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
Ascent Industries (NASDAQ:ACNT)
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