Ascent Industries Reports Third Quarter 2023 Results

Ascent Industries Co. (Nasdaq: ACNT) (“Ascent” or the “Company”), an industrials company focused on the production and distribution of industrial tubular products and specialty chemicals, is reporting its results for the third quarter ended September 30, 2023.

Third Quarter 2023 Summary – Continuing Operations1

(in millions, expect per share and margin)

Q3 2023

Q3 2022

Change

Net Sales

$56.1

$78.2

-28.3%

Gross Profit

$6.0

$14.1

-57.3%

Gross Profit Margin

10.7%

18.0%

-730bps

Net Income (Loss)

$(12.8)

$3.1

-511.2%

Diluted Earnings (Loss) per Share

$(1.26)

$0.30

-520.0%

Adjusted EBITDA

$0.9

$8.2

-88.5%

Adjusted EBITDA Margin

1.7%

10.5%

-880bps

__________________________

1 On June 2, 2023, the Board of Directors of Ascent made the decision to permanently cease operations at the Company’s welded pipe and tube facility located in Munhall, PA (“Munhall”) effective on August 31, 2023. As a result, financial results from Munhall have been categorized into discontinued operations.

Management Commentary

“After a challenging first half of the year, we were pleased to begin seeing signs of improvement within our operations during the third quarter,” said Chris Hutter, president and CEO of Ascent. “Challenging macro-economic volatility continues to play a factor in overall end market demand, which impacted sales volumes in both our segments during the quarter. Despite this, our sales teams remained diligent in their efforts to uncover demand, and we believe we are building a healthier backlog across the board. We were also proud to appoint Bryan Kitchen as the new president of Ascent Chemicals. In the few weeks that Bryan has been onboard, he has already made significant contributions to our chemicals segment, and we look forward to the success we believe he will bring.

“While there is still much work to be done to return to acceptable levels of profitability, we do believe that we have turned the corner operationally and are continuing to make progress stabilizing the business. We remain determined to hit our long-term strategic goals and believe the operational moves we made in 2023 were necessary to achieve those goals. Although broader economic uncertainty continues to hamper sales volumes in both our segments, we believe that we have the right leadership in place to capitalize on our market position heading into 2024.”

Third Quarter 2023 Financial Results

Net sales from continuing operations were $56.1 million compared to $78.2 million in the prior year period. The decrease is primarily due to continued lower overall sales volumes and lower average selling prices within both the tubular products and specialty chemicals segments.

Gross profit from continuing operations was $6.0 million, or 10.7% of net sales, compared to $14.1 million, or 18.0% of net sales, in the third quarter of 2022. The decrease is primarily attributable to the decline in net sales in addition to lower product margin.

Net loss from continuing operations was $12.8 million, or $(1.26) diluted loss per share, compared to net income from continuing operations of $3.1 million, or $0.30 diluted earnings per share, in the third quarter of 2022. The decrease is primarily attributable to the $11.4 million goodwill impairment within the specialty chemicals segment, along with the aforementioned decline in gross profit.

Adjusted EBITDA was $0.9 million compared to $8.2 million in the third quarter of 2022. Adjusted EBITDA margin was 1.7% compared to 10.5% in the prior year period. The decrease is primarily attributable to the Company’s aforementioned decline in net sales.

Segment Results

Ascent Tubularnet sales from continuing operations in the third quarter of 2023 were $36.1 million compared to $50.6 million in the third quarter of 2022. Operating income from continuing operations in the third quarter was $1.7 million compared to operating income from continuing operations of $7.6 million in the prior year period. Adjusted EBITDA from continuing operations in the third quarter was $2.6 million compared to $8.9 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was 7.3% compared to 17.6% in the third quarter of 2022.

Ascent Chemicalsnet sales in the third quarter of 2023 were $20.1 million compared to $27.3 million in the third quarter of 2022. Operating loss in the third quarter was $(11.5) million compared to operating income of $1.1 million in the prior year period. Adjusted EBITDA in the third quarter was $1.0 million compared to $2.7 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was 5.2% compared to 10.0% in the third quarter of 2022.

Liquidity

As of September 30, 2023, total debt was $53.0 million under the Company’s revolving credit facility, compared to $71.5 million in debt at December 31, 2022. As of September 30, 2023, the Company had $41.8 million of remaining available borrowing capacity under its revolving credit facility, compared to $37.6 million at December 31, 2022.

During the third quarter of 2023, the Company repurchased 44,799 shares at an average cost of $8.87 per share for approximately $0.4 million, bringing total year-to-date repurchases for 2023 to 95,955 shares. The Company currently has 584,024 shares remaining under its share repurchase authorization.

