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Ascent Industries Reports First Quarter 2024 Results

Ascent Industries Co. (Nasdaq: ACNT) (“Ascent” or the “Company”), an industrials company focused on the production of specialty chemicals and industrial tubular products, is reporting its results for the first quarter ended March 31, 2024.

First Quarter 2024 Summary1

 

(in millions, except per share and margin)

Q1 2024

Q1 2023

Change

Net Sales

$44.1

$54.9

(19.6)%

Gross Profit

$2.5

$1.5

72.4%

Gross Profit Margin

5.7%

2.7%

300bps

Net (Loss)

$(4.7)

$(5.8)

18.6%

Diluted (Loss) per Share

$(0.47)

$(0.57)

17.5%

Adjusted EBITDA

$(3.1)

$(3.7)

16.6%

Adjusted EBITDA Margin

(7.1)%

(6.8)%

(30)bps

____________________________

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. On December 22, 2023, the Company closed on a transaction to sell substantially all of the assets of Specialty Pipe & Tube (“SPT”). As a result, financial results from Munhall & SPT have been categorized into discontinued operations.

Management Commentary

“The first quarter of 2024 marked a period of structural cost reduction and stabilization efforts across the enterprise,” said Ascent CEO Bryan Kitchen. “Without question, our initial efforts to optimize both cash and costs have helped drive year-over-year improvements across our consolidated gross margin and bottom line, while operating within the confines of our own free cash flow. Aggressive self-help has been at the core of our ability to overcome ongoing market headwinds that have resulted in a year-over-year decline in total net sales.

“As promised, in just a short period of time we have made progress in laying the groundwork for driving profitable growth through the optimization of our product mix while recapitalizing our SG&A across both segments. These actions, coupled with a continued focus on driving efficiencies across all sites and functions, will create a more predictable, reliable, and profitable operating model moving forward. Momentum is building, and we expect continued improvements in our financial results throughout 2024. We believe we are on the right track to create durable value for shareholders.”

First Quarter 2024 Financial Results

Net sales from continuing operations were $44.1 million compared to $54.9 million in the first quarter of 2023, primarily attributable to decreased end-market demand and de-stocking trends across both segments.

Gross profit from continuing operations improved to $2.5 million, or 5.7% of net sales, compared to $1.5 million, or 2.7% of net sales, in the first quarter of 2023. The increase was primarily attributable to improved strategic sourcing initiatives and cost improvements.

Net loss from continuing operations decreased to $4.7 million, or $(0.47) diluted loss per share, compared to net loss from continuing operations of $5.8 million, or $(0.57) diluted earnings per share, in the first quarter of 2023. The decrease was primarily attributable to the aforementioned increases in gross profit and a year-over-year decrease in interest expense due to lower debt outstanding.

Adjusted EBITDA improved to $(3.1) million compared to $(3.7) million in the first quarter of 2023, primarily driven by the aforementioned cost optimization efforts. Adjusted EBITDA margin was (7.1)% compared to (6.8)% in the prior year period, with the decline primarily a result of the aforementioned lower net sales base.

Segment Results

Ascent Chemicalsnet sales in the first quarter of 2024 were $20.3 million compared to $23.7 million in the first quarter of 2023. Operating loss in the first quarter was $1.4 million compared to operating income of $1.4 million in the prior year period. Adjusted EBITDA in the first quarter was $(0.3) million compared to $2.5 million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was (1.4)% compared to 10.5% in the first quarter of 2023.

Ascent Tubularnet sales from continuing operations in the first quarter of 2024 were $23.8 million compared to $31.1 million in the first quarter of 2023. Operating loss from continuing operations in the first quarter decreased to $1.5 million compared to operating loss from continuing operations of $3.3 million in the prior year period. Adjusted EBITDA from continuing operations in the first quarter was $(0.7) million compared to $(2.4) million in the prior year period. As a percentage of segment net sales, adjusted EBITDA was (3.0)% compared to (7.7)% in the first quarter of 2023.

Liquidity

As of March 31, 2024, the Company had no debt outstanding under its revolving credit facilities and had $63.6 million in availability under its revolving credit facility.

For the quarter ended March 31, 2024, the Company repurchased 16,330 shares at an average cost of $9.97 per share for approximately $0.2 million.

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, 2024.

