Sixth Consecutive Quarter of Year-Over-Year Net
Sales Growth
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, 2022.
Third Quarter 2022
Summary
(in millions, expect per share and
margin)
Q3 20221
Q3 2021
Change
Net Sales
$100.2
$86.2
16%
Gross Profit
$11.6
$18.0
-36%
Gross Profit Margin
11.5%
20.9%
-940bps
Net Income
$0.6
$8.2
-92%
Diluted Earnings per Share
$0.06
$0.87
-93%
Adjusted EBITDA
$5.6
$14.8
-62%
Adjusted EBITDA Margin
5.6%
17.2%
-1160bps
Management Commentary
“Our third quarter results represent our sixth consecutive
quarter of year-over-year revenue growth,” said Chris Hutter,
president and CEO of Ascent. “While the overall pricing environment
began to decline during the quarter, we were still able to
capitalize on higher stainless prices in our tubular segment
compared to the prior year. We continued to make improvements in
our on-time delivery rates and employee safety record across both
segments, driven by the enhanced safety measures we’ve implemented
over the past two years. I’m also very pleased with the investments
we have made in our customer development initiatives, which we
expect to benefit us in the coming quarters. Notably, we’ve seen
positive reception towards our corporate re-brand and have taken
the opportunity to re-introduce our aligned suite of products to
the market through well attended customer events at our
facilities.
“Our tubular segment continues to make progress as we further
invest in our ongoing sales, inventory and operations planning
initiatives to better shift our sales efforts towards higher margin
products. In addition to pricing pressure on our lower margin
products, we saw some increased competition from the influx of
imports during the quarter, leading to slower sales of these
affected products. We are using this transient period to allocate
additional resources toward improving internal processes and pursue
opportunities that will better position us for growth and
structurally increase the earnings power of the segment. We
anticipate these investments will enable us to react to dynamic
market conditions more quickly and optimize our profitability
across all environments. Our chemicals segment delivered consistent
growth while we continued to invest in our equipment and
infrastructure to enhance our capabilities, drive efficiency and
capture the full potential of this very promising business. I’m
very pleased with the culture that we’ve created at Ascent
Chemicals through an unparalleled level of collaboration leading to
new and innovative commercial opportunities.
“For the rest of 2022, we are focused on expanding our market
share in both segments through our revamped branding and
go-to-market strategy. We are confident in the current position of
our balance sheet and we anticipate accelerating cash flows and
further debt reduction over the coming quarters. We are making
notable progress both identifying and progressing accretive
acquisition opportunities that we believe will lead to durable
value creation.
“As we look towards next year, we are prioritizing our efforts
towards keeping a lean inventory position through a disciplined
working capital strategy, continuing our shift to a higher margin
product mix, and executing on our refined commercial strategy to
drive sales toward large scale projects. Additionally, we remain
committed to our share repurchase program and expect to be highly
opportunistic in the near-term. We are confident in our ability to
continue executing on our strategy, further unlocking value across
our platform and driving long-term results for our
shareholders.”
Third Quarter 2022 Financial
Results
Net sales increased 16% to $100.2 million compared to $86.2
million in the prior year period, attributable to favorable tubular
pricing early in the quarter, as well as the ongoing shift to
higher priced products.
Gross profit was $11.6 million, or 11.5% of net sales, compared
to $18.0 million, or 20.9% of net sales, in the third quarter of
2021. The decrease is primarily attributable to increased input and
labor costs and a slightly unfavorable product mix over the prior
year, partially offset by the elevated pricing environment.
Net income was $0.6 million, or $0.06 diluted earnings per
share, compared to $8.2 million, or $0.87 diluted earnings per
share, in the third quarter of 2021. The decrease is primarily
attributable to lower gross profit within the tubular products
segment and higher corporate expenses aimed at internal process
improvements.
