Ascent Industries Reports Second 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 second quarter ended June 30, 2023.

Second Quarter 2023 Summary – Continuing Operations1

(in millions, expect per share and margin)

Q2 2023

Q2 2022

Change

Net Sales

$60.7

$84.6

-28.3%

Gross Profit

$3.2

$20.2

-84.0%

Gross Profit Margin

5.3%

23.9%

-1860bps

Net Income (Loss)

$(3.7)

$10.8

-134.8%

Diluted Earnings (Loss) per Share

$(0.37)

$1.04

-135.6%

Adjusted EBITDA

$(1.5)

$14.8

-110.0%

Adjusted EBITDA Margin

(2.4)%

17.4%

-1980bps

1On 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 or around August 31, 2023. As a result, financial results from Munhall have been categorized into discontinued operations.

Management Commentary

“Challenges related to the strategic changes we’ve implemented over the last several quarters, along with difficult end market conditions impacting demand, continued to persist in the second quarter,” said Chris Hutter, president and CEO of Ascent. “Despite this difficult environment, our organization took action by finalizing the permanent closure of our Munhall operations, as well as managing working capital effectively to generate cash and pay down debt. We believe our tubular products segment is on a path to improve through the remainder of the year, while we continue to work on expanding our sales pipeline within the specialty chemicals segment to drive long-term, profitable growth.

“We remain highly committed to executing our strategic goals and believe the operational changes we’ve made will significantly benefit the Company’s value proposition over the long-term. Although the work is never done, we have made tangible progress to right-size our operational footprint, create a more efficient organization, and implement a refreshed culture based on accountability and performance-based results. We believe the largest hurdles are now behind us and expect to begin seeing improvements through the remainder of the year.”

Second Quarter 2023 Financial Results

Net sales from continuing operations were $60.7 million compared to $84.6 million in the prior year period. The decrease is primarily due to lower overall sales volumes and lower average selling prices within both the tubular products and specialty chemicals segments.

Gross profit from continuing operations was $3.2 million, or 5.3% of net sales, compared to $20.2 million, or 23.9% of net sales, in the second quarter of 2022. The decrease is primarily attributable to the decline in net sales in addition to increased raw material and labor costs.

Net loss from continuing operations was $3.7 million, or $(0.37) diluted loss per share, compared to net income from continuing operations of $10.8 million, or $1.04 diluted earnings per share, in the second quarter of 2022. The decrease is primarily attributable to the aforementioned decline in gross profit and higher interest expense.

Adjusted EBITDA was $(1.5) million compared to $14.8 million in the second quarter of 2022. Adjusted EBITDA margin was (2.4)% compared to 17.4% 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 second quarter of 2023 were $39.3 million compared to $55.6 million in the second quarter of 2022. Operating loss from continuing operations in the second quarter was $0.1 million compared to operating income from continuing operations of $13.0 million in the prior year period. Adjusted EBITDA from continuing operations in the second quarter was $0.8 million compared to $14.2 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was 2.1% compared to 25.6% in the second quarter of 2022.

Ascent Chemicalsnet sales in the second quarter of 2023 were $21.4 million compared to $29.0 million in the second quarter of 2022. Operating loss in the second quarter was $0.8 million compared to operating income of $2.6 million in the prior year period. Adjusted EBITDA in the second quarter was $0.3 million compared to $3.6 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was 1.5% compared to 12.6% in the second quarter of 2022.

Liquidity

As of June 30, 2023, total debt was $54.5 million under the Company’s revolving credit facility, compared to $71.5 million in debt at December 31, 2022. As of June 30, 2023, the Company had $45.4 million of remaining available borrowing capacity under its revolving credit facility, compared to $37.6 million at December 31, 2022.

During the second quarter of 2023, the Company repurchased 18,843 shares at an average cost of $9.34 per share for approximately $0.2 million, bringing total year-to-date repurchases for 2023 to 51,156 shares. The Company currently has 628,823 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 second quarter ended June 30, 2023.

