Sales of $303 million, down 4% versus prior
year
Earnings Per Share of $0.31; Cash Flow from
Operations of $20 million
Business designated as essential during
COVID-19 response
Company taking proactive measures to mitigate
COVID-19 impacts; Continues to operate to meet customer demand
while protecting health and safety of employees
AdvanSix (NYSE: ASIX) today announced its financial
results for the first quarter ending March 31, 2020. Overall, the
Company's first quarter results reflected the resilience and
strength of its vertically integrated asset base and global
low-cost advantage with minimal impact from COVID-19.
First Quarter 2020
Results
- Sales down approximately 4% versus prior year, as 6.5% higher
volume and 1.1% higher raw material pass-through pricing was more
than offset by 11.5% unfavorable impact of market-based
pricing
- Net Income of $8.6 million, a decrease of $11.6 million versus
the prior year
- EBITDA of $28.6 million, a decrease of $13.4 million versus the
prior year
- Cash Flow from Operations of $19.7 million, a decrease of $22.4
million versus the prior year
- Capital Expenditures of $34.1 million, a decrease of $5.4
million versus the prior year
- Free Cash Flow of ($14.4) million, a decrease of $16.9 million
versus the prior year
“Our integrated asset base, global low-cost position, and
diverse co-product portfolio served us well in the first quarter as
we continued to navigate through challenging nylon industry
conditions," said Erin Kane, president and CEO of AdvanSix. "As we
progress through the second quarter, we are executing our business
continuity plans to ensure we remain a trusted partner for reliable
supply to our customers. Designated as an essential business during
the COVID-19 response, we take our obligations seriously to produce
materials that support the broader population while maintaining a
relentless focus on health and safety. Nylon demand weakness in
carpet and engineered plastics applications is expected to
continue, however, we've seen resilience across various other
product lines including our acetone for hand sanitizer and acrylic
screens, nylon for food packaging, and granular ammonium sulfate
into the heart of the domestic planting season. I'm proud of the
way our entire team has come together to keep our business moving
forward during this dynamic and unprecedented time.”
Summary first quarter 2020 financial results for the Company are
included below:
($ in Thousands, Except Earnings Per
Share)
1Q 2020
1Q 2019
Sales
$302,713
$314,895
Net Income
8,576
20,174
Earnings Per Share (Diluted)
$0.31
$0.68
EBITDA (1)
28,631
42,020
EBITDA Margin % (1)
9.5%
13.3%
Cash Flow from Operations
19,719
42,076
Free Cash Flow (1)(2)
(14,381)
2,564
(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 $302.7 million decreased approximately 4% versus the
prior year. Market-based pricing was unfavorable by 11.5% compared
to the prior year reflecting challenging end market conditions in
our nylon and caprolactam product lines as well as higher standard
export sales mix in ammonium sulfate. Raw material pass-through
pricing was favorable by 1.1% following a net cost increase in
benzene and propylene (inputs to cumene which is a key feedstock to
our products). Sales volume in the quarter increased 6.5% versus
the prior year primarily due to higher standard ammonium sulfate
export sales and improved industry dynamics in chemical
intermediates, particularly acetone and oximes.
Sales by product line represented the following approximate
percentage of our total sales:
1Q 2020
1Q 2019
Nylon
26%
31%
Caprolactam
22%
20%
Ammonium Sulfate Fertilizers
23%
21%
Chemical Intermediates
29%
28%
EBITDA of $28.6 million in the quarter decreased $13.4 million
versus the prior year primarily due to the unfavorable impact of
market-based pricing partially offset by higher volume, the
favorable impact of lower raw material costs including natural gas
and sulfur, and productivity benefits from our natural gas
boilers.
Earnings per share of $0.31 decreased $0.37 versus the prior
year driven by the factors discussed above as well as a higher
effective tax rate in the quarter versus the prior year.
Cash flow from operations of $19.7 million in the quarter
decreased $22.4 million versus the prior year primarily due to
lower net income and the unfavorable impact of changes in working
capital. Capital expenditures of $34.1 million in the quarter
decreased $5.4 million versus the prior year.
COVID-19 Response
Summary
The U.S. 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.
