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 September 30, ~~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

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)

(630)

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	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 November ~~7, 2022~~6, 2023 was ~~10,236,684~~10,125,533

Ascent Industries Co.

Table of Contents



PART I. FINANCIAL INFORMATION
Disclosure Regarding Forward Looking Statements		2
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, ~~2022~~2023 (unaudited) and December 31, ~~2021~~2022	3
	Condensed Consolidated Statements of Income (Loss) for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	5
	Condensed Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended September 30, ~~2022~~2023 and ~~2021~~2022 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)
	Note 1: Basis of Presentation	9
	Note 2: ~~Acquisitions~~Discontinued Operations	109
	Note 3: Revenue Recognition	11
	Note 4: Fair Value of Financial Instruments	11
	Note 5: Inventories	13
	Note 6: Property, Plant and Equipment	1314
	Note 7: Goodwill, Intangible Assets and Deferred Charges	14
	Note 8: Debt	1516
	Note 9: Leases	1617
	Note 10: Shareholders' Equity	1718
	Note 11: Earnings Per Share	1819
	Note 12: Income Taxes	1819
	Note 13: Commitments and Contingencies	1920
	Note 14: Industry Segments	1920
	Note 15: Subsequent Events	2021
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2122
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3031
Item 4.	Controls and Procedures	3032

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3233
Item 1A.	Risk Factors	3233
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3233
Item 3.	Defaults Upon Senior Securities	3233
Item 4.	Mine Safety Disclosures	3233
Item 5.	Other Information	3233
Item 6.	Exhibits	3334

	Signatures	3435

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 Ascent Industries Co.'s Securities and Exchange Commission filings, including our Annual Report on Form 10-K, which filings are available from the SEC. Ascent Industries Co. assumes no obligation to update any forward-looking information included in this release.

Part I - Financial Information

Item 1. Financial Statements

Ascent Industries Co.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)


		(Unaudited)					(Unaudited)
		September 30, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	532	$	2,021	Cash and cash equivalents	$	730	$	1,440
Accounts receivable, net of allowance for credit losses of $998 and $216, respectively		55,592		50,126
Inventories, net		137,843		103,249
Accounts receivable, net of allowance for credit losses of $1,105 and $762, respectively						Accounts receivable, net of allowance for credit losses of $1,105 and $762, respectively	32,910		37,062
Inventories						Inventories	83,044		85,572
Prepaid expenses and other current assets	Prepaid expenses and other current assets	4,632		3,728		Prepaid expenses and other current assets	8,775		7,801
Assets held for sale	Assets held for sale	518		855		Assets held for sale	8,956		380
Current assets of discontinued operations						Current assets of discontinued operations	620		38,120
Total current assets	Total current assets	199,117		159,979		Total current assets	135,035		170,375
Property, plant and equipment, net	Property, plant and equipment, net	43,176		43,720		Property, plant and equipment, net	31,981		37,045
Right-of-use assets, operating leases, net	Right-of-use assets, operating leases, net	29,575		30,811		Right-of-use assets, operating leases, net	28,170		29,198
Goodwill	Goodwill	11,430		12,637		Goodwill	—		11,389
Intangible assets, net	Intangible assets, net	11,794		14,382		Intangible assets, net	8,872		10,001

Deferred income taxes						Deferred income taxes	9,217		1,353
Deferred charges, net	Deferred charges, net	228		302		Deferred charges, net	128		203
Other non-current assets, net	Other non-current assets, net	4,122		4,171		Other non-current assets, net	1,782		1,862
Long-term assets of discontinued operations						Long-term assets of discontinued operations	6		7,617
Total assets	Total assets	$	299,442	$	266,002	Total assets	$	215,191	$	269,043

Liabilities and Shareholders' Equity	Liabilities and Shareholders' Equity					Liabilities and Shareholders' Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	44,815	$	32,318	Accounts payable	$	25,758	$	19,623
Accounts payable - related parties		—		2

Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	11,430		12,407		Accrued expenses and other current liabilities	5,608		6,039
Current portion of note payable	Current portion of note payable	580		—		Current portion of note payable	630		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		—		1,961

Current portion of operating lease liabilities	Current portion of operating lease liabilities	1,041		1,104		Current portion of operating lease liabilities	1,132		1,029
Current portion of finance lease liabilities	Current portion of finance lease liabilities	290		233		Current portion of finance lease liabilities	296		280

Current liabilities of discontinued operations						Current liabilities of discontinued operations	970		3,656
Total current liabilities	Total current liabilities	60,620		50,489		Total current liabilities	36,858		33,478
Long-term debt	Long-term debt	70,131		67,928		Long-term debt	50,543		69,085

Long-term portion of operating lease liabilities	Long-term portion of operating lease liabilities	31,190		32,059		Long-term portion of operating lease liabilities	30,051		30,911
Long-term portion of finance lease liabilities	Long-term portion of finance lease liabilities	1,302		1,414		Long-term portion of finance lease liabilities	1,378		1,242
Deferred income taxes		1,593		2,433

Other long-term liabilities	Other long-term liabilities	67		89		Other long-term liabilities	59		68
Total non-current liabilities	Total non-current liabilities	104,283		103,923		Total non-current liabilities	82,031		101,306
Total liabilities						Total liabilities	$	118,889	$	134,784

Commitments and contingencies – See Note 13	Commitments and contingencies – See Note 13					Commitments and contingencies – See Note 13

Shareholders' equity:	Shareholders' equity:					Shareholders' equity:
Common stock, par value $1 per share; authorized 24,000,000 shares; issued 11,085,103 shares		11,085		11,085
Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,120,281 shares issued and outstanding, respectively						Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,120,281 shares issued and outstanding, respectively	$	11,085	$	11,085
Capital in excess of par value	Capital in excess of par value	46,637		46,058		Capital in excess of par value	47,189		47,021
Retained earnings	Retained earnings	85,021		63,080		Retained earnings	47,379		85,146
		142,743		120,223			105,653		143,252
Less: cost of common stock in treasury - 850,671 and 918,471 shares, respectively		8,204		8,633
Less: cost of common stock in treasury - 964,822 and 924,504 shares, respectively						Less: cost of common stock in treasury - 964,822 and 924,504 shares, respectively	(9,351)		(8,993)
Total shareholders' equity	Total shareholders' equity	134,539		111,590		Total shareholders' equity	96,302		134,259
Total liabilities and shareholders' equity	Total liabilities and shareholders' equity	$	299,442	$	266,002	Total liabilities and shareholders' equity	$	215,191	$	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.

Ascent Industries Co.

Condensed Consolidated Statements of Income (Loss) (Unaudited)

(in thousands, except per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net sales	Net sales	$	100,167	$	86,182	$	332,587	$	239,047	Net sales	$	56,113	$	78,221	$	184,197	$	246,530
Cost of sales	Cost of sales	88,598		68,176		277,649		198,219		Cost of sales	50,097		64,129		167,814		190,795
Gross profit	Gross profit	11,569		18,006		54,938		40,828		Gross profit	6,016		14,092		16,383		55,735

Selling, general and administrative	Selling, general and administrative	9,853		6,948		27,133		21,941		Selling, general and administrative	7,352		9,258		22,614		25,435
Acquisition costs and other	Acquisition costs and other	149		201		837		201		Acquisition costs and other	42		149		323		836
Proxy contest costs and recoveries		—		—		—		168
Earn-out adjustments		—		160		(7)		1,430
Asset impairments		—		—		—		233

Operating income		1,567		10,697		26,975		16,855
Other expense (income)
Interest expense		827		329		1,637		1,068
Loss on extinguishment of debt		—		—		—		223
Change in fair value of interest rate swaps		—		—		—		(2)
Other, net		(118)		(10)		(176)		152
Income before income taxes		858		10,378		25,514		15,414
Income tax provision		234		2,179		3,573		3,235

Goodwill impairment										Goodwill impairment	11,389		—		11,389		—

Net income		$	624	$	8,199	$	21,941	$	12,179
Operating income (loss) from continuing operations										Operating income (loss) from continuing operations	(12,767)		4,685		(17,943)		29,464
Other expense (income)										Other expense (income)
Interest expense										Interest expense	1,063		827		3,217		1,637

Other, net										Other, net	(97)		(118)		(344)		(176)
Income (loss) from continuing operations before income taxes										Income (loss) from continuing operations before income taxes	(13,733)		3,976		(20,816)		28,003
Income tax provision (benefit)										Income tax provision (benefit)	(964)		871		(2,350)		4,069
Income (loss) from continuing operations										Income (loss) from continuing operations	(12,769)		3,105		(18,466)		23,934
Loss from discontinued operations, net of tax										Loss from discontinued operations, net of tax	(5,163)		(2,481)		(19,301)		(1,993)
Net income (loss)										Net income (loss)	$	(17,932)	$	624	$	(37,767)	$	21,941

Net income (loss) per common share from continuing operations:										Net income (loss) per common share from continuing operations:
Basic										Basic	$	(1.26)	$	0.30	$	(1.82)	$	2.34
Diluted										Diluted	$	(1.26)	$	0.30	$	(1.82)	$	2.30

Net loss per common share from discontinued operations:										Net loss per common share from discontinued operations:
Basic										Basic	$	(0.51)	$	(0.24)	$	(1.90)	$	(0.19)
Diluted										Diluted	$	(0.51)	$	(0.24)	$	(1.90)	$	(0.19)

Net income per common share:
Net income (loss) per common share:										Net income (loss) per common share:
Basic	Basic	$	0.06	$	0.88	$	2.14	$	1.32	Basic	$	(1.77)	$	0.06	$	(3.72)	$	2.14
Diluted	Diluted	$	0.06	$	0.87	$	2.11	$	1.30	Diluted	$	(1.77)	$	0.06	$	(3.72)	$	2.11

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	10,253		9,287		10,235		9,237		Basic	10,135		10,253		10,151		10,235
Dilutive effect from stock options and grants	Dilutive effect from stock options and grants	212		116		172		111		Dilutive effect from stock options and grants	—		212		—		172
Diluted	Diluted	10,465		9,403		10,407		9,348		Diluted	10,135		10,465		10,151		10,407

See accompanying notes to condensed consolidated financial statements.

