UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the Transition Period from _____ to _____

COMMISSION FILE NUMBER 0-19687

~~Synalloy Corporation~~Ascent Industries Co.

(Exact name of registrant as specified in its charter)

Delaware

57-0426694

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1400 16th Street,

Suite 270,

Oak Brook,

Illinois

60523

(Address of principal executive offices)

(Zip Code)

~~(804)~~(630)

~~822-3260~~884-9181

(Registrant's telephone number, including area code)

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	~~SYNL~~ACNT	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐x

Non-accelerated filer

x☐

Smaller reporting company

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. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

The number of shares outstanding of the registrant's common stock as of May ~~9, 2022~~5, 2023 was ~~10,239,998~~10,172,945

~~Synalloy Corporation~~Ascent Industries Co.

Table of Contents



PART I. FINANCIAL INFORMATION
Disclosure Regarding Forward Looking Statements		32
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	43
	Condensed Consolidated Statements of ~~Operations~~Income for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (unaudited)	54
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (unaudited)	65
	Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022 (unaudited)	76
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Note 1: Basis of Presentation	87

	Note 2: ~~Acquisitions~~Revenue Recognition	97
	Note 3: ~~Revenue Recognition~~Fair Value of Financial Instruments	108
	Note 4: ~~Fair Value of Financial Instruments~~Inventories	10
	Note 5: ~~Inventories~~Property, Plant and Equipment	10
	Note 6: Goodwill, Intangible Assets and Deferred Charges	10
	Note 7: Debt	11
	Note 8: Leases	12
	Note ~~6: Property, Plant and Equipment~~	13
	~~Note 7: Intangible Assets and Deferred Charges~~	13
	~~Note 8: Long-term Debt~~9: Shareholders' Equity	14
	Note ~~9: Leases~~10: Earnings Per Share	14
	Note 11: Income Taxes	15
	Note ~~10: Shareholders' Equity~~12: Commitments and Contingencies	15
	Note 13: Industry Segments	16
	~~Note 11: Earnings Per Share~~	17
	~~Note 12: Income Taxes~~	17
	~~Note 13: Commitments and Contingencies~~	17
	~~Note 14: Industry Segments~~	18
	~~Note 15: Subsequent Events~~	19
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2018
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2725
Item 4.	Controls and Procedures	2826

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2827
Item 1A.	Risk Factors	2827
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2827
Item 3.	Defaults Upon Senior Securities	2827
Item 4.	Mine Safety Disclosures	2827
Item 5.	Other Information	2827
Item 6.	Exhibits	2928

	Signatures	3029

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "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, including without limitation those identified below, 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. The following factors could cause actual results to differ materially from historical results or those anticipated: adverse economic conditions, including risks relating to the impact and spread of and the government’s response to COVID-19; inability to weather an economic downturn; the impact of competitive products and pricing; product demand and acceptance risks; raw material and other increased costs; raw material availability; financial stability of the Company’s customers; customer delays or difficulties in the production of products; loss of consumer or investor confidence; employee relations; ability to maintain workforce by hiring trained employees; labor efficiencies; risks associated with acquisitions; environmental issues; negative or unexpected results from tax law changes; inability to comply with covenants and ratios required by the Company’s debt financing arrangements; and other risks detailed from time-to-time in ~~Synalloy Corporation's~~Ascent Industries Co.'s Securities and Exchange Commission filings, including our Annual Report on Form 10-K, which filings are available from the SEC. ~~Synalloy Corporation~~Ascent Industries Co. assumes no obligation to update any forward-looking information included in this release.

Part I - Financial Information

Item 1. Financial Statements

~~SYNALLOY CORPORATION~~Ascent Industries Co.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)


		(Unaudited)					(Unaudited)
		March 31, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,241	$	2,021	Cash and cash equivalents	$	421	$	1,441
Accounts receivable, net of allowance for credit losses of $456 and $216, respectively		67,819		50,126
Accounts receivable, net of allowance for credit losses of $975 and $1,250, respectively						Accounts receivable, net of allowance for credit losses of $975 and $1,250, respectively	46,779		45,120
Inventories, net	Inventories, net	112,114		103,249		Inventories, net	99,792		114,452
Prepaid expenses and other current assets	Prepaid expenses and other current assets	3,808		3,728		Prepaid expenses and other current assets	11,400		8,982
Assets held for sale	Assets held for sale	797		855		Assets held for sale	—		380
Total current assets	Total current assets	185,779		159,979		Total current assets	158,392		170,375
Property, plant and equipment, net	Property, plant and equipment, net	42,720		43,720		Property, plant and equipment, net	41,445		42,346
Right-of-use assets, operating leases, net	Right-of-use assets, operating leases, net	30,431		30,811		Right-of-use assets, operating leases, net	28,871		29,224
Goodwill	Goodwill	12,637		12,637		Goodwill	11,389		11,389
Intangible assets, net	Intangible assets, net	13,661		14,382		Intangible assets, net	9,991		10,387

Deferred income taxes						Deferred income taxes	1,000		1,353
Deferred charges, net	Deferred charges, net	278		302		Deferred charges, net	178		203
Other non-current assets, net	Other non-current assets, net	4,127		4,171		Other non-current assets, net	3,766		3,766
Total assets	Total assets	$	289,633	$	266,002	Total assets	$	255,032	$	269,043

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	44,268	$	32,318	Accounts payable	$	25,783	$	22,731
Accounts payable - related parties		2		2

Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	13,609		12,407		Accrued expenses and other current liabilities	8,040		6,560
Current portion of note payable						Current portion of note payable	98		387
Current portion of long-term debt	Current portion of long-term debt	2,464		2,464		Current portion of long-term debt	2,464		2,464
Current portion of earn-out liabilities		891		1,961

Current portion of operating lease liabilities	Current portion of operating lease liabilities	1,140		1,104		Current portion of operating lease liabilities	1,077		1,056
Current portion of finance lease liabilities	Current portion of finance lease liabilities	248		233		Current portion of finance lease liabilities	273		280

Total current liabilities	Total current liabilities	62,622		50,489		Total current liabilities	37,735		33,478
Long-term debt	Long-term debt	68,610		67,928		Long-term debt	56,189		69,085

Long-term portion of operating lease liabilities	Long-term portion of operating lease liabilities	31,748		32,059		Long-term portion of operating lease liabilities	30,628		30,911
Long-term portion of finance lease liabilities	Long-term portion of finance lease liabilities	1,362		1,414		Long-term portion of finance lease liabilities	1,378		1,242
Deferred income taxes		2,861		2,433

Other long-term liabilities	Other long-term liabilities	76		89		Other long-term liabilities	58		68
Total non-current liabilities	Total non-current liabilities	104,657		103,923		Total non-current liabilities	88,253		101,306

Commitments and contingencies – See Note 13		0		0
Commitments and contingencies – See Note 12						Commitments and contingencies – See Note 12

Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Common stock, par value $1 per share; authorized 24,000,000 shares; issued 11,085,000 shares		11,085		11,085
Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,172,265 shares issued and outstanding, respectively						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	Capital in excess of par value	46,028		46,058		Capital in excess of par value	46,903		47,021
Retained earnings	Retained earnings	73,340		63,080		Retained earnings	79,947		85,146
		130,453		120,223			137,935		143,252
Less: cost of common stock in treasury - 861,605 and 918,471 shares, respectively		8,099		8,633
Less: cost of common stock in treasury - 912,838 and 924,504 shares, respectively						Less: cost of common stock in treasury - 912,838 and 924,504 shares, respectively	(8,891)		(8,993)
Total shareholders' equity	Total shareholders' equity	122,354		111,590		Total shareholders' equity	129,044		134,259
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	289,633	$	266,002	Total liabilities and shareholders' equity	$	255,032	$	269,043

Note: The condensed consolidated balance sheet at December 31, ~~2021~~2022 has been derived from the audited consolidated financial statements at that date. See accompanying notes to condensed consolidated financial statements.

~~SYNALLOY CORPORATION~~Ascent Industries Co.

Condensed Consolidated Statements of ~~Operations~~Income (Unaudited)

(in thousands, except per share data)


		Three Months Ended March 31,				Three Months Ended March 31,
		2022		2021				2023		2022
Net sales	Net sales	$	116,218	$	69,778		Net sales	$	82,452	$	116,218
Cost of sales	Cost of sales	93,722		61,043			Cost of sales	78,160		93,722
Gross profit	Gross profit	22,496		8,735			Gross profit	4,292		22,496

Selling, general and administrative	Selling, general and administrative	8,646		6,869			Selling, general and administrative	9,553		8,646
Acquisition costs and other	Acquisition costs and other	531		—			Acquisition costs and other	333		531
Proxy contest costs and recoveries		—		(464)

Earn-out adjustments	Earn-out adjustments	102		225			Earn-out adjustments	—		102

Operating income		13,217		2,105
Operating income (loss)							Operating income (loss)	(5,594)		13,217
Other expense (income)	Other expense (income)						Other expense (income)
Interest expense	Interest expense	403		387			Interest expense	1,107		403
Loss on extinguishment of debt		—		223
Change in fair value of interest rate swaps		—		(2)

Other, net	Other, net	(35)		162			Other, net	(95)		(35)
Income before income taxes		12,849		1,335
Income tax provision		2,589		241
Income (loss) before income taxes							Income (loss) before income taxes	(6,606)		12,849
Income tax provision (benefit)							Income tax provision (benefit)	(1,407)		2,589

Net income		$	10,260	$	1,094
Net income (loss)							Net income (loss)	$	(5,199)	$	10,260

Net income per common share:
Net income (loss) per common share:							Net income (loss) per common share:
Basic	Basic	$	1.00	$	0.12		Basic	$	(0.51)	$	1.00
Diluted	Diluted	$	0.99	$	0.12		Diluted	$	(0.51)	$	0.99

Weighted average shares outstanding:	Weighted average shares outstanding:						Weighted average shares outstanding:
Basic	Basic	10,209		9,191			Basic	10,148		10,209
Dilutive effect from stock options and grants	Dilutive effect from stock options and grants	111		97			Dilutive effect from stock options and grants	—		111
Diluted	Diluted	10,320		9,288			Diluted	10,148		10,320

See accompanying notes to condensed consolidated financial statements.

