Ascent Industries Co.

11/04/2025 | Press release | Distributed by Public on 11/04/2025 16:13

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity, and capital resources during the three and nine months ended September 30, 2025 and 2024, respectively. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the year ended December 31, 2024 (the Annual Report), as well as the condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) contained in this report. Unless otherwise specified, all comparisons made are to the corresponding period of 2024. This discussion and analysis is presented in five sections:
•Executive Overview
•Results of Operations and Non-GAAP Financial Measures
•Liquidity and Capital Resources
•Material Cash Requirements from Contractual and Other Obligations
•Critical Accounting Policies and Estimates
Executive Overview
Ascent Industries Co. is a specialty chemicals platform focused on the development, production, and distribution of tailored, performance-driven chemical solutions. Ascent Industries Co. was incorporated in 1958 as the successor to a chemical manufacturing business founded in 1945 known as Blackman Uhler Industries Inc.
The Company has one reportable segment: Specialty Chemicals. The Specialty Chemicals segment produces critical ingredients and process aids for the oil & gas, household, industrial and institutional ("HII"), personal care, coatings, adhesives, sealants and elastomers (CASE), pulp and paper, textile, automotive, agricultural, water treatment, construction and other industries.
During the third quarter, the Company's first as a pure-play specialty chemicals company, we delivered continued earnings improvements with our strongest earnings performance since 2022. Gross profit nearly doubled year-over-year with margins continuing to expand reflecting disciplined sourcing, focused product line management and operational rigor even in a demand environment that remains muted across many end markets. The discussion and analysis of our results of operations refers to continuing operations unless noted.
Divestiture of American Stainless Tubing
On June 23, 2025, the Company and its wholly-owned subsidiary American Stainless Tubing, Inc. ("ASTI"), entered into an Asset Purchase Agreement (the "Purchase Agreement") pursuant to which they sold substantially all of the assets related to ASTI to First Tube, LLC., a Texas limited liability company and wholly-owned subsidiary of Triple-S Steel Holdings, Inc (the "Purchaser"). On June 30, 2025, the Company and Purchaser completed the transaction contemplated by the Purchase Agreement. The consideration for the transaction was approximately $16 million of cash proceeds, of which $0.8 million was placed in an escrow account to be received in 12 months from the closing date. The escrow amount is presented within "Advances and other receivables" on the condensed consolidated balance sheets. The sale resulted in a preliminary, pretax gain on sale of $4.6 million, subject to certain measurement period closing adjustments. ASTI's results of operations are classified under discontinued operations for all periods presented. Prior to the divestiture, ASTI was reported under the Company's former Tubular Products segment.
Divestiture of Bristol Metals
On March 12, 2025, the Company and its wholly-owned subsidiaries Synalloy Metals, Inc. ("Synalloy Metals") and Bristol Metals, LLC. ("BRISMET"), entered into an Asset Purchase Agreement (the "Purchase Agreement") pursuant to which they sold substantially all of the assets related to BRISMET to Bristol Pipe and Tube, Inc., a Delaware corporation and wholly-owned subsidiary of Ta Chen International, Inc. (the "Purchaser"). Ascent and Purchaser also entered into a Transition Services Agreement (the "TSA") dated March 12, 2025, pursuant to which Ascent has agreed to provide certain transition services to Purchaser immediately after the closing for certain agreed upon transition periods. On April 4, 2025, the Company and Purchaser completed the transaction contemplated by the Purchase Agreement. The consideration for the transaction was approximately $45 million of cash proceeds, of which $4.5 million was placed in an escrow account to be received in 18 months from the closing date. The escrow amount is presented within "Advances and other receivables" on the condensed consolidated balance sheets. During the three months ended September 30, 2025, the Company and Purchaser completed the
measurement period closing adjustments under the terms of the Purchase Agreement resulting in a pretax gain on sale of $2.5 million. As result of the sale, BRISMET results of operations are classified under discontinued operations for all periods presented. Prior to the divestiture, BRISMET was reported under the Company's former Tubular Products segment.