Ascent Industries Co.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2022		2021			2023		2022
Operating activities	Operating activities					Operating activities
Net income		$	21,941	$	12,179
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)						Net income (loss)	$	(37,767)	$	21,941
Loss from discontinued operations, net of tax						Loss from discontinued operations, net of tax	(19,301)		(1,993)
Net income (loss) from continuing operations						Net income (loss) from continuing operations	(18,466)		23,934
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation expense	Depreciation expense	6,380		5,459		Depreciation expense	4,833		4,950
Amortization expense	Amortization expense	2,588		2,041		Amortization expense	1,128		2,440
Amortization of debt issuance costs	Amortization of debt issuance costs	74		71		Amortization of debt issuance costs	75		75
Asset impairments		—		233

Goodwill impairment						Goodwill impairment	11,389		—

Loss on extinguishment of debt		—		223

Deferred income taxes	Deferred income taxes	(1,227)		(615)		Deferred income taxes	(7,864)		(1,227)

Earn-out adjustments		(7)		1,430

Payments on earn-out liabilities in excess of acquisition date fair value	Payments on earn-out liabilities in excess of acquisition date fair value	(662)		(11)		Payments on earn-out liabilities in excess of acquisition date fair value	—		(372)
Provision for (reduction of) losses on accounts receivable		782		(388)
Provision for losses on accounts receivable						Provision for losses on accounts receivable	343		608
Provision for losses on inventories	Provision for losses on inventories	1,871		2,286		Provision for losses on inventories	2,199		1,372
Loss (gain) on disposal of property, plant and equipment		31		(580)
Loss on disposal of property, plant and equipment						Loss on disposal of property, plant and equipment	182		31
Non-cash lease expense	Non-cash lease expense	322		373		Non-cash lease expense	205		322
Non-cash lease termination loss		—		5

Change in fair value of interest rate swap		—		(2)

Issuance of treasury stock for director fees	Issuance of treasury stock for director fees	364		58		Issuance of treasury stock for director fees	—		364
Stock-based compensation expense	Stock-based compensation expense	961		695		Stock-based compensation expense	718		951
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(6,249)		(15,525)		Accounts receivable	3,809		(6,210)
Inventories	Inventories	(36,127)		(15,539)		Inventories	526		(30,252)
Other assets and liabilities	Other assets and liabilities	(782)		(1,443)		Other assets and liabilities	323		(515)
Accounts payable	Accounts payable	11,774		15,118		Accounts payable	5,934		10,154
Accounts payable - related parties		(2)		2

Accrued expenses	Accrued expenses	(1,594)		3,272		Accrued expenses	(430)		(1,508)
Accrued income taxes	Accrued income taxes	555		6,844		Accrued income taxes	(772)		555
Net cash provided by operating activities - continuing operations						Net cash provided by operating activities - continuing operations	4,132		5,672
Net cash provided by (used in) operating activities - discontinued operations						Net cash provided by (used in) operating activities - discontinued operations	17,395		(4,679)
Net cash provided by operating activities	Net cash provided by operating activities	993		16,186		Net cash provided by operating activities	21,527		993
Investing activities	Investing activities					Investing activities
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(3,467)		(761)		Purchases of property, plant and equipment	(2,660)		(2,875)
Proceeds from disposal of property, plant and equipment	Proceeds from disposal of property, plant and equipment	5		1,054		Proceeds from disposal of property, plant and equipment	—		5

Net cash (used in) provided by investing activities		(3,462)		293
Net cash used in investing activities - continuing operations						Net cash used in investing activities - continuing operations	(2,660)		(2,870)
Net cash used in investing activities - discontinued operations						Net cash used in investing activities - discontinued operations	(145)		(592)
Net cash used in investing activities						Net cash used in investing activities	(2,805)		(3,462)
Financing activities	Financing activities					Financing activities
Borrowings from long-term debt	Borrowings from long-term debt	352,513		41,648		Borrowings from long-term debt	201,588		352,513
Proceeds from note payable	Proceeds from note payable	967		—		Proceeds from note payable	900		967
Proceeds from exercise of stock options	Proceeds from exercise of stock options	175		—		Proceeds from exercise of stock options	—		175
Payments on long-term debt	Payments on long-term debt	(350,311)		(54,056)		Payments on long-term debt	(220,130)		(350,311)
Payments on note payable	Payments on note payable	(387)		—		Payments on note payable	(657)		(387)
Principal payments on finance lease obligations	Principal payments on finance lease obligations	(193)		(31)		Principal payments on finance lease obligations	(231)		(193)
Payments on earn-out liabilities	Payments on earn-out liabilities	(1,292)		(2,891)		Payments on earn-out liabilities	—		(484)
Payments for termination of interest rate swap		—		(46)

Repurchase of common stock	Repurchase of common stock	(492)		—		Repurchase of common stock	(903)		(492)
Payments of deferred financing costs		—		(165)
Net cash provided by (used in) financing activities		980		(15,541)
(Decrease) increase in cash and cash equivalents		(1,489)		938
Net cash provided by (used in) financing activities - continuing operations						Net cash provided by (used in) financing activities - continuing operations	(19,433)		1,788
Net cash used in financing activities - discontinued operations						Net cash used in financing activities - discontinued operations	—		(808)
Net cash used in financing activities						Net cash used in financing activities	(19,433)		980
Decrease in cash and cash equivalents						Decrease in cash and cash equivalents	(711)		(1,489)
Less: Cash and cash equivalents of discontinued operations						Less: Cash and cash equivalents of discontinued operations	1		4
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	2,021		236		Cash and cash equivalents at beginning of period	1,440		2,017
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	532	$	1,174	Cash and cash equivalents at end of period	$	730	$	532

See accompanying notes to condensed consolidated financial statements.

Ascent Industries Co.

Condensed Consolidated Statements of Cash Flows (Unaudited)

Continued


							Nine Months Ended September 30,
		Nine Months Ended September 30,					2023		2022
Supplemental Disclosure of Cash Flow Information	Supplemental Disclosure of Cash Flow Information	2022		2021		Supplemental Disclosure of Cash Flow Information
Cash paid for:	Cash paid for:					Cash paid for:
Interest	Interest	$	1,176	$	994	Interest	$	2,937	$	1,176
Income taxes	Income taxes	4,248		$	649	Income taxes	817		4,248

Noncash Investing Activities:	Noncash Investing Activities:					Noncash Investing Activities:
Capital expenditures, not yet paid	Capital expenditures, not yet paid	$	785	$	—	Capital expenditures, not yet paid	$	201	$	785

See accompanying notes to condensed consolidated financial statements.

Ascent Industries Co.

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(in thousands)

Three Months Ended September 30, 2022
Common Stock Capital in Excess of
Par Value Retained Earnings Cost of Common Stock in Treasury Total
Shares Amount
Balance June 30, 2022 11,085 $ 11,085 $ 46,162 $ 84,397 $ (7,760) $ 133,884
Net income — — — 624 — 624
Issuance of 4,102 shares of common stock from treasury — — (39) — 39 —
Exercise of stock options for 980 shares, net — — 4 — 9 13
Stock-based compensation — — 510 — — 510
Repurchase of 30,200 shares of common stock — — — — (492) (492)
Balance September 30, 2022 11,085 $ 11,085 $ 46,637 $ 85,021 $ (8,204) $ 134,539


	Three Months Ended September 30, 2023

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock				Total
	Shares	Amount						Shares		Amount
Balance June 30, 2023	11,085	$	11,085	$	46,951	$	65,311	927		$	(9,021)	$	114,326
Net loss	—	—		—		(17,932)				—		(17,932)
Issuance of 6,860 shares of common stock from treasury	—	—		(67)		—		(7)		67		—

Stock-based compensation	—	—		305		—				—		305
Repurchase of 44,799 shares of common stock	—	—		—		—		45		(397)		(397)
Balance as of September 30, 2023	11,085	$	11,085	$	47,189	$	47,379	965		$	(9,351)	$	96,302

	Nine Months Ended September 30, 2023

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock				Total
	Shares	Amount						Shares		Amount
Balance at December 31, 2022	11,085	$	11,085	$	47,021	$	85,146	$	924	$	(8,993)	$	134,259
Net loss	—	—		—		(37,767)				—		(37,767)
Issuance of 55,636 shares of common stock from treasury	—	—		(542)		—		(55)		542		—
Stock-based compensation	—	—		710		—				—		710
Repurchase of 95,955 shares of common stock	—	—		—		—		96		(900)		(900)
Balance as of September 30, 2023	11,085	$	11,085	$	47,189	$	47,379	$	965	$	(9,351)	$	96,302

See accompanying notes to condensed consolidated financial statements.

Nine Months Ended September 30, 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 — — — 21,941 — 21,941
Issuance of 79,903 shares of common stock from treasury — — (387) — 751 364
Exercise of stock options for 18,098 shares, net — — 5 — 170 175
Stock-based compensation — — 961 — — 961
Repurchase of 30,200 shares of common stock — — — — (492) (492)
Balance September 30, 2022 11,085 $ 11,085 $ 46,637 $ 85,021 $ (8,204) $ 134,539

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

Ascent Industries Co.

Condensed Consolidated Statement of Shareholders' Equity (Unaudited)

Continued

Three Months Ended September 30, 2021
Common Stock Capital in Excess of
Par Value Retained Earnings Cost of Common Stock in Treasury Total
Shares Amount
Balance June 30, 2021 10,300 $ 10,300 $ 37,309 $ 46,815 $ (9,693) $ 84,731
Net income — — — 8,199 — 8,199
Issuance of 60,494 shares of common stock from treasury — — (511) — 569 58
Stock-based compensation — — 239 — — 239
Balance September 30, 2021 10,300 $ 10,300 $ 37,037 $ 55,014 $ (9,124) $ 93,227


	Three Months Ended September 30, 2022

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock			Total
	Shares	Amount						Shares	Amount
Balance June 30, 2022	11,085	$	11,085	$	46,162	$	84,397	825	$	(7,760)	$	133,884
Net income	—	—		—		624			—		624
Issuance of 4,102 shares of common stock from treasury	—	—		(39)		—		(4)	39		—
Exercise of stock options for 980 shares, net	—	—		4		—		(1)	9		13
Stock-based compensation	—	—		510		—			—		510
Repurchase of 30,200 shares of common stock	—	—		—		—		30	(492)		(492)
Balance as of September 30, 2022	11,085	11,085		46,637		85,021		850	(8,204)		$	134,539

	Nine Months Ended September 30, 2022

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock			Total
	Shares	Amount						Shares	Amount
Balance at December 31, 2021	11,085	$	11,085	$	46,058	$	63,080	918	$	(8,633)	$	111,590
Net Income	—	—		—		21,941			—		21,941

Issuance of 79,903 shares of common stock from treasury	—	—		(387)		—		(80)	751		364
Exercise of Stock option for 18,098 Shares, net				5				(18)	170		175
Stock-based compensation	—	—		961		—			—		961
Repurchase 30,200 of common stock	—	—		—		—		30	(492)		(492)
Balance as of September 30, 2022	11,085	11,085		46,637		85,021		850	(8,204)		$	134,539

See accompanying notes to condensed consolidated financial statements.