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

Date: Tuesday, August 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)

 

 

 

June 30, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

717

 

 

$

1,440

 

Accounts receivable, net of allowance for credit losses of $734 and $762, respectively

 

35,053

 

 

 

37,062

 

Inventories

 

74,300

 

 

 

85,572

 

Prepaid expenses and other current assets

 

9,186

 

 

 

7,802

 

Assets held for sale

 

17,398

 

 

 

380

 

Current assets of discontinued operations

 

3,441

 

 

 

38,120

 

Total current assets

 

140,095

 

 

 

170,376

 

Property, plant and equipment, net

 

34,364

 

 

 

37,045

 

Right-of-use assets, operating leases, net

 

28,509

 

 

 

29,198

 

Goodwill

 

11,389

 

 

 

11,389

 

Intangible assets, net

 

9,248

 

 

 

10,001

 

Deferred income taxes

 

6,869

 

 

 

1,353

 

Deferred charges, net

 

153

 

 

 

203

 

Other non-current assets, net

 

1,782

 

 

 

1,861

 

Long-term assets of discontinued operations

 

13

 

 

 

7,617

 

Total assets

$

232,422

 

 

$

269,043

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

22,242

 

 

$

19,623

 

Accrued expenses and other current liabilities

 

5,504

 

 

 

6,039

 

Current portion of note payable

 

900

 

 

 

387

 

Current portion of long-term debt

 

2,464

 

 

 

2,464

 

Current portion of operating lease liabilities

 

1,093

 

 

 

1,029

 

Current portion of finance lease liabilities

 

283

 

 

 

280

 

Current liabilities of discontinued operations

 

1,839

 

 

 

3,656

 

Total current liabilities

 

34,325

 

 

 

33,478

 

Long-term debt

 

52,056

 

 

 

69,085

 

Long-term portion of operating lease liabilities

 

30,338

 

 

 

30,911

 

Long-term portion of finance lease liabilities

 

1,313

 

 

 

1,242

 

Other long-term liabilities

 

64

 

 

 

68

 

Total non-current liabilities

 

83,771

 

 

 

101,306

 

Total liabilities

$

118,096

 

 

$

134,784

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,158,219 shares issued and outstanding, respectively

$

11,085

 

 

$

11,085

 

Capital in excess of par value

 

46,951

 

 

 

47,021

 

Retained earnings

 

65,311

 

 

 

85,146

 

 

 

123,347

 

 

 

143,252

 

Less: cost of common stock in treasury - 926,884 and 924,504 shares, respectively

 

(9,021

)

 

 

(8,993

)

Total shareholders' equity

 

114,326

 

 

 

134,259

 

Total liabilities and shareholders' equity

$

232,422

 

 

$

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

June 30,

 

Six Months Ended

June 30,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net sales

 

 

 

 

 

 

 

 

Tubular Products

$

39,302

 

 

$

55,580

 

 

$

82,922

 

 

$

111,454

 

 

Specialty Chemicals

 

21,363

 

 

 

29,020

 

 

 

45,112

 

 

 

56,741

 

 

All Other

 

 

 

 

 

 

 

50

 

 

 

114

 

 

 

 

60,665

 

 

 

84,600

 

 

 

128,084

 

 

 

168,309

 

Operating income (loss) from continuing operations

 

 

 

 

 

 

 

Tubular Products

 

(105

)

 

 

12,992

 

 

 

1,560

 

 

 

27,120

 

 

Specialty Chemicals

 

(806

)

 

 

2,627

 

 

 

546

 

 

 

5,014

 

 

All Other

 

(74

)

 

 

(235

)

 

 

(552

)

 

 

(317

)

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

Unallocated corporate expenses

 

(2,750

)

 

 

(3,322

)

 

 

(6,455

)

 

 

(6,351

)

 

Acquisition costs and other

 

(17

)

 

 

(157

)

 

 

(274

)

 

 

(688

)

 

Total Corporate

 

(2,767

)

 

 

(3,479

)

 

 

(6,729

)

 

 

(7,039

)

 

Operating income (loss)

 

(3,752

)

 

 

11,905

 

 

 

(5,175

)

 

 

24,778

 

 

Interest expense

 

1,047

 

 

 

407

 

 

 

2,154

 

 

 

810

 

 

Other, net

 

(154

)

 

 

(23

)

 

 

(247

)

 

 

(58

)

Income (loss) from continuing operations before income taxes

 

(4,645

)

 

 

11,521

 

 

 

(7,082

)

 

 

24,026

 

 

Income tax provision (benefit)

 

(897

)

 

 

699

 

 

 

(1,385

)

 

 

3,197

 

 

Income (loss) from continuing operations

 

(3,748

)

 

 

10,822

 

 

 

(5,697

)

 

 

20,829

 

 