~~SYNALLOY CORPORATION~~Ascent Industries Co.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

Three Months Ended March 31,
2022 2021
Operating activities
Net income $ 10,260 $ 1,094
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense 2,116 1,817
Amortization expense 721 680
Amortization of debt issuance costs 25 21
Loss on extinguishment of debt — 223
Deferred income taxes 428 (41)
Earn-out adjustments 102 225
Payments on earn-out liabilities in excess of acquisition date fair value (372) —
Provision for losses on accounts receivable 240 12
Provision for losses on inventories 496 184
Loss on disposal of property, plant and equipment (5) 28
Non-cash lease expense 107 124
Change in fair value of interest rate swap — (2)
Issuance of treasury stock for director fees 254 —
Stock-based compensation expense 132 187
Changes in operating assets and liabilities:
Accounts receivable (17,933) (11,181)
Inventories (9,302) (3,866)
Other assets and liabilities (27) 38
Accounts payable 11,950 6,357
Accrued expenses (959) (569)
Accrued income taxes 2,161 3,901
Net cash provided by (used in) operating activities 394 (768)
Investing activities
Purchases of property, plant and equipment (1,117) (245)
Proceeds from disposal of property, plant and equipment 5 18
Net cash used in investing activities (1,112) (227)
Financing activities
Borrowings from long-term debt 122,068 14,730
Proceeds from exercise of stock options 118 —
Payments on long-term debt (121,386) (12,333)
Principal payments on finance lease obligations (62) (10)
Payments on earn-out liabilities (800) (1,029)
Payments for termination of interest rate swap — (46)
Payments of deferred financing costs — (155)
Net cash (used in) provided by financing activities (62) 1,157
(Decrease) increase in cash and cash equivalents (780) 162
Cash and cash equivalents at beginning of period 2,021 236
Cash and cash equivalents at end of period $ 1,241 $ 398
Supplemental disclosure
Cash paid for:
Interest $ 317 $ 315
Income taxes $ 2 $ —

~~See accompanying notes to condensed consolidated financial statements.~~

~~SYNALLOY CORPORATION~~

~~Condensed Consolidated Statement of Shareholders' Equity (Unaudited)~~

~~(in thousands)~~

Three Months Ended March 31, 2022
Common Stock Capital in Excess of
Par Value Retained Earnings Cost of Common Stock in Treasury Total
Shares Amount
Balance December 31, 2021 11,085 $ 11,085 $ 46,058 $ 63,080 $ (8,633) $ 111,590
Net income — — — 10,260 — 10,260
Issuance of 43,082 shares of common stock from treasury — — (151) — 405 254
Exercise of stock options for 13,784 shares, net — — (11) — 129 118
Stock-based compensation — — 132 — — 132
Balance March 31, 2022 11,085 $ 11,085 $ 46,028 $ 73,340 $ (8,099) $ 122,354


	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 on 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 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 at beginning of period	1,441		2,021
Cash and cash equivalents at end of period	$	421	$	1,241

Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest	$	1,061	$	317
Income taxes	$	817	$	2

Noncash Investing Activities:
Capital expenditures, not yet paid	$	266	$	—

See accompanying notes to condensed consolidated financial statements.

Three Months Ended March 31, 2021
Common Stock Capital in Excess of
Par Value Retained Earnings Cost of Common Stock in Treasury Total
Shares Amount
Balance December 31, 2020 10,300 $ 10,300 $ 37,719 $ 42,835 $ (10,559) $ 80,295
Net income — — — 1,094 — 1,094
Issuance of 25,363 shares of common stock from treasury — — (238) — 238 —
Stock-based compensation — — 187 — — 187
Balance March 31, 2021 10,300 $ 10,300 $ 37,668 $ 43,929 $ (10,321) $ 81,576

Ascent Industries Co.

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(in thousands)


	Three Months Ended March 31, 2023

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock			Total
	Shares	Amount						Shares	Amount
Balance December 31, 2022	11,085	$	11,085	$	47,021	$	85,146	924	$	(8,993)	$	134,259
Net loss	—	—		—		(5,199)			—		(5,199)
Issuance of 43,479 shares of common stock from treasury	—	—		(429)		—		(43)	429		—

Stock-based compensation	—	—		311		—			—		311
Repurchase of 32,313 shares of common stock	—	—		—		—		32	(327)		(327)
Balance March 31, 2023	11,085	$	11,085	$	46,903	$	79,947	913	$	(8,891)	$	129,044

See accompanying notes to condensed consolidated financial statements.


	Three Months Ended March 31, 2022

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock			Total
	Shares	Amount						Shares	Amount
Balance December 31, 2021	11,085	$	11,085	$	46,058	$	63,080	918	$	(8,633)	$	111,590
Net income	—	—		—		10,260			—		10,260
Issuance of 43,082 shares of common stock from treasury	—	—		(151)		—		(43)	405		254
Exercise of stock options for 13,784 shares, net	—	—		(11)		—		(14)	129		118
Stock-based compensation	—	—		132		—			—		132

Balance March 31, 2022	11,085	$	11,085	$	46,028	$	73,340	861	$	(8,099)	$	122,354

See accompanying notes to condensed consolidated financial statements.

~~Synalloy Corporation~~Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Unless indicated otherwise, the terms "Company," "we," "us," and "our" refer to ~~Synalloy Corporation~~Ascent Industries Co. and its consolidated subsidiaries.

Note 1: Basis of Presentation

Basis of Financial Statement Presentation

The accompanying unaudited condensed consolidated financial statements and notes to the unaudited condensed consolidated financial statements are presented in accordance with the rules and regulations of the ~~Company have been~~Securities and Exchange Commission and do not include all the disclosures normally required in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") ~~for interim~~. The unaudited condensed consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally acceptedstatements, in ~~the United States of America for complete financial statements. In~~ the opinion of management, contain all ~~adjustments (consisting of~~ normal recurring ~~accruals) considered~~adjustments necessary ~~for~~to present a fair ~~presentation have been included~~statement of the condensed consolidated balance sheets as ~~required by Regulation S-X, Rule 10-01.~~of March 31, 2023, the statements of income and shareholders’ equity for the three months ended March 31, 2023 and 2022, and the statements of cash flows for the three months ended March 31, 2023 and 2022. The December 31, 2022 condensed consolidated balance sheet was derived from the audited financial statements.

These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the "Annual Report"). The financial results for the interim periods may not be indicative of the financial results for the entire ~~year.~~year as our future assessment of our current expectations could result in material impacts to our consolidated financial statements in future reporting periods.

Use of Estimates

The preparation of the Company's financial statements in ~~conformity~~accordance with ~~U.S. GAAP required~~accounting principles generally accepted in the United States of America requires management to make estimates ~~and judgments~~ that affect the reported amounts ~~reported~~of assets, liabilities, sales and ~~disclosed~~expenses, and related disclosures of contingent assets and liabilities. Significant items subject to such estimates and assumptions include the carrying value of property, plant and equipment; intangible assets; the fair value of assets or liabilities acquired in a business combination; valuation allowances for receivables, inventories and deferred income tax assets and liabilities; environmental liabilities; liabilities for potential tax deficiencies; and, potential litigation claims and settlements. The Company bases these estimates on historical results and various other assumptions believed to be reasonable, all of which form the ~~condensed consolidated financial statements~~basis for making estimates concerning the carrying value of assets and ~~accompanying notes.~~liabilities that are readily available from other sources. Actual results ~~could~~may differ ~~materially~~ from ~~those~~these estimates.

Reclassifications

~~COVID-19 Update~~

~~The COVID-19 pandemic~~Certain prior period amounts have been reclassified to conform to current period presentation, including the reclassification of immaterial revenue and related responses by public health and governmental authorities to contain and combat the outbreak and spread have adversely affected many economic sectors, significantly disrupted the global supply chain and fueled producer price and consumer inflation. During the first quarter of 2022, aspects of the Company's business continued to be affected by macroeconomic factorsexpenses related to the COVID-19 pandemic, specifically with labor shortages at our plants and other areas of our business. We continue to experience demand for our products, however, the full extent of the future impact of the COVID-19 pandemic onPalmer business within the Company's ~~operational and financial performance is currently uncertain and will depend on many factors outside of the Company's control.~~reportable segments.

Accounting Pronouncements ~~Not Yet~~Recently Adopted

InOn March ~~2020,~~31, 2023, the ~~Financial Accounting Standards Board (FASB) issued~~Company adopted ASU 2020-04 "Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting." The ASU, and subsequent clarifications, provide practical expedients for contract modification accounting related to the transition away from the London Interbank Offered Rate (LIBOR) and other interbank offering rates to alternative reference rates. The expedients are applicable to contract modifications made and hedging relationships entered into on or before December 31, ~~2022.~~2024. The Company intends to use the expedients where needed for reference rate transition. The ~~Company continues to evaluate~~adoption of this standard ~~update and does~~by the Company did not ~~currently expect~~have a material ~~impact to~~effect on the ~~Company’s~~condensed consolidated financial statements or footnote disclosures.

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Note 2: Acquisitions~~

~~Acquisition of DanChem Technologies, Inc.~~

On October 22, 2021, the Company completed the acquisition of DanChem, a contract manufacturer of chemical products located in Danville, Virginia. The Company accounted for the transaction as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805 - "Business Combinations." The preliminary purchase price was $34.1 million including $1.5 million in cash obtained through the acquisition. The purchase price was paid in cash and funded through a drawdown of $34.5 million on the Company’s existing revolving credit facility. Amounts outstanding under the revolving line of credit portion of the facility currently bear interest, at the Company's option, at (a) the Base Rate (as defined in the Credit Agreement) plus 0.50%, or (b) LIBOR plus 150%. See ~~Note 8~~ ~~for more information on the Company's long-term debt.~~

The table below summarizes the preliminary estimates of fair value of identifiable assets acquired and liabilities assumed in the Acquisition. These preliminary estimates of the fair value are subject to revisions, which may result in an adjustment to the preliminary values presented below.


~~(in thousands)~~	~~October 22, 2021~~
~~Cash and cash equivalents~~	$	~~1,533~~
~~Accounts receivable, net of allowance for credit losses~~	~~5,358~~
~~Inventories, net~~	~~1,561~~
~~Prepaid expenses and other current assets~~	~~454~~
~~Property, plant and equipment, net~~	~~15,697~~
~~Right of use asset, operating leases, net~~	~~208~~
~~Intangible assets, net~~	~~5,750~~
~~Total identifiable assets acquired~~	~~30,561~~

~~Accounts payable~~	~~1,751~~
~~Accrued expenses and other current liabilities~~	~~1,622~~
~~Current portion of operating lease liabilities~~	51
~~Current portion of finance lease liabilities~~	~~215~~
~~Deferred income taxes~~	~~2,542~~
~~Long-term portion of operating lease liabilities~~	~~157~~
~~Long-term portion of finance lease liabilities~~	~~1,408~~
~~Total identifiable liabilities assumed~~	~~7,746~~

~~Net identifiable assets acquired~~	~~22,815~~
~~Transaction price~~	~~34,097~~
~~Goodwill~~	$	~~11,282~~

The Company is in various phases of valuing the assets and liabilities assumed, including deferred tax balances, and the Company's estimates of these values was still preliminary on March 31, 2022. Therefore, these provisional amounts are subject to change as the Company continues to evaluate information required to complete the valuations throughout the measurement period, which will not exceed one year from the acquisition date.

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired. The recognized goodwill is attributable to operational synergies, assembled workforce and growth opportunities and was allocated to the Company's ~~Specialty Chemicals Segment~~. ~~Substantially all of the goodwill resulting from this acquisition is not expected to be deductible for tax purposes.~~

~~Approximately~~ ~~$0.3 million~~ ~~of one-time, acquisition-related costs, is recognized in acquisition costs and other expenses in the condensed consolidated statement of operations for the~~ ~~three months ended March 31, 2022~~.

