AdvanSix Inc.
11/07/2025 | Press release | Distributed by Public on 11/07/2025 15:08
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of operations, of AdvanSix Inc. ("AdvanSix," the "Company," "we" or "our"), which we refer to as our "MD&A," should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto contained in this Quarterly Report on Form 10-Q (this "Form 10-Q"), as well as the MD&A section included in our Annual Report on Form 10-K for the year ended December 31, 2024 ("2024 Form 10-K"). Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors that can affect our performance in both the near- and long-term, including those incorporated by reference in Item 1A of Part II of this Form 10-Q as such factors may be revised or supplemented in subsequent filings with the SEC, as well as those discussed in the section entitled "Note Regarding Forward-Looking Statements" below.
Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this MD&A regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements within the meaning of Section 21E of the Exchange Act. When used in this Form 10-Q, words such as "expect," "anticipate," "estimate," "outlook," "project," "strategy," "intend," "plan," "target," "goal," "may," "will," "should," and "believe," and other variations or similar terminology and expressions identify 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, 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; the potential effects of inflationary pressures, tariffs or the imposition of new tariffs, trade wars, barriers or restrictions, or threats of such actions, changes in interest rates, labor market shortages and supply chain issues; instability or volatility in financial markets or other unfavorable economic or business conditions caused by geopolitical concerns, including as a result of new or proposed legislation or regulatory, trade or other policies in or impacting the U.S., the U.S. government shutdown, the conflict between Russia and Ukraine, the conflicts in Israel, Gaza and Iran, and related instability in the surrounding region, and the uncertain outcomes of such conflicts; the effect of any of the foregoing 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; the ability of our customers to pay for our products; any closures of our and our customers' offices and facilities; risks associated with increased phishing, compromised business emails and other cybersecurity attacks, data privacy incidents and disruptions to our technology infrastructure; risks associated with operating with a reduced workforce; risks associated with our indebtedness including compliance with financial and restrictive covenants, and our ability to access capital on reasonable terms, at a reasonable cost, or at all, due to economic conditions 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, pandemics, geopolitical conflicts and related events; price fluctuations, cost increases 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; failure to maintain effective internal controls; our ability to declare and pay quarterly cash dividends and the amounts and timing of any future dividends; our ability to repurchase our common stock and the amount and timing of any future repurchases; disruptions in supply chain, transportation and logistics; potential for uncertainty regarding qualification for tax treatment of our spin-off; fluctuations in our stock price; and changes in laws or regulations applicable to our business. Forward-looking statements are not guarantees of future performance and actual results could differ materially from those contemplated by the forward-looking statements as a result of a number of risks, uncertainties and other factors including those noted above and those detailed in Item 1A of Part I and elsewhere in our 2024 Form 10-K, and subsequent reports filed with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph. We do not undertake to update or revise any of our forward-looking statements.
Business Overview
AdvanSix is a diversified chemistry company that produces essential materials for our customers in a wide variety of end markets and applications that touch people's lives. Our integrated value chain of our five U.S.-based manufacturing facilities plays a critical role in global supply chains and enables us to innovate and deliver essential products for our customers across
building and construction, fertilizers, agrochemicals, plastics, solvents, packaging, paints, coatings, adhesives, electronics and other end markets. Guided by our core values of Safety, Integrity, Accountability and Respect, AdvanSix strives to deliver best-in-class customer experiences and differentiated products in the industries of nylon solutions, plant nutrients, and chemical intermediates. Our key product lines are as follows:
•Nylon Solutions
◦Nylon - We sell our Nylon 6 resin globally, primarily under the Aegis® brand name. 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. 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. Our Hopewell, VA manufacturing facility is one of the world's largest single-site producers of caprolactam as of September 30, 2025.
•Plant Nutrients -Our ammonium sulfate is used by customers as a fertilizer containing nitrogen and sulfur, two key plant nutrients. Ammonium sulfate fertilizer is derived from the integrated operations at the Hopewell manufacturing facility. 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 September 30, 2025. We market and sell ammonium sulfate primarily to North American and South American distributors, farm cooperatives and retailers to fertilize crops. We also manufacture sulfuric acid, ammonia and carbon dioxide as part of our integrated operations at Hopewell and occasionally sell any excess material not consumed internally to customers externally.