Macroeconomic Events
We continue to monitor macroeconomic trends and uncertainties such as key material inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs, which may have adverse effects on net sales and profitability. As a result of the recent tariffs announced by the U.S. presidential administration and potential tariff modifications or the imposition of tariffs or export controls by other countries, we have worked with our suppliers to mitigate supply chain challenges, cost volatility, and consumer and economic uncertainty due to rapid changes in global trade policies. Much of our raw material used in production is domestically sourced and while we do not expect these factors to result in a material negative effect on our net sales or profitability for the remainder of fiscal year 2025, we are continuing to evaluate these factors and their potential effects as well as our ability to potentially offset all or a portion of cost increases through pricing actions and additional cost savings efforts. Economic pressures on customers and consumers, including the challenges of high inflation and the effects of increased tariffs, may negatively affect our net sales and profitability in the future.
Results of Operations
Consolidated Performance Summary
Consolidated net sales for the third quarter of 2025 were $19.7 million, a decrease of $1.2 million, or 5.7%, compared to net sales for the third quarter of 2024. The decrease in net sales was primarily driven by a 12.4% decrease in pounds shipped partially offset by a 6.3% increase in average selling prices.
Consolidated net sales for the nine months ended September 30, 2025 were $56.2 million, a decrease of $6.5 million, or 10.3%, compared to net sales for the nine months ended September 30, 2024. The decrease in net sales was primarily driven by a 23.1% decrease in pounds shipped partially offset by a 15.4% increase in average selling prices.
For the third quarter of 2025, consolidated gross profit increased 94.2% to $5.8 million, or 29.7% of sales, compared to $3.0 million, or 14.4% of sales in the third quarter of 2024. For the nine months ended September 30, 2025, consolidated gross profit increased 91.1% to $13.8 million, or 24.5% of sales, compared to $7.2 million, or 11.5% of sales in the nine months ended September 30, 2024. The increase for the third quarter was primarily attributable to continued sourcing improvements resulting in lower raw material costs as well as reductions in other production related costs. The increase for the nine months ended September 30, 2025 was primarily attributable to aforementioned price gains, continued sourcing improvements resulting in lower raw material costs, reductions in production related costs and a reclass of $1.2 million from cost of good sold to SG&A to better reflect the nature of the ongoing Munhall and Palmer facility expenses.
Consolidated selling, general, and administrative expense (SG&A) for the third quarter of 2025 increased $1.2 million to $6.3 million, or 31.7% of sales, compared to $5.0 million, or 24.1% of sales in the third quarter of 2024. The increase in SG&A expense for the third quarter of 2025 was primarily driven by increases in salaries, wages and benefits, stock compensation, incentive bonus, taxes and licenses, utilities and insurance expense, partially offset by decreases in professional fees.
Consolidated selling, general, and administrative expense (SG&A) for the nine months ended September 30, 2025 was $17.6 million, or 31.3% of sales, compared to $15.5 million, or 24.8% of sales in the nine months ended September 30, 2024. The increase in SG&A expense for the nine months ended September 30, 2025 was primarily driven by increases in salaries, wages and benefits, stock compensation, incentive bonus, taxes and licenses and utilities expenses, partially offset by decreases in professional fees and bad debt expense. The increase in SG&A is attributable to the aforementioned reclass of $1.2 million from cost of good sold to SG&A, and other labor related increases, partially offset by decrease in professional fees and bad debt expense.
Consolidated operating loss in the third quarter of 2025 totaled $0.8 million compared to operating loss of $2.0 million in the third quarter of 2024. Consolidated operating loss in the nine months ended September 30, 2025 totaled $5.5 million compared to operating loss of $8.3 million in the nine months ended September 30, 2024. The operating loss decrease in the third quarter of 2025 and nine months ended September 30, 2025 was primarily driven by aforementioned increase in gross profit offset by increases in SG&A expense.