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~The Company identified DanChem’s customer relationships, product development know-how, and tradename as finite-lived assets with estimated fair values as of the acquisition date~~ ~~of $5.1 million, $0.5 million, and $0.2 million, respectively.~~ ~~The finite-lived assets are subject to amortization using the straight-line method over 15 years.~~

~~Total net sales and operating income for DanChem for the~~ ~~three months ended March 31, 2022~~ ~~were as follows:~~


~~(in thousands)~~	Three Months Ended March 31, 2022
~~Net sales~~	$	~~7,474~~
~~Operating income~~	$	~~235~~

Note 3:2: Revenue Recognition

Revenue is generated primarily from contracts to produce, ship and deliver steel and specialty chemical products. ~~The Company’s performance obligations~~Revenues are ~~satisfied and revenue is~~ recognized when control ~~and title~~ of the ~~contract~~ promised goods or services is transferred to our ~~customers~~customers upon shipment, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The Company's revenues are derived from contracts with customers where performance obligations are satisfied at a point-in-time or over-time. For certain contracts under which the Company produces product with no alternative use and for which the Company has an enforceable right to payment during the production cycle, product in which the material is customer owned or in which the customer simultaneously consumes the benefits throughout the production cycle, progress toward satisfying the performance obligation is measured using an output method of units produced. Certain customer arrangements consist of bill-and-hold characteristics

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

under which transfer of control has been met (including the passing of title and significant risk and reward of ownership to the customers). Therefore, the customers can direct the use of the bill-and-hold inventory while we retain physical possession of the product until it is shipped ~~or services rendered. Revenues are recorded net of any sales incentives and discounts.~~ to a customer at a point in time in the future.

Sales tax and other taxes we collect with revenue-producing activities are excluded from revenue. Shipping costs charged to customers are treated as fulfillment activities and are recorded in both revenue and cost of sales at the time control is transferred to the customer. Costs related to obtaining sales contracts are incidental and are expensed when incurred. Because customers are invoiced at the time title transfers and the Company’s right to consideration is unconditional at that time, the Company does not maintain contract asset balances. Additionally, the Company does not maintain material contract liability balances, as performance obligations for substantially all contracts are satisfied prior to customer payment for product. The Company offers industry standard payment terms.

The following table presents the Company's revenues, disaggregated by product ~~group. Substantially all of the Company's revenues~~group:


	Three Months Ended March 31,
(in thousands)		2023		2022
Fiberglass and steel liquid storage tanks and separation equipment		$	50	$	114
Heavy wall seamless carbon steel pipe and tube		12,387		12,373
Stainless steel pipe and tube		44,460		62,239
Galvanized pipe and tube		1,806		13,771
Specialty Chemicals		23,749		27,721
Net sales		$	82,452	$	116,218

Performance obligations are ~~derived from~~supported by contracts with customers, ~~where~~providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance ~~obligations are satisfied~~obligation is typically indicated by the terms of the contract. The following table represents the Company's revenue recognized at a ~~point-in-time.~~point- in-time and over-time:

Three Months Ended March 31,
(in thousands) 2022 2021
Fiberglass and steel liquid storage tanks and separation equipment $ 114 $ 141
Heavy wall seamless carbon steel pipe and tube 12,373 7,818
Stainless steel pipe and tube 62,239 39,911
Galvanized pipe and tube 13,771 7,343
Specialty chemicals 27,721 14,565
Net sales $ 116,218 $ 69,778


	Three Months Ended March 31,
(in thousands)	2023		2022
Point-in-time	$	77,029	$	109,003
Over-time	$	5,423	$	7,215

Note 4:3: Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, we use a three-tier valuation hierarchy based upon observable and non-observable inputs:

Level 1 - Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date.

Level 2 - Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

•Quoted prices for similar assets or liabilities in active markets;

•Quoted prices for identical or similar assets or liabilities in non-active markets;

•Inputs other than quoted prices that are observable for the asset or liability; and

•Inputs that are derived principally from or corroborated by other observable market data.

Level 3 - Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using model-based techniques, including option pricing models, discounted cash flow models, probability weighted models, and Monte Carlo simulations.

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~The Company's financial instruments include cash and cash equivalents, accounts receivable, accounts payable, earn-out liabilities, a revolving line of credit and long-term debt.~~

~~Assets and Liabilities Measured at Fair Value on a Recurring Basis~~

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

~~Level 3: Contingent consideration (earn-out) liabilities~~

The fair value of contingent consideration ("earn-out") liabilities resulting from the 2018 MUSA-Galvanized acquisition and the 2019 American Stainless acquisition are classified as Level 3. Each quarter-end, the Company re-evaluates its assumptions for all earn-out liabilities and adjusts to reflect the updated fair values. Changes in the estimated fair value of the earn-out liabilities are reflected in operating income in the periods in which they are identified. Changes in the fair value of the earn-out liabilities may materially impact and cause volatility in the Company's operating results. The significant unobservable inputs used in the fair value measurement of the Company's earn-out liabilities are the discount rate, timing of the estimated payouts, and future revenue projections. Significant increases (decreases) in any of those inputs would not have resulted in a material difference in the fair value measurement of the earn-out liabilities for the three months ended March 31, 2022.

~~The following table presents a summary of changes in fair value of the Company's Level 3 earn-out liabilities measured on a recurring basis for the three months ended March 31, 2022:~~

(in thousands) MUSA-Galvanized American Stainless Total
Balance December 31, 2021 $ 1,106 $ 855 $ 1,961
Earn-out payments during the period (317) (855) (1,172)
Changes in fair value during the period 102 — 102
Balance March 31, 2022 $ 891 $ — $ 891

~~For the three months ended March 31, 2022, the Company had no unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value instruments.~~

~~Quantitative Information about Significant Unobservable Inputs Used in Level 3 Fair Value Measurements~~

~~The following table summarizes the significant unobservable inputs in the fair value measurement of our contingent consideration (earn-out) liabilities as of March 31, 2022:~~

Instrument Fair Value
March 31, 2022 Principal Valuation Technique Significant Unobservable Inputs Range Weighted
Average
Contingent consideration (earn-out) liabilities $891 Probability Weighted Expected Return Discount rate - 5%
Timing of estimated payouts 2022 -
Future revenue projections $8.9M $8.9M

The weighted average discount rate was calculated by applying an equal weighting to each contingent consideration's (earn-out liabilities) discount rate. The weighted average future revenue projection was calculated by applying an equal weighting of probabilities to each forecasted scenario within the valuation models to determine the probability weighted sales applicable to the contingent consideration (earn-out liabilities).

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

During the three months ended March 31, ~~2022,~~2023, the Company's only significant measurements of assets or liabilities at fair value on a non-recurring basis subsequent to their initial recognition were certain ~~assets classified as held for sale.~~

long-lived assets.

~~Synalloy Corporation~~Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Long-lived assets

The Company reviews the carrying amounts of long-lived assets whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable. The Company assesses performance quarterly against historical patterns, projections of future profitability, and whether it is more likely than not that the assets will be disposed of significantly prior to the end of their estimated useful life for evidence of possible impairment. An impairment loss is recognized when the carrying amount of the asset (disposal) group is not recoverable and exceeds fair value. The Company estimates the fair values of assets subject to long-lived asset impairment based on the Company's own judgments about the assumptions market participants would use in pricing the assets and observable market data, when available. The Company classifies these fair value measurements as Level 3.

During the fourth quarter of 2022, the Company began a strategic reassessment of certain operations to drive an increased focus on its core operations and to continue to improve overall performance and operating profitability. As a result of this reassessment, management and the Board of Directors decided to pursue an exit of the Company's galvanized pipe and tube operations at its Munhall facility. During the first quarter of 2023, it was determined that a continued change in the use of the assets of the Munhall facility had occurred before the end of their previous useful lives, and therefore, had experienced a triggering event and were evaluated for recoverability. Based on this evaluation of the Munhall assets, it was determined the assets were recoverable and no impairment was recorded.

Assets Held for Sale

On February 17, 2021, the Board of Directors authorized the permanent cessation of operations at Palmer of Texas Tanks, Inc. ("Palmer") and the subleasing of the Palmer facility. As of December 31, 2021, the Company permanently ceased operations at the Palmer facility and determined that the remaining asset group met the criteria to be classified as held for sale, and therefore classified the related assets as held for sale on the consolidated balance sheets. The Company determined that the exit from this business did not represent a strategic shift that had a major effect on its consolidated results of operations, and therefore this business was not classified as discontinued operations. As of March 31, ~~2022,~~2023, the Company has disposed of all remaining ~~Palmer~~ assets ~~continue to be~~ classified as held for ~~sale.~~ sale at the Palmer facility. The ~~results of operations~~Palmer assets held for ~~this business are included within the Metals Segment for all periods presented in this quarterly report. The Company uses observable inputs, such~~sale at December 31, 2022 were classified as ~~prices of comparable assets in active markets to determine the~~Level 2 fair value ~~of the remaining assets. The Company classifies these fair value measurements as Level 2.~~measurements.

The assets classified as held for sale as are as follows:

(in thousands) March 31, 2022 December 31, 2021
Inventory, net $ 559 $ 617
Property, plant and equipment, net 238 238
Assets held for sale $ 797 $ 855


(in thousands)	March 31, 2023		December 31, 2022
Inventory, net	$	—	$	198
Property, plant and equipment, net	—		182
Assets held for sale	$	—	$	380

The Company remains obligated under the terms of the leases for the rent and other costs that may be associated with the lease of the facility through 2036. ~~The~~During the fourth quarter of 2022, the Company ~~currently has~~entered into an amended sublease agreement with a third party to sublease ~~for a portion~~the entirety of the Palmer ~~facility~~facility. The sublease agreement amends the previous sublease agreement entered into in the fourth quarter of 2021 and ~~is actively pursuing a sublease for~~continues through the remaining ~~portion~~term of the ~~facility.~~Master Lease Agreement. The ~~Company~~sublease will ~~continue~~expire on September 30, 2036, unless terminated in accordance with the amended sublease agreement. The sublease provides for an annual base rent of approximately $0.4 million, which increases on an annual basis by 2.0%. The sublessee is responsible for its pro rata share of certain costs, taxes and operating expenses related to ~~dispose~~the subleased space. The sublease includes an initial security deposit of ~~the remaining assets throughout fiscal 2022.~~$0.1 million.

