ACNT Ascent Industries Company

Positioned for Improved Profitability in Back-Half of 2023

First Quarter Net Loss of $5.2 Million and Adjusted EBITDA of $(1.6) Million Includes Net Loss of $4.0 Million and Adjusted EBITDA of $(2.8) Million Attributable to its Munhall Facility1

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 first quarter ended March 31, 2023.

First Quarter 2023 Summary

(in millions, expect per share and margin)

Q1 2023

Q1 2022

Change

Net Sales

$82.5

$116.2

-29.1%

Gross Profit

$4.3

$22.5

-80.9%

Gross Profit Margin

5.2%

19.4%

-1,420bps

Net Income (Loss)

$(5.2)

$10.3

-150.7%

Diluted Earnings (Loss) per Share

$(0.51)

$0.99

-151.5%

Adjusted EBITDA

$(1.6)

$17.0

-109.3%

Adjusted EBITDA Margin

(1.9)%

14.6%

-1,650bps

________________________________

1 Company management has previously articulated its intent to reduce operations at the Company's facility in Munhall, PA, specifically its galvanized pipe and tube operations. The majority of the galvanized reduction has been completed as of March 31, 2023, and the Company is currently evaluating strategic alternatives for the operations at this facility.

Management Commentary

“As we started the year, we expected the first quarter to be challenging given our continued work to reduce our galvanized pipe and tube operations at our facility in Munhall, PA,” said Chris Hutter, president and CEO of Ascent. “While this is having an outsized impact on our near-term results, we expect our tubular products segment to begin stabilizing in the second quarter and improving through the back-half of the year. Within our specialty chemicals segment, we continued to be affected by industry-wide destocking trends, resulting in a lower sales base to start the year. Despite this, our sales pipeline remains robust and we expect destocking trends to ease over the coming quarters.

“Subsequent to the end of the quarter, we were pleased to bring on a seasoned executive in Bill Steckel as CFO. Bill has a strong operational mindset with considerable experience in successfully transforming and building out finance organizations within both public and private companies. Since his appointment, he has hit the ground running and is already having a positive impact across our finance and accounting functions. With his expertise in place, we believe we are well positioned to continue enhancing our reporting processes and focus on driving operational efficiencies across the organization.

“Overall, we are continuing to navigate impacts from the strategic and operational changes we enacted over the past few quarters. However, the recent headwinds in our financial performance have not discouraged our view of Ascent’s long-term value potential. As we have now taken proactive steps to reduce the earnings volatility associated with our galvanized product line, we plan to focus more mindshare on other more profitable areas, including expanding our specialty chemicals segment and continuing to grow our value proposition across our tubular product lines. We believe that we are positioned to rebound meaningfully into an improved Q2 and stronger second half of the year. Our team remains committed to delivering long-term value to our shareholders through a culture of hard work and performance-based results.”

First Quarter 2023 Financial Results

Net sales were $82.5 million compared to $116.2 million in the prior year period. The decrease is primarily due to the intentional reduction in low-margin sales and lower overall volumes within the tubular products segment, along with the decline in sales within the specialty chemicals segment resulting from destocking trends within the industry.

Gross profit was $4.3 million, or 5.2% of net sales, compared to $22.5 million, or 19.4% of net sales, in the first quarter of 2022. The decrease is primarily attributable to the aforementioned decline in net sales, along with continued inflationary pressures on input and labor costs.

Net loss was $5.2 million, or $(0.51) loss per share, compared to net income of $10.3 million, or $0.99 diluted earnings per share, in the first quarter of 2022. The decline is primarily attributable to the aforementioned decline in gross profit, higher interest expense and an increase in restructuring and severance costs within the tubular products segment, offset by lower income tax expense.

Adjusted EBITDA was $(1.6) million compared to $17.0 million in the first quarter of 2022. Adjusted EBITDA margin was (1.9)% compared to 14.6% in the prior year period. The decrease is primarily attributable to the aforementioned decline in net sales, predominantly concentrated within the Company’s pipe and tube operations.

Segment Results

Ascent Tubular – net sales in the first quarter of 2023 were $58.7 million compared to $88.4 million in the first quarter of 2022. Operating loss in the first quarter was $2.5 million compared to operating income of $14.6 million in the prior year period. Adjusted EBITDA in the first quarter was $(0.2) million compared to $16.4 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was (0.4)% compared to 18.5% in the first quarter of 2022.

Ascent Chemicals – net sales in the first quarter of 2023 were $23.7 million compared to $27.7 million in the first quarter of 2022. Operating income in the first quarter was $1.4 million compared to $2.4 million in the prior year period. Adjusted EBITDA in the first quarter was $2.5 million compared to $3.4 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was 10.5% compared to 12.2% in the first quarter of 2022.

Liquidity

As of March 31, 2023, total debt was $58.7 million under the Company’s revolving credit facility, compared to $71.5 million in debt at December 31, 2022. As of March 31, 2023, the Company had $50.0 million of remaining available borrowing capacity under its revolving credit facility, compared to $37.6 million at December 31, 2022.