Adjusted EBITDA was $5.6 million compared to $14.8 million in
the third quarter of 2021. Adjusted EBITDA margin was 5.6% compared
to 17.2% in the prior year period. The decline was primarily a
result of the lower volume of tubular sales from some customer
destocking trends, increased tubular operating expenses and
modestly higher corporate expenses.
Segment Results
Ascent Tubular – Net sales in the third quarter of 2022
increased 4% to $72.8 million compared to $70.1 million in the
third quarter of 2021. Operating income in the third quarter was
$4.5 million compared to $11.7 million in the prior year period.
Adjusted EBITDA in the third quarter was $6.3 million compared to
$14.2 million in the prior year period given the aforementioned
factors related to lower volumes and higher operating expenses. As
a percentage of segment net sales, adjusted EBITDA was 8.6%
compared to 20.2% in the third quarter of 2021.
Ascent Chemicals – Net sales in the third quarter of 2022
increased 70% to $27.3 million compared to $16.1 million in the
third quarter of 2021. Operating income in the third quarter was
$1.1 million compared to $1.4 million in the prior year period.
Adjusted EBITDA in the third quarter increased 55% to $2.7 million
compared to $1.8 million in the prior year period and corresponding
adjusted EBITDA margin was 10.0% compared to 10.9% in the third
quarter of 2021.
Liquidity
As of September 30, 2022, total debt was $72.6 million under the
Company’s credit facility, compared to $70.4 million in debt at
December 31, 2021. As of the end of the third quarter of 2022, the
Company had $36.7 million of remaining available borrowing capacity
under its credit facility, compared to $39.4 million at December
31, 2021.
During the third quarter of 2022, the Company repurchased 30,200
shares at an average cost of $16.29 per share for approximately
$0.5 million.
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, 2022.
Ascent management will host the conference call, followed by a
question-and-answer period.
Date: Tuesday, November 08, 2022 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 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.
1 The third quarter of 2022 included $8.3
million in net sales, $0.7 million in operating loss and $0.5
million in adjusted EBITDA from the acquisition of DanChem, which
closed on October 22, 2021.
Ascent Industries Co.
Condensed Consolidated Balance
Sheets
($ in thousands)
(Unaudited)
September 30, 2022
December 31, 2021
Assets
Current assets:
Cash and cash equivalents
$
532
$
2,021
Accounts receivable, net of allowance for
credit losses of $998 and $216, respectively
55,592
50,126
Inventories, net
137,843
103,249
Prepaid expenses and other current
assets
4,632
3,728
Assets held for sale
518
855
Total current assets
199,117
159,979
Property, plant and equipment, net
43,176
43,720
Right-of-use assets, operating leases,
net
29,575
30,811
Goodwill
11,430
12,637
Intangible assets, net
11,794
14,382
Deferred charges, net
228
302
Other non-current assets, net
4,122
4,171
Total assets
$
299,442
$
266,002
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable
$
44,815
$
32,318
Accounts payable - related parties
—
2
Accrued expenses and other current
liabilities
11,430
12,407
Current portion of note payable
580
—
Current portion of long-term debt
2,464
2,464
Current portion of earn-out
liabilities
—
1,961
Current portion of operating lease
liabilities
1,041
1,104
Current portion of finance lease
liabilities
290
233
Total current liabilities
60,620
50,489
Long-term debt
70,131
67,928
Long-term portion of operating lease
liabilities
31,190
32,059
Long-term portion of finance lease
liabilities
1,302
1,414
Deferred income taxes
1,593
2,433
Other long-term liabilities
67
89
Total non-current liabilities
104,283
103,923
Commitments and contingencies
Shareholders' equity:
Common stock, par value $1 per share;
authorized 24,000,000 shares; issued 11,085,103 shares
11,085
11,085
Capital in excess of par value
46,637
46,058
Retained earnings
85,021
63,080
142,743
120,223
Less: cost of common stock in treasury -
850,671 and 918,471 shares, respectively
8,204
8,633
Total shareholders' equity
134,539
111,590
Total liabilities and shareholders'
equity
$
299,442
$
266,002
Note: The condensed consolidated balance
sheet at December 31, 2021 has been derived from the audited
consolidated financial statements at that date. See accompanying
notes to condensed consolidated financial statements.