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

Date: Wednesday, May 8, 2024

Time: 5:00 p.m. Eastern time

Live Call Registration Link: Here

Webcast Registration Link: Here

To access the call by phone, please register via the live call registration link above or here and you will be provided with dial-in instructions and details. 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 via the webcast registration link above or 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 specialty chemicals and industrial tubular products. For more information about Ascent, please visit its website 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, 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, shelf registration costs, loss on extinguishment of debt, 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)

 

 

 

March 31, 2024

 

December 31, 2023

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

1,299

 

 

$

1,851

 

Accounts receivable, net of allowance for credit losses of $792 and $463, respectively

 

28,160

 

 

 

26,604

 

Inventories

 

51,197

 

 

 

52,306

 

Prepaid expenses and other current assets

 

4,146

 

 

 

4,879

 

Assets held for sale

 

1,792

 

 

 

2,912

 

Current assets of discontinued operations

 

46

 

 

 

861

 

Total current assets

 

86,640

 

 

 

89,413

 

Property, plant and equipment, net

 

28,648

 

 

 

29,755

 

Right-of-use assets, operating leases, net

 

27,431

 

 

 

27,784

 

Intangible assets, net

 

8,129

 

 

 

8,496

 

Deferred income taxes

 

7,366

 

 

 

5,808

 

Deferred charges, net

 

79

 

 

 

104

 

Other non-current assets, net

 

2,678

 

 

 

1,935

 

Total assets

$

160,971

 

 

$

163,295

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

20,549

 

 

$

16,416

 

Accrued expenses and other current liabilities

 

4,824

 

 

 

5,108

 

Current portion of note payable

 

88

 

 

 

360

 

Current portion of operating lease liabilities

 

1,170

 

 

 

1,140

 

Current portion of finance lease liabilities

 

288

 

 

 

292

 

Current liabilities of discontinued operations

 

1,376

 

 

 

1,473

 

Total current liabilities

 

28,295

 

 

 

24,789

 

Long-term portion of operating lease liabilities

 

29,419

 

 

 

29,729

 

Long-term portion of finance lease liabilities

 

1,236

 

 

 

1,307

 

Other long-term liabilities

 

57

 

 

 

60

 

Total non-current liabilities

 

30,712

 

 

 

31,096

 

Total liabilities

$

59,007

 

 

$

55,885

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,124,781 shares issued and outstanding, respectively

$

11,085

 

 

$

11,085

 

Capital in excess of par value

 

47,097

 

 

 

47,333

 

Retained earnings

 

53,024

 

 

 

58,517

 

 

 

111,206

 

 

 

116,935

 

Less: cost of common stock in treasury - 960,323 and 990,282 shares, respectively

 

(9,242

)

 

 

(9,525

)

Total shareholders' equity

 

101,964

 

 

 

107,410

 

Total liabilities and shareholders' equity

$

160,971

 

 

$

163,295

 

 

Note: The condensed consolidated balance sheets at December 31, 2023 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

March 31,

 

2024

 

2023

Net sales

 

 

 

Tubular Products

$

23,814

 

 

$

31,061

 

Specialty Chemicals

 

20,296

 

 

 

23,749

 

All Other

 

 

 

 

50

 

 

 

44,110

 

 

 

54,860

 

Operating (loss) income from continuing operations

 

 

Tubular Products

 

(1,502

)

 

 

(3,293

)

Specialty Chemicals

 

(1,439

)

 

 

1,352

 

All Other

 

(162

)

 

 

(479

)

 

 

 

 

Corporate

 

 

 

Unallocated corporate expenses

 

(2,150

)

 

 

(3,704

)

Acquisition costs and other

 

 

 

 

(259

)

Total Corporate

 

(2,150

)

 

 

(3,963

)

Operating loss

 

(5,253

)

 

 

(6,383

)

Interest expense

 

127

 

 

 

1,107

 

Other, net

 

(120

)

 

 

(95

)

Loss from continuing operations before income taxes

 

(5,260

)

 

 

(7,395

)

Income tax benefit

 

(1,166

)

 

 

(1,607

)

Loss from continuing operations

 

(4,094

)

 

 

(5,788

)

(Loss) income from discontinued operations, net of tax

 

(1,399

)

 

 

589

 

Net loss

$

(5,493

)

 

$

(5,199

)

 

 

 

 

Net loss per common share from continuing operations

 

 

 

Basic

$

(0.41

)

 

$

(0.57

)

Diluted

$

(0.41

)

 

$

(0.57

)

 

 

 

 

Net (loss) income per common share from discontinued operations

 

 

 

Basic

$

(0.14

)

 

$

0.06

 

Diluted

$

(0.14

)

 

$

0.06

 

 

 

 

 

Net loss per common share

 

 

 

Basic

$

(0.54

)

 

$

(0.51

)

Diluted

$

(0.54

)

 

$

(0.51

)

 

 

 

 

Average shares outstanding

 

 

 

Basic

 

10,094

 

 

 

10,148

 

Diluted

 

10,094

 

 

 

10,148

 

 

 

 

 

Other data:

 

 

 

Adjusted EBITDA1

$

(3,115

)

 

$

(3,735

 

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, 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, 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,

 

2024

 

2023

Operating activities

 

 

 

Net loss

$

(5,493

)

 

$

(5,199

)

(Loss) income from discontinued operations, net of tax

 

(1,399

)

 

 

589

 

Net loss from continuing operations

 

(4,094

)

 

 

(5,788

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

Depreciation expense

 

1,522

 

 

 

1,549

 