~~During the three months ended March 31, 2021, the Company had no significant measurements of assets or liabilities at fair value on a non-recurring basis subsequent to their initial recognition.~~

Fair Value of Financial Instruments

~~For short-term instruments, other than those required to be reported at~~The fair ~~value on a recurring and non-recurring basis and for which additional disclosures are included above, management concluded the historical carrying value is a reasonable estimate~~values of fair value because of the short period of time between the origination of such instruments and their expected realization. Therefore, as of March 31, 2022 and December 31, 2021, the carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and the Company's note payable approximated their carrying value because of the short-term nature of these instruments. The Company's revolving line of credit and long-term debt, which is based on a variable interest rate, are also reflected in the financial statements at carrying value which approximate ~~their~~ fair ~~value.~~values as of March 31, 2023. The carrying amount of cash and cash equivalents are considered Level 1 measurements. The carrying amounts of accounts receivable, accounts payable, note payable, revolving line of credit and long-term debt are considered Level 2 measurements. See Note 7 for further information on the Company's debt.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 5:4: Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined by either specific identification or weighted average methods. The components of inventories are as follows:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Raw materials	Raw materials	$	54,654	$	48,745	Raw materials	$	49,862	$	57,475
Work-in-process	Work-in-process	29,970		25,187		Work-in-process	22,786		23,136
Finished goods	Finished goods	29,280		30,666		Finished goods	32,030		37,549
		113,904		104,598			104,678		118,160
Less: inventory reserves	Less: inventory reserves	(1,790)		(1,349)		Less: inventory reserves	(4,886)		(3,708)
Inventories, net	Inventories, net	$	112,114	$	103,249	Inventories, net	$	99,792	$	114,452

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Note 6:5: Property, Plant and Equipment

Property, plant and equipment consist of the following:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Land	Land	$	723	$	723	Land	$	723	$	723
Leasehold improvements	Leasehold improvements	4,641		4,641		Leasehold improvements	4,203		4,114
Buildings	Buildings	53		53		Buildings	1,534		1,534
Machinery, fixtures and equipment	Machinery, fixtures and equipment	110,331		110,127		Machinery, fixtures and equipment	114,780		113,413
Construction-in-progress	Construction-in-progress	2,803		1,900		Construction-in-progress	2,866		3,270
		118,551		117,444			124,106		123,054
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(75,831)		(73,724)		Less: accumulated depreciation and amortization	(82,661)		(80,708)
Property, plant and equipment, net	Property, plant and equipment, net	$	42,720	$	43,720	Property, plant and equipment, net	$	41,445	$	42,346

The following table sets forth depreciation expense related to property, plant and equipment:


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Cost of sales	Cost of sales	$	2,054	$	1,734	Cost of sales	$	1,917	$	2,054
Selling, general and administrative	Selling, general and administrative	62		83		Selling, general and administrative	74		62
Total depreciation	Total depreciation	$	2,116	$	1,817	Total depreciation	$	1,991	$	2,116

Note 7:6: Goodwill, Intangible Assets and Deferred Charges

Goodwill

The Company's goodwill balance of $11.4 million as of March 31, 2023 and December 31, 2022, respectively, was attributable to the Specialty Chemicals segment.

Intangible Assets

Intangible assets represent the fair value of intellectual, non-physical assets resulting from business acquisitions and are amortized over their estimated useful life using either an accelerated or straight-line method over a period of eight to 15 years.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The balance of intangible assets subject to amortization are as follows:

(in thousands) March 31, 2022 December 31, 2021
Intangible assets, gross $ 28,876 $ 28,876
Accumulated amortization of intangible assets (15,215) (14,494)
Intangible assets, net $ 13,661 $ 14,382


	March 31, 2023				December 31, 2022
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Definite-lived intangible assets:
Customer related	$	28,226	$	(18,823)	$	28,226	$	(18,437)
Trademarks and trade names	150		(14)		150		(12)
Other	500		(48)		500		(40)
Total definite-lived intangible assets	$	28,876	$	(18,885)	$	28,876	$	(18,489)

Estimated amortization expense related to intangible assets for the next five years are as follows:


(in thousands)	(in thousands)			(in thousands)
Remainder of 2022		$	2,163
2023		1,433
Remainder of 2023				Remainder of 2023	$	1,185
2024	2024	1,336		2024	1,555
2025	2025	1,238		2025	1,384
2026	2026	1,141		2026	1,153
2027	2027	1,044		2027	973
2028				2028	820
Thereafter	Thereafter	$	5,306	Thereafter	2,921

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Deferred Charges

Deferred charges represent debt issuance costs and are amortized over their estimated useful lives using the straight-line method over a period of four years.

The balance of deferred charges subject to amortization are as follows:


(in thousands)	(in thousands)	March 31, 2022		December 31, 2021		(in thousands)	March 31, 2023		December 31, 2022
Deferred charges, gross	Deferred charges, gross	$	398	$	398	Deferred charges, gross	$	398	$	398
Accumulated amortization of deferred charges	Accumulated amortization of deferred charges	(120)		(96)		Accumulated amortization of deferred charges	(220)		(195)
Deferred charges, net	Deferred charges, net	$	278	$	302	Deferred charges, net	$	178	$	203

Note ~~8: Long-term~~7: Debt

~~Long-term~~Short-term debt ~~consists~~

On June 6, 2022, the Company entered into a note payable in the amount of $1.0 million with an interest rate of 2.77% maturing April 1, 2023. The agreement is associated with the financing of the ~~following:~~Company's insurance premium in the current year. As of March 31, 2023, the outstanding balance was $0.1 million.

(in thousands) March 31, 2022 December 31, 2021
Revolving line of credit, due January 15, 2025 $ 66,432 $ 65,571
Term loan, due January 15, 2025 4,642 4,821
Total long-term debt 71,074 70,392
Less: Current portion of long-term debt (2,464) (2,464)
Long-term debt, less current portion $ 68,610 $ 67,928
Credit Facilities

~~The~~


(in thousands)	March 31, 2023		December 31, 2022
Revolving line of credit, due January 15, 2025	$	54,724	$	67,442
Term loan, due January 15, 2025	3,929		4,107
Total long-term debt	58,653		71,549
Less: Current portion of long-term debt	(2,464)		(2,464)
Long-term debt, less current portion	$	56,189	$	69,085

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

During the first quarter of 2023, the Company entered into an Amended and ~~its subsidiaries have a~~Restated Credit Agreement ("Credit Agreement") with BMO Harris Bank, N.A. ("BMO") ~~which~~to replace LIBOR with the Secured Overnight Funding Rate ("SOFR"). The Credit Agreement provides the Company with a four-year revolving credit facility with up to $150.0 million of borrowing capacity (the "Facility").

The initial borrowing capacity under the Facility totals $110.0 million consisting of a $105.0 million revolving line of credit and a $5.0 million delayed draw term loan. The revolving line of credit includes a $17.5 million machinery and equipment sub-limit which requires quarterly payments of $0.4 million with a balloon payment due upon maturity of the Facility in January 2025. The term loan requires quarterly payments of $0.2 million with a balloon payment due upon maturity of the Facility in January 2025.

We have pledged all of our accounts receivable, inventory, and certain machinery and equipment as collateral for the Credit Agreement. Availability under the Credit Agreement is subject to the amount of eligible collateral as determined by the lenders' borrowing base calculations. Amounts outstanding under the revolving line of credit portion of the Facility currently bear interest, at the Company's option, at (a) the Base Rate (as defined in the Credit Agreement) plus 0.50%, or (b) ~~LIBOR~~SOFR plus 1.50%. Amounts outstanding under the delayed draw term loan portion of the Facility bear interest at ~~LIBOR~~SOFR plus 1.65%. The Facility also provides an unused commitment fee based on the daily used portion of the Facility.

The weighted average interest rate per annum was ~~2.14% as~~6.62% as of March 31, ~~2022.~~2023.

Pursuant to the Credit Agreement, the Company was required to pledge all of its tangible and intangible properties, including the stock and membership interests of its subsidiaries. The Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $7.5 million and (ii) 10% of the revolving credit facility (currently $10.5 million). As of March 31, ~~2022,~~2023, the Company was in compliance with all financial debt covenants.

As of March 31, ~~2022,~~2023, the Company had ~~$38.6~~$50.0 million of remaining available capacity under its credit facility.

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Note 9:8: Leases

The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC (“Store”), an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the American Stainless acquisition in 2019 as well as the sale of land at the Munhall facility in 2020. As of March 31, 2023, operating lease liabilities related to the master lease agreement with Store Capital totaled $31.3 million, or 94% of the total lease liabilities on the consolidated balance sheet.

During the three months ended March 31, 2023, the Company entered into new finance lease agreements resulting in an additional $0.3 million of right-of-use assets and lease liabilities.

Balance Sheet Presentation

Operating and finance lease amounts included in the unaudited condensed consolidated balance sheet are as follows (in thousands):


Classification	Classification	Financial Statement Line Item	March 31, 2022		December 31, 2021		Classification	Financial Statement Line Item	March 31, 2023		December 31, 2022
Assets	Assets	Right-of-use assets, operating leases	$	30,431	$	30,811	Assets	Right-of-use assets, operating leases	$	28,871	$	29,224
Assets	Assets	Property, plant and equipment	1,598		1,640		Assets	Property, plant and equipment	1,617		1,494
Current liabilities	Current liabilities	Current portion of lease liabilities, operating leases	1,140		1,104		Current liabilities	Current portion of lease liabilities, operating leases	1,077		1,056
Current liabilities	Current liabilities	Current portion of lease liabilities, finance leases	248		233		Current liabilities	Current portion of lease liabilities, finance leases	273		280
Non-current liabilities	Non-current liabilities	Non-current portion of lease liabilities, operating leases	31,748		32,059		Non-current liabilities	Non-current portion of lease liabilities, operating leases	30,628		30,911
Non-current liabilities	Non-current liabilities	Non-current portion of lease liabilities, finance leases	1,362		1,414		Non-current liabilities	Non-current portion of lease liabilities, finance leases	1,378		1,242

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Total Lease Cost

Individual components of the total lease cost incurred by the Company are as follows:


							Three Months Ended March 31,
(in thousands)	(in thousands)	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021		(in thousands)	2023		2022
Operating lease cost		$	1,048	$	1,023
Operating lease cost1						Operating lease cost1	$	1,000	$	1,048
Finance lease cost:	Finance lease cost:					Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	67		9		Amortization of right-of-use assets	78		67
Interest on finance lease liabilities	Interest on finance lease liabilities	9		—		Interest on finance lease liabilities	13		9
Sublease income	Sublease income	$	(33)	$	—	Sublease income	(91)		(33)
Total lease cost	Total lease cost	$	1,091	$	1,032	Total lease cost	$	1,000	$	1,091

1Includes short term leases, which are immaterial

Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the unaudited condensed consolidated statement of ~~operations.~~

During the fourth quarter of 2021, the Company entered into a sublease agreement with a third party to sublease a portion of the Palmer facility. The sublease agreement continues through the remaining term of the Master Lease Agreement and will expire on September 30, 2036, unless terminated in accordance with the sublease agreement. The sublease provides for an annual base rent of approximately $0.1 million in the first year, which increases on an annual basis by 2.0%. The sublessee is responsible for its pro rata share of certain costs, taxes and operating expenses related to the subleased space. The sublease includes an initial security deposit of $0.1 million.income.