Specialty Chemicals
Gross profit for the third quarter of 2025 increased to $5.8 million, or 29.7% of sales, compared to $3.1 million, or 15.0% of sales in the third quarter of 2024. Gross profit for the nine months ended September 30, 2025 increased to $13.8 million, or
24.5% of sales, compared to $7.6 million, or 12.1% of sales in the nine months ended September 30, 2024. The increases for the third quarter and nine months were primarily attributable to higher selling prices and continued sourcing improvements resulting in lower raw material cost.
SG&A expense for the third quarter of 2025 was $3.7 million, or 18.8% of sales, compared to $2.7 million, or 13.2% of sales in the third quarter of 2024. SG&A expense for the nine months ended September 30, 2025 was $9.3 million, or 16.5% of sales, compared to $8.2 million, or 13.1% of sales in the nine months ended September 30, 2024. The increase in dollars for the third quarter and nine months ended September 30, 2025 were driven by increases in corporate expense allocation, offset by decreases in salaries, wages and benefits, incentive bonus, professional fees and bad debt expense.
Operating income increased to $2.1 million for the third quarter of 2025 compared to operating income of $0.4 million for the third quarter of 2024. Operating income increased to $4.4 million for the nine months ended September 30, 2025 compared to operating loss of $0.6 million for the nine months ended September 30, 2024. The current year increases in operating income was primarily driven by the aforementioned increases in gross profit offset by increase in SG&A expense.
Corporate & Other Items
Unallocated corporate and other expenses for the third quarter of 2025 increased $0.1 million, or 6.0%, to $2.6 million, or 13.0% of sales, compared to $2.4 million, or 11.6% of sales, in the prior year. The third quarter of 2025 increase in dollars was primarily driven by increases in salaries, wages and benefits, professional fees, taxes and licenses and insurance expenses, partially offset by decreases in corporate allocation expense related to the divestiture of BRISMET and ASTI.
Unallocated corporate and other expenses for the nine months ended September 30, 2025 increased $0.6 million, or 8.0%, to $8.3 million, or 14.8% of sales, compared to $7.7 million, or 12.3% of sales, in the prior year. The nine months of 2025 increase in dollars was primarily driven by increases in salaries, wages and benefits, incentive bonus, tax and licenses and insurance expenses, partially offset by decreases in professional fees and corporate allocation expense related to the divestiture of BRISMET and ASTI and professional fees.
Interest income was $0.5 million and $0.4 million for the third quarter and nine months of 2025 compared to interest expense of $0.1 million and $0.3 million for the third quarter and nine months of 2024 due to escrow interest from ASTI and BRIMET divestiture. The Company had no debt outstanding in either period.
The effective tax rate for continuing operations was 0.7% and (92.3)% for the three and nine months ended September 30, 2025, respectively. The three and nine months ended September 30, 2025 effective tax rate was lower than the U.S. statutory rate of 21.0% primarily due to the valuation allowance over federal and U.S. state deferred tax assets.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we use the following non-GAAP financial measures: EBITDA and Adjusted EBITDA. 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.
EBITDA and Adjusted EBITDA
We define "EBITDA" as earnings before interest, income taxes, depreciation and amortization. We define "Adjusted EBITDA" as EBITDA further adjusted for the impact of non-cash and other items we do not consider in our evaluation of ongoing performance. These items include: 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 and severance costs from net income. We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies calculate EBITDA and Adjusted EBITDA in the same manner. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.