Amortization expense

 

367

 

 

 

376

 

Amortization of debt issuance costs

 

25

 

 

 

25

 

Deferred income taxes

 

(1,166

)

 

 

353

 

Provision for (reduction of) losses on accounts receivable

 

330

 

 

 

(57

)

(Reduction of) provision for losses on inventories

 

(73

)

 

 

791

 

Loss on disposal of property, plant and equipment

 

 

 

 

182

 

Non-cash lease expense

 

55

 

 

 

64

 

Stock-based compensation expense

 

209

 

 

 

319

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(1,885

)

 

 

(1,072

)

Inventories

 

1,182

 

 

 

9,492

 

Other assets and liabilities

 

(73

)

 

 

297

 

Accounts payable

 

4,022

 

 

 

6,827

 

Accrued expenses

 

(283

)

 

 

1,629

 

Accrued income taxes

 

78

 

 

 

(2,577

)

Net cash provided by operating activities - continuing operations

 

216

 

 

 

12,410

 

Net cash provided by operating activities - discontinued operations

 

47

 

 

 

980

 

Net cash provided by operating activities

 

263

 

 

 

13,390

 

Investing activities

 

 

 

Purchases of property, plant and equipment

 

(305

)

 

 

(586

)

Net cash used in investing activities - continuing operations

 

(305

)

 

 

(586

)

Net cash used in investing activities - discontinued operations

 

 

 

 

(238

)

Net cash used in investing activities

 

(305

)

 

 

(824

)

Financing activities

 

 

 

Borrowings from long-term debt

 

50,950

 

 

 

67,488

 

Payments on long-term debt

 

(50,950

)

 

 

(80,384

)

Payments on note payable

 

(271

)

 

 

(289

)

Principal payments on finance lease obligations

 

(76

)

 

 

(74

)

Repurchase of common stock

 

(163

)

 

 

(327

)

Net cash used in financing activities

 

(510

)

 

 

(13,586

)

Decrease in cash and cash equivalents

 

(552

)

 

 

(1,020

)

Less: Cash and cash equivalents of discontinued operations

 

 

 

 

1

 

Cash and cash equivalents, beginning of period

 

1,851

 

 

 

1,440

 

Cash and cash equivalents, end of period

$

1,299

 

 

$

421

 

 
 

Ascent Industries Co.

Non-GAAP Financial Measures Reconciliation

Reconciliation of Net Income (Loss) to Adjusted EBITDA (Unaudited)

($ in thousands)

 

Three Months Ended

March 31,

($ in thousands)

2024

 

2023

Consolidated

 

 

 

Net loss from continuing operations

$

(4,094

)

 

$

(5,788

)

Adjustments:

 

 

 

Interest expense

 

127

 

 

 

1,106

 

Income taxes

 

(1,166

)

 

 

(1,607

)

Depreciation

 

1,522

 

 

 

1,549

 

Amortization

 

367

 

 

 

376

 

EBITDA

 

(3,244

)

 

 

(4,364

)

Acquisition costs and other

 

12

 

 

 

261

 

Stock-based compensation

 

59

 

 

 

220

 

Non-cash lease expense

 

55

 

 

 

64

 

Retention expense

 

3

 

 

 

 

Restructuring and severance costs

 

 

 

 

84

 

Adjusted EBITDA

$

(3,115

)

 

$

(3,735

)

% sales

 

(7.1

)%

 

 

(6.8

)%

 

 

 

 

Specialty Chemicals

 

 

 

Net (loss) income

$

(1,458

)

 

$

1,342

 

Adjustments:

 

 

 

Interest expense

 

19

 

 

 

12

 

Depreciation expense

 

954

 

 

 

952

 

Amortization expense

 

169

 

 

 

158

 

EBITDA

 

(316

)

 

 

2,464

 

Acquisition costs and other

 

 

 

 

2

 

Stock-based compensation

 

7

 

 

 

8

 

Non-cash lease expense

 

19

 

 

 

24

 

Specialty Chemicals Adjusted EBITDA

$

(290

)

 

$

2,498

 

% segment sales

 

(1.4

)%

 

 

10.5

%

 

 

 

 

Tubular Products

 

 

 

Net loss from continuing operations

$

(1,502

)

 

$

(3,293

)

Adjustments:

 

 

 

Depreciation expense

 

544

 

 

 

575

 

Amortization expense

 

198

 

 

 

218

 

EBITDA

 

(760

)

 

 

(2,500

)

Acquisition costs and other

 

12

 

 

 

 

Stock-based compensation

 

11

 

 

 

(20

)

Non-cash lease expense

 

25

 

 

 

31

 

Restructuring and severance costs

 

 

 

 

84

 

Tubular Products Adjusted EBITDA

$

(712

)

 

$

(2,405

)

% segment sales

 

(3.0

)%

 

 

(7.7

)%

 

Contacts

Company Contact

Ryan Kavalauskas

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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