During the first quarter of 2023, the Company repurchased 32,313 shares at an average cost of $10.11 per share for approximately $0.3 million. The Company currently has 647,666 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 first quarter ended March 31, 2023.

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

Date: Tuesday, May 9, 2023 Time: 5:00 p.m. Eastern time U.S. dial-in: 1-646-307-1963 International dial-in: 1-800-715-9871 Conference ID: 2763561

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 and galvanized pipe and tube, 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)

 

(Unaudited)

 

 

 

March 31, 2023

 

December 31, 2022

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

421

 

 

$

1,441

 

Accounts receivable, net of allowance for credit losses of $975 and $1,250, respectively

 

46,779

 

 

 

45,120

 

Inventories, net

 

99,792

 

 

 

114,452

 

Prepaid expenses and other current assets

 

11,400

 

 

 

8,982

 

Assets held for sale

 

—

 

 

 

380

 

Total current assets

 

158,392

 

 

 

170,375

 

Property, plant and equipment, net

 

41,445

 

 

 

42,346

 

Right-of-use assets, operating leases, net

 

28,871

 

 

 

29,224

 

Goodwill

 

11,389

 

 

 

11,389

 

Intangible assets, net

 

9,991

 

 

 

10,387

 

Deferred income taxes

 

1,000

 

 

 

1,353

 

Deferred charges, net

 

178

 

 

 

203

 

Other non-current assets, net

 

3,766

 

 

 

3,766

 

Total assets

$

255,032

 

 

$

269,043

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

25,783

 

 

$

22,731

 

Accrued expenses and other current liabilities

 

8,040

 

 

 

6,560

 

Current portion of note payable

 

98

 

 

 

387

 

Current portion of long-term debt

 

2,464

 

 

 

2,464

 

Current portion of operating lease liabilities

 

1,077

 

 

 

1,056

 

Current portion of finance lease liabilities

 

273

 

 

 

280

 

Total current liabilities

 

37,735

 

 

 

33,478

 

Long-term debt

 

56,189

 

 

 

69,085

 

Long-term portion of operating lease liabilities

 

30,628

 

 

 

30,911

 

Long-term portion of finance lease liabilities

 

1,378

 

 

 

1,242

 

Other long-term liabilities

 

58

 

 

 

68

 

Total non-current liabilities

 

88,253

 

 

 

101,306

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,172,265 shares issued and outstanding, respectively

 

11,085

 

 

 

11,085

 

Capital in excess of par value

 

46,903

 

 

 

47,021

 

Retained earnings

 

79,947

 

 

 

85,146

 

 

 

137,935

 

 

 

143,252

 

Less: cost of common stock in treasury - 912,838 and 924,504 shares, respectively

 

(8,891

)

 

 

(8,993

)

Total shareholders' equity

 

129,044

 

 

 

134,259

 

Total liabilities and shareholders' equity

$

255,032

 

 

$

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 - Comparative Analysis (Unaudited)

($ in thousands, except per share data)

 

Three Months Ended

March 31,

 

2023

 

2022

Net sales

 

 

 

Tubular Products

$

58,653

 

 

$

88,383

 

Specialty Chemicals

 

23,749

 

 

 

27,721

 

All Other

 

50

 

 

 

114

 

 

$

82,452

 

 

$

116,218

 

Operating income (loss)

 

 

Tubular Products

$

(2,504

)

 

$

14,574

 

Specialty Chemicals

 

1,352

 

 

 

2,387

 

All Other

 

(479

)

 

 

(82

)

 

 

 

 

Corporate

 

 

 

Unallocated corporate expenses

 

(3,704

)

 

 

(3,029

)

Acquisition costs and other

 

(259

)

 

 

(531

)

Earn-out adjustments

 

—

 

 

 

(102

)

Total Corporate

 

(3,963

)

 

 

(3,662

)

Operating income (loss)

 

(5,594

)

 

 

13,217

 

Interest expense

 

1,107

 

 

 

403

 

Other, net

 

(95

)

 

 

(35

)

Income (loss) before income taxes

 

(6,606

)

 

 

12,849

 

Income tax provision (benefit)

 

(1,407

)

 

 

2,589

 

Net income (loss)

$

(5,199

)

 

$

10,260

 

 

 

 

 

Net income (loss) per common share

 

 

 

Basic

$

(0.51

)

 

$

1.00

 

Diluted

$

(0.51

)

 

$

0.99

 

 

 

 

 

Average shares outstanding

 

 

 

Basic

 

10,148

 

 

 

10,209

 

Diluted

 

10,148

 

 

 

10,320

 

 

 

 

 

Other data:

 

 

 

Adjusted EBITDA1

$

(1,577

)

 

$

16,961

 

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)

 

Three Months Ended March 31,

 

2023

 

2022

Operating activities

 

 

 

Net income (loss)

$

(5,199

)