Health, Safety and Operations
- Company protocols in place including on-site medical personnel
to actively monitor employees and contractors
- Business continuity plans supporting safe and stable
operations, while continuing to serve our customers by adjusting
output to changes in mix and demand
- Previously scheduled 2Q20 planned plant turnaround has been
de-risked – a majority of the work has been shifted into 3Q20 in
order to limit the number of contractors on site
- Thermal screening process at all manufacturing facilities, with
restrictions on non-essential visitors
- Social distancing measures limiting the number of employees in
control rooms, labs and meetings
- Maintaining policies and practices consistent with CDC and
government guidelines, including upgraded personal protective
equipment and face coverings at all manufacturing facilities
- Telecommuting across all sites, where possible
- Prohibiting all non-essential domestic and international
business travel
Financial Position
- $425 million revolving credit facility in place maturing in
2023 - provides base source of liquidity in addition to cash flow
from operations
- As of 1Q20, the Company had approximately $31 million of cash
on hand with approximately $87 million of additional capacity
available under the revolving credit facility; Increasing cash
balances through 2Q20 as we navigate COVID-19 impacts
- Evaluating additional liquidity potential under the credit
facility’s uncommitted accordion feature
- Previously announced credit facility amendment executed in 1Q20
provides 2020 covenant flexibility
- Disciplined cost management including discretionary spending
and further reduction of capital expenditures
Outlook
- Nylon demand weakness expected to continue; COVID-19 further
challenging industry conditions
- Ammonium sulfate and acetone demand expected to remain firm on
essential application use
- Steady ammonium sulfate fertilizer demand expected through
domestic planting season
- Improved acetone industry supply and demand balance following
final, affirmative anti-dumping duties
- Expect Capital Expenditures to be $80 to $90 million in 2020, a
decrease of $60 to $70 million versus 2019
- Expect pre-tax income impact of planned plant turnarounds to be
$30 to $35 million in 2020, approximately flat to $5 million
favorable versus 2019
- Mitigating impact of 2019 PES supplier disruption and shutdown;
Currently expect impact to 2020 pre-tax income of $5 to $10
million, approximately flat to $5 million favorable versus
2019
"In these uncertain times, we're taking a prudent and
disciplined approach to cost and cash management. We've further
reduced our expected capital expenditures for this year and as
previously announced, shifted a majority of our second quarter
planned turnaround into the third quarter to minimize risk to the
continuity of our operations. We're continuing to leverage our
strengths and are committed to driving best possible outcomes,
which will require us to remain agile as we navigate through the
near-term environment,” added Kane.
The Company also recently published its third annual
Sustainability Report. To read more about the many ongoing
initiatives at AdvanSix, the 2019 Sustainability Report can be
accessed at http://www.advansix.com/global-citizenship.
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
first quarter 2020 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 May 1 until 12 noon ET on May 8 by dialing (719) 457-0820
(domestic) or (888) 203-1112 (international). The access code is
1073556.
About AdvanSix
AdvanSix is a leading manufacturer of Nylon 6, 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 electronic
components, sports apparel, food packaging and other industrial
applications. 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
integrated manufacturing value 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: general economic
and financial conditions in the U.S. and globally, including the
impact of the coronavirus (COVID-19) pandemic; the scope and
duration of the pandemic and pace of recovery; governmental,
business and individuals’ actions in response to the pandemic,
including our business continuity and cash optimization plans that
have and may be implemented; the impact of social and economic
restrictions and other containment measures taken to combat virus
transmission; the effect on our customers’ demand for our products
and our suppliers’ ability to manufacture and deliver our raw
materials, including implications of reduced refinery utilization
in the U.S.; our ability to sell and provide our goods and
services, including as a result of travel and other
COVID-19-related restrictions; the ability of our customers to pay
for our products; and any closures of our and our customers’
offices and facilities; risks associated with our indebtedness
including compliance with financial and restrictive covenants, and
our ability to access capital on reasonable terms or at all due to
economic conditions resulting from COVID-19 or otherwise; the
impact of scheduled turnarounds and significant unplanned downtime
and interruptions of production or logistics operations as a result
of mechanical issues or other unanticipated events such as fires,
severe weather conditions, natural disasters and pandemics
including the coronavirus; price fluctuations and supply of raw
materials; our operations and growth projects requiring substantial
capital; growth rates and cyclicality of the industries we serve
including global changes in supply and demand; failure to develop
and commercialize new products or technologies; loss of significant
customer relationships; adverse trade and tax policies; extensive
environmental, health and safety laws that apply to our operations;
hazards associated with chemical manufacturing, storage and
transportation; litigation associated with chemical manufacturing
and our business operations generally; inability to acquire and
integrate businesses, assets, products or technologies; protection
of our intellectual property and proprietary information; prolonged
work stoppages as a result of labor difficulties or otherwise;
cybersecurity 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 (SEC), including the risk factors in Part 1,
Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2019, as updated in subsequent reports filed with the
SEC.
Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures
intended to supplement, not to act as substitutes for, comparable
GAAP measures. Reconciliations of non-GAAP financial measures to
GAAP financial measures are provided in this press release.
Investors are urged to consider carefully the comparable GAAP
measures and the reconciliations to those measures provided.
Non-GAAP measures in this press release may be calculated in a way
that is not comparable to similarly-titled measures reported by
other companies.
AdvanSix Inc.
