8-K
Ascent Industries Co. (ACNT)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 9, 2023
Ascent Industries Co.
(Exact name of registrant as specified in its charter)
| Delaware | 0-19687 | 57-0426694 | ||
|---|---|---|---|---|
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||
| 1400 16th Street, | Suite 270, | |||
| Oak Brook, | Illinois | 60523 | ||
| (Address of principal executive offices) | (Zip Code) | |||
| (630) | 884-9181 | |||
| (Registrant's telephone number, including area code) | ||||
| Inapplicable | ||||
| (Former name or former address if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of exchange on which registered |
|---|---|---|
| Common Stock, par value $1.00 per share | ACNT | NASDAQ Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Results of Operations and Financial Condition
On May 9, 2023, Ascent Industries Co ("the Company") issued a press release announcing financial information for its first quarter ended March 31, 2023. The press release is attached as Exhibit 99.1 to this Form 8-K and is furnished to, but not filed with, the Commission.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
| Exhibit Number | Description of Exhibit |
|---|---|
| 99.1 | Ascent Industries Co. Press Release dated May 9, 2023 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on behalf by the undersigned hereunto duly authorized.
| Ascent Industries Co | |
|---|---|
| Dated: May 9, 2023 | By: /s/ William S. Steckel |
| William S. Steckel | |
| Chief Financial Officer |
Document
Exhibit 99.1
Ascent Industries Reports First Quarter 2023 Results
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
Oak Brook, Illinois, May 9, 2023 – 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, except 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% | -1420bps |
| 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% | -1650bps |
________________
1Company 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
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 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, 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.
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
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 <br>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 (Loss) to Adjusted EBITDA (Unaudited)
($ in thousands)
| Three Months Ended <br>March 31, | ||||||
|---|---|---|---|---|---|---|
| ( in thousands) | 2023 | 2022 | ||||
| Consolidated | ||||||
| Net income (loss) | $ | (5,199) | $ | 10,260 | ||
| Adjustments: | ||||||
| 1,107 | 403 | |||||
| (1,407) | 2,589 | |||||
| 1,991 | 2,116 | |||||
| 396 | 721 | |||||
| EBITDA | (3,112) | 16,089 | ||||
| 333 | 531 | |||||
| — | 102 | |||||
| 211 | 132 | |||||
| 91 | 107 | |||||
| 900 | — | |||||
| Adjusted EBITDA | $ | (1,577) | $ | 16,961 | ||
| (1.9) | % | 14.6 | % |
All values are in US Dollars.
| 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 | % |
7