•Chemical Intermediates -We 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 which is used by our customers in the production of solvents, paints, coatings, adhesives, resins and herbicides. Other intermediate chemicals that we manufacture, market and sell include phenol, alpha-methylstyrene, cyclohexanone, oximes, cyclohexanol, and alkyl and specialty amines. Additional end-products for intermediates include automotive components, and water treatment and pharmaceutical intermediates.
Global demand for Nylon 6 resin spans a variety of end-uses such as textiles, engineered plastics, industrial filament, food and industrial films, and carpet. The market growth typically tracks global GDP growth over the long-term but varies by end-use. 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 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. 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.
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. 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. 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.
Our ammonium sulfate fertilizer experiences quarterly sales seasonality reflecting both geographical and product sales mix considerations based on the timing and length of the growing seasons in North and South America. The North American fertilizer season typically runs from July, when the value chain begins restocking fertilizer, through June of the following year, when most application for the year's planting is completed. The new season fill begins in the third quarter and proceeds sequentially into the following spring, which is the peak period for crop fertilizer application. As a result of this pattern, North American ammonium sulfate demand and pricing, particularly for our higher-value granular product, are typically strongest in
the first half of the year through application for the spring crop and then decline in the second half of the year. Ammonium sulfate industry prices in the corn belt have declined approximately 12% from the second quarter to the third quarter, on average, since 2016. Due to the ammonium sulfate fertilizer sales cycle, we occasionally build up higher inventory balances because our production is continuous throughout the year and not tied to seasonal demand for fertilizers. Sales of most of our other products have generally been subject to minimal, or no, seasonality.
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. 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.
We seek to run our production facilities on a nearly continuous basis for maximum efficiency as several of our intermediate products are key feedstock materials for other products in our integrated manufacturing 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. Further, although we believe that our sources of supply for our raw materials, including cumene, natural gas and sulfur, are generally robust, it is difficult to predict the impact that shortages, increased costs and related supply chain logistics considerations may have in the future. In order to mitigate the risk of unplanned interruptions, we schedule planned plant turnarounds each year to conduct routine and major maintenance across our facilities. 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.
Recent Developments
Amendment to Credit Agreement
On October 23, 2025, the Company entered into Amendment No. 2 (the "Amendment") to the Credit Agreement (as defined below). See "Liquidity and Capital Resources - Credit Agreement" for a discussion regarding the Amendment.
Anti-Dumping Duty Petition - Acetone
On November 4, 2024, the U.S. Department of Commerce ("Commerce") initiated the first five-year review of the anti-dumping orders on imports of acetone from Belgium, Singapore, South Africa, South Korea, and Spain. On November 1, 2024, the U.S. International Trade Commission ("ITC") issued its notice of initiation of its five-year review of the orders. The anti-dumping orders and applicable duties will continue for another five-year period if Commerce finds that revocation of the orders is likely to lead to continuation or recurrence of dumping and if the ITC finds that revocation is likely to lead to continuation or recurrence of material injury to the U.S. domestic industry. On December 26, 2024, Commerce notified the ITC that it would conduct an expedited review and issue its results no later than March 4, 2025. On February 4, 2025, the ITC voted to conduct a full review and is expected to issue its results in the fourth quarter of 2025. On March 7, 2025, Commerce determined that revocation of the anti-dumping orders would likely lead to continuation of recurrence of dumping. The anti-dumping duties will continue to apply during the ITC's pending review.
Philadelphia Energy Solutions' Shut Down
The Company previously reported a business impact associated with the June 2019 fire that shut down the Philadelphia Energy Solutions ("PES") refinery in Philadelphia, Pennsylvania. PES was one of multiple suppliers to the Company of cumene, a feedstock material used to produce phenol, acetone and other chemical intermediates. The Company has been actively pursuing the claim over several years, with a final omnibus settlement in January 2025 which resulted in insurance settlement proceeds of approximately $26 million in the first quarter of 2025. The total aggregate insurance proceeds since the original claim submission are approximately $39 million.