Future expected cash receipts from the sublease as of March 31, ~~2022~~2023 are as follows:

(in thousands) Sublease Receipts
Remainder of 2022 $ 95
2023 129
2024 132
2025 134
2026 137
Thereafter 1,490
Total sublease receipts $ 2,117

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~


(in thousands)	Sublease Receipts
Remainder of 2023	$	272
2024	370
2025	377
2026	385
2027	392
Thereafter	3,786
Total sublease receipts	$	5,582

Maturity of Leases

The amounts of undiscounted future minimum lease payments under leases as of March 31, ~~2022~~2023 are as follows:


(in thousands)	(in thousands)	Operating		Finance		(in thousands)	Operating		Finance
Remainder of 2022		$	2,548	$	211
2023		3,818		272
Remainder of 2023						Remainder of 2023	$	2,736	$	300
2024	2024	3,658		246		2024	3,667		333
2025	2025	3,677		233		2025	3,687		326
2026	2026	3,683		233		2026	3,703		326
2027						2027	3,765		326
Thereafter	Thereafter	39,866		542		Thereafter	36,152		354
Total undiscounted minimum future lease payments	Total undiscounted minimum future lease payments	57,250		1,737		Total undiscounted minimum future lease payments	53,710		1,965
Imputed interest	Imputed interest	24,362		127		Imputed interest	(22,005)		(314)
Present value of lease liabilities	Present value of lease liabilities	$	32,888	$	1,610	Present value of lease liabilities	$	31,705	$	1,651

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Lease Term and Discount Rate

Weighted-average remaining lease term March 31, 2022 December 31, 2021
Operating leases 14.21 years 14.43 years
Finance leases 6.79 years 7.07 years
Weighted-average discount rate
Operating leases 8.30 % 8.30 %
Finance leases 2.29 % 2.27 %

~~During the three months ended March 31, 2022, no right-of-use assets were recognized in exchange for new operating lease liabilities.~~


Weighted-average remaining lease term	March 31, 2023		December 31, 2022
Operating leases	13.37 years		13.61 years
Finance leases	5.75 years		6.06 years
Weighted-average discount rate
Operating leases	8.32	%	8.31	%
Finance leases	5.85	%	2.32	%

Note ~~10:~~9: Shareholders' Equity

Share Repurchase Program

On ~~February 17, 2021,~~December 20, 2022, the Board of Directors re-authorized the Company's share repurchase program. The previous share repurchase program had a term of 24 months and ~~terminated~~was set to expire on February ~~21, 2021.~~17, 2023. The share repurchase program allows for repurchase of up to 790,383 shares of the Company's outstanding common stock ~~over 24 months.~~and extends to February 17, 2025. The shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Under the program, the purchases will be funded from available working capital, and the repurchased shares will be returned to the status of authorized, but unissued shares of common stock or held in treasury. There is no guarantee as to the exact number of shares that will be repurchased by the Company, and the Company may discontinue purchases at any time that management determines additional purchases are not warranted. As of March 31, ~~2022,~~2023, the Company has ~~790,383~~647,666 shares of its share repurchase authorization remaining.

Shares repurchased for the three months ended March 31, 2023 and 2022 were as follows:

~~Synalloy Corporation~~


	Three Months Ended March 31,
	2023		2022
Number of shares repurchased	32,313		—
Average price per share	$	10.11	$	—
Total cost of shares repurchased	$	327,521	$	—

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

Note ~~11:~~10: Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted earnings (loss) per share:


		Three Months Ended March 31,				Three Months Ended March 31,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021			(in thousands, except per share data)	2023		2022
Numerator:	Numerator:						Numerator:
Net income		$	10,260	$	1,094
Net income (loss)							Net income (loss)	$	(5,199)	$	10,260
Denominator:	Denominator:						Denominator:
Denominator for basic earnings per share - weighted average shares		10,209		9,191
Denominator for basic earnings (loss) per share - weighted average shares							Denominator for basic earnings (loss) per share - weighted average shares	10,148		10,209
Effect of dilutive securities:	Effect of dilutive securities:						Effect of dilutive securities:
Employee stock options and stock grants	Employee stock options and stock grants	111		97			Employee stock options and stock grants	—		111
Denominator for diluted earnings per share - weighted average shares		10,320		9,288
Denominator for diluted earnings (loss) per share - weighted average shares							Denominator for diluted earnings (loss) per share - weighted average shares	10,148		10,320

Net income per share:
Net income (loss) per share:							Net income (loss) per share:
Basic	Basic	$	1.00	$	0.12		Basic	$	(0.51)	$	1.00
Diluted	Diluted	$	0.99	$	0.12		Diluted	$	(0.51)	$	0.99

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The diluted earnings (loss) per share calculations exclude the effect of potentially dilutive shares when the inclusion of those shares in the calculation would have an anti-dilutive effect. The Company had 0.1 million shares that were anti-dilutive for the three months ended March 31, 2023. The Company had an immaterial number of shares of common stock that were anti-dilutive for the three months ended March 31, 2022. ~~The Company had 0.2 million shares of common stock that were anti-dilutive for the three months ended March 31, 2021.~~

Note ~~12:~~11: Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. The Company is no longer subject to U.S. federal examinations for years before ~~2018~~2019 or state examinations for years before ~~2017.~~2018. During the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the Company did not identify nor reserve for any unrecognized tax benefits.

Our income tax provision (benefit) and overall effective tax rates for the periods presented are as follows:


		Three Months Ended March 31,						Three Months Ended March 31,
(in thousands)	(in thousands)	2022			2021				(in thousands)	2023			2022
Income tax provision		$	2,589		$	241
Income tax provision (benefit)									Income tax provision (benefit)	$	(1,407)		$	2,589
Effective income tax rate	Effective income tax rate	20.2		%	18.1		%		Effective income tax rate	21.3		%	20.2		%

The effective tax rate was ~~20.2%~~21.3% and ~~18.1%~~20.2% for the three months ended March 31, 2023 and 2022, respectively. The March 31, 2023, effective tax rate was higher than the U.S. statutory rate of 21.0% primarily due to the effects of discrete tax charges related to stock based compensation and ~~2021, respectively.~~ an increase in pre-tax book losses.

The March 31, 2022, effective tax rate was lower than the U.S. statutory tax rate of 21.0% primarily due to a forecasted reduction in the valuation allowance infor the ~~current year~~. ~~The March 31, 2021 effective tax rate was also lower than the statutory rate of 21.0% primarily due to a reduction in the valuation allowance in the~~ period.

Note ~~13:~~12: Commitments and Contingencies

~~The~~In October 2021, the Company isacquired DanChem Technologies, Inc. ("DanChem"), a specialty chemical manufacturer based in Virginia. In June of 2020, DanChem received a demand letter from ~~time-to-time subject to~~Henkel US Operations Corporation (“Henkel”), a former customer, asserting various claims ~~possible legal actions~~ for breach of contract alleging that product ~~liability~~supplied by DanChem under four (4) purchase orders in 2018 and 2019 were defective and/or non-conforming and seeking approximately $315,000 in damages. DanChem responded in August 2020 disputing the claims and denying wrongdoing. Henkel was silent almost two years and then, in August 2022, sent another demand letter to DanChem asserting similar, if not identical claims, but now seeking alleged damages of approximately $3 million (with the main difference between the two demands being Henkel’s new claims for lost profits and other consequential damages). Henkel filed a lawsuit against DanChem in Connecticut state court in October 2022 seeking its newly alleged damages ~~and other matters arising out~~of approximately $3 million. Given the various amounts alleged by Henkel, the early stages of the proceedings, and the fact that DanChem denies liability under the purported legal theory for the claims, we are unable to estimate the reasonably possible loss or range of loss, if any, arising from this matter.

In addition, from time to time, we are involved in various other legal proceedings arising from the normal ~~conduct~~course of business activities. We are not presently a party to any other such litigation the ~~Company's business.~~

~~Management is not currently aware~~outcome of ~~any asserted~~which, we believe, if determined adversely to us, would individually, or ~~unasserted matters which could~~taken together, have a material adverse effect on our business, operating results, cash flows, or financial condition. Defending such proceedings is costly and can impose a significant burden on management and employees. We may receive unfavorable preliminary or interim rulings in the ~~financial condition or results~~course of ~~operations of the Company.~~litigation, and there can be no assurances that favorable final outcomes will be obtained.

~~Synalloy Corporation~~Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note ~~14:~~13: Industry Segments

~~The Company's business is divided into 2~~Ascent Industries Co. has two reportable operating segments, the Metals Segment and the Specialty Chemicals Segment. The Metals Segment operates as 3 reporting units that include Bristol Metals, LLC ("BRISMET") and American Stainless Tubing, LLC ("ASTI") (collectively "Welded Pipe & Tube"), Palmer of Texas Tanks, Inc. ("Palmer"),segments: Tubular Products and Specialty ~~Pipe & Tube, Inc. ("Specialty"). As discussed in~~ No ~~te 4~~,Chemicals. The Tubular Products segment includes the ~~Company permanently ceased operations at Palmer as of December 31, 2021 and have classified the remaining assets as held for sale. The~~operating results of ~~operations for this business are included within~~ the ~~Metals Segment for all periods presented~~Company’s plants involved in ~~this quarterly report.~~the production and distribution of stainless steel, galvanized steel and seamless carbon pipe and tube. The ~~Metals Segment~~Tubular Products segment serves markets through pipe and tube and customers in the appliance, architectural, automotive and commercial transportation, brewery, chemical, petrochemical, pulp and paper, mining, power generation (including nuclear), water and waste-water treatment, liquid natural gas ("LNG"), food processing, pharmaceutical, oil and gas and other industries.

On January 1, 2023, the Company changed the grouping of certain immaterial revenue and expenses associated with the ceased Palmer operations. As a result, certain prior period Tubular Products segment results have been reclassified to All Other to be comparable to the current period's presentation.

The Specialty Chemicals ~~Segment operates as 1 reporting unit which~~segment includes ~~Manufacturers Chemicals, LLC ("MC"), a wholly-owned subsidiary~~the operating results of ~~Manufacturers Soap and Chemical Company ("MS&C"), CRI Tolling, LLC ("CRI") and DanChem Technologies, Inc ("DanChem").~~the Company’s plants involved in the production of specialty chemicals. The Specialty Chemicals ~~Segment~~segment produces ~~specialty~~ products for the pulp and paper, coatings, adhesives, sealants and elastomers (CASE), textile, automotive, household, industrial and institutional ("HII"), agricultural, water and waste-water treatment, construction, oil and gas and other industries.

The chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measures being operating income and Adjusted earnings (loss) before interest, income taxes, depreciation and amortization. Adjusted earnings (loss) before interest, income taxes, depreciation and amortization excludes certain items that management believes are not indicative of future results.