Nine Months Ended September 30, 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 — — — 12,179 — 12,179
Issuance of 152,666 shares of common stock from treasury — — (1,377) — 1,435 58
Stock-based compensation — — 695 — — 695
Balance September 30, 2021 10,300 $ 10,300 $ 37,037 $ 55,014 $ (9,124) $ 93,227

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Unless indicated otherwise, the terms "Company," "we," "us," and "our" refer to 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 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"). The unaudited condensed consolidated financial statements, in the opinion of management, contain all normal recurring adjustments necessary to present a fair statement of the condensed consolidated balance sheets as of September 30, ~~2022,~~2023, the statements of income (loss) and shareholders’ equity for the three and nine months ended September 30, ~~2022~~2023 and ~~2021,~~2022, and the statements of cash flows for the nine months ended September 30, ~~2022~~2023 and ~~2021.~~2022. The December 31, ~~2021~~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 as our future assessment of our current expectations ~~including consideration of the unknown future impacts of the COVID-19 pandemic,~~ 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 ~~unaudited 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.

~~Name Change~~Reclassifications

~~On August 5, 2022, we filed with~~Certain prior period amounts have been reclassified to conform to current period presentation, including the ~~Secretary~~reclassification of ~~State of~~immaterial revenue and expenses related to the ~~State of Delaware a Certificate of Amendment~~Palmer business within the Company's reportable segments and the Company's Munhall operations within the Tubular Products segment to ~~our Certificate of Incorporation to change our corporate name from Synalloy Corporation to Ascent Industries Co., effective August 10, 2022.~~discontinued operations.

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.

Note 2: Discontinued Operations

During the second quarter of 2023, the Board of Directors of the Company made the decision to permanently cease operations at Munhall effective on or around August 31, 2023. It is anticipated that the complete exit and disposal of all assets at Munhall

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

will be completed within one year from the date the decision was made. The strategic decision to cease manufacturing operations at Munhall is part of the Company’s ongoing efforts to consolidate manufacturing to drive an increased focus on its core operations and to improve profitability while driving operational efficiencies.

As a result of this decision, during the second quarter ended June 30, 2023, the Company incurred asset impairment charges of $6.4 million related to the write down of inventory and long-lived assets as well as $1.4 million in increased reserves on accounts receivable at the facility. During the third quarter ended September 30, 2023, the Company incurred additional asset impairment charges of $2.4 million related to the write down of inventory to net realizable value. Certain assets of Munhall were also classified as held for sale and the results of operations have been classified as discontinued operations for all periods presented. See Note 4 for further discussion of the assets held for sale and related fair value measurements.

The following table presents the aggregate carrying amounts of the classes of assets and liabilities of discontinued operations of Munhall:


(in thousands)	September 30, 2023		December 31, 2022
Carrying amounts of assets included as part of discontinued operations:
Cash and cash equivalents	$	—	$	1
Accounts receivable, net	500		8,058
Inventories	—		28,880
Prepaid expenses and other current assets	120		1,181
Current assets classified as discontinued operations	620		38,120
Property, plant and equipment, net	—		5,301
Right-of-use assets, operating leases, net	6		26
Intangible assets, net	—		386
Other non-current assets, net	—		1904
Long-term assets classified as discontinued operations	6		7,617
Total assets classified as discontinued operations	$	626	$	45,737

Carrying amounts of current liabilities included as part of discontinued operations:
Accounts payable	$	348	$	3,108
Accrued expenses and other current liabilities	615		521
Current portion of operating lease liabilities	7		27
Total current liabilities classified as discontinued operations	$	970	$	3,656

The financial results of Munhall are presented as loss from discontinued operations, net of tax on the unaudited condensed consolidated statements of income (loss). The following table summarizes the results of discontinued operations of Munhall:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Net sales	$	2,650	$	21,945	$	25,313	$	86,057
Cost of sales	6,640		24,469		36,868		86,854
Gross profit	(3,990)		(2,524)		(11,555)		(797)

Selling, general and administrative expense	170		595		4,310		1,699
Asset impairments	2,416		—		8,720		—
Earnout adjustments	—		—		—		(7)

Operating loss of discontinued operations	(6,576)		(3,119)		(24,585)		(2,489)
Loss on classification as held for sale	—		—		83		—
Loss on discontinued operations before income taxes	(6,576)		(3,119)		(24,668)		(2,489)
Income tax benefit	(1,413)		(638)		(5,367)		(496)
Net loss from discontinued operations	$	(5,163)	$	(2,481)	$	(19,301)	$	(1,993)

Ascent Industries Co.

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.~~

During the three and nine months ended September 30, 2022, subsequent to the preliminary estimates of fair value of identifiable assets acquired and liabilities assumed, management revised the initial estimate of the fair value of property, plant and equipment resulting in an increase of $1.6 million. As a result of this revision within the measurement period, goodwill was decreased by $1.2 million and the Company's deferred tax balances were increased by $0.4 million. In addition, the change to the provisional amount resulted in an increase in depreciation expense and accumulated depreciation of $0.2 million of which $0.1 million relates to a previous reporting period.

The table below summarizes the preliminary estimates of fair value of identifiable assets acquired and liabilities assumed in the Acquisition and the revisions made in the third quarter of 2022. These preliminary estimates of the fair value are subject to additional revisions, which may result in additional adjustments to the values presented below.

(in thousands) October 22, 2021 Revisions September 30, 2022
Cash and cash equivalents $ 1,533 $ 1,533
Accounts receivable, net of allowance for credit losses of $118 5,358 5,358
Inventories, net 1,561 1,561
Prepaid expenses and other current assets 454 454
Property, plant and equipment, net 15,697 $ 1,594 17,291
Right of use asset, operating leases, net 208 208
Intangible assets, net 5,750 5,750
Total identifiable assets acquired $ 30,561 $ 1,594 $ 32,155
Accounts payable $ 1,751 $ 1,751
Accrued expenses and other current liabilities 1,622 1,622
Current portion of operating lease liabilities 51 51
Current portion of finance lease liabilities 215 215
Deferred income taxes 2,542 $ 387 2,929
Long-term portion of operating lease liabilities 157 157
Long-term portion of finance lease liabilities 1,408 1,408
Total identifiable liabilities assumed $ 7,746 $ 387 $ 8,133
Net identifiable assets acquired $ 22,815 $ 1,207 $ 24,022
Transaction price 34,097 34,097
Goodwill $ 11,282 $ (1,207) $ 10,075

The Company is in the process of finalizing the value of deferred tax balances and the Company's estimates of these values was still preliminary on September 30, 2022, pending completion of the DanChem pre-acquisition tax returns. 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.

~~Ascent Industries Co.~~

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

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.~~

~~The Company had no one-time, acquisition-related costs recognized in acquisition costs and other expenses in the unaudited condensed consolidated statements of income for the three months~~ ~~ended September 30, 2022. Approximately $0.4 million of one-time, acquisition-related costs, is recognized in acquisition costs and other expenses in the unaudited condensed consolidated statements of income for the~~ ~~nine months ended September 30, 2022~~.

~~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 either an accelerated or straight-line method over 15 years.~~

~~Total net sales and operating loss for DanChem for the three and~~ ~~nine months ended September 30, 2022~~ ~~were as follows:~~

(in thousands) Three Months Ended September 30, 2022 Nine Months Ended September 30, 2022
Net sales $ 8,306 $ 24,167
Operating loss $ (728) $ (286)

Note 3: 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 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 from continuing operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Fiberglass and steel liquid storage tanks and separation equipment	$	—	$	287	$	50	$	401
Heavy wall seamless carbon steel pipe and tube	9,366		12,284		32,052		36,782
Stainless steel pipe and tube	26,695		38,322		86,931		125,277

Specialty chemicals	20,052		27,328		65,164		84,070
Net sales	$	56,113	$	78,221	$	184,197	$	246,530

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 September 30, Nine Months Ended September 30,
(in thousands) 2022 2021 2022 2021
Fiberglass and steel liquid storage tanks and separation equipment $ 287 $ 189 401 881
Heavy wall seamless carbon steel pipe and tube 12,333 10,398 36,782 29,347
Stainless steel pipe and tube 52,309 48,331 180,633 134,632
Galvanized pipe and tube 7,910 11,209 30,701 28,578
Specialty Chemicals 27,328 16,055 84,070 45,609
Net sales $ 100,167 $ 86,182 $ 332,587 $ 239,047


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2023		2022		2023		2022
Point-in-time	$	51,403	$	71,616	$	170,037	$	225,237
Over-time	$	4,710	$	6,605	$	14,160	$	21,293

Note 4: 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:

~~Ascent Industries Co.~~

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

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

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

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

•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.

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 nine months ended September 30, 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 nine months ended September 30, 2022:~~

(in thousands) MUSA-Galvanized American Stainless Total
Balance December 31, 2021 $ 1,106 $ 855 $ 1,961
Earn-out payments during the period (1,099) (855) (1,954)
Changes in fair value during the period (7) — (7)
Balance September 30, 2022 $ — $ — $ —

~~For the three and nine months ended September 30, 2022, the Company had no unrealized gains or losses included in other comprehensive income for recurring Level 3 fair value instruments.~~

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

During the three and nine months ended September 30, ~~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 long-lived assets.

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.

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 ("Munhall"). 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 during the first quarter.

During the second quarter of 2023, the Board of Directors of the Company made the decision to permanently cease operations at the Munhall facility effective on or around August 31, 2023. As a result of this decision, it was determined to be more likely than not that the assets of Munhall would be sold or otherwise disposed of significantly before the end of their previously estimated useful lives, and therefore, experienced a triggering event and were evaluated for recoverability. Based on this evaluation, inventory at Munhall was written down to its net realizable value of $16.0 million and certain long-lived assets, including intangible assets, were written down to their estimated fair value of $2.6 million, resulting in asset impairment charges of $6.4 million in the second quarter of 2023.