Results of Operations
(Dollars in thousands, unless otherwise noted)
Sales
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Sales | $ | 374,473 | $ | 398,187 | $ | 1,162,286 | $ | 1,188,495 | |||||||||||||||
| % change compared with prior year period | (6.0)% | (2.2)% | |||||||||||||||||||||
The change in sales compared to the prior year period is attributable to the following:
|
Three Months Ended September 30, 2025 |
Nine Months Ended September 30, 2025 |
||||||||||
| Volume | (3.2)% | (1.9)% | |||||||||
| Price | (2.8)% | (0.3)% | |||||||||
| (6.0)% | (2.2)% | ||||||||||
Sales decreased in the three months ended September 30, 2025 compared to the prior year period by $23.7 million (approximately 6%) due to (i) lower raw material pass through pricing (approximately 5%) following a net cost decrease in benzene and propylene (inputs to cumene which is a key feedstock to our products) and (ii) decreased volume (approximately 3%) primarily driven by softer demand in chemical intermediate and nylon end markets, partially offset by favorable market-based pricing (approximately 2%) driven by continued strength in Plant Nutrients reflecting favorable North American ammonium sulfate supply and demand conditions.
Sales decreased in the nine months ended September 30, 2025 compared to the prior year period by $26.2 million (approximately 2%) due to decreased volume (approximately 2%) driven by softer demand in nylon end markets partially offset by higher granular ammonium sulfate sales supported by our SUSTAIN (Sustainable U.S. Sulfate to Accelerate Increased Nutrition) program. Pricing was flat, primarily reflecting favorable market-based pricing across our Plant Nutrients and Nylon Solutions product lines offset by lower raw material pass through pricing following a net cost decrease in benzene and propylene.
Costs of Goods Sold
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Costs of goods sold | $ | 349,088 | $ | 340,885 | $ | 1,024,716 | $ | 1,046,860 | |||||||||||||||
| % change compared with prior year period | 2.4% | (2.1)% | |||||||||||||||||||||
| Gross Margin percentage | 6.8% | 14.4% | 11.8% | 11.9% | |||||||||||||||||||
Costs of goods sold increased in the three months ended September 30, 2025 compared to the prior year period by $8.2 million (approximately 2%) due to (i) increased plant costs (approximately 2%) driven primarily by utility costs and (ii) increased raw material costs (approximately 1%) driven by sulfur and natural gas.
Costs of goods sold decreased in the nine months ended September 30, 2025 compared to the prior year period by $22.1 million (approximately 2%) due to (i) insurance proceeds collected as a result of the PES supplier shutdown (approximately 3%),and (ii) decreased sales volume (approximately 3%), partially offset by (i) increased raw material costs (approximately 2%) driven by sulfur and natural gas and (ii) increased plant costs driven primarily by utility costs (approximately 1%).
Gross margin percentage decreased in the three months ended September 30, 2025 compared to the prior year period (approximately 8%) due primarily to (i) the impact of pricing, net of raw material costs (approximately 3%), (ii) increased plant costs driven primarily by utility costs (approximately 2%), and (iii) lower sales volumes as discussed above (approximately 2%).
Gross margin percentage was approximately flat in the nine months ended September 30, 2025 compared to the prior year period due to insurance proceeds collected as a result of the PES supplier shutdown (approximately 2%), offset by the impact of pricing, net of raw material costs (approximately 2%).
Selling, General and Administrative Expenses
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Selling, general and administrative expenses | $ | 27,425 | $ | 24,265 | $ | 76,250 | $ | 72,290 | |||||||||||||||
| Percentage of Sales | 7.3% | 6.1% | 6.6% | 6.1% | |||||||||||||||||||
Selling, general and administrative expenses increased by $3.2 million in the three months ended September 30, 2025 compared to the prior year period due primarily to legal and professional fees associated with strategic regulatory matters and potential inorganic growth options, and the planned investment to upgrade our enterprise resource planning system.
Selling, general and administrative expenses increased by $4.0 million in the nine months ended September 30, 2025 compared to the prior period due primarily to legal and professional fees associated with strategic regulatory matters and potential inorganic growth options, and the planned investment to upgrade our enterprise resource planning system.