The accounting principles applied at the operating segment level are the same as those applied at the consolidated financial statement level. Intersegment sales and transfers are eliminated at the corporate consolidation level.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table summarizes certain information regarding segments of the Company's operations:

Three Months Ended March 31,
(in thousands) 2022 2021
Net sales
Metals Segment $ 88,497 $ 55,213
Specialty Chemicals Segment 27,721 14,565
$ 116,218 $ 69,778
Operating income
Metals Segment $ 14,492 $ 2,577
Specialty Chemicals Segment 2,387 1,056
Unallocated corporate expenses 3,029 1,767
Acquisition costs and other 531 —
Proxy contest costs and recoveries — (464)
Earn-out adjustments 102 225
Operating income 13,217 2,105
Interest expense 403 387
Loss on extinguishment of debt — 223
Change in fair value of interest rate swap — (2)
Other, net (35) 162
Income before income taxes $ 12,849 $ 1,335
As of
(in thousands) March 31, 2022 December 31, 2021
Identifiable assets
Metals Segment $ 177,039 $ 160,625
Specialty Chemicals Segment 80,342 72,908
Corporate 32,252 32,469
$ 289,633 $ 266,002


	Three Months Ended March 31,
(in thousands)	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

	As of
(in thousands)	March 31, 2023		December 31, 2022
Identifiable assets
Tubular Products	$	145,416	$	158,664
Specialty Chemicals	70,406		72,990
Corporate	39,210		37,389

	$	255,032	$	269,043

~~Synalloy Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~

~~Note 15: Subsequent Events~~

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q, and determined that there have been no events that have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements.

1917

Item 2. 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 months ended March 31, 2023 and 2022, 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 ~~2021, respectively.~~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, ~~2021~~2022 (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 ~~2021.~~2022. 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

First Quarter ~~2022~~2023 Highlights

Consolidated net sales for the first quarter of ~~2022~~2023 were ~~$116.2~~$82.5 million ~~increasing 66.6%~~decreasing 29.1%, or ~~$46.4~~$33.8 million, compared to the first quarter of ~~2021.~~2022. The ~~increase~~decrease was primarily driven by a decrease in pounds shipped partially offset by increases in average selling ~~price and~~prices. The decrease in pounds shipped ~~as well as~~is significantly driven by the Company's ~~acquisition of DanChem~~decision to exit the galvanized pipe and tube operations at its Munhall facility in the fourth quarter of ~~2021, which is discussed in more detail in~~ 2022.

~~Note 2~~Consolidated net loss increased ~~of the notes~~ to ~~the unaudited condensed consolidated financial statements. Excluding the DanChem acquisition, net sales increased 55.8%,~~$5.2 million, or ~~$39.0 million, over~~$0.51 loss per share, in the first quarter of ~~2021.~~

~~Consolidated~~2023, compared to net income ~~increased to~~of $10.3 million, or $0.99 diluted earnings per share, in the first quarter of 2022, compared to net income of $1.1 million, or $0.12 diluted earnings per share, in the first quarter of 2021. Excluding the DanChem acquisition, consolidated net income increased to $10.0 million and earnings per share increased to $0.97 diluted earnings per share.2022.

During the first quarter of 2022, the Company generated cash flows from operating activities of $0.4 million driven by increased profitability, partially offset by working capital use due to the rise in raw material costs. During the quarter, the Company ~~also~~ used ~~$1.1~~$0.8 million for capital expenditures focusing on growth and maintenance projects to continue to improve operational efficiencies.

In the first quarter of ~~2022,~~2023, we ~~experienced another period~~continued to experience inflationary pressures including continued increased raw material costs in both segments of ~~profitable growth continuing~~our business, as well as reduced demand resulting from inventory management measures being pursued by our customers. The Company's decision to exit the ~~sustained levels of high performance from 2021 across both business segments. In our Metals Segment, strong growth~~galvanized pipe and tube operations at its Munhall facility in the fourth quarter ~~was driven by~~of 2022 also had an impact on the first quarter of 2023 with a 63.0% decrease in pounds shipped and a 53.1% decrease in net sales from that facility compared to the prior year. We continue to pass through of rising input and other raw material costs as appropriate and continue efforts to maximize our working capital use and debt reduction. During the quarter, we also repurchased 32,313 shares for $0.3 million through our share repurchase program as part of our continued efforts to create sustainable value for our shareholders.

Macroeconomic Events

In February 2022, the United States announced targeted economic sanctions on Russia in response to the military conflict in Ukraine. As our operations are located in North America, we have no direct exposure to Russia and Ukraine. However, we are actively monitoring the broader economic impact of the crisis, especially the potential impact on commodity and fuel prices, and the potential decreased demand for our products.

There are additional macroeconomic uncertainties, including continued global supply chain constraints, labor shortages and the continuing impact of inflation, which continues to impact the Company's raw material costs. ~~In our Specialty Chemicals Segment, competitive~~The Company continues efforts to implement price ~~adjustments as well as the acquisition of DanChem helped~~increases to offset ~~continued labor~~these inflationary pressures and ~~raw material constraints~~continues to ~~drive earnings growth. The first quarter of 2022 includes $7.5 million in net sales~~take action to improve working capital and ~~$0.2 million in operating income attributable~~evaluate other opportunities to ~~the DanChem operations acquired~~maintain and improve financial performance in the ~~fourth quarter of 2021.~~short and long term.

~~Impacts of COVID-19~~

We continue to monitor the impact of COVID-19 on all aspects of our business. We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with federal guidelines and with state and local orders to date, we have continued to operate across our footprint throughout the COVID-19 pandemic. Ensuring the health and safety of our employees, and all who visit our sites, is our top priority, and we are following all U.S. Centers for Disease Control and Prevention and state and local health department guidelines. Following the onset of COVID-19 and its negative effects on our business, most prominently reflected in our fiscal 2020 results, global economic conditions improved during fiscal 2021, resulting in increased demand for our products. Beginning in fiscal 2021 and continuing through the first quarter of fiscal 2022, there has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on individual, business, and government activities. The existence of new or enduring variant strains of COVID-19 may lead to a rise in infections, which could cause delays in the easing of restrictions previously in place and the implementation of new restrictions and mandates, and there are ongoing global impacts resulting directly or indirectly from the pandemic including labor shortages, logistical challenges such as increased port congestion, and increases in costs for certain goods and services. While the ongoing effects of the COVID-19 pandemic could negatively impact our results of operations, cash flows, and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact cannot be reasonably estimated at this time. See Part I - Item 1A, "Risk Factors," included in our Annual Report on Form 10-K for our risk factors regarding risks associated with the COVID-19 pandemic.

Results of Operations

Consolidated Performance Summary

Consolidated net sales for the first quarter of ~~2022~~2023 were ~~$116.2~~$82.5 million, ~~an increase~~a decrease of ~~$46.4~~$33.8 million, or ~~66.6%~~29.1%, compared to net sales for the first quarter of ~~2021.~~2022. The ~~increase~~decrease in net sales was primarily driven by a ~~62.7%~~32.4% decrease in pounds shipped partially offset by a 5.8% increase in average selling price and a 2.3% increase in pounds shipped. Excluding DanChem, net sales increased $39.0 million, or 55.8%, to $108.7 million primarily driven by a 60.9% increase in average selling price partially offset by a 3.3%prices. The decrease in pounds ~~shipped.~~is significantly driven by the Company's decision to exit the galvanized pipe and tube operations at its Munhall facility in the fourth quarter of 2022.

For the first quarter of ~~2022,~~2023, consolidated gross profit ~~increased 157.5%~~decreased 80.9% to $4.3 million, or 5.2% of sales, compared to $22.5 million, or 19.4% of sales ~~compared to $8.7 million, or 12.5% of sales~~ in the first quarter of ~~2021.~~2022. The ~~increase in dollars and percentage~~decrease for the first quarter of ~~sales were~~2023 was attributable to ~~increased selling prices partially offset by~~continued increasing raw material and ~~freight costs.~~other manufacturing costs partially offset by increased selling prices.

Consolidated selling, general, and administrative expense (SG&A) for the first quarter of ~~2022~~2023 increased ~~$1.8~~$1.0 million to $9.6 million, or 11.6% of sales, compared to $8.6 million, or 7.4% of sales ~~compared to $6.9 million, or 9.8% of sales~~ in the first quarter of ~~2021.~~2022. The ~~changes~~increase in SG&A ~~were primarily driven by:~~

•~~Increases in salaries, wages and benefits~~expense for the first quarter of ~~$1.1 million primarily driven by increased personnel costs;~~

•~~Increases in bad debt expense of $0.2 million primarily driven by the increase in accounts receivable;~~

•~~Increases in travel expense of $0.2 million primarily driven by continued easing of COVID-19 restrictions; and,~~

•~~Increases in other expenses of $0.3 million~~2023 was primarily driven by increases in ~~utilities, taxes, licenses~~professional fees, salaries, wages and ~~insurance.~~benefits, and higher realized losses on the disposal of assets compared to the prior year partially offset by lower bad debt expense, amortization expense and repairs and maintenance expense.

Consolidated operating ~~income~~loss in the first quarter of ~~2022~~2023 totaled ~~$13.2~~$5.6 million compared to operating income of ~~$2.1~~$13.2 million in the first quarter of ~~2021.~~2022. The operating ~~increase~~decrease in the first quarter of ~~2022~~2023 was primarily driven by the aforementioned decrease in gross profit and increases in SG&A costs partially offset by increases in average selling ~~price~~prices.

Tubular Products

On January 1, 2023, the Company changed the grouping of certain immaterial revenue and ~~increased demand driven sales.~~expenses associated with the ceased Palmer operations. As a result, certain prior period Tubular Products segment results have been reclassified to be comparable to the current period's presentation.

~~Metals Segment~~

Net sales for the ~~Metals Segment~~Tubular Products segment in the first quarter of ~~2022~~2023 totaled ~~$88.5~~$58.7 million, ~~an increase~~ a decrease of ~~$33.3~~$29.7 million, or ~~60.3%~~33.6%, from the first quarter of ~~2021.~~2022. The ~~increase~~decrease was primarily driven by a ~~64.5%~~42.1% decrease in pounds shipped partially offset by 15.6% increase in average selling ~~price partially offset by 2.6%~~prices. The decrease in pounds ~~shipped.~~shipped is significantly driven by the Company's decision to exit the galvanized pipe and tube operations at its Munhall facility in the fourth quarter of 2022.

The net sales ~~increase~~decrease for the first quarter of ~~2022~~2023 compared to the first quarter of ~~2021~~2022 is ~~summarized~~summarized as follows:


($ in thousands)	($ in thousands)	$		%	Average selling price	Units shipped	($ in thousands)	$		%	Average selling price	Units shipped

Fiberglass and steel liquid storage tanks and separation equipment		$	(27)	(19.1)%	457.2%	(85.4)%
Heavy wall seamless carbon steel pipe and tube	Heavy wall seamless carbon steel pipe and tube	4,555		58.3%	41.4%	11.9%	Heavy wall seamless carbon steel pipe and tube	14		0.1%	15.9%	(13.6)%
Stainless steel pipe and tube	Stainless steel pipe and tube	22,252		55.7%	61.6%	(3.8)%	Stainless steel pipe and tube	(17,779)		(28.6)%	(1.8)%	(27.2)%
Galvanized pipe and tube	Galvanized pipe and tube	6,504		88.9%	104.0%	(7.4)%	Galvanized pipe and tube	(11,965)		(86.9)%	(30.2)%	(81.2)%
Total increase		$	33,284
Total decrease							Total decrease	$	(29,730)

SG&A expense for the first quarter of ~~2022~~2023 decreased ~~$0.1~~to $3.9 million compared to $4.1 million ~~or 4.7%~~in the first quarter of 2022. As a percentage of sales, ~~compared~~SG&A expense increased to ~~$4.2 million, or 7.6%~~6.7% of sales in the first quarter of ~~2021.~~2023 compared to 4.7% of sales in the first quarter of 2022. The changes in SG&A were primarily driven by ~~a decrease~~by lower bad debt expense and amortization expense partially offset by higher salaries, wages and benefits and incentive bonus expense in ~~professional fees of $0.1 million.~~the current year compared to the prior year partially.