During the third quarter of 2023, the remaining inventory at Munhall was written down to its net realizable value of $4.0 million resulting in asset impairment charges of $2.4 million in the third quarter of 2023. See Note 2 for further information on the Company's discontinued operations.

Assets Held for Sale

As a result of the Company's decision to cease operations and exit Munhall, during the three and nine months ended September 30, 2023, certain assets of Munhall were classified as held for sale and classified as Level 2 fair value measurements. 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 Munhall facility through 2036. The Company is actively pursuing a sublease for the facility.

Munhall assets classified as held for ~~sale.~~sale as are as follows:

~~Assets Held for Sale~~


(in thousands)	September 30, 2023		December 31, 2022
Inventory, net	$	4,021	$	—
Property, plant and equipment, net	2,382		—
Other assets, net	2,553		—
Assets held for sale	$	8,956	$	—

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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 September 30, ~~2022,~~2023, the ~~remaining Palmer assets continue to be classified as held for sale.~~ ~~The results~~Company has disposed of ~~operations for this business are included within the Tubular Products segment for~~ all ~~periods presented in this quarterly report. The Company uses observable inputs, such as prices of comparable assets in active markets to determine the fair value of the~~ remaining ~~assets. The Company classifies these fair value measurements as Level 2.~~

~~Ascent Industries Co.~~

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

~~The~~ assets classified as held for sale at the Palmer facility. The Palmer assets held for sale at December 31, 2022 were classified as Level 2 fair value measurements.

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

(in thousands) September 30, 2022 December 31, 2021
Inventory, net $ 307 $ 617
Property, plant and equipment, net 211 238
Assets held for sale $ 518 $ 855


(in thousands)	September 30, 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 Palmer facility through ~~2036. The~~2036. 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 negotiating a sublease for~~continues through the remaining ~~portion~~term of the ~~facility. The Company~~Master Lease Agreement. The sublease will ~~continue to dispose of the remaining assets throughout fiscal 2022.~~

~~During the three and nine months ended~~expire on September 30, ~~2021,~~2036, unless terminated in accordance with the ~~Company's only significant measurements~~amended sublease agreement. The sublease provides for an annual base rent of ~~assets or liabilities at fair value~~approximately $0.4 million, which increases on ~~a non-recurring~~an annual basis ~~subsequent~~by 2.0%. The sublessee is responsible for its pro rata share of certain costs, taxes and operating expenses related to ~~their~~the subleased space. The sublease includes an initial ~~recognition were certain long-lived assets. During the three and nine months ended September 30, 2021, t~~he Company determined that technology associated with certain long lived assets within the Specialty Chemicals segment was obsolete and, as a result, recognized a non-cash, pre-tax asset impairment chargesecurity deposit of ~~$0.2~~$0.1 million.

Fair Value of Financial Instruments

The fair values of 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 fair values as of September 30, ~~2022.~~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 8 for further information on the Company's debt.

Note 5: 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)	September 30, 2022		December 31, 2021		(in thousands)	September 30, 2023		December 31, 2022
Raw materials	Raw materials	$	71,567	$	48,745	Raw materials	$	51,941	$	49,655
Work-in-process	Work-in-process	28,068		25,187		Work-in-process	15,223		10,931
Finished goods	Finished goods	41,015		30,666		Finished goods	21,475		28,157
		140,650		104,598			88,639		88,743
Less: inventory reserves	Less: inventory reserves	(2,807)		(1,349)		Less: inventory reserves	(5,595)		(3,171)
Inventories, net		$	137,843	$	103,249
Inventories						Inventories	$	83,044	$	85,572

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 6: Property, Plant and Equipment

Property, plant and equipment from continuing operations consist of the following:


(in thousands)	(in thousands)	September 30, 2022		December 31, 2021		(in thousands)	September 30, 2023		December 31, 2022
Land	Land	$	723	$	723	Land	$	723	$	723
Leasehold improvements	Leasehold improvements	3,807		4,641		Leasehold improvements	3,672		4,114
Buildings	Buildings	1,478		53		Buildings	1,534		1,534
Machinery, fixtures and equipment	Machinery, fixtures and equipment	113,190		110,127		Machinery, fixtures and equipment	98,323		99,786
Construction-in-progress	Construction-in-progress	3,171		1,900		Construction-in-progress	1,181		1,881
		122,369		117,444			105,433		108,038
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(79,193)		(73,724)		Less: accumulated depreciation and amortization	(73,452)		(70,993)
Property, plant and equipment, net	Property, plant and equipment, net	$	43,176	$	43,720	Property, plant and equipment, net	$	31,981	$	37,045

~~Ascent Industries Co.~~

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

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Cost of sales	Cost of sales	$	2,112	$	1,822	$	6,198	$	5,269	Cost of sales	$	1,527	$	1,690	$	4,643	$	4,774
Selling, general and administrative	Selling, general and administrative	59		46		182		190		Selling, general and administrative	63		58		190		176
Total depreciation	Total depreciation	$	2,171	$	1,868	$	6,380	$	5,459	Total depreciation	$	1,590	$	1,748	$	4,833	$	4,950

Note 7: Goodwill, Intangible Assets and Deferred Charges

Goodwill

~~During the three months ended~~ As of September 30, 2023 the Company had no goodwill. As of December 31, 2022, ~~management revised~~ the ~~initial estimate of the fair value of property, plant and equipment acquired as part of the DanChem acquisition. As~~Company had a ~~result of this revision within the measurement period, goodwill was decreased by $1.2 million. The Company's~~ goodwill balance of $11.4 million, ~~and $12.6 million as of September 30, 2022, and year ended December 31, 2021, respectively, was~~ attributable to the Specialty Chemicals segment.

During the third quarter of 2023, the Company determined potential indicators of impairment within the Specialty Chemicals reporting unit, with an associated goodwill balance of $11.4 million existed. Macroeconomic conditions and pressures, increased risks within the broader specialty chemicals business, reporting unit operating losses and a decline in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event and the need to perform a quantitative evaluation of goodwill. The Company performed a discounted cash flow analysis and a market multiple analysis for the Specialty Chemicals reporting unit to determine the reporting unit's fair value. The discounted cash flow analysis included management assumptions for expected sales growth, capital expenditures and overall operational forecasts while the market multiple analysis included historical and projected performance, market capitalization, volatility and multiples for industry peers. Determining the fair value of the reporting unit and allocation of that fair value to individual assets and liabilities within the reporting unit to determine the implied fair value of the goodwill is judgmental in nature and requires the use of significant management estimates and assumptions. Any changes in the judgments, estimates, or assumptions could produce significantly different results. As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Specialty Chemicals reporting unit was below its carrying value by 27.6% resulting in a goodwill impairment charge of $11.4 million for the three and nine months ended September 30, 2023.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

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.

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

(in thousands) September 30, 2022 December 31, 2021
Intangible assets, gross $ 28,876 $ 28,876
Accumulated amortization of intangible assets (17,082) (14,494)
Intangible assets, net $ 11,794 $ 14,382


	September 30, 2023				December 31, 2022
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Definite-lived intangible assets:
Customer related	$	26,061	$	(17,766)	$	26,061	$	(16,658)
Trademarks and trade names	150		(17)		150		(12)
Other	500		(56)		500		(40)
Total definite-lived intangible assets	$	26,711	$	(17,839)	$	26,711	$	(16,710)

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


(in thousands)	(in thousands)			(in thousands)
Remainder of 2022		$	816
2023		1,683
Remainder of 2023				Remainder of 2023	$	376
2024	2024	1,648		2024	1,487
2025	2025	1,467		2025	1,324
2026	2026	1,226		2026	1,102
2027	2027	1,036		2027	930
2028				2028	786
Thereafter	Thereafter	3,918		Thereafter	2,867

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)	September 30, 2022		December 31, 2021		(in thousands)	September 30, 2023		December 31, 2022
Deferred charges, gross	Deferred charges, gross	$	398	$	398	Deferred charges, gross	$	397	$	398
Accumulated amortization of deferred charges	Accumulated amortization of deferred charges	(170)		(96)		Accumulated amortization of deferred charges	(269)		(195)
Deferred charges, net	Deferred charges, net	$	228	$	302	Deferred charges, net	$	128	$	203

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 8: Debt

Short-term debt

On June ~~6, 2022,~~13, 2023, the Company entered into a note payable in the amount of ~~$1.0~~$0.9 million with an interest rate of ~~2.77%~~3.70% maturing April 1, ~~2023.~~2024. The agreement is associated with the financing of the Company's insurance premium in the current year. As of September 30, ~~2022,~~2023, the outstanding balance was $0.6 million.

~~Long-term debt~~Credit Facilities

~~Long-term debt consists~~


(in thousands)	September 30, 2023		December 31, 2022
Revolving line of credit, due January 15, 2025	$	49,436	$	67,442
Term loan, due January 15, 2025	3,571		4,107
Total long-term debt	53,007		71,549
Less: Current portion of long-term debt	(2,464)		(2,464)
Long-term debt, less current portion	$	50,543	$	69,085

During the first quarter of 2023, the ~~following:~~

(in thousands) September 30, 2022 December 31, 2021
Revolving line of credit, due January 15, 2025 $ 68,309 $ 65,571
Term loan, due January 15, 2025 4,286 4,821
Total long-term debt 72,595 70,392
Less: Current portion of long-term debt (2,464) (2,464)
Long-term debt, less current portion $ 70,131 $ 67,928

~~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 ~~2.94%~~7.20% as of September 30, ~~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 September 30, ~~2022,~~2023, the Company was in compliance with all financial debt covenants.

As of September 30, ~~2022,~~2023, the Company had ~~$36.7~~$41.8 million of remaining available capacity under its credit facility.

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 9: 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 September 30, 2023, operating lease liabilities related to the master lease agreement with Store Capital totaled $30.9 million, or 94% of the total lease liabilities on the consolidated balance sheet.

During the three and nine months ended September 30, 2023, the Company entered into new finance lease agreements resulting in an additional $0.1 million and $0.5 million, respectively, of right-of-use assets and lease liabilities.

