/en/
Media Debra Lewis (973) 526-1767
debra.lewis@advansix.com
Investors Adam Kressel (973) 526-1700
adam.kressel@advansix.com
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