Operating ~~income~~loss increased ~~$12.2 million, or 571.8%,~~ to ~~$14.3~~$2.5 million for the first quarter of ~~2022~~2023 compared to ~~$2.1~~operating income of $14.6 million for the first quarter of ~~2021.~~2022. The current quarter increase in operating ~~income~~loss was primarily driven by increasing raw material costs and other manufacturing costs partially offset by average selling price increases due to the continued pass through of raw material cost fluctuations.

Specialty Chemicals ~~Segment~~

Net sales for the Specialty Chemicals ~~Segment~~segment in the first quarter of ~~2022~~2023 totaled ~~$27.7~~$23.7 million, representing a ~~$13.2~~$4.0 million, or ~~90.3%~~14.3%, ~~increase~~decrease from the first quarter of ~~2021.~~2022. The ~~increase~~decrease was driven by a ~~60.8%~~18.5% decrease in pounds shipped partially offset by a 7.1% increase in average selling price and a 10.7% increase in pounds shipped, excluding trial and dedicated facility revenue. Excluding DanChem, net sales totaled $20.2 million, representing a $5.7 million, or 39.0%, increase primarily driven by a 45.2% increase in average selling price partially offset by a 4.3% decrease in pounds shipped.prices.

SG&A expense for the first quarter of ~~2022 increased $0.6~~2023 increased to $1.8 million, or 7.4% of sales, compared to $1.6 million, or 5.7% of sales ~~compared to $1.0 million, or 7.0% of sales~~ in the first quarter of ~~2021.~~2022. The increase in SG&A expense was primarily driven by ~~the acquisition of DanChem~~increased incentive bonus expense, amortization expense and bad debt expense in the ~~fourth quarter of 2021.~~current year compared to the prior year partially offset by lower salaries, wages and benefits and professional fees.

Operating income ~~increased $1.3~~decreased to $1.4 million ~~or 126.1%,~~for the first quarter of 2023 compared to operating income of $2.4 million for the first quarter of ~~2022 compared to $1.1 million for the first quarter of 2021.~~2022. The ~~increase~~decrease in operating income is primarily driven by the aforementioned decreases in net sales and increases in ~~average selling price, favorable operational efficiencies and~~SG&A expense in the ~~acquisition of DanChem in fourth quarter of 2021.~~period.

Corporate & Other Items

Unallocated corporate and other expenses for the first quarter of ~~2022~~2023 increased ~~$1.3~~$1.2 million, or ~~71.5%~~39.8%, to $4.2 million, or 5.1% of sales, compared to $3.0 million, or 2.6% of sales, ~~compared to $1.8 million, or 2.5% of sales,~~ in the prior ~~year comparative period.~~year. The first quarter ~~2022~~of 2023 increases ~~resulted~~were primarily ~~from decreases in allocated costs of $1.0 million and~~driven by increases in professional fees, stock based compensation, taxes and licenses and insurance ~~of $0.3 million.~~expense partially offset by decreases in salaries, wages and benefits, utilities, travel expense and repairs and maintenance expense.

Interest expense ~~was $0.4 million~~ for ~~both~~ the first quarter of ~~2022 and~~2023 increased to $1.1 million, from $0.4 million for the first quarter of ~~2021.~~2022. The increase is primarily driven by higher interest rates in the current year compared to the prior year.

The effective tax rate was ~~20.2% and 18.1%~~21.3% for the three months ended March 31, ~~2022 and 2021, respectively.~~2023. The three months ended March 31, ~~2022~~2023, effective tax rate was ~~lower~~higher than the U.S. statutory rate of 21.0% primarily due to ~~a forecasted reduction~~the effects of discrete tax charges related to stock based compensation and an increase in ~~the valuation allowance in the current year.~~pre-tax book losses.

~~The March 31, 2021 effective tax rate was lower than the statutory rate of 21.0% primarily due to a reduction in the valuation allowance in the period.~~

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 ~~provide additional~~are useful ~~information~~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 (including change in fair value of interest rate swap), 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, 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 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 are as follows:


		Three Months Ended March 31,
($ in thousands)		2023			2022
Consolidated
Net income (loss)		$	(5,199)		$	10,260
Adjustments:
	Interest expense	1,107			403

	Income taxes	(1,407)			2,589
	Depreciation	1,991			2,116
	Amortization	396			721
EBITDA		(3,112)			16,089
	Acquisition costs and other	333			531



	Earn-out adjustments	—			102




	Stock-based compensation	211			132
	Non-cash lease expense	91			107

	Restructuring and severance cost	900			—
Adjusted EBITDA		$	(1,577)		$	16,961
	% of sales	(1.9)		%	14.6		%

~~Consolidated~~Tubular Products EBITDA and Adjusted EBITDA are as follows:


			Three Months Ended March 31,						Three Months Ended March 31,
($ in thousands)	($ in thousands)		2022			2021				($ in thousands)		2023			2022
Consolidated
Net income			$	10,260		$	1,094
Tubular Products										Tubular Products
Net income (loss)										Net income (loss)		$	(2,504)		$	14,424
Adjustments:	Adjustments:									Adjustments:
		Interest expense	403			387
		Change in fair value of interest rate swap	—			(2)
		Income taxes	2,589			241
		Depreciation	2,116			1,817					Depreciation	1,017			1,213
		Amortization	721			680					Amortization	238			625
EBITDA	EBITDA		16,089			4,217				EBITDA		(1,249)			16,262
		Acquisition costs and other	531			—					Acquisition costs and other	72			—
		Proxy contest costs and recoveries	—			(464)					Earn-out adjustments	—			102

		Loss on extinguishment of debt	—			223
		Earn-out adjustments	102			225					Stock-based compensation	(29)			35
		Loss on investments in equity securities and other investments	—			363					Non-cash lease expense	58			—

											Restructuring and severance costs	900			—
Tubular Products Adjusted EBITDA										Tubular Products Adjusted EBITDA		$	(248)		$	16,399
											% of segment sales	(0.4)		%	18.5		%
		Stock-based compensation	132			187
		Non-cash lease expense	107			124

Adjusted EBITDA			$	16,961		$	4,875
		% of sales	14.6		%	7.0		%

~~Metals Segment~~Specialty Chemicals EBITDA and Adjusted EBITDA are as follows:

Three Months Ended March 31,
($ in thousands) 2022 2021
Metals Segment
Net income $ 14,424 $ 2,538
Adjustments:
Depreciation 1,213 1,393
Amortization 625 680
EBITDA 16,262 4,611
Earn-out adjustments 102 225
Stock-based compensation 35 38
Metals Segment Adjusted EBITDA $ 16,399 $ 4,874
% of segment sales 18.5 % 8.8 %


		Three Months Ended March 31,
($ in thousands)		2023			2022
Specialty Chemicals
Net income		$	1,342		$	2,378
Adjustments:
	Interest expense	12			9
	Depreciation	952			886
	Amortization	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
	% of segment sales	10.5		%	12.2		%

~~Specialty Chemicals Segment EBITDA and Adjusted EBITDA are as follows:~~

Three Months Ended March 31,
($ in thousands) 2022 2021
Specialty Chemicals Segment
Net income $ 2,378 $ 1,055
Adjustments:
Interest expense 9 —
Depreciation 886 386
Amortization 96 —
EBITDA 3,369 1,441
Stock-based compensation 6 31
Specialty Chemicals Segment Adjusted EBITDA $ 3,375 $ 1,472
% of segment sales 12.2 % 10.1 %

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 March 31, ~~2022,~~2023, we held ~~$1.2~~$0.4 million of cash and cash equivalents, as well as ~~$38.6~~$50.0 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.~~months and beyond.

Cash Flows

Cash flows from total operations were as follows:


		Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	(in thousands)	2022		2020		(in thousands)	2023		2022
Total cash (used in) provided by:
Total cash provided by (used in):						Total cash provided by (used in):
Operating activities	Operating activities	$	394	$	(768)	Operating activities	$	13,390	$	394
Investing activities	Investing activities	(1,112)		(227)		Investing activities	(824)		(1,112)
Financing activities	Financing activities	(62)		1,157		Financing activities	(13,586)		(62)
Net (decrease) increase in cash and cash equivalents		$	(780)	$	162
Net decrease in cash and cash equivalents						Net decrease in cash and cash equivalents	$	(1,020)	$	(780)

Operating Activities

The increase in cash provided by operating activities for the three months ended March 31, ~~2022~~2023, compared to cash ~~used in~~provided by operating activities in the three months ended March 31, ~~2021~~2022, was primarily driven by ~~increased net income in the first quarter of 2022 compared to the first quarter of 2021 and~~ changes in working capital. ~~Accounts~~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 increased operating cash flows for the first three months of 2023 by $13.7 million compared to a decrease of $9.3 million for the first three months of 2022, while accounts payable increased operating cash flows by ~~$17.9 million, compared to an increase of $11.2~~$2.8 million for the first three months of ~~2021, driving a reduction of $6.7 million in operating cash flows for the first quarter of 2022. Inventories increased $9.3 million in the first three months of 2022~~2023, compared to ~~an increase of $3.9~~$12.0 million in the first three months of 2021, driving a reduction of $5.4 million in operating cash flow for the first quarter of 2022. The increase in accounts receivable and inventory was due to a larger increase in sales volume over prior quarter in the first three months of 2022 than the increase experienced in the first three months of 2021, increases in DSO from 44 days during the first three months of 2021 to 46 days in the first three months

~~of 2022 and higher inventory purchases to meet customer demand~~ in the first three months of 2022. The ~~increases~~decrease in ~~cash used from~~inventory and accounts ~~receivable and~~payable is primarily driven by lower inventory ~~were~~purchases to match inventory levels with sales partially offset by ~~increases in accounts payable due to higher~~slightly lower inventory ~~purchases to meet customer demand~~turns year-over-year and ~~an increase~~a decrease in days payables ~~outstanding from 32 days~~outstanding. Accounts receivable decreased operating cash flows by $1.4 million in the first three months of ~~2021~~2023 compared to ~~37 days~~$17.9 million in the first three months of ~~2021.~~2022. The decrease in accounts receivable is primarily driven by a reduction in sales in the first quarter of 2023 partially offset by an increase in days sales outstanding compared to the first three months of 2022.

Investing Activities

Net cash used in investing activities primarily consists of transactions related to capital expenditures. The ~~increase~~decrease in cash used in investing activities for the three months ended March 31, ~~2022~~2023, compared to the cash used in investing activities for the three months ended March 31, ~~2021~~2022, was primarily due to ~~a increases~~decreases 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 long-term debt. The increase in cash used in financing activities for the three months ended March 31, ~~2022~~2023, compared to cash ~~provided by~~used in financing activities for the three months ended March 31, ~~2021~~2022, was primarily due to ~~payments towards~~decreased borrowings and increased repayments under the Company's ~~revolving line~~credit facility compared to the prior year.

