Ascent Industries Reports Third Quarter 2023 Results

Rhea-AI Summary

Ascent Industries Co. (Nasdaq: ACNT) reports Q3 2023 financial results, with net sales down 28.3% to $56.1 million, gross profit down 57.3% to $6.0 million, and net loss of $12.8 million. The company cites challenging macro-economic volatility impacting sales volumes in both segments but remains optimistic about future prospects.

Positive

• The company is making operational progress and has appointed a new president for its chemicals segment, showing a commitment to long-term strategic goals.
• The company's total debt decreased to $53.0 million from $71.5 million at the end of 2022, with $41.8 million in remaining available borrowing capacity under its revolving credit facility.

Negative

• Net sales, gross profit, net income, and adjusted EBITDA all experienced significant declines compared to the third quarter of 2022, reflecting a challenging operating environment.
• The operating loss in the chemicals segment and the decline in adjusted EBITDA for both segments indicate ongoing challenges in profitability.

OAK BROOK, Ill.--(BUSINESS WIRE)-- 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 Tubular – net 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 Chemicals – net 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	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231108315671/en/

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

Source: Ascent Industries Co.

FAQ

What are Ascent Industries Co.'s (Nasdaq: ACNT) Q3 2023 financial results?

In Q3 2023, Ascent reported a 28.3% decrease in net sales to $56.1 million, a 57.3% decrease in gross profit to $6.0 million, and a net loss of $12.8 million.

What is the company's current debt situation?

As of September 30, 2023, Ascent's total debt was $53.0 million, down from $71.5 million at the end of 2022, with $41.8 million in remaining available borrowing capacity under its revolving credit facility.

What is the company's response to the challenging operating environment?

The company is making operational progress and has appointed a new president for its chemicals segment, showing a commitment to long-term strategic goals.