 

$

10,260

 

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

 

 

 

Depreciation expense

 

1,991

 

 

 

2,116

 

Amortization expense

 

396

 

 

 

721

 

Amortization of debt issuance costs

 

25

 

 

 

25

 

Deferred income taxes

 

353

 

 

 

428

 

Earn-out adjustments

 

—

 

 

 

102

 

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

 

—

 

 

 

(372

)

(Reduction of) provision for losses on accounts receivable

 

(275

)

 

 

240

 

Provision for losses on inventories

 

1,178

 

 

 

496

 

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

 

182

 

 

 

(5

)

Non-cash lease expense

 

91

 

 

 

107

 

Issuance of treasury stock for director fees

 

—

 

 

 

254

 

Stock-based compensation expense

 

311

 

 

 

132

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(1,384

)

 

 

(17,933

)

Inventories

 

13,680

 

 

 

(9,302

)

Other assets and liabilities

 

352

 

 

 

(27

)

Accounts payable

 

2,786

 

 

 

11,950

 

Accrued expenses

 

1,480

 

 

 

(959

)

Accrued income taxes

 

(2,577

)

 

 

2,161

 

Net cash provided by operating activities

 

13,390

 

 

 

394

 

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(824

)

 

 

(1,117

)

Proceeds from disposal of property, plant and equipment

 

—

 

 

 

5

 

Net cash used in investing activities

 

(824

)

 

 

(1,112

)

Financing activities

 

 

 

Borrowings from long-term debt

 

67,488

 

 

 

122,068

 

Proceeds from the exercise of stock options

 

—

 

 

 

118

 

Payments on long-term debt

 

(80,384

)

 

 

(121,386

)

Payments on note payable

 

(289

)

 

 

—

 

Principal payments on finance lease obligations

 

(74

)

 

 

(62

)

Payments on earn-out liabilities

 

—

 

 

 

(800

)

Repurchase of common stock

 

(327

)

 

 

—

 

Net cash used in financing activities

 

(13,586

)

 

 

(62

)

Decrease in cash and cash equivalents

 

(1,020

)

 

 

(780

)

Cash and cash equivalents, beginning of period

 

1,441

 

 

 

2,021

 

Cash and cash equivalents, end of period

$

421

 

 

$

1,241

 

Ascent Industries Co.

Non-GAAP Financial Measures Reconciliation

Reconciliation of Net Income to Adjusted EBITDA (Unaudited)

($ in thousands)

 

Three Months Ended

March 31,

($ in thousands)

2023

 

2022

Consolidated

 

 

 

Net income (loss)

$

(5,199

)

 

$

10,260

 

Adjustments:

 

 

 

Interest expense

 

1,107

 

 

 

403

 

Income taxes

 

(1,407

)

 

 

2,589

 

Depreciation

 

1,991

 

 

 

2,116

 

Amortization

 

396

 

 

 

721

 

EBITDA

 

(3,112

)

 

 

16,089

 

Acquisition costs and other

 

333

 

 

 

531

 

Earn-out adjustments

 

—

 

 

 

102

 

Stock-based compensation

 

211

 

 

 

132

 

Non-cash lease expense

 

91

 

 

 

107

 

Restructuring and severance costs

 

900

 

 

 

—

 

Adjusted EBITDA

$

(1,577

)

 

$

16,961

 

% sales

 

(1.9

)%

 

 

14.6

%

 

 

 

 

Tubular Products

 

 

 

Net income (loss)

$

(2,504

)

 

$

14,424

 

Adjustments:

 

 

 

Interest expense

 

—

 

 

 

—

 

Depreciation expense

 

1,017

 

 

 

1,213

 

Amortization expense

 

238

 

 

 

625

 

EBITDA

 

(1,249

)

 

 

16,262

 

Acquisition costs and other

 

72

 

 

 

—

 

Earn-out adjustments

 

—

 

 

 

102

 

Stock-based compensation

 

(29

)

 

 

35

 

Non-cash lease expense

 

58

 

 

 

—

 

Restructuring and severance costs

 

900

 

 

 

—

 

Tubular Products Adjusted EBITDA

$

(248

)

 

$

16,399

 

% segment sales

 

(0.4

)%

 

 

18.5

%

 

 

 

 

Specialty Chemicals

 

 

 

Net income

$

1,342

 

 

$

2,378

 

Adjustments:

 

 

 

Interest expense

 

12

 

 

 

9

 

Depreciation expense

 

952

 

 

 

886

 

Amortization expense

 

158

 

 

 

96

 

EBITDA

 

2,464

 

 

 

3,369

 

Acquisition costs and other

 

2

 

 

 

—

 

Stock-based compensation

 

8

 

 

 

6

 

Non-cash lease expense

 

24

 

 

 

—

 

Specialty Chemicals Adjusted EBITDA

$

2,498

 

 

$

3,375

 

% segment sales

 

10.5

%

 

 

12.2

%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230509005959/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@gatewayir.com