Ascent Industries Co.
Condensed Consolidated Statements of
Income - Comparative Analysis (Unaudited)
($ in thousands, except per share data)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022
2021
2022
2021
Net sales
Tubular Products
$
72,839
$
70,127
$
248,517
$
193,438
Specialty Chemicals
27,328
16,055
84,070
45,609
$
100,167
$
86,182
$
332,587
$
239,047
Operating income
Tubular Products
$
4,509
$
11,711
$
31,935
$
21,793
Specialty Chemicals
1,097
1,356
6,111
1,999
Corporate
Unallocated corporate expenses
3,890
2,009
10,241
5,138
Acquisition costs and other
149
201
837
201
Proxy contest costs and recoveries
—
—
—
168
Earn-out adjustments
—
160
(7
)
1,430
Total Corporate
4,039
2,370
11,071
6,937
Operating income
1,567
10,697
26,975
16,855
Interest expense
827
329
1,637
1,068
Loss on extinguishment of debt
—
—
—
223
Change in fair value of interest rate
swap
—
—
—
(2
)
Other, net
(118
)
(10
)
(176
)
152
Income before income taxes
858
10,378
25,514
15,414
Income tax provision
234
2,179
3,573
3,235
Net income
$
624
$
8,199
$
21,941
$
12,179
Net income per common share
Basic
$
0.06
$
0.88
$
2.14
$
1.32
Diluted
$
0.06
$
0.87
$
2.11
$
1.30
Average shares outstanding
Basic
10,253
9,287
10,235
9,237
Diluted
10,465
9,403
10,407
9,348
Other data:
Adjusted EBITDA1
$
5,572
$
14,808
$
37,987
$
29,447
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)
Nine Months Ended September
30,
2022
2021
Operating activities
Net income
$
21,941
$
12,179
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation expense
6,380
5,459
Amortization expense
2,588
2,041
Amortization of debt issuance costs
74
71
Asset impairments
—
233
Loss on extinguishment of debt
—
223
Deferred income taxes
(1,227
)
(615
)
Earn-out adjustments
(7
)
1,430
Payments of earn-out liabilities in excess
of acquisition date fair value
(662
)
(11
)
Provision for (reduction of) losses on
accounts receivable
782
(388
)
Provision for losses on inventories
1,871
2,286
Loss (gain) on disposal of property, plant
and equipment
31
(580
)
Non-cash lease expense
322
373
Non-cash lease termination loss
—
5
Change in fair value of interest rate
swap
—
(2
)
Issuance of treasury stock for director
fees
364
58
Stock-based compensation expense
961
695
Changes in operating assets and
liabilities:
Accounts receivable
(6,249
)
(15,525
)
Inventories
(36,127
)
(15,539
)
Other assets and liabilities
(782
)
(1,443
)
Accounts payable
11,774
15,118
Accounts payable - related parties
(2
)
2
Accrued expenses
(1,594
)
3,272
Accrued income taxes
555
6,844
Net cash provided by operating
activities
993
16,186
Investing activities
Purchases of property, plant and
equipment
(3,467
)
(761
)
Proceeds from disposal of property, plant
and equipment
5
1,054
Net cash (used in) provided by
investing activities
(3,462
)
293
Financing activities
Borrowings from long-term debt
352,513
41,648
Proceeds from note payable
967
—
Proceeds from the exercise of stock
options
175
—
Payments on long-term debt
(350,311
)
(54,056
)
Payments on note payable
(387
)
—
Principal payments on finance lease
obligations
(193
)
(31
)
Payments on earn-out liabilities
(1,292
)
(2,891
)
Payments for termination of interest rate
swap
—
(46
)
Repurchase of common stock
(492
)
—
Payments for deferred financing costs
—
(165
)
Net cash provided by (used in)
financing activities
980
(15,541
)
(Decrease) increase in cash and cash
equivalents
(1,489
)
938
Cash and cash equivalents, beginning of
period
2,021
236
Cash and cash equivalents, end of
period
$
532
$
1,174
Supplemental Disclosure of Cash Flow
Information
Cash paid for:
Interest
$
1,176
$
994
Income taxes
4,248
649
Noncash Investing Activities:
Capital expenditures, not yet paid
$
785
$
—
Ascent Industries Co.