Balance Sheet Presentation

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


Classification	Classification	Financial Statement Line Item	September 30, 2022		December 31, 2021		Classification	Financial Statement Line Item	September 30, 2023		December 31, 2022
Assets		Right-of-use assets, operating leases	$	29,575	$	30,811
Assets		Property, plant and equipment	1,572		1,640
Long-term Assets							Long-term Assets	Right-of-use assets, operating leases	$	28,170	$	29,198
Long-term Assets							Long-term Assets	Property, plant and equipment	1,624		1,494
Current liabilities	Current liabilities	Current portion of lease liabilities, operating leases	1,041		1,104		Current liabilities	Current portion of lease liabilities, operating leases	1,132		1,029
Current liabilities	Current liabilities	Current portion of lease liabilities, finance leases	290		233		Current liabilities	Current portion of lease liabilities, finance leases	296		280
Non-current liabilities	Non-current liabilities	Non-current portion of lease liabilities, operating leases	31,190		32,059		Non-current liabilities	Non-current portion of lease liabilities, operating leases	30,051		30,911
Non-current liabilities	Non-current liabilities	Non-current portion of lease liabilities, finance leases	1,302		1,414		Non-current liabilities	Non-current portion of lease liabilities, finance leases	1,378		1,242

Total Lease Cost

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Operating lease cost1	Operating lease cost1	$	1,045	$	1,026	$	3,137	$	3,072	Operating lease cost1	$	989	$	1,039	$	2,971	$	3,116
Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of right-of-use assets	Amortization of right-of-use assets	71		13		204		33		Amortization of right-of-use assets	87		71		251		204
Interest on finance lease liabilities	Interest on finance lease liabilities	9		1		27		2		Interest on finance lease liabilities	24		9		62		27
Sublease income	Sublease income	(32)		—		(96)		—		Sublease income	(91)		(32)		(273)		(96)
Total lease cost	Total lease cost	$	1,093	$	1,040	$	3,272	$	3,107	Total lease cost	$	1,009	$	1,087	$	3,011	$	3,251

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~~statements of ~~income.~~income (loss).

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.

Future expected cash receipts from the Company's sublease as of September 30, ~~2022~~2023 are as follows:

(in thousands) Sublease Receipts
Remainder of 2022 $ 32
2023 129
2024 132
2025 134
2026 137
Thereafter 1,490
Total sublease receipts $ 2,054


(in thousands)	Sublease Receipts
Remainder of 2023	$	92
2024	370
2025	377
2026	385
2027	392
Thereafter	3,786
Total sublease receipts	$	5,402

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Maturity of Leases

The amounts of undiscounted future minimum lease payments under leases in continuing operations as of September 30, ~~2022~~2023 are as follows:


(in thousands)	(in thousands)	Operating		Finance		(in thousands)	Operating		Finance
Remainder of 2022		$	927	$	83
2023		3,645		311
Remainder of 2023						Remainder of 2023	$	916	$	99
2024	2024	3,667		257		2024	3,667		367
2025	2025	3,687		244		2025	3,687		361
2026	2026	3,703		244		2026	3,703		361
2027						2027	3,765		361
Thereafter	Thereafter	39,917		570		Thereafter	36,152		387
Total undiscounted minimum future lease payments	Total undiscounted minimum future lease payments	55,546		1,709		Total undiscounted minimum future lease payments	51,890		1,936
Imputed interest	Imputed interest	(23,315)		(116)		Imputed interest	(20,707)		(262)
Present value of lease liabilities	Present value of lease liabilities	$	32,231	$	1,593	Present value of lease liabilities	$	31,183	$	1,674

Lease Term and Discount Rate

Weighted-average remaining lease term September 30, 2022 December 31, 2021
Operating leases 13.84 years 14.43 years
Finance leases 6.25 years 7.07 years
Weighted-average discount rate
Operating leases 8.31 % 8.30 %
Finance leases 2.34 % 2.27 %

~~During the three and nine months ended September 30, 2022, the Company entered into new operating lease agreements resulting in an additional $0.2 million of right-of-use assets and lease liabilities.~~


Weighted-average remaining lease term	September 30, 2023		December 31, 2022
Operating leases	12.90 years		13.61 years
Finance leases	5.30 years		6.06 years
Weighted-average discount rate
Operating leases	8.32	%	8.31	%
Finance leases	5.92	%	2.32	%

Note 10: 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 September 30, 2023, the Company has 584,024 shares of its share repurchase authorization remaining.

~~During~~Shares repurchased for the three and nine months ended September 30, 2023 and 2022 ~~the Company purchased 30,200 shares under the stock~~were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Number of shares repurchased	44,799		30,200		95,955		30,200
Average price per share	$	8.87	$	16.29	$	9.38	$	16.59
Total cost of shares repurchased1	$	398,861	$	492,741	$	903,012	$	492,741

1Includes broker commissions paid as part of repurchase program at an average price of approximately $16.29 per share for an aggregate amount of $0.5 million. During the three and nine months ended September 30, 2021, the Company purchased no shares under the stock repurchase program.

~~As of September 30, 2022, the Company has 760,183 shares of its share repurchase authorization remaining.~~transactions

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 11: Earnings (Loss) Per Share

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


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	(in thousands, except per share data)	2022		2021		2022		2021			(in thousands, except per share data)	2023		2022		2023		2022
Numerator:	Numerator:										Numerator:
Net income		$	624	$	8,199	$	21,941	$	12,179
Net income (loss) from continuing operations											Net income (loss) from continuing operations	$	(12,769)	$	3,105	$	(18,466)	$	23,934
Net loss from discontinued operations											Net loss from discontinued operations	$	(5,163)	$	(2,481)	$	(19,301)	$	(1,993)
Net income (loss)											Net income (loss)	$	(17,932)	$	624	$	(37,767)	$	21,941
Denominator:	Denominator:										Denominator:
Denominator for basic earnings per share - weighted average shares		10,253		9,287		10,235		9,237
Weighted-average common shares outstanding											Weighted-average common shares outstanding	10,135		10,253		10,151		10,235
Effect of dilutive securities:	Effect of dilutive securities:										Effect of dilutive securities:
Employee stock options and stock grants	Employee stock options and stock grants	212		116		172		111			Employee stock options and stock grants	—		212		—		172
Denominator for diluted earnings per share - weighted average shares		10,465		9,403		10,407		9,348
Weighted-average common shares, as adjusted											Weighted-average common shares, as adjusted	10,135		10,465		10,151		10,407

Net income per share:
Net income (loss) per share from continuing operations:											Net income (loss) per share from continuing operations:
Basic	Basic	$	0.06	$	0.88	$	2.14	$	1.32		Basic	$	(1.26)	$	0.30	$	(1.82)	$	2.34
Diluted	Diluted	$	0.06	$	0.87	$	2.11	$	1.30		Diluted	$	(1.26)	$	0.30	$	(1.82)	$	2.30

Net loss per share from discontinued operations:											Net loss per share from discontinued operations:
Basic											Basic	$	(0.51)	$	(0.24)	$	(1.90)	$	(0.19)
Diluted											Diluted	$	(0.51)	$	(0.24)	$	(1.90)	$	(0.19)

Net income (loss) per share:											Net income (loss) per share:
Basic											Basic	$	(1.77)	$	0.06	$	(3.72)	$	2.14
Diluted											Diluted	$	(1.77)	$	0.06	$	(3.72)	$	2.11

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 and nine months ended September 30, 2023. The Company had an ~~insignificant~~immaterial number of shares that were anti-dilutive for the three and nine months ended September 30, 2022. ~~The Company had 0.3 million and 0.2 million shares~~ ~~of common stock that were anti-dilutive for both the three and nine months ended September 30, 2021.~~

Note 12: 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 and nine months ended September 30, ~~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 continuing operations for the periods presented are as follows:


		Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	(in thousands)	2022			2021			2022			2021			(in thousands)	2023			2022			2023			2022
Income tax provision		$	234		$	2,179		$	3,573		$	3,235
Income tax provision (benefit)														Income tax provision (benefit)	$	(964)		$	871		$	(2,350)		$	4,069
Effective income tax rate	Effective income tax rate	27.3		%	21.0		%	14.0		%	21.0		%	Effective income tax rate	7.0		%	22.1		%	11.2		%	14.6		%

Ascent Industries Co.

Notes to Condensed Consolidated Financial Statements (Unaudited)

The effective tax rate for continuing operations was 7.0% and 11.2% for the three and nine months ended September 30, 2023. The September 30, 2023 effective tax rate was lower than the U.S. statutory rate of 21.0% primarily due to the effects of permanent goodwill impairment reducing the tax benefit in the period.

The effective tax rate was ~~27.3%~~22.1% and ~~14.0%~~14.6% for the three and nine months ended September 30, 2022. The three months ended September 30, 2022, effective tax rate was higher than the U.S. statutory rate 21.0% primarily due to lower quarter to date pretax earnings relative to permanent ~~differences. The~~differences.The nine months ended September 30, 2022 effective tax rate was lower than the U.S. statutory tax rate of 21.0% primarily dueto the year-to-date release of federal valuation allowances.

In prior years, primarily due to the historical losses, the Company established valuation allowances against its certain deferred tax assets. At each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of its deferred tax assets. When the Company is able to demonstrate that it could generate taxable income on a sustained basis, its conclusion could change regarding the need for valuation allowance against its deferred tax assets.

During the nine months ended September 30, 2022, the Company continued to generate pre-tax profits and as a result of sustained profitability evidenced by a strong earnings history and additional positive evidence, the Company determined it was more likely than not it would be able to support realization of certain deferred tax assets and released valuation allowances of $1.9 million. The remaining valuation allowances relate to certain U.S. state deferred tax assets that are not considered realizable based on the assessment of all available evidence as of September 30, 2022.

~~Ascent Industries Co.~~

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

~~The three and nine months ended September 30, 2021, effective tax rates approximated the U.S. statutory rate of 21.0%.~~

Note 13: Commitments and Contingencies

In October 2021, the Company acquired DanChem Technologies, Inc. ("DanChem"), a specialty chemical manufacturer based in Virginia. In June of 2020, DanChem received a demand letter from Henkel US Operations Corporation (“Henkel”), a former customer, asserting various claims for breach of contract alleging that product 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 of approximately $3 million. The Company issettled the lawsuit with Henkel during the third quarter of 2023.

In addition, from ~~time-to-time subject~~time to time, we are involved in various ~~claims, possible~~other legal ~~actions for product liability and other damages, and other matters~~proceedings arising ~~out of~~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.