Conference Call

Ascent will conduct a conference call today at 5:00 p.m. Eastern time to discuss its results for the third quarter ended September 30, 2023.

Ascent management will host the conference call, followed by a question and answer period.

Date: Wednesday, November 8, 2023

Time: 5:00 p.m. Eastern time

Live Call Registration Link: Here

Webcast Registration Link: Here

Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Group at 1-949-574-3860.

The conference call will also be broadcast live and available for replay here. The webcast will be archived for one year in the investor relations section of the Company’s website at www.ascentco.com.

About Ascent Industries Co.

Ascent Industries Co. (Nasdaq: ACNT) is a company that engages in a number of diverse business activities including the production of stainless steel, the master distribution of seamless carbon pipe and tube, and the production of specialty chemicals. For more information about Ascent, please visit its web site at www.ascentco.com.

Forward-Looking Statements

This press release may include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other applicable federal securities laws. All statements that are not historical facts are forward-looking statements. Forward looking statements can be identified through the use of words such as "estimate," "project," "intend," "expect," "believe," "should," "anticipate," "hope," "optimistic," "plan," "outlook," "should," "could," "may" and similar expressions. The forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from historical results or those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements and to review the risks as set forth in more detail in Ascent Industries Co.’s Securities and Exchange Commission filings, including our Annual Report on Form 10-K, which filings are available from the SEC or on our website. Ascent Industries Co. assumes no obligation to update any forward-looking information included in this release.

Non-GAAP Financial Information

Financial statement information included in this earnings release includes non-GAAP (Generally Accepted Accounting Principles) measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures.

Adjusted EBITDA is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results to determine the value of a company. An item is excluded in the measure if its periodic value is inconsistent and sufficiently material that not identifying the item would render period comparability less meaningful to the reader or if including the item provides a clearer representation of normalized periodic earnings. The Company excludes in Adjusted EBITDA two categories of items: 1) Base EBITDA components, including: interest expense (including change in fair value of interest rate swap), income taxes, depreciation and amortization, and 2) Material transaction costs including: goodwill impairment, asset impairment, gain on lease modification, stock-based compensation, non-cash lease cost, acquisition costs and other fees, proxy contest costs and recoveries, shelf registration costs, loss on extinguishment of debt, earn-out adjustments, realized and unrealized (gains) and losses on investments in equity securities and other investments, retention costs and restructuring & severance costs from net income.

Management believes that these non-GAAP measures are useful because they are key measures used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions as well as allow readers to compare the financial results between periods. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

Ascent Industries Co.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)

 

 

 

 

 

(Unaudited)

 

 

 

September 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

730

 

 

$

1,440

 

Accounts receivable, net of allowance for credit losses of $1,105 and $762, respectively

 

32,910

 

 

 

37,062

 

Inventories

 

83,044

 

 

 

85,572

 

Prepaid expenses and other current assets

 

8,775

 

 

 

7,802

 

Assets held for sale

 

8,956

 

 

 

380

 

Current assets of discontinued operations

 

620

 

 

 

38,120

 

Total current assets

 

135,035

 

 

 

170,376

 

Property, plant and equipment, net

 

31,981

 

 

 

37,045

 

Right-of-use assets, operating leases, net

 

28,170

 

 

 

29,198

 

Goodwill

 

 

 

 

11,389

 

Intangible assets, net

 

8,872

 

 

 

10,001

 

Deferred income taxes

 

9,217

 

 

 

1,353

 

Deferred charges, net

 

128

 

 

 

203

 

Other non-current assets, net

 

1,782

 

 

 

1,861

 

Long-term assets of discontinued operations

 

6

 

 

 

7,617

 

Total assets

$

215,191

 

 

$

269,043

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

25,758

 

 

$

19,623

 

Accrued expenses and other current liabilities

 

5,608

 

 

 

6,039

 

Current portion of note payable

 

630

 

 

 

387

 

Current portion of long-term debt

 

2,464

 

 

 

2,464

 

Current portion of operating lease liabilities

 

1,132

 

 

 

1,029

 

Current portion of finance lease liabilities

 

296

 

 

 

280

 

Current liabilities of discontinued operations

 

970

 

 

 

3,656

 

Total current liabilities

 

36,858

 

 

 

33,478

 

Long-term debt

 

50,543

 

 

 

69,085

 

Long-term portion of operating lease liabilities

 

30,051

 

 

 

30,911

 

Long-term portion of finance lease liabilities

 

1,378

 

 

 

1,242

 