Non-GAAP Financial Measures
Reconciliation
Reconciliation of Net Income to
Adjusted EBITDA (Unaudited)
($ in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)
2022
2021
2022
2021
Consolidated
Net income
$
624
$
8,199
$
21,941
$
12,179
Adjustments:
Interest expense
827
329
1,637
1,068
Change in fair value of interest rate
swap
—
—
—
(2
)
Income taxes
234
2,179
3,573
3,235
Depreciation
2,171
1,868
6,380
5,459
Amortization
1,146
680
2,588
2,041
EBITDA
5,002
13,255
36,119
23,980
Acquisition costs and other
149
201
837
201
Proxy contest costs and recoveries1
—
—
—
168
Loss on extinguishment of debt
—
—
—
223
Earn-out adjustments
—
160
(7
)
1,430
Loss on investment in equity securities
and other investments
—
—
—
363
Asset impairments
—
—
—
233
Gain on lease modification
—
—
(2
)
—
Stock-based compensation
313
239
708
695
Non-cash lease expense
108
124
322
373
Retention expense
—
18
—
494
Restructuring and severance costs
—
811
10
1,287
Adjusted EBITDA
$
5,572
$
14,808
$
37,987
$
29,447
% sales
5.6
%
17.2
%
11.4
%
12.3
%
1Proxy contest costs and recoveries for
the nine months ended September 30, 2021 are reimbursements of
documented, out-of-pocket costs to Privet and UPG partially offset
by insurance recoveries for costs related to the 2020 shareholder
activism.
Ascent Industries Co.
Non-GAAP Financial Measures
Reconciliation
Reconciliation of Net Income to
Adjusted EBITDA (Unaudited)
($ in thousands)
Three Months Ended
September 30,
Nine Months Ended
September 30,
($ in thousands)
2022
2021
2022
2021
Tubular Products
Net income
$
4,539
$
11,556
$
32,037
$
20,558
Adjustments:
Interest expense
—
—
1
—
Depreciation expense
1,063
1,449
3,438
4,192
Amortization expense
625
680
1,876
2,041
EBITDA
6,227
13,685
37,352
26,791
Earn-out adjustments
—
160
(7
)
1,430
Stock-based compensation
40
(7
)
64
75
Non-cash lease expense
—
—
(1
)
—
Retention expense
—
18
—
494
Restructuring and severance costs
—
313
—
363
Tubular Products Adjusted EBITDA
$
6,267
$
14,169
$
37,408
$
29,153
% segment sales
8.6
%
20.2
%
15.1
%
15.1
%
Specialty Chemicals
Net income
$
1,088
$
1,360
$
6,083
$
2,001
Adjustments:
Interest expense
9
—
28
1
Depreciation expense
1,097
389
2,897
1,165
Amortization expense
520
—
712
—
EBITDA
2,714
1,749
9,720
3,167
Asset impairments
—
—
—
233
Stock-based compensation
12
5
29
172
Non-cash lease expense
—
—
1
—
Restructuring and severance costs
—
—
—
427
Specialty Chemicals Adjusted EBITDA
$
2,726
$
1,754
$
9,750
$
3,999
% segment sales
10.0
%
10.9
%
11.6
%
8.8
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221108006186/en/
Company Aaron Tam Chief
Financial Officer 1-630-884-9181
Investor Relations Cody
Slach and Cody Cree Gateway Group, Inc. 1-949-574-3860
ACNT@gatewayir.com
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