Note 14: Industry Segments

Ascent Industries Co. has two reportable segments: Tubular Products and Specialty Chemicals. The Tubular Products segment includes the operating results of the Company’s plants involved in the production and distribution of stainless steel ~~galvanized steel~~ and seamless carbon pipe and tube. ~~The Tubular Products segment includes the operating results of our Palmer business in Andrews, Texas currently held for sale, which will be removed from the segment beginning in 2023.~~ The 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. During the second quarter of 2023, the Board of Directors made the decision to permanently cease operations at the Company’s Munhall facility effective on or around August 31, 2023. As a result, certain prior period Tubular Products segment results have been reclassified to remove Munhall's results from continuing operations to discontinued operations.

The Specialty Chemicals segment includes the operating results of the Company’s plants involved in the production of specialty chemicals. The Specialty Chemicals segment produces 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~~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 continuing operations:


		Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		2022		2021			(in thousands)	2023		2022		2023		2022
Net sales	Net sales										Net sales
Tubular Products	Tubular Products	$	72,839	$	70,127	$	248,517	$	193,438		Tubular Products	$	36,061	$	50,606	$	118,983	$	162,059
Specialty Chemicals	Specialty Chemicals	27,328		16,055		84,070		45,609			Specialty Chemicals	20,052		27,328		65,164		84,070
All Other											All Other	—		287		50		401
		$	100,167	$	86,182	$	332,587	$	239,047			$	56,113	$	78,221	$	184,197	$	246,530
Operating income
Operating income (loss)											Operating income (loss)
Tubular Products	Tubular Products	$	4,509	$	11,711	$	31,935	$	21,793		Tubular Products	$	1,705	$	7,640	$	3,264	$	34,761
Specialty Chemicals	Specialty Chemicals	1,097		1,356		6,111		1,999			Specialty Chemicals	(11,481)		1,097		(10,935)		6,111
All Other											All Other	(132)		(13)		(684)		(330)

Corporate	Corporate										Corporate
Unallocated corporate expenses	Unallocated corporate expenses	3,890		2,009		10,241		5,138			Unallocated corporate expenses	(2,859)		(3,890)		(9,314)		(10,241)
Acquisition costs and other	Acquisition costs and other	149		201		837		201			Acquisition costs and other	—		(149)		(274)		(837)
Proxy contest costs and recoveries		—		—		—		168
Earn-out adjustments		—		160		(7)		1,430

Total Corporate	Total Corporate	4,039		2,370		11,071		6,937			Total Corporate	(2,859)		(4,039)		(9,588)		(11,078)
Operating income		1,567		10,697		26,975		16,855
Operating income (loss)											Operating income (loss)	(12,767)		4,685		(17,943)		29,464
Interest expense	Interest expense	827		329		1,637		1,068			Interest expense	1,063		827		3,217		1,637
Loss on extinguishment of debt		—		—		—		223
Change in fair value of interest rate swap		—		—		—		(2)

Other, net	Other, net	(118)		(10)		(176)		152			Other, net	(97)		(118)		(344)		(176)

Income before income taxes		$	858	$	10,378	$	25,514	$	15,414
Income (loss) from continuing operations before income taxes											Income (loss) from continuing operations before income taxes	$	(13,733)	$	3,976	$	(20,816)	$	28,003

		As of										As of
(in thousands)	(in thousands)	September 30, 2022		December 31, 2021							(in thousands)	September 30, 2023		December 31, 2022
Identifiable assets	Identifiable assets										Identifiable assets
Tubular Products	Tubular Products	$	190,646	$	160,625						Tubular Products	$	106,968	$	112,926
Specialty Chemicals	Specialty Chemicals	$	77,391	72,908							Specialty Chemicals	53,529		72,990
Corporate		$	31,405	32,469
Corporate and other											Corporate and other	54,694		83,127

		$	299,442	$	266,002							$	215,191	$	269,043

Note 15: Subsequent Events

~~During~~The Company evaluated subsequent events and transactions that occurred after the ~~fourth quarter of 2022,~~balance sheet date up to the date that the financial statements were available to be issued. Based upon this review, the Company ~~entered into an amended sublease agreement with a third party to sublease the entirety of the Palmer facility. The sublease agreement amends the previous sublease agreement entered into~~did not identify any subsequent events that would have required adjustment or disclosure in the fourth quarter of 2021 and continues through the remaining term of the Master Lease Agreement. The sublease will expire on September 30, 2036, unless terminated in accordance with the amended sublease agreement. The sublease provides for an annual base rent of approximately $0.5 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.

financial statements.

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 and nine months ended September 30, 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

~~Name Change~~

On August 5, 2022, we filed with the Secretary of State of the State of Delaware a Certificate of Amendment to our Certificate of Incorporation to change our corporate name from Synalloy Corporation to Ascent Industries Co., effective August 10, 2022.

~~Third Quarter 2022 Highlights~~

~~Consolidated net sales for~~During the third quarter, ~~of 2022 were $100.2 million increasing 16.2%, or $14.0 million, compared~~we continued to experience challenges to the third quarter of 2021. The increase was primarily driven by increases in average selling price as well as the Company's acquisition of DanChem in the fourth quarter of 2021, which is discussed in more detail in ~~Note 2~~ of the notes to the unaudited condensed consolidated financial statements, partially offset by a decrease in pounds shipped. Excluding the DanChem acquisition, net sales increased 6.6%, or $5.7 million,strategic changes we have implemented over the ~~third quarter of 2021.~~

~~Consolidated net income decreased~~ ~~to $0.6 million, or~~ ~~$0.06~~ ~~diluted ea~~rnings per share, in the third quarter of 2022, compared to net income of $8.2 million, or $0.87 diluted earnings per share, in the third quarter of 2021. Excluding the DanChem acquisition, consolidated net income decreased to $1.4 millionlast several quarters, along with difficult end market conditions from macro-economic volatility including continued inflationary pressures, continued increased raw material and ~~earnings per share decreased to $0.13 diluted earnings per share.~~

~~During the quarter, the Company used $1.6 million for capital expenditures focusing on growth and maintenance projects to continue to improve operational efficiencies.~~

In the third quarter of 2022, we delivered another quarter of financial performance with our sixth consecutive quarter of top line year-over-year growth and positive earnings with both segments delivering strong top line growth. We continue to experience varying levels of inflation, increased shipping and transportation costs and increased labor ~~and raw material~~ costs in both segments of our business ~~caused~~as well as continued reduced demand resulting from inventory management measures being pursued by ~~current economic conditions, however~~our customers. Despite this difficult environment, we believe we are making progress to stabilize the business and return to an acceptable level of profitability. We have continued to manage the impacts of significant changes in inflation rates and other economic disruptions through our customer relationships, continued pass through of rising input and other raw material costs and a continued focus on operational productivity in our facilities. During the quarter we continued to make progress on our transformation efforts and strategic priorities by investing in upgrades and new equipment at our facilities to further enhance and improve manufacturing processes, continued to focus on operational efficiencies within our facilities and continued efforts to maximize ourmanaging working capital ~~use.~~effectively throughout the year to generate cash and pay down debt, a decrease of $18.5 million to date in 2023. During the quarter, we also ~~repurchased 30,200 shares for $0.5 million through~~continued our ~~share repurchase program as part~~efforts of ~~our continued efforts to create~~creating sustainable value for our ~~shareholders.~~shareholders by repurchasing 44,799 shares for $0.4 million bringing our year to date total to 95,955 shares for a total of $0.9 million repurchased under our share repurchase program.

Munhall Closure

During the second quarter of 2023, the Board of Directors of the Company made the decision to permanently cease operations at Munhall effective on or around August 31, 2023. This strategic decision is part of the Company’s ongoing efforts to consolidate manufacturing to drive an increased focus on its core operations and to improve profitability while driving operational efficiencies. As a result of this decision, Munhall results have been reclassified from the Tubular Products segment and as discontinued operations in all periods presented. The discussion and analysis of our results of operations refers to continuing operations unless noted.

Goodwill Impairment Review

During the third quarter of ~~2022 includes $8.3 million in net sales and $0.7 million in operating loss attributable to the DanChem operations acquired in the fourth quarter of 2021.~~

~~Nine Months Ended September 30, 2022 Highlights~~

Consolidated net sales for the first nine months of 2022 were $332.6 million increasing 39.1%, or $93.5 million, compared to the first nine months of 2021. The increase was primarily driven by increases in average selling price2023, as ~~well as the Company's acquisition of DanChem in the fourth quarter of 2021, which is discussed in more detail~~described in Note 2 7 - Goodwill , Intangible Assets and De ferr ed Charges, we tested our goodwill for impairment. The Company determined potential indicators of impairment within the Specialty Chemicals reporting unit, with an associated goodwill balance of $11.4 million existed. Macroeconomic conditions and pressures, increased risks within the broader specialty chemicals business, reporting unit operating losses and a decline in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event and the need to perform a quantitative evaluation of goodwill. The Company performed a discounted cash flow analysis and a market multiple analysis for the Specialty Chemicals reporting unit to determine the reporting unit's fair value. The discounted cash flow analysis included management assumptions for expected sales growth, capital expenditures and overall operational forecasts while the market multiple analysis included historical and projected performance, market capitalization, volatility and multiples for industry peers. Determining the fair value of the ~~notes~~reporting unit and allocation of that fair value to individual assets and liabilities within the ~~unaudited condensed consolidated financial statements, partially offset~~reporting unit to determine the implied fair value of the goodwill is judgmental in nature and requires the use of significant management estimates and assumptions. Any changes in the judgments, estimates, or assumptions could produce significantly different results. As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Specialty Chemicals reporting unit was below its carrying value by 27.6% resulting in a ~~decrease in pounds shipped. Excluding~~goodwill impairment charge of $11.4 million for the ~~DanChem acquisition, net sales increased 29.0%, or $69.4 million, over the first~~three and nine months ~~of 2021.~~ended

Consolidated net income increased to $21.9 million, or $2.11 diluted earnings per share, in the first nine months of 2022, compared to net income of $12.2 million, or $1.30 diluted earnings per share, in the first nine months of 2021. Excluding the DanChem acquisition, consolidated net income increased to $22.3 million and earnings per share increased to $2.14 diluted earnings per share.

During the first nine months of 2022, the Company generated cash flows from operating activities of $1.0 million compared to $16.2 million in the first nine months of 2021. The decrease is primarily driven by increased working capital use due to the rise in raw material costs partially offset by increased profitability. The Company also used $4.3 million for capital expenditures during the first nine months of 2022 compared to $0.8 million in the first nine months of 2021. The increase in capital expenditures was primarily driven by growth and maintenance projects to continue to improve operational efficiencies.