Income Tax Expense (Benefit)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Income tax expense (benefit) | $ | (909) | $ | 7,479 | $ | 4,955 | $ | 14,603 | |||||||||||||||
| Effective tax rate | 25.6% | 25.1% | 8.7% | 25.0% | |||||||||||||||||||
The Company's provision (benefit) for income taxes in interim periods is computed by applying an estimated annual effective tax rate against Income (loss) before taxes for the period in addition to recording any tax effects of discrete items for the quarter. The Company's effective tax rate for the three and nine months ended September 30, 2025 and 2024 differed from the U.S. federal statutory rate due to state taxes and executive compensation deduction limitations which generally increase the rate, offset by research tax credits and the foreign-derived intangible income deduction that generally decrease the rate. During the nine months ended September 30, 2025, discrete tax adjustments recorded relating to Internal Revenue Code (IRC) Section 45Q tax credits of $9.7 million and return to provision adjustments related to the filing of the Company's 2024 U.S. federal income tax return of $0.2 million, offset slightly by state tax legislation changes and the vesting of equity compensation, resulted in a net 5% increase and 17% decrease in the estimated annual effective tax rate for the three and nine months ended September 30, 2025, respectively. In 2024, the Company recorded discrete tax adjustments related to the vesting of equity compensation, changes to state tax legislation, and return to provision adjustments related to the filing of the Company's 2023 U.S. federal income tax return which resulted in a net 3.3% and 1.5% increase to the estimated annual effective tax rate for the three and nine months ended September 30, 2024, respectively.
The Company's effective tax rate for the three months ended September 30, 2025 was marginally higher than the prior year period. The increase was mainly attributed to the effect of return-to-provision adjustments on the tax rate during the three months ended September 30, 2025, relative to the prior year period, partially offset by a reduction in state taxes during the three months ended September 30, 2025 relative to the prior year period.
The Company's effective tax rate for the nine months ended September 30, 2025 was lower than the prior year period due primarily to the impact of the IRC Section 45Q tax credits recorded in the current year-to-date period compared to the prior year-to-date period.
On July 4, 2025, President Trump signed into law legislation commonly referred to as the One Big Beautiful Bill Act (the "Act"), which includes numerous tax provisions affecting businesses, including the reinstatement of full expensing of domestic research and experimental expenditures, modification of the limitation on business interest and making permanent full expensing for certain business property. These provisions resulted in an approximate $10 million reduction in cash taxes in our financial results for the three and nine months ended September 30, 2025 and we anticipate that it will also reduce our cash taxes in future periods. However, due to the elective applicability of these provisions, we are still evaluating the full impact and timing that these provisions will have on our financial results. We do not currently anticipate that the Act will have a material impact on our effective tax rate.
Net Income
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income (loss) | $ | (2,638) | $ | 22,266 | $ | 52,077 | $ | 43,797 | |||||||||||||||
As a result of the factors described above, Net income (loss) was ($2.6) million and $52.1 million for the three and nine months ended September 30, 2025, respectively, as compared to $22.3 million and $43.8 million in the corresponding prior year period.
Non-GAAP Measures
(Dollars in thousands, unless otherwise noted)
The following tables set forth the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net income and Adjusted EPS. 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 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 management believes do not reflect the Company's ongoing operations.
These non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with U.S. GAAP. Non-GAAP financial measures should be read only in conjunction with the comparable U.S. GAAP financial measures. The Company's non-GAAP measures may not be comparable to other companies' non-GAAP measures.
The following is a reconciliation between the non-GAAP financial measures of Adjusted Net income, Adjusted EBITDA and Adjusted EBITDA Margin to their most directly comparable U.S. GAAP financial measure:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income (loss) | $ | (2,638) | $ | 22,266 | $ | 52,077 | $ | 43,797 | |||||||||||||||
| Non-cash stock-based compensation | 1,632 | 1,559 | 5,919 | 5,963 | |||||||||||||||||||
| Non-recurring, unusual or extraordinary expense* | - | - | - | 1,200 | |||||||||||||||||||
| Non-cash amortization from acquisitions | 532 | 531 | 1,595 | 1,595 | |||||||||||||||||||
| Strategic advisory and professional fees** | 4,000 | - | 4,000 | - | |||||||||||||||||||
| Income tax benefit relating to reconciling items | (1,378) | (367) | (2,287) | (1,594) | |||||||||||||||||||
| Adjusted Net income (non-GAAP) | 2,148 | 23,989 | 61,304 | 50,961 | |||||||||||||||||||
| Interest expense, net | 2,322 | 2,924 | 6,119 | 9,137 | |||||||||||||||||||
| Income tax expense - Adjusted | 469 | 7,846 | 7,242 | 16,197 | |||||||||||||||||||
| Depreciation and amortization - Adjusted | 19,795 | 18,402 | 57,371 | 55,602 | |||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 24,734 | $ | 53,161 | 132,036 | 131,897 | |||||||||||||||||
| Sales | $ | 374,473 | $ | 398,187 | $ | 1,162,286 | $ | 1,188,495 | |||||||||||||||
| Adjusted EBITDA Margin*** (non-GAAP) | 6.6% | 13.4% | 11.4% | 11.1% | |||||||||||||||||||
* 2024 includes a pre-tax loss of approximately $1.2 million from the reduction of the Company's anticipated receivable related to the gain on the termination fee recorded upon the exit from the Oben Holding Group S.A. alliance during the third quarter of 2023.