Income (loss) from discontinued operations, net of tax

 

(10,888

)

 

 

235

 

 

 

(14,138

)

 

 

488

 

Net income (loss)

$

(14,636

)

 

$

11,057

 

 

$

(19,835

)

 

$

21,317

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share from continuing operations

 

 

 

 

 

 

 

 

Basic

$

(0.37

)

 

$

1.06

 

 

$

(0.56

)

 

$

2.04

 

 

Diluted

$

(0.37

)

 

$

1.04

 

 

$

(0.56

)

 

$

2.01

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share from discontinued operations

 

 

 

 

 

 

 

 

Basic

$

(1.07

)

 

$

0.02

 

 

$

(1.39

)

 

$

0.05

 

 

Diluted

$

(1.07

)

 

$

0.02

 

 

$

(1.39

)

 

$

0.05

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

Basic

$

(1.44

)

 

$

1.08

 

 

$

(1.95

)

 

$

2.08

 

 

Diluted

$

(1.44

)

 

$

1.06

 

 

$

(1.95

)

 

$

2.05

 

 

 

 

 

 

 

 

 

 

Average shares outstanding

 

 

 

 

 

 

 

 

Basic

 

10,170

 

 

 

10,244

 

 

 

10,159

 

 

 

10,226

 

 

Diluted

 

10,170

 

 

 

10,431

 

 

 

10,159

 

 

 

10,377

 

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

 

Adjusted EBITDA1

$

(1,471

)

 

$

14,751

 

 

$

(166

)

 

$

30,680

 

1The 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)

 

Six Months Ended June 30,

 

2023

 

2022

Operating activities

 

 

 

Net income (loss)

$

(19,835

)

 

$

21,317

 

Net income (loss) from discontinued operations, net of tax

 

(14,138

)

 

 

488

 

Net income (loss) from continuing operations

 

(5,697

)

 

 

20,829

 

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

 

 

 

Depreciation expense

 

3,243

 

 

 

3,201

 

Amortization expense

 

753

 

 

 

1,343

 

Amortization of debt issuance costs

 

50

 

 

 

49

 

Deferred income taxes

 

(5,515

)

 

 

(642

)

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

 

 

 

 

(372

)

(Reduction of) provision for losses on accounts receivable

 

(28

)

 

 

459

 

Provision for losses on inventories

 

1,190

 

 

 

863

 

Loss (gain) on disposal of property, plant and equipment

 

182

 

 

 

(5

)

Non-cash lease expense

 

137

 

 

 

214

 

Issuance of treasury stock for director fees

 

 

 

 

364

 

Stock-based compensation expense

 

414

 

 

 

446

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

2,037

 

 

 

(10,173

)

Inventories

 

10,279

 

 

 

(27,738

)

Other assets and liabilities

 

(295

)

 

 

(755

)

Accounts payable

 

2,095

 

 

 

14,476

 

Accrued expenses

 

(587

)

 

 

(1,980

)

Accrued income taxes

 

(743

)

 

 

110

 

Net cash provided by operating activities - continuing operations

 

7,515

 

 

 

689

 

Net cash provided by operating activities - discontinued operations

 

10,557

 

 

 

2,200

 

Net cash provided by operating activities

 

18,072

 

 

 

2,889

 

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(1,483

)

 

 

(1,981

)

Proceeds from disposal of property, plant and equipment

 

 

 

 

5

 

Net cash used in investing activities - continuing operations

 

(1,483

)

 

 

(1,976

)

Net cash used in investing activities - discontinued operations

 

(142

)

 

 

(349

)

Net cash used in investing activities

 

(1,625

)

 

 

(2,325

)

Financing activities

 

 

 

Borrowings from long-term debt

 

139,137

 

 

 

237,938

 

Proceeds from note payable

 

900

 

 

 

967

 

Proceeds from the exercise of stock options

 

 

 

 

161

 

Payments on long-term debt

 

(156,166

)

 

 

(240,017

)

Payments on note payable

 

(387

)

 

 

(96

)

Principal payments on finance lease obligations

 

(151

)

 

 

(126

)

Payments on earn-out liabilities

 

 

 

 

(484

)

Repurchase of common stock

 

(504

)

 

 

 

Net cash used in financing activities - continuing operations

 

(17,171

)

 

 

(1,657

)

Net cash used in financing activities - discontinued operations

 

 

 

 

(683

)

Net cash used in financing activities

 

(17,171

)

 

 

(2,340

)

Decrease in cash and cash equivalents

 

(724

)

 

 

(1,776

)

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

$

717

 

 

$

245

 

Ascent Industries Co.

