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 Tubular – net 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 Chemicals – net 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
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808299203/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
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