** Legal and professional fees associated with strategic regulatory matters and potential inorganic growth options.
*** Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Sales.
The following is a reconciliation between the non-GAAP financial measures of Adjusted EPS to its most directly comparable U.S. GAAP financial measure:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Net income (loss) | $ | (2,638) | $ | 22,266 | $ | 52,077 | $ | 43,797 | |||||||||||||||
| Adjusted Net income (non-GAAP) | 2,148 | 23,989 | 61,304 | 50,961 | |||||||||||||||||||
| Weighted-average number of common shares outstanding - basic | 26,927,305 | 26,790,752 | 26,887,489 | 26,836,114 | |||||||||||||||||||
| Dilutive effect of equity awards and other stock-based holdings | - | 413,962 | 361,270 | 373,566 | |||||||||||||||||||
| Weighted-average number of common shares outstanding - diluted | 26,927,305 | 27,204,714 | 27,248,759 | 27,209,680 | |||||||||||||||||||
| EPS - Basic | $ | (0.10) | $ | 0.83 | $ | 1.94 | $ | 1.63 | |||||||||||||||
| EPS - Diluted | $ | (0.10) | $ | 0.82 | $ | 1.91 | $ | 1.61 | |||||||||||||||
| Adjusted EPS - Basic (non-GAAP) | $ | 0.08 | $ | 0.90 | $ | 2.28 | $ | 1.90 | |||||||||||||||
| Adjusted EPS - Diluted (non-GAAP) | $ | 0.08 | $ | 0.88 | $ | 2.25 | $ | 1.87 | |||||||||||||||
Liquidity and Capital Resources
(Dollars in thousands, unless otherwise noted)
Liquidity
We believe that cash balances and operating cash flows, together with available capacity under our credit agreement, as utilized in the third quarter of 2025, 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, in our "Note Regarding Forward-Looking Statements" above, and in the risk factors previously disclosed in Item 1A of Part I of our 2024 Form 10-K. 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 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. 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 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. 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. 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, 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 and comply with health, safety and environmental ("HSE") regulations. We believe that our future cash from operations, cash on hand and available capacity under our credit agreement, as well as our access to credit and capital markets, will provide adequate resources to fund our expected operating and financing needs and obligations. 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 of Part I of our 2024 Form 10-K, as well as general economic, financial, competitive, regulatory and other factors that are beyond our control.
As of the end of the third quarter of 2025, the Company had approximately $23.7 million of cash on hand with approximately $249 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. Capital expenditures are expected to
be approximately $120 million to $125 million in 2025 compared to $134 million in 2024, reflecting the planned progression of our SUSTAIN growth program, and refined execution timing to address critical enterprise risk mitigation.
We assumed from Honeywell International Inc. ("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 the three 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. Honeywell retained all HSE liabilities related to former business locations or the operation of our former businesses. 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 or results of operations.
We expect that our primary cash requirements for 2025 will be to fund costs associated with ongoing operations, capital expenditures, and amounts related to other contractual obligations.
The Company made no cash contributions to the defined benefit pension plan during the nine months ended September 30, 2025 as there were no funding requirements for the period. Additional contributions may be made in future periods sufficient to satisfy pension funding requirements in those periods or on a discretionary basis.
As of September 30, 2025, the Company has repurchased a total of 6,313,789 shares of common stock life-to-date, including 1,068,333 shares withheld to cover tax withholding obligations in connection with the vesting of awards, for an aggregate of $194.1 million at a weighted average market price of $30.74 per share. As of September 30, 2025, approximately $62.0 million remained available for share repurchases under the current authorization approved by the Board on February 17, 2023. During the period October 1, 2025 through October 31, 2025, no additional shares were repurchased for tax withholding obligations or under the currently authorized repurchase program.