Consolidated EBITDA and Adjusted EBITDA from continuing operations are as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
($ in thousands) 2025 2024 2025 2024
Consolidated
Net loss from continuing operations $ (125) $ (7,801) $ (4,577) $ (12,731)
Adjustments:
Interest expense (income), net (447) 124 (347) 323
Income taxes 58 5,807 (32) 4,413
Depreciation 854 962 2,725 2,923
Amortization 153 174 458 522
EBITDA 493 (734) (1,773) (4,550)
Acquisition costs and other 398 2 665 54
Asset impairments - - 1,622 -
Gain on lease modification - (67) (544) (67)
Stock-based compensation 197 55 318 148
Non-cash lease expense 86 35 85 96
Retention expense - - - 3
Restructuring and severance cost 202 - 202 177
Adjusted EBITDA $ 1,376 $ (709) $ 575 $ (4,139)
% of sales 7.0 % (3.4) % 1.0 % (6.6) %
Specialty Chemicals EBITDA and Adjusted EBITDA are as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
($ in thousands) 2025 2024 2025 2024
Specialty Chemicals
Net income (loss) $ 2,138 $ 367 $ 4,375 $ (681)
Adjustments:
Interest expense, net 7 19 39 57
Depreciation 830 945 2,671 2,863
Amortization 153 174 458 522
EBITDA 3,128 1,505 7,543 2,761
Acquisition costs and other - - 92 -
Stock-based compensation 4 - 4 7
Non-cash lease expense 26 19 30 57
Restructuring and severance costs - - - 109
Specialty Chemicals Adjusted EBITDA $ 3,158 $ 1,524 $ 7,669 $ 2,934
% of segment sales 16.0 % 7.3 % 13.7 % 4.7 %
Liquidity and Capital Resources
We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including level of investment required to support our business strategies, the performance of our business, capital expenditures, credit facilities and working capital management. Capital expenditures and share repurchases are a component of our cash flow and capital management strategy which we can adjust in response to economic and other changes in our business environment. We have a disciplined approach to capital allocation focusing on priorities that support our business and growth.
Sources of Liquidity
Funds generated by operating activities supplemented by our available cash and cash equivalents and our credit facilities are our most significant sources of liquidity. As of September 30, 2025, we held $58.0 million of cash and cash equivalents, as well as $13.7 million of remaining available capacity on our revolving line of credit. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures as well as repay our debt obligations as they become due over the next 12 months and beyond.
Cash Flows
Cash flows from continuing operations were as follows:
Nine Months Ended September 30,
(in thousands) 2025 2024
Total cash (used in) provided by:
Operating activities $ (7,568) $ 924
Investing activities (1,082) (737)
Financing activities (8,705) (676)
Net decrease in cash and cash equivalents $ (17,355) $ (489)
Operating Activities
The increase in cash used in operating activities for the nine months ended September 30, 2025, compared to cash provided by operating activities in the nine months ended September 30, 2024, was primarily driven by changes in working capital and increases in advances partially offset by decreases in net loss year over year. Changes in working capital can vary significantly depending on factors such as the timing of inventory production and purchases, customer payments of accounts receivable and payments to vendors in the regular course of business. Inventory decreased operating cash flows for the first nine months of 2025 by $1.5 million compared to an increase of $3.7 million for the first nine months of 2024, while accounts payable decreased operating cash flows by $1.5 million for the first nine months of 2025, compared to decrease of $2.6 million in the first nine months of 2024. The changes in inventory and accounts payable is primarily driven by higher inventory purchases to match inventory levels with expected sales growth, higher inventory turns year-over-year and decreases in days payables outstanding. Accounts receivable and advances decreased operating cash flows by $5.2 million in the first nine months of 2025 compared to a $0.2 million decrease in the first nine months of 2024. The decrease in cash generated by accounts receivable and advances is primarily driven by the $5.3 million of escrow receivables from the BRISMET and ASTI divestitures partially offset by a slight decrease in days sales outstanding compared to the first nine months of 2024.
Investing Activities
Net cash used in investing activities primarily consists of transactions related to capital expenditures. The increase in cash used in investing activities for the nine months ended September 30, 2025 compared to the cash used in investing activities for the nine months ended September 30, 2024 was primarily due to increases in capital expenditures in the current year compared to the prior year.