Other long-term liabilities

 

59

 

 

 

68

 

Total non-current liabilities

 

82,031

 

 

 

101,306

 

Total liabilities

$

118,889

 

 

$

134,784

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,120,281 shares issued and outstanding, respectively

$

11,085

 

 

$

11,085

 

Capital in excess of par value

 

47,189

 

 

 

47,021

 

Retained earnings

 

47,379

 

 

 

85,146

 

 

 

105,653

 

 

 

143,252

 

Less: cost of common stock in treasury - 964,822 and 924,504 shares, respectively

 

(9,351

)

 

 

(8,993

)

Total shareholders' equity

 

96,302

 

 

 

134,259

 

Total liabilities and shareholders' equity

$

215,191

 

 

$

269,043

 

 

Note: The condensed consolidated balance sheets at December 31, 2022 have been derived from the audited consolidated financial statements at that date.

Ascent Industries Co.

Condensed Consolidated Statements of Income (Loss) - Comparative Analysis (Unaudited)

($ in thousands, except per share data)

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Net sales

 

 

 

 

 

 

 

Tubular Products

$

36,061

 

 

$

50,606

 

 

$

118,983

 

 

$

162,059

 

Specialty Chemicals

 

20,052

 

 

 

27,328

 

 

 

65,164

 

 

 

84,070

 

All Other

 

 

 

 

287

 

 

 

50

 

 

 

401

 

 

 

56,113

 

 

 

78,221

 

 

 

184,197

 

 

 

246,530

 

Operating income (loss) from continuing operations

 

 

 

 

 

 

Tubular Products

 

1,705

 

 

 

7,640

 

 

 

3,264

 

 

 

34,761

 

Specialty Chemicals

 

(11,481

)

 

 

1,097

 

 

 

(10,935

)

 

 

6,111

 

All Other

 

(132

)

 

 

(13

)

 

 

(684

)

 

 

(330

)

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

Unallocated corporate expenses

 

(2,859

)

 

 

(3,890

)

 

 

(9,314

)

 

 

(10,241

)

Acquisition costs and other

 

 

 

 

(149

)

 

 

(274

)

 

 

(837

)

Total Corporate

 

(2,859

)

 

 

(4,039

)

 

 

(9,588

)

 

 

(11,078

)

Operating income (loss)

 

(12,767

)

 

 

4,685

 

 

 

(17,943

)

 

 

29,464

 

Interest expense

 

1,063

 

 

 

827

 

 

 

3,217

 

 

 

1,637

 

Other, net

 

(97

)

 

 

(118

)

 

 

(344

)

 

 

(176

)

Income (loss) from continuing operations before income taxes

 

(13,733

)

 

 

3,976

 

 

 

(20,816

)

 

 

28,003

 

Income tax provision (benefit)

 

(964

)

 

 

871

 

 

 

(2,350

)

 

 

4,069

 

Income (loss) from continuing operations

 

(12,769

)

 

 

3,105

 

 

 

(18,466

)

 

 

23,934

 

Loss from discontinued operations, net of tax

 

(5,163

)

 

 

(2,481

)

 

 

(19,301

)

 

 

(1,993

)

Net income (loss)

$

(17,932

)

 

$

624

 

 

$

(37,767

)

 

$

21,941

 

 

 

 

 

 

 

 

 

Net income (loss) per common share from continuing operations

 

 

 

 

 

 

 

Basic

$

(1.26

)

 

$

0.30

 

 

$

(1.82

)

 

$

2.34

 

Diluted

$

(1.26

)

 

$

0.30

 

 

$

(1.82

)

 

$

2.30

 

 

 

 

 

 

 

 

 

Net loss per common share from discontinued operations

 

 

 

 

 

 

 

Basic

$

(0.51

)

 

$

(0.24

)

 

$

(1.90

)

 

$

(0.19

)

Diluted

$

(0.51

)

 

$

(0.24

)

 

$

(1.90

)

 

$

(0.19

)

 

 

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

 

 

Basic

$

(1.77

)

 

$

0.06

 

 

$

(3.72

)

 

$

2.14

 

Diluted

$

(1.77

)

 

$

0.06

 

 

$

(3.72

)

 

$

2.11

 

 

 

 

 

 

 

 

 

Average shares outstanding

 

 

 

 

 

 

 

Basic

 

10,135

 

 

 

10,253

 

 

 

10,151

 

 

 

10,235

 

Diluted

 

10,135

 

 

 

10,465

 

 

 

10,151

 

 

 

10,407

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

Adjusted EBITDA1

$

944

 

 

$

8,214

 

 