Condensed Consolidated Balance
Sheets
(Unaudited)
(Dollars in thousands, except
share and per share amounts)
March 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
30,754
$
7,050
Accounts and other receivables – net
113,302
104,613
Inventories – net
158,066
171,710
Taxes receivable
9,701
2,047
Other current assets
4,641
5,117
Total current assets
316,464
290,537
Property, plant and equipment – net
766,355
755,881
Operating lease right-of-use assets
127,501
135,985
Goodwill
15,005
15,005
Other assets
37,987
38,561
Total assets
$
1,263,312
$
1,235,969
LIABILITIES
Current liabilities:
Accounts payable
$
185,938
$
205,911
Accrued liabilities
31,311
28,114
Operating lease liabilities –
short-term
38,361
38,005
Deferred income and customer advances
13,070
19,696
Total current liabilities
268,680
291,726
Deferred income taxes
120,663
110,071
Operating lease liabilities –
long-term
89,759
98,347
Line of credit – long-term
337,000
297,000
Postretirement benefit obligations
32,734
32,410
Other liabilities
6,640
5,537
Total liabilities
855,476
835,091
STOCKHOLDERS' EQUITY
Common stock, par value $0.01; 200,000,000
shares authorized; 31,578,393 shares issued and 27,996,115
outstanding at March 31, 2020; 31,423,898 shares issued and
27,914,777 outstanding at December 31, 2019
316
314
Preferred stock, par value $0.01;
50,000,000 shares authorized and 0 shares issued and outstanding at
March 31, 2020 and December 31, 2019
—
—
Treasury stock at par (3,582,278 shares at
March 31, 2020; 3,509,121 shares at December 31, 2019)
(36)
(35)
Additional paid-in capital
181,158
180,884
Retained earnings
237,742
229,166
Accumulated other comprehensive loss
(11,344)
(9,451)
Total stockholders' equity
407,836
400,878
Total liabilities and stockholders'
equity
$
1,263,312
$
1,235,969
AdvanSix Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
(Dollars in thousands, except
share and per share amounts)
Three Months Ended
March 31,
2020
2019
Sales
$
302,713
$
314,895
Costs, expenses and other:
Costs of goods sold
272,008
266,880
Selling, general and administrative
expenses
16,740
19,413
Other non-operating expense (income),
net
1,725
1,604
Total costs, expenses and other
290,473
287,897
Income before taxes
12,240
26,998
Income tax expense
3,664
6,824
Net income
$
8,576
$
20,174
Earnings per common share
Basic
$
0.31
$
0.70
Diluted
$
0.31
$
0.68
Weighted average common shares
outstanding
Basic
27,942,486
28,820,603
Diluted
28,050,955
29,786,957
AdvanSix Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
2020
2019
Cash flows from operating
activities:
Net income
$
8,576
$
20,174
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
14,432
13,915
Loss on disposal of assets
35
415
Deferred income taxes
11,204
3,747
Stock based compensation
1,198
2,762
Accretion of deferred financing fees
130
107
Changes in assets and liabilities:
Accounts and other receivables
(8,746)
42,621
Inventories
13,644
(3,416)
Taxes receivable
(7,654)
397
Accounts payable
(9,752)
(30,674)
Accrued liabilities
2,912
(7,232)
Deferred income and customer advances
(6,626)
(1,862)
Other assets and liabilities
366
1,122
Net cash provided by operating
activities
19,719
42,076
Cash flows from investing
activities:
Expenditures for property, plant and
equipment
(34,100)
(39,512)
Other investing activities
(385)
(587)
Net cash used for investing activities
(34,485)
(40,099)
Cash flows from financing
activities:
Borrowings from line of credit
133,500
85,500
Payments of line of credit
(93,500)
(65,500)
Payment of line of credit facility
fees
(425)
—
Principal payments of finance leases
(182)
(145)
Purchase of treasury stock
(925)
(23,853)
Issuance of common stock
2
16
Net cash provided by (used for) financing
activities
38,470
(3,982)
Net change in cash and cash
equivalents
23,704
(2,005)
Cash and cash equivalents at beginning of
period
7,050
9,808
Cash and cash equivalents at the end of
period
$
30,754
$
7,803
Supplemental non-cash investing
activities:
Capital expenditures included in accounts
payable
$
11,553
$
14,039
AdvanSix Inc.
Non-GAAP Measures
(Dollars in thousands)
Reconciliation of Net Cash
Provided by Operating Activities to Free Cash Flow
Three Months Ended
March 31,
2020
2019
Net cash provided by operating
activities
$
19,719
$
42,076
Expenditures for property, plant and
equipment
(34,100)
(39,512)
Free cash flow (1)
$
(14,381)
$
2,564
(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
March 31,
2020
2019
Net income
$
8,576
$
20,174
Interest expense, net
1,959
1,107
Income taxes
3,664
6,824
Depreciation and amortization
14,432
13,915
EBITDA (2)
$
28,631
$
42,020
Sales
$
302,713
$
314,895
EBITDA margin (3)
9.5%
13.3%
(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 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 (4)
1Q
2Q
3Q
4Q
FY
2017
—
~$10
~$4
~$20
~$34
2018
~$2
~$10
~$30
—
~$42
2019
—
~$5
~$5
~$25
~$35
2020E
~$2
$5-$10
~$20
~$3
$30-$35
(4) Primarily reflects the impact of fixed cost absorption,
maintenance expense, and the purchase of feedstocks which are
normally manufactured by the Company. 2020E also reflects the
planned shift of a majority of the work scheduled for the
previously announced 2Q20 planned plant turnaround into 3Q20.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200501005235/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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