Short-term Debt

The Company has a note payable in the amount of ~~credit and payments for~~$1.0 million with an annual interest rate of 2.77% maturing April 1, 2023, associated with the financing of the Company's ~~earnout liabilities partially offset by borrowings from the Company's revolving line of credit and proceeds received from the exercise of stock options~~insurance premium in the current year. As of March 31, 2023, the outstanding balance was $0.1 million.

Long-term Debt

The Company and its subsidiaries have a Credit Agreement with BMO providing the Company with a four-year revolving credit facility, maturing on January 15, 2025, and providing the Company with up to $150.0 million of borrowing capacity. As of March 31, ~~2022,~~2023, the Company had ~~$71.1~~$58.7 million of total borrowings outstanding with its lender, ~~an increase~~a decrease of ~~$0.7~~$12.9 million from the balance at December 31, ~~2021.~~2022. The Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $7.5 million and (ii) 10% of the revolving credit facility (currently $10.5 million). As of March 31, ~~2022,~~2023, the Company was in compliance with all financial debt covenants. See Note 87 in the notes to the unaudited condensed consolidated financial statements for additional information on the Company's line of credit.

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. ~~The~~During the three months ended March 31, 2023, the Company ~~repurchased no~~purchased 32,313 shares ~~during~~under the stock repurchase program at an average price of approximately $10.11 per share for an aggregate amount of $0.3 million. During the three months ended March 31, 2022, ~~and 2021.~~ the Company purchased no shares under the stock repurchase program.

As of March 31, ~~2022,~~2023, the Company has ~~790,383~~647,666 shares of its share repurchase authorization remaining.

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 ~~2021~~,2022, 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.

Leverage Measure:

•Debt to capital = total debt divided by total capital. The debt to capital 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:


		March 31, 2022	December 31, 2021		March 31, 2023	December 31, 2022
Current ratio	Current ratio	3.0	3.3	Current ratio	4.2	5.1
Debt to capital	Debt to capital	37%	39%	Debt to capital	30%	34%
Return on average equity	Return on average equity	28.8%	21.1%	Return on average equity	(4.1)%	18.0%

Material Cash Requirements from Contractual and Other Obligations

As of March 31, ~~2022,~~2023, our material cash requirements for our known contractual and other obligations were as follows:

•Debt Obligations and Interest Payments - Outstanding obligations on our revolving credit facility and term loan were ~~$66.4~~$54.7 million and ~~$4.6~~$3.9 million, respectively, with $2.5 million payable within 12 months. The interest payments on our remaining borrowings will be determined based upon the average outstanding balance of our borrowings and the prevailing interest rate during that time. Outstanding obligations on our note payable were $0.1 million, which matures within 12 months. Interest payments on the remaining note payable borrowings will be based on an interest rate of 2.77%. See Note 87 for further detail of our debt and the timing of expected future payments.

•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 ~~$34.5~~$33.4 million, with $1.4 million payable within 12 months. See ~~Note 9~~Note 8 for 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 ~~$8.1~~$4.9 million for the remainder of fiscal ~~2022.~~2023.

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, ~~2021.~~2022. 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, ~~2021.~~2022. There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of ~~2021.~~2022.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act; therefore, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

~~Changes~~Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rule 13a-15(e) of the Exchange Act as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2023. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2023, because of the previously reported material weaknesses in internal control over financial reporting, as described below.

Previously Reported Material Weaknesses in Internal Control over Financial Reporting

~~Other than the actions taken as described below under “Remediation Efforts to Address Material Weaknesses”, there were no changes in the Company's~~Management is responsible for establishing and maintaining adequate internal control over financial reporting, ~~during the first quarter of 2022, which were identified~~as such term is defined in ~~connection with management's evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the~~ Exchange Act ~~that have materially affected, or are reasonable likely to materially affect,~~Rules 13a-15(f) and 15f-15(f). As reported in our 2022 Form 10-K, we did not maintain effective internal control over financial ~~reporting.~~reporting as of December 31, 2022 as a result of material weaknesses in the control environment and control activities areas. A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Refer to our 2022 Form 10-K for a description of our material weaknesses.

Ongoing Remediation Efforts to Address Material Weaknesses

~~In response~~Our material weaknesses were not remediated at March 31, 2023. Our Board of Directors and management are committed to the continued implementation of remediation efforts to address the material weaknesses. The Company is developing a remediation plan to include designing and implementing review and approval controls over the data utilized in various accounting processes, controls that will address the accuracy, timely recording and completeness of data used in the determination of significant accounting estimates, reserves and valuations in accordance with U.S. GAAP, controls that will address the sufficient review of complex accounting areas and controls that will address the monitoring of general information technology areas including user access, cyber security and segregation of duties.

The following steps are among the measures to be taken by the Company with a number of these initiatives directly related to strengthening our controls and addressing specific control deficiencies which contributed to the material weaknesses identified in Management’s Report on Internal Control Over Financial Reporting as set forth in Item 9A “Controls and Procedures” in the 2021 Form 10-K, the Company, with oversight from the Audit Committee of the Board of Directors, developed a planweaknesses. The steps to remediate the deficiencies underlying the material weaknesses ~~at Synalloy. The remediation actions include~~include:

•Hiring adequate accounting, finance and information technology resources to enhance the ~~following:~~capabilities of these functions across the organization.

•Providing and expanding relevant training on internal controls over financial reporting to control owners and control ~~preparers;~~preparers across the organization to reinforce the importance of a strong control environment

•~~Hiring accounting and finance resources with relevant public company experience and evaluating~~Evaluating and realigning roles and responsibilities of ~~management;~~management

•Evaluating and realigning roles and responsibilities of control owners and control preparers to maintain segregation of duties

•Developing enhanced policies and procedures relating to documentation of control activities performed including those that reflect the control attributes performed and the demonstration of completeness and accuracy of the data used in the control.

•Enhancing/designing/implementing controls over ~~physical~~the inventory, ~~counts~~revenue recognition and ~~inventory valuation;~~accounts receivable, period-end financial reporting, account analyses, and journal entry processes

•Enhancing/designing/implementing controls over ~~revenue recognition and accounts receivable; and,~~accounting for complex areas

•Enhancing/designing/implementing controls over ~~period-end~~general information technology controls, including user access provisioning and cyber-security

The Audit Committee of the Board of Directors is monitoring management's ongoing remediation efforts. With the Audit Committee's oversight, management has dedicated significant resources and efforts to improve our internal control environment to remedy the identified material weaknesses. As we continue to evaluate and implement improvements to our internal control over financial reporting, ~~account reconciliation and account analyses processes.~~

~~As the Company continues~~our management may decide to ~~evaluate the~~take additional measures to address our control deficiencies ~~that gave rise~~or to modify the remediation efforts undertaken. Because the reliability of the internal control process requires repeatable execution, our material weaknesses ~~the Company may determine~~cannot be considered fully remediated until all remedial processes and procedures (including additional remediation ~~measures~~efforts identified by our senior management as necessary) have been implemented, each applicable control has operated for a sufficient period of time and management has concluded, through testing, that the controls are ~~necessary.~~operating effectively. Until all identified material weaknesses are remediated, we will not be able to assert that our internal controls are effective.

Changes in Internal Control over Financial Reporting

Other than the ongoing remediation efforts described above, there have been no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II

Item 1. Legal Proceedings

It is not unusual for us and our subsidiaries to be involved in various unresolved legal actions, administrative proceedings and claims in the ordinary course of business involving, among other things, product liability, commercial, employment, workers' compensation, and environmental ~~matters. We establish~~matters.. With respect to such lawsuits, claims and proceedings, the Company records reserves ~~in a manner that~~when it is ~~consistent with accounting principles generally accepted in the U.S. for costs associated with such matters when~~probable a liability ~~is probable~~has been incurred and ~~those costs are capable~~the amount of ~~being~~loss can be reasonably estimated. We cannot predict with any certainty the outcome of these unresolved legal actions or the range of possible loss or recovery. ~~Based on current information, however, we believe that the eventual outcome of these unresolved~~Information pertaining to legal ~~actions, either individually or~~proceedings can be found in Note 1 2 - Commitments and Contingencies in the ~~aggregate, will not have a material adverse effect on our~~notes to the unaudited condensed consolidated financial position, results of operations or cash flows. There were no material changes in our Legal Proceedings, as discussed in Part I, Item 3 in the Company's Annual Report on Form 10-K for the period ending December 31, 2021.statements, and is incorporated by reference herein.

Item 1A. Risk Factors

There were no material changes in our assessment of risk factors as discussed in Part I, Item 1A in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~None.~~Issuer Purchases of Equity Securities

The following table sets forth information with respect to purchases of the Company’s common stock on a trade date basis made during the three months ended March 31, 2023:


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs1	Number of Shares that May Yet Be Purchased under the Program
January 1, 2023 - January 31, 2023	23,865	$	10.07	23,865	656,114
February 1, 2023 - February 28, 2023	3,810	10.68		3,810	652,304
March 1, 2023 - March 31, 2023	4,638	9.82		4,638	647,666
As of March 31, 2023	32,313	$	10.11	32,313	647,666

1Pursuant to the 790,383 share stock repurchase program authorized by the Board of Directors in February 2021. The stock repurchase program expires in twenty-four months from authorization and there is no guarantee to the exact number of shares that will be repurchased by the Company over that period. See Note 9 for additional information.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits


Exhibit No.						Description
~~10.1~~						~~Synalloy Corporation 2022 Omnibus Equity Incentive Plan, incorporated by reference to Registrant's Form DEF 14A filed April 27, 2022.~~
31.1						Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer
31.2						Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer
32.1						Certifications Pursuant to 18 U.S.C. Section 1350
101.INS*						XBRL Instance Document
101.SCH*						XBRL Taxonomy Extension Schema
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase
101.LAB*						XBRL Taxonomy Extension Label Linkbase
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase
101.DEF*						XBRL Taxonomy Extension Definition Linkbase
104						Cover Page Interactive Data File (formatted as Inline XBRL document and included in Exhibit 101*)
*						In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed "furnished" and not "filed."

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	~~SYNALLOY CORPORATION~~ASCENT INDUSTRIES CO.
	(Registrant)


Date:	May ~~10, 2022~~9, 2023	By:	/s/ Christopher G. Hutter
			Christopher G. Hutter
			President and Chief Executive Officer
			(principal executive officer)

Date:	May ~~10, 2022~~9, 2023	By:	/s/ ~~Aaron M. Tam~~William S. Steckel
			~~Aaron M. Tam~~William S. Steckel
			Chief Financial Officer
			(principal accounting officer)


(in thousands)	MUSA-Galvanized		American Stainless		Total
Balance December 31, 2021	$	1,106	$	855	$	1,961
Earn-out payments during the period	(317)		(855)		(1,172)
Changes in fair value during the period	102		—		102
Balance March 31, 2022	$	891	$	—	$	891