$

778

 

 

$

38,894

 

1 The term Adjusted EBITDA is a non-GAAP financial measure that the Company believes is useful to investors in evaluating its results to determine the value of a company. An item is excluded in the measure if its periodic value is inconsistent and sufficiently material that not identifying the item would render period comparability less meaningful to the reader or if including the item provides a clearer representation of normalized periodic earnings. The Company excludes in Adjusted EBITDA two categories of items: 1) Base EBITDA components, including: interest expense (including change in fair value of interest rate swap), income taxes, depreciation and amortization, and 2) Material transaction costs including: goodwill impairment, asset impairment, gain on lease modification, stock-based compensation, non-cash lease cost, acquisition costs and other fees, proxy contest costs and recoveries, loss on extinguishment of debt, earn-out adjustments, realized and unrealized (gains) and losses on investments in equity securities and other investments, retention costs and restructuring & severance costs from net income. For a reconciliation of this non-GAAP measure to the most comparable GAAP equivalent, refer to the Reconciliation of Net Income (Loss) to Adjusted EBITDA.

Ascent Industries Co.

Consolidated Statements of Cash Flows (Unaudited)

($ in thousands)

 

 

 

Nine Months Ended September 30,

 

2023

 

2022

Operating activities

 

 

 

Net income (loss)

$

(37,767

)

 

$

21,941

 

Loss from discontinued operations, net of tax

 

(19,301

)

 

 

(1,993

)

Net income (loss) from continuing operations

 

(18,466

)

 

 

23,934

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

Depreciation expense

 

4,833

 

 

 

4,950

 

Amortization expense

 

1,128

 

 

 

2,440

 

Amortization of debt issuance costs

 

75

 

 

 

75

 

Goodwill impairment

 

11,389

 

 

 

 

Deferred income taxes

 

(7,864

)

 

 

(1,227

)

Payments of earn-out liabilities in excess of acquisition date fair value

 

 

 

 

(372

)

Provision for losses on accounts receivable

 

2,199

 

 

 

608

 

Provision for losses on inventories

 

343

 

 

 

1,372

 

Loss on disposal of property, plant and equipment

 

182

 

 

 

31

 

Non-cash lease expense

 

205

 

 

 

322

 

Issuance of treasury stock for director fees

 

 

 

 

364

 

Stock-based compensation expense

 

718

 

 

 

951

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

3,809

 

 

 

(6,210

)

Inventories

 

526

 

 

 

(30,252

)

Other assets and liabilities

 

323

 

 

 

(515

)

Accounts payable

 

5,934

 

 

 

10,154

 

Accrued expenses

 

(430

)

 

 

(1,508

)

Accrued income taxes

 

(772

)

 

 

555

 

Net cash provided by operating activities - continuing operations

 

4,132

 

 

 

5,672

 

Net cash provided by (used in) operating activities - discontinued operations

 

17,395

 

 

 

(4,679

)

Net cash provided by operating activities

 

21,527

 

 

 

993

 

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(2,660

)

 

 

(2,875

)

Proceeds from disposal of property, plant and equipment

 

 

 

 

5

 

Net cash used in investing activities - continuing operations

 

(2,660

)

 

 

(2,870

)

Net cash used in investing activities - discontinued operations

 

(145

)

 

 

(592

)

Net cash used in investing activities

 

(2,805

)

 

 

(3,462

)

Financing activities

 

 

 

Borrowings from long-term debt

 

201,588

 

 

 

352,513

 

Proceeds from note payable

 

900

 

 

 

967

 

Proceeds from the exercise of stock options

 

 

 

 

175

 

Payments on long-term debt

 

(220,130

)

 

 

(350,311

)

Payments on note payable

 

(657

)

 

 

(387

)

Principal payments on finance lease obligations

 

(231

)

 

 

(193

)

Payments on earn-out liabilities

 

 

 

 

(484

)

Repurchase of common stock

 

(903

)

 

 

(492

)

Net cash provided by (used in) financing activities - continuing operations

 

(19,433

)

 

 

1,788

 

Net cash used in financing activities - discontinued operations

 

 

 

 

(808

)

Net cash used in financing activities

 

(19,433

)

 

 

980

 

Decrease in cash and cash equivalents

 

(711

)

 

 

(1,489

)

Less: Cash and cash equivalents of discontinued operations

 

1

 

 

 

4

 

Cash and cash equivalents, beginning of period

 

1,440

 

 

 

2,017

 

Cash and cash equivalents, end of period

$

730

 

 

$

532

 

Ascent Industries Co.