Non-GAAP Financial Measures Reconciliation

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

($ in thousands)

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

($ in thousands)

2023

 

2022

 

2023

 

2022

Consolidated

 

 

 

 

 

 

 

Net income (loss) from continuing operations

$

(3,748

)

 

$

10,822

 

 

$

(5,697

)

 

$

20,687

 

Adjustments:

 

 

 

 

 

 

 

 

Interest expense

 

1,047

 

 

 

407

 

 

 

2,154

 

 

 

810

 

 

Income taxes

 

(897

)

 

 

699

 

 

 

(1,385

)

 

 

3,339

 

 

Depreciation

 

1,632

 

 

 

1,621

 

 

 

3,243

 

 

 

3,201

 

 

Amortization

 

376

 

 

 

672

 

 

 

753

 

 

 

1,343

 

EBITDA

 

(1,590

)

 

 

14,221

 

 

 

(932

)

 

 

29,380

 

 

Acquisition costs and other

 

20

 

 

 

157

 

 

 

280

 

 

 

688

 

 

Gain on lease modification

 

 

 

 

(2

)

 

 

 

 

 

(2

)

 

Stock-based compensation

 

24

 

 

 

258

 

 

 

246

 

 

 

390

 

 

Non-cash lease expense

 

68

 

 

 

107

 

 

 

137

 

 

 

214

 

 

Restructuring and severance costs

 

7

 

 

 

10

 

 

 

103

 

 

 

10

 

Adjusted EBITDA

$

(1,471

)

 

$

14,751

 

 

$

(166

)

 

$

30,680

 

 

% sales

 

(2.4

)%

 

 

17.4

%

 

 

(0.1

)%

 

 

18.2

%

 

 

 

 

 

 

 

 

 

Tubular Products

 

 

 

 

 

 

 

Net income (loss) from continuing operations

$

(105

)

 

$

12,993

 

 

$

1,560

 

 

$

27,120

 

Adjustments:

 

 

 

 

 

 

 

 

Depreciation expense

 

653

 

 

 

688

 

 

 

1,290

 

 

 

1,363

 

 

Amortization expense

 

218

 

 

 

576

 

 

 

436

 

 

 

1,152

 

EBITDA

 

766

 

 

 

14,257

 

 

 

3,286

 

 

 

29,635

 

 

Acquisition costs and other

 

4

 

 

 

 

 

 

4

 

 

 

 

 

Stock-based compensation

 

10

 

 

 

(16

)

 

 

(9

)

 

 

19

 

 

Non-cash lease expense

 

36

 

 

 

(1

)

 

 

72

 

 

 

(1

)

 

Restructuring and severance costs

 

 

 

 

 

 

 

97

 

 

 

 

Tubular Products Adjusted EBITDA

$

816

 

 

$

14,240

 

 

$

3,450

 

 

$

29,653

 

 

% segment sales

 

2.1

%

 

 

25.6

%

 

 

4.2

%

 

 

26.6

%

 

 

 

 

 

 

 

 

 

Specialty Chemicals

 

 

 

 

 

 

 

Net income (loss)

$

(818

)

 

$

2,617

 

 

$

523

 

 

$

4,995

 

Adjustments:

 

 

 

 

 

 

 

 

Interest expense

 

18

 

 

 

9

 

 

 

31

 

 

 

18

 

 

Depreciation expense

 

956

 

 

 

915

 

 

 

1,908

 

 

 

1,800

 

 

Amortization expense

 

158

 

 

 

96

 

 

 

317

 

 

 

192

 

EBITDA

 

314

 

 

 

3,637

 

 

 

2,779

 

 

 

7,005

 

 

Acquisition costs and other

 

 

 

 

 

 

 

2

 

 

 

 

 

Stock-based compensation

 

(23

)

 

 

11

 

 

 

(16

)

 

 

18

 

 

Non-cash lease expense

 

22

 

 

 

 

 

 

46

 

 

 

 

Specialty Chemicals Adjusted EBITDA

$

313

 

 

$

3,648

 

 

$

2,811

 

 

$

7,023

 

 

% segment sales

 

1.5

%

 

 

12.6

%

 

 

6.2

%

 

 

12.4

%

 

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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