~~The first nine months of 2022 includes $24.2 million in net sales and $0.3 million in operating loss attributable to the DanChem operations acquired in the fourth quarter of 2021.~~

September 30, 2023

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 ~~and distribution~~ costs. The Company continues efforts to implement price increases, as appropriate, to offset these inflationary pressures and continues to take action to ~~improve~~drive working capital efficiencies and evaluate other opportunities to maintain and improve financial performance in the short and long term.

Results of Operations

Consolidated Performance Summary

Consolidated net sales for the third quarter of ~~2022~~2023 were ~~$100.2~~$56.1 million, ~~an increase~~a decrease of $~~14.0~~22.1 million, or ~~16.2%~~28.3%, compared to net sales for the third quarter of ~~2021.~~2022. The ~~increase~~decrease in net sales was primarily driven by a ~~38.7% increase~~23.2% decrease in pounds shipped and a 6.4% decrease in average selling price partially offset by a 16.8% decrease in pounds shipped. Excluding DanChem, net sales increased $5.7 million, or 6.6%, to $91.9 million primarily driven by a 40.8% increase in average selling price partially offset by a 23.6% decrease in pounds shipped.prices.

Consolidated net sales for the first nine months of ~~2022~~2023 were ~~$332.6~~$184.2 million, ~~an increase~~a decrease of ~~$93.5~~$62.3 million, or ~~39.1%~~25.3%, compared to ~~net sales for the nine months of 2021. The increase in~~ net sales for the first nine months of ~~2022~~2022. The decrease in net sales was primarily driven by a ~~51.9% increase~~21.5% decrease in pounds shipped and a 3.8% decrease in average selling price partially offset by a 9.9% decrease in pounds shipped. Excluding DanChem, net sales increased $69.4 million, or 29.0%, to $308.4 million primarily driven by a 53.4% increase in average selling price partially offset by a 15.8% decrease in pounds shipped.prices.

For the third quarter of ~~2022,~~2023, consolidated gross profit decreased ~~35.8%~~57.3% to ~~$11.6~~$6.0 million, or ~~11.5%~~10.7% of sales, compared to ~~$18.0~~$14.1 million, or ~~20.9%~~18.0% of sales in the third quarter of ~~2021. The decrease for the third quarter of 2022 was attributable to continued increasing raw material costs, freight costs, and other manufacturing costs partially offset by increased selling prices.~~2022. For the first nine months of ~~2022,~~2023, consolidated gross profit ~~increased 34.6%~~decreased 70.6% to ~~$54.9~~$16.4 million, or ~~16.5%~~8.9% of sales, compared to ~~$40.8~~$55.7 million, or ~~17.1%~~22.6% of sales ~~in the first nine months of 2021. The increase~~ for the first nine months of ~~2022~~2022. The decrease was attributable to ~~increased selling prices partially offset by~~the decrease in volumes as well as continued increasing raw material and labor costs ~~freight costs, other manufacturing costs.~~in 2023.

Consolidated selling, general, and administrative expense (SG&A) for the third quarter of ~~2022 increased $3.0~~2023 decreased $1.9 million to ~~$9.9~~$7.4 million, or ~~9.8%~~13.1% of sales, compared to ~~$6.9~~$9.3 million, or ~~8.1%~~11.8% of sales in the third quarter of ~~2021.~~ 2022. The decrease in SG&A expense for the third quarter of 2023 was primarily driven by decreases in incentive bonus, amortization expense and salaries, wages and benefits, partially offset by increases in professional fees and bad debt expense.

Consolidated SG&A expense for the first nine months of ~~2022 increased $5.2~~2023 decreased $2.8 million to ~~$27.1~~$22.6 million, or ~~8.2%~~12.3% of sales, compared to ~~$21.9~~$25.4 million, or ~~9.2%~~10.3% of sales infor the first nine months of ~~2021.~~2022. The ~~increase~~decrease in SG&A expense for the ~~third quarter and~~ first nine months of ~~2022~~2023 was primarily driven by ~~the acquisition of DanChem~~decreases in ~~the fourth quarter of 2021 as well as~~incentive bonus, amortization expense, salaries wages and benefits, bad debt expense, travel expense and stock based compensations expense partially offset by increases in professional ~~fees, incentive bonus expense, and bad debt expense, lower realized gains on the disposal of assets compared to the prior year partially offset by lower salaries, wages and benefits.~~fees.

Consolidated operating ~~income~~loss in the third quarter of ~~2022~~2023 totaled ~~$1.6~~$12.8 million compared to operating income of ~~$10.7~~$4.7 million in the third quarter of ~~2021.~~2022. The operating decrease in the third quarter of ~~2022~~2023 was primarily driven by the aforementioned goodwill impairment within the Company's Specialty Chemicals segment and decrease in gross ~~margin and increases~~profit partially offset by decreases in SG&A ~~costs partially offset by increases in average selling prices.~~ costs.

Consolidated operating ~~income for~~loss in the first nine months of ~~2022~~2023 totaled ~~$27.0~~$17.9 million ~~increasing 60.0%~~ compared to operating income of ~~$16.9~~$29.5 million in the first nine months of ~~2021~~.2022. The operating ~~increase~~decrease in the ~~third quarter and~~ first nine months of ~~2022~~2023 was primarily driven by ~~increases~~the aforementioned goodwill impairment within the Company's Specialty Chemicals segment and decrease in ~~average selling prices and a continued focus on operational productivity in our facilities~~gross profit partially offset by ~~increases~~decreases in ~~raw material costs and increases in~~ SG~~&A.~~&A costs.

Tubular Products

~~Net sales for~~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 be comparable to the current period's presentation.

Net sales in the third quarter of ~~2022~~2023 totaled ~~$72.8~~$36.1 million, ana ~~increase~~decrease of ~~$2.7~~$14.5 million, or ~~3.9%~~28.7%, from the third quarter of ~~2021.~~2022. The ~~increase~~decrease was primarily driven by a ~~40.4% increase~~19.7% decrease in pounds shipped and a 10.9% decrease in average selling ~~price partially offset by 25.2% decrease in pounds shipped.~~ prices.

Net sales in the first nine months of ~~2022~~2023 totaled ~~$248.5~~$119.0 million, ~~an increase~~ a decreaseof ~~$55.1~~$43.1 million, or ~~28.5%~~26.6%, from the first nine months of ~~2021.~~2022. The ~~increase~~decrease was primarily driven by a ~~54.8% increase~~21.8% decrease in pounds shipped and a 5.5% decrease in average selling ~~price partially offset by 16.7% decrease in pounds shipped.~~prices.

The net sales de~~increase~~crease for the third quarter of ~~2022~~2023 compared to the third quarter of ~~2021~~2022 is 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		$	98	51.7%	(52.2)%	220.4%
Heavy wall seamless carbon steel pipe and tube	Heavy wall seamless carbon steel pipe and tube	1,935		18.6%	39.4%	(14.9)%	Heavy wall seamless carbon steel pipe and tube	(2,918)		(23.8)%	(9.0)%	(16.2)%
Stainless steel pipe and tube	Stainless steel pipe and tube	3,978		8.2%	63.7%	(23.0)%	Stainless steel pipe and tube	(11,627)		(30.3)%	(11.1)%	(21.6)%
Galvanized pipe and tube		(3,299)		(29.4)%	9.2%	(35.4)%
Total increase		$	2,712

Total decrease							Total decrease	$	(14,545)

The net sales ~~increase~~decrease for the first nine months of ~~2022~~2023 compared to the first nine months 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		$	(480)	(54.4)%	3.3%	(58.1)%
Heavy wall seamless carbon steel pipe and tube	Heavy wall seamless carbon steel pipe and tube	7,435		25.3%	42.0%	(11.7)%	Heavy wall seamless carbon steel pipe and tube	(4,730)		(12.9)%	3.5%	(15.8)%
Stainless steel pipe and tube	Stainless steel pipe and tube	46,001		34.2%	54.3%	(13.1)%	Stainless steel pipe and tube	(38,346)		(30.6)%	(7.0)%	(25.4)%
Galvanized pipe and tube		2,123		7.4%	41.6%	(24.1)%
Total increase		$	55,079

Total decrease							Total decrease	$	(43,076)

SG&A expense for the third quarter of ~~2022~~2023 decreased to ~~$3.8~~$2.5 million ~~or 5.2%~~compared to $3.2 million in the third quarter of 2022. As a percentage of sales, ~~compared~~SG&A expense increased to ~~$4.0 million, or 5.7%~~7.0% of sales in the third quarter of ~~2021.~~2023 compared to 6.3% of sales in the third quarter of 2022. The changes in SG&A were primarily driven by ~~lower~~decreases in amortization expense and salaries, wages and benefits ~~and lower allocated costs in the current year~~ compared to ~~the~~ prior year, partially offset by ~~increases~~increase in ~~travel expense and~~ bad debt expense.SG&A expense for the first nine months of 2022 decreased to $11.8 million, or 4.7% of sales, compared to $13.1 million, or 6.7% of sales for the first nine months of 2021. The changes in SG&A were primarily driven by lower professional fees and lower allocated costs in the current year compared to the prior year partially offset by increases in salaries, wages and benefits and travel expense.

Operating income decreased to $4.5 million for the third quarter of 2022 compared to $11.7 million for the third quarter of 2021. The current quarter decrease in operating income was primarily driven by increasing raw material costs, increased freight and scrap costs partially offset by average selling price increases due to pass through of raw material cost fluctuations. Operating income increased to $31.9 million for the first nine months of 2022 compared to $21.8 million for the first nine months of 2021. The first nine months of 2022 increase in operating income was primarily driven by average selling price increases due to pass through of raw material cost fluctuations partially offset by increased freight and scrap costs.

~~Specialty Chemicals~~

Net sales for the Specialty Chemicals segment in the third quarter of 2022 totaled $27.3 million, representing a $11.3 million, or 70.2%, increase from the third quarter of 2021. The increase was driven by a 64.3% increase in average selling price partially offset by a 2.9% decrease in pounds shipped. Excluding DanChem, net sales totaled $19.0 million, representing a $3.0 million, or 18.5%, increase primarily driven by a 49.8% increase in average selling price partially offset by a 21.0% decrease in pounds shipped.