Non-GAAP Financial Measures Reconciliation

Reconciliation of Net Income (Loss) to Adjusted EBITDA (Unaudited)

($ in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

($ in thousands)

2023

 

2022

 

2023

 

2022

Consolidated

 

 

 

 

 

 

 

Net income (loss) from continuing operations

$

(12,769

)

 

$

3,105

 

 

$

(18,466

)

 

$

23,934

 

Adjustments:

 

 

 

 

 

 

 

Interest expense

 

1,063

 

 

 

827

 

 

 

3,217

 

 

 

1,637

 

Income taxes

 

(964

)

 

 

871

 

 

 

(2,350

)

 

 

4,069

 

Depreciation

 

1,590

 

 

 

1,748

 

 

 

4,833

 

 

 

4,950

 

Amortization

 

376

 

 

 

1,098

 

 

 

1,129

 

 

 

2,440

 

EBITDA

 

(10,704

)

 

 

7,649

 

 

 

(11,637

)

 

 

37,030

 

Acquisition costs and other

 

42

 

 

 

149

 

 

 

323

 

 

 

836

 

Goodwill impairment

 

11,389

 

 

 

 

 

 

11,389

 

 

 

 

Gain on lease modification

 

 

 

 

 

 

 

 

 

 

(2

)

Stock-based compensation

 

142

 

 

 

307

 

 

 

389

 

 

 

697

 

Non-cash lease expense

 

69

 

 

 

109

 

 

 

205

 

 

 

323

 

Retention expense

 

6

 

 

 

 

 

 

6

 

 

 

 

Restructuring and severance costs

 

 

 

 

 

 

 

103

 

 

 

10

 

Adjusted EBITDA

$

944

 

 

$

8,214

 

 

$

778

 

 

$

38,894

 

% sales

 

1.7

%

 

 

10.5

%

 

 

0.4

%

 

 

15.8

%

Tubular Products

 

 

 

 

 

 

 

Net income from continuing operations

$

1,705

 

 

$

7,640

 

 

$

3,265

 

 

$

34,760

 

Adjustments:

 

 

 

 

 

 

 

Depreciation expense

 

626

 

 

 

637

 

 

 

1,916

 

 

 

2,000

 

Amortization expense

 

217

 

 

 

576

 

 

 

653

 

 

 

1,728

 

EBITDA

 

2,548

 

 

 

8,853

 

 

 

5,834

 

 

 

38,488

 

Acquisition costs and other

 

42

 

 

 

 

 

 

46

 

 

 

 

Stock-based compensation

 

11

 

 

 

34

 

 

 

2

 

 

 

53

 

Non-cash lease expense

 

36

 

 

 

 

 

 

109

 

 

 

(1

)

Restructuring and severance costs

 

 

 

 

 

 

 

97

 

 

 

 

Tubular Products Adjusted EBITDA

$

2,637

 

 

$

8,887

 

 

$

6,088

 

 

$

38,540

 

% segment sales

 

7.3

%

 

 

17.6

%

 

 

5.1

%

 

 

23.8

%

 

 

 

 

 

 

 

 

Specialty Chemicals

 

 

 

 

 

 

 

Net income (loss)

$

(11,498

)

 

$

1,088

 

 

$

(10,974

)

 

$

6,083

 

Adjustments:

 

 

 

 

 

 

 

Interest expense

 

21

 

 

 

9

 

 

 

52

 

 

 

28

 

Depreciation expense

 

942

 

 

 

1,097

 

 

 

2,850

 

 

 

2,897

 

Amortization expense

 

159

 

 

 

520

 

 

 

475

 

 

 

712

 

EBITDA

 

(10,376

)

 

 

2,714

 

 

 

(7,597

)

 

 

9,720

 

Acquisition costs and other

 

 

 

 

 

 

 

2

 

 

 

 

Goodwill impairment

 

11,389

 

 

 

 

 

 

11,389

 

 

 

 

Stock-based compensation

 

3

 

 

 

12

 

 

 

(13

)

 

 

29

 

Non-cash lease expense

 

23

 

 

 

 

 

 

69

 

 

 

1

 

Specialty Chemicals Adjusted EBITDA

$

1,039

 

 

$

2,726

 

 

$

3,850

 

 

$

9,750

 

% segment sales

 

5.2

%

 

 

10.0

%

 

 

5.9

%

 

 

11.6

%

 

Contacts

Company Contact

Bill Steckel

Chief Financial Officer

1-630-884-9181

Investor Relations

Cody Slach and Cody Cree

Gateway Group, Inc.

1-949-574-3860

ACNT@gateway-grp.com

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