Repurchases may be made from time to time on the open market in accordance with Rule 10b-18 of the Exchange Act, including through the use of trading plans intended to qualify under Rule 10b5-1 of the Exchange Act. The size and timing of these repurchases will depend on pricing, market and economic conditions, legal and contractual requirements and other factors. The share repurchase program has no expiration date and may be modified, suspended or discontinued at any time. The par value of the shares repurchased is applied to Treasury stock and the excess of the purchase price over par value is applied to Additional paid-in capital.
As of September 30, 2025, the Company did not have any off-balance sheet arrangements as described in Instruction 8 to Item 303(b) of Regulation S-K and did not have any material changes in the commitments or contractual obligations detailed in the 2024 Form 10-K (see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" under "Liquidity and Capital Resources - Liquidity"). The Company has not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
Dividends
The Company commenced the declaration of dividends on September 28, 2021.
Dividends paid during 2025 and the dividend announced on the date of this filing are as follows:
| Date of Announcement | Date of Record | Date Payable | Dividend per Share | Total Approximate Dividend Amount ($M) | ||||||||||||||||||||||
| 11/7/2025 | 11/18/2025 | 12/2/2025 | $0.16 | $4.3 | ||||||||||||||||||||||
| 8/1/2025 | 8/12/2025 | 8/26/2025 | $0.16 | $4.3 | ||||||||||||||||||||||
| 5/2/2025 | 5/13/2025 | 5/27/2025 | $0.16 | $4.3 | ||||||||||||||||||||||
| 2/21/2025 | 3/10/2025 | 3/24/2025 | $0.16 | $4.3 | ||||||||||||||||||||||
The timing, declaration, amount and payment of future dividends to stockholders, if any, will fall within the discretion of our Board. 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.
Credit Agreement
On October 27, 2021, the Company entered into a Credit Agreement, as amended on June 27, 2023 (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").
Borrowings under the Revolving Credit Facility are subject to customary borrowing conditions.
The Revolving Credit Facility provided for a scheduled maturity date of October 27, 2026. The Credit Agreement permits the Company to utilize up to $40 million of the Revolving Credit Facility for the issuance of letters of credit and up to $40 million for swing line loans. The Company has the option to establish a new class of term loans and/or increase the amount of the Revolving Credit Facility in an aggregate principal amount for all such incremental term loans and increases of the Revolving Credit Facility of up to the sum of (x) $175 million plus (y) an amount such that the Company's Consolidated First Lien Secured Leverage Ratio (as defined in the Credit Agreement) would not be greater than 2.75 to 1.00, in each case, to the extent that any one or more lenders, whether or not currently party to the Credit Agreement, commits to be a lender for such amount or any portion thereof.
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). The Company is also required to pay a commitment fee in respect of unused commitments under the Revolving Credit Facility, if any, at a rate ranging from 0.15% to 0.35% per annum depending on the Company's Consolidated Leverage Ratio.
Substantially all tangible and intangible assets of the Company and its domestic subsidiaries are pledged as collateral to secure the Company's obligations under the Credit Agreement.
The Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, pay cash dividends, incur debt or liens, redeem or repurchase stock of the Company, enter into transactions with affiliates, make investments, make capital expenditures, merge or consolidate with others or dispose of assets. The Credit Agreement also contains financial covenants that require the Company to maintain a Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 3.00 to 1.00 and to maintain a Consolidated Leverage Ratio of (ii) 3.75 to 1.00 or less (subject to the Company's option to elect a consolidated leverage ratio increase in connection with certain acquisitions). If the Company does not comply with the covenants in the Credit Agreement, the lenders may, subject to customary cure rights, require the immediate payment of all amounts outstanding under the Revolving Credit Facility. We were in compliance with all of our covenants at September 30, 2025 and through the date of the filing of this Form 10-Q.
We had a borrowed balance of $195 million under the Revolving Credit Facility at December 31, 2024. We borrowed an incremental net amount of $55 million during the nine months ended September 30, 2025, bringing the balance under the Revolving Credit Facility to $250 million, and available credit for use of approximately $249 million as of September 30, 2025. We expect that Cash provided by operating activities will fund future interest payments on the Company's outstanding indebtedness.