Financing Activities
Net cash used in financing activities primarily consists of transactions related to our credit facilities and share repurchases. The increase in cash used in financing activities for the nine months ended September 30, 2025 compared to cash used in financing activities for the nine months ended September 30, 2024 was primarily due to increased repurchases of common stock. The Company had no debt outstanding as of September 30, 2025 and December 31, 2024.
Short-term Debt
The Company has a note payable in the amount of $1.1 million with an annual interest rate of 3.68% maturing April 1, 2026, associated with the financing of the Company's insurance premium in 2025. As of September 30, 2025, the outstanding balance was $0.8 million.
Credit Facilities
On April 4, 2025, Ascent entered into a Limited Consent, Fourth Amendment to Credit Agreement to Loan Documents with BMO Bank N.A. under Ascent's credit facility (the "Fourth Credit Facility Amendment") which released the lien on the assets of BRISMET and removed BRISMET as a loan party and reduced the maximum revolving loan commitment under the credit facility from $60 million to $30 million.
On June 30, 2025, Ascent entered into a Limited Consent, Fifth Amendment to Credit Agreement to Loan Documents with BMO Bank N.A. under Ascent's credit facility (the "Fifth Credit Facility Amendment") which released the lien on the assets of ASTI and removed ASTI as a loan party. The maximum revolving loan commitment under the credit facility remains $30 million with an interest rate between 1.85% and 2.35%, depending on average availability under the credit facility and the Company's consolidated fixed charge coverage ratio. The term of the credit facility remains through December 31, 2027.
The Company had no debt outstanding under its credit facilities as of September 30, 2025 and December 31, 2024. See Note 8for additional information on the Company's debt.
Share Repurchases and Dividends
We have a share repurchase program, authorized by the Company's Board of Directors, that is executed through purchases made from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Shares repurchased are returned to status of authorized, but unissued shares of common stock or held in treasury. As of September 30, 2025, the Company has 274,970 shares of its share repurchase authorization remaining.
Shares repurchased for the three and nine months ended September 30, 2025 and 2024 were as follows:
Three Months Ended September 30, Nine Months Ended
September 30,
2025 2024 2025 2024
Number of shares repurchased 64,782 42,623 725,775 74,186
Average price per share $ 12.85 $ 9.79 $ 12.23 $ 9.92
Total cost of shares repurchased $ 834,520 $ 418,563 $ 8,897,903 $ 738,361
At the end of each fiscal year the Board of Directors reviews the financial performance and capital needed to support future growth to determine the amount of cash dividend, if any, which is appropriate. In 2024, no dividends were declared or paid by the Company.
Other Financial Measures
Below are additional financial measures that we believe are important in understanding the Company's liquidity position from year to year. The metrics are defined as:
Liquidity Measure:
•Current ratio = current assets divided by current liabilities. The current ratio will be determined by the Company using generally accepted accounting principles, consistently applied.
Profitability Ratio:
•Return on average equity ("ROAE") = net income divided by the trailing 12-month average of equity. The ROAE will be determined by the Company using generally accepted accounting principles, consistently applied.
Results of these additional measures are as follows:
September 30, 2025 December 31, 2024
Current ratio 6.4 2.8
Return on average equity (7.2)% (34.0)%
Material Cash Requirements from Contractual and Other Obligations
As of September 30, 2025, our material cash requirements for our known contractual and other obligations were as follows:
•Operating and Finance Leases- The Company enters into various lease agreements for the real estate and manufacturing equipment used in the normal course of business. Operating and finance lease obligations were $20.7 million, with $1.3 million payable within 12 months. See Note 9for further detail of our lease obligations and the timing of expected future payments.
The Company has no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on the Company's financial position, revenues, results of operations, liquidity, or capital expenditures. We expect capital spending to be as much as $1.6 million for the remainder of fiscal 2025.
Critical Accounting Policies and Estimates
We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements presented in the Annual Report on Form 10-K for the year ended December 31, 2024. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2024.
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