On October 23, 2025, the Company entered into Amendment No. 2 (the "Amendment") to the Credit Agreement, (as further amended by the Amendment, the "Amended Credit Agreement"), among the Company, the guarantors, the lenders party thereto and Truist Bank, as administrative agent.
The Credit Agreement includes a senior secured revolving credit facility with aggregate commitments of $500 million (the "Revolving Credit Commitments"). Pursuant to the Amendment, the Credit Agreement was amended to, among other things: (i) extend the maturity date of revolving credit commitments of participating Revolving Credit Lenders, as defined in the Amended Credit Agreement, in an aggregate principal amount of $452 million to the earlier of (x) October 27, 2027 and (y) the date of the termination in whole of the Revolving Credit Commitments, pursuant to the terms of the Amended Credit Agreement, and (ii) effect certain other conforming changes and modifications consistent with the foregoing. The remaining $48 million of revolving credit commitments under the Credit Agreement that were not extended will continue to mature on the earlier of (x) October 27, 2026 and (y) the date of the termination in whole of the Revolving Credit Commitments, pursuant to the terms of the Amended Credit Agreement.
Cash Flow Summary
|
Nine Months Ended September 30, |
|||||||||||
| 2025 | 2024 | ||||||||||
| Cash provided by (used for): | |||||||||||
| Operating activities | $ | 59,141 | $ | 71,248 | |||||||
| Investing activities | (95,002) | (105,426) | |||||||||
| Financing activities | 39,993 | 21,708 | |||||||||
| Net change in cash and cash equivalents | $ | 4,132 | $ | (12,470) | |||||||
Cash provided by operating activities decreased by $12.1 million for the nine months ended September 30, 2025 versus the prior year period due primarily to (i) the unfavorable cash impact of $17.7 million from Taxes receivable and Income taxes payable combined, driven by the timing of tax receipts and (ii) a $11.6 million unfavorable cash impact from working capital (comprised of Accounts and other receivables, Inventories, Accounts payable and Deferred income and customer advances) with $56.0 million unfavorable cash impact from working capital for the nine months ended September 30, 2025 compared to a $44.4 million unfavorable cash impact in the prior year period. These net unfavorable impacts were partially offset by (i) a favorable impact of $10.8 million from Deferred income taxes and (ii) an $8.3 million increase in Net income.
Cash used for investing activities decreased by $10.4 million for the nine months ended September 30, 2025 versus the prior year period due primarily to the timing of cash payments for capital expenditures and other enterprise programs.
Cash provided by financing activities increased by $18.3 million for the nine months ended September 30, 2025 versus the prior year period due primarily to (i) net borrowings of $55.0 million during the nine months ended September 30, 2025 compared to net borrowings of $45.0 million during the prior year period and (ii) payments for share repurchases of $1.7 million during the nine months ended September 30, 2025 compared to $10.4 million during the prior year period.
Capital Expenditures
(Dollars in thousands, unless otherwise noted)
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 output, further improve mix, yield and cost position, and comply with environmental and safety regulations.
The following table summarizes ongoing and expansion capital expenditures:
|
Nine Months Ended September 30, 2025 |
|||||
|
Capital expenditures in Accounts payable at December 31, 2024
|
$ | 23,645 | |||
| Purchases of property, plant and equipment | 80,098 | ||||
|
Less: Capital expenditures in Accounts payable at September 30, 2025
|
(14,894) | ||||
| Cash paid for capital expenditures | $ | 88,849 | |||
For 2025, we expect our total capital expenditures to be approximately $120 million to $125 million as discussed above.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements in accordance with U.S. GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions about the effects of matters that are inherently uncertain. We consider these accounting policies to be critical to the understanding of our Condensed Consolidated Financial Statements. For a full description of our critical accounting policies, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2024 Form 10-K. While there have been no material changes to our critical accounting policies, or the methodologies or assumptions we apply under them since the filing of the 2024 Form 10-K, we continue to monitor such methodologies and assumptions.
Recent Accounting Pronouncements
See "Note 2. Recent Accounting Pronouncements" to the Condensed Consolidated Financial Statements included in Part I. Item 1 of this Form 10-Q.
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