Net sales for the Specialty Chemicals segment in the first nine months of 2022 totaled $84.1 million, representing a $38.5 million, or 84.3%, increase from the first nine months of 2021. The increase was driven by a 66.4% increase in average selling price and a 2.0% increase in pounds shipped. Excluding DanChem, net sales totaled $59.9 million, representing a $14.3 million, or 31.3%, increase primarily driven by a 51.8% increase in average selling price partially offset by a 14.0% decrease in pounds shipped.

~~SG&A expense for the third quarter of 2022 increased~~ to $2.3 million, or 8.3% of sales, compared to $1.1 million, or 6.8% of sales in the third quarter of 2021. The increase in SG&A expense was primarily driven by amortization expense related to the DanChem acquired intangibles as well as increases in salaries, wages and benefits, incentive bonus expense, bad debt expense and professional fees in the period. Excluding DanChem, SG&A expense for the third quarter of 2022 decreased to $0.5 million compared to $1.1 million in the third quarter of 2021.

SG&A expense for the first nine months of ~~2022~~2023 decreased to $7.9 million compared to $10.0 million in the first nine months of 2022. As a percentage of sales, SG&A expense increased to ~~$5.4 million, or 6.5% of sales, compared to $4.1 million, or 9.0%~~6.6% of sales in the first nine months of ~~2021.~~2023 compared to 6.2% of sales in the first nine months of 2022. The ~~increase~~changes in SG&A were primarily driven by decreases in amortization expense, salaries, wages and benefits, travel and incentive bonus expense in the current year compared to the prior year.

Operating income decreased to $1.7 million for the third quarter of 2023 compared to operating income of $7.6 million for the third quarter of 2022. Operating income decreased to $3.3 million for the first nine months of 2023 compared to operating income of $34.8 million for the first nine months of 2022. Current year decrease in operating income was primarily driven by ~~amortization expense related to~~ the ~~DanChem acquired intangibles~~aforementioned decrease in net sales and continued increases in material and labor costs partially offset by decreases in SG&A expense.

Specialty Chemicals

Net sales in the third quarter of 2023 totaled $20.1 million, representing a $7.3 million, or 26.6%, decrease from the third quarter of 2022. The decrease was driven by a 24.8% decrease in pounds shipped as well as a 2.7% decrease in average selling prices.

Net sales in the first nine months of 2023 totaled $65.2 million, representing a $18.9 million, or 22.5%, decrease from the first nine months of 2022. The decrease was driven by a 21.0% decrease in pounds shipped partially offset by a 0.3% increase in average selling prices.

SG&A expense for the third quarter of 2023 decreased to $2.0 million, or 9.8% of sales, compared to $2.3 million, or 8.3% of sales in the third quarter of 2022. The decrease was primarily driven by decreases in incentive bonus and amortization expense partially offset by increases in professional fees and salaries, wages and ~~benefits, incentive bonus expense, bad debt expense and professional fees partially offset by lower share-based compensation expense. Excluding DanChem,~~ benefits.

SG&A expense for the first nine months of ~~2022 decrease~~ 2023 decreased to ~~$1.4~~$5.3 million, or 8.1% of sales, compared to ~~$4.1~~$5.4 million, or 6.5% of sales in the first nine months of ~~2021.~~2022. The increase was primarily driven by decreases in amortization expense and incentive bonus partially offset by increases in professional fees and salaries, wages and benefits

Operating loss increased to $11.5 million for the third quarter of 2023 compared to operating income ~~decreased to~~of $1.1 million for the third quarter of ~~2022~~2022. Current year increase in operating loss was primarily driven by the aforementioned goodwill impairment charge of $11.4 million and the decrease in net sales.

Operating loss increased to $10.9 million for the first nine months of 2023 compared to operating income of ~~$1.4 million for the third quarter of 2021. The decrease in operating income is primarily driven by the aforementioned increases in SG&A expense in the period. Operating income increased to~~ $6.1 million for the first nine months of ~~2022 compared to $2.0 million for the first nine months of 2021. The~~2022. Current year increase in operating ~~income is~~loss was primarily driven by ~~increases in average selling prices~~the aforementioned goodwill impairment charge of $11.4 million and the ~~acquisition of DanChem~~decrease in ~~fourth quarter of 2021 partially offset by the aforementioned increases in SG&A expense.~~net sales.

Corporate & Other Items

Unallocated corporate and other expenses for the third quarter of ~~2022 increased $1.9~~2023 decreased $1.2 million, or ~~93.5%~~28.6%, to ~~$3.9~~$3.0 million, or ~~3.9%~~5.3% of sales, compared to ~~$2.0~~$4.2 million, or ~~2.3%~~5.4% of sales, in the prior ~~year comparative period.~~ year. The third quarter of 2023 decrease was primarily driven by decreases in incentive bonus, salaries, wages and benefits and other corporate overhead, partially offset by increases in professional fees, taxes and licenses and insurance expense.

Unallocated corporate and other expenses for the first nine months of ~~2022 increased $5.1~~2023 decreased $1.0 million, or ~~99.3%~~8.4%, to ~~$10.2~~$10.0 million, or ~~3.1%~~5.5% of sales, compared to ~~$5.1~~$11.0 million, or ~~2.2%~~4.5% of sales, in the prior ~~year comparative period.~~year. The ~~third quarter and~~ first nine months of ~~2022 increases resulted~~2023 decrease was primarily ~~from decreases~~driven by decrease in ~~allocated costs, increases in professional fees, share based~~incentive bonus, salaries, wages and benefits, stock compensation ~~taxes, licenses and insurance~~ and other corporate overhead costs, partially offset by ~~decreases~~increases in ~~salaries, wages~~professional fees, taxes and ~~benefits.~~licenses and insurance expense.

Interest expense for the third quarter of ~~2022~~2023 increased to ~~$0.8~~$1.1 million, from ~~$0.3~~$0.8 million for the third quarter of ~~2021. For~~2022. Interest expense for the first nine ~~months~~month of ~~2022, interest expense~~2023 increased to $3.2 million, from $1.6 million ~~from $1.1 million in~~for the first nine ~~months~~month of ~~2021~~2022. The increase is primarily driven by higher ~~debt outstanding~~interest rates in the current year ~~as a result of~~compared to the ~~DanChem acquisition in the fourth quarter of 2021.~~prior year.

The effective tax rate was ~~27.3%~~7.0% and ~~14.0%~~11.2% for the three and nine months ended September 30, ~~2022.~~2023. The ~~three months ended~~ September 30, 2022, effective tax rate was higher than the U.S. statutory rate 21.0% primarily due to lower quarter to date pretax earnings relative to permanent differences. The nine months ended September 30, 2022,2023 effective tax rate was lower than the U.S. statutory rate of 21.0% primarily dueto the ~~year-to-date release~~effects of ~~federal valuation allowances.~~permanent goodwill impairment reducing the tax benefit in the period.

~~The three and nine months ended September 30, 2021 effective tax rates approximated the U.S. statutory rate of 21.0%.~~

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States ("GAAP"), we use the following non-GAAP financial measures: EBITDA and Adjusted EBITDA. Management believes that these non-GAAP measures are useful because they are key measures used by our management team to evaluate our operating performance, generate future operating plans and make strategic decisions as well as allow readers to compare the financial results between periods. Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

EBITDA and Adjusted EBITDA

We define "EBITDA" as earnings before interest (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 September 30, Nine Months Ended September 30,
($ in thousands) 2022 2021 2022 2021
Consolidated
Net income $ 624 $ 8,199 $ 21,941 $ 12,179
Adjustments:
Interest expense 827 329 1,637 1,068
Change in fair value of interest rate swap — — — (2)
Income taxes 234 2,179 3,573 3,235
Depreciation 2,171 1,868 6,380 5,459
Amortization 1,146 680 2,588 2,041
EBITDA 5,002 13,255 36,119 23,980
Acquisition costs and other 149 201 837 201
Proxy contest costs and recoveries — — — 168
Loss on extinguishment of debt — — — 223
Earn-out adjustments — 160 (7) 1,430
Loss on investments in equity securities and other investments — — — 363
Asset impairments — — — 233
Gain on lease modification — — (2) —
Stock-based compensation 313 239 708 695
Non-cash lease expense 108 124 322 373
Retention expense — 18 — 494
Restructuring and severance cost — 811 10 1,287
Adjusted EBITDA $ 5,572 $ 14,808 $ 37,987 $ 29,447
% of sales 5.6 % 17.2 % 11.4 % 12.3 %

Consolidated EBITDA and Adjusted EBITDA from continuing operations are as follows:


		Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)		2023			2022			2023			2022
Consolidated
Net income (loss) from continuing operations		$	(12,769)		$	3,105		$	(18,466)		$	23,934
Adjustments:
	Interest expense	1,063			827			3,217			1,637

	Income taxes	(964)			871			(2,350)			4,069
	Depreciation	1,590			1,748			4,833			4,950
	Amortization	376			1,098			1,129			2,440
EBITDA		(10,704)			7,649			(11,637)			37,030
	Acquisition costs and other	42			149			323			836






	Goodwill impairment	11,389			—			11,389			—
	Gain on lease modification	—			—			—			(2)
	Stock-based compensation	142			307			389			697
	Non-cash lease expense	69			109			205			323
	Retention expense	6			—			6			—
	Restructuring and severance cost	—			—			103			10
Adjusted EBITDA		$	944		$	8,214		$	778		$	38,894
	% of sales	1.7		%	10.5		%	0.4		%	15.8		%

Tubular Products EBITDA and Adjusted EBITDA from continuing operations are as follows:


			Three Months Ended September 30,						Nine Months Ended September 30,								Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	($ in thousands)		2022			2021			2022			2021			($ in thousands)		2023			2022			2023			2022
Tubular Products	Tubular Products														Tubular Products
Net income			$	4,539		$	11,556		$	32,037		$	20,558
Net income from continuing operations															Net income from continuing operations		$	1,705		$	7,640		$	3,265		$	34,760
Adjustments:	Adjustments:														Adjustments:
		Interest expense	—			—			1			—
		Depreciation	1,063			1,449			3,438			4,192				Depreciation	626			637			1,916			2,000
		Amortization	625			680			1,876			2,041				Amortization	217			576			653			1,728
EBITDA	EBITDA		6,227			13,685			37,352			26,791			EBITDA		2,548			8,853			5,834			38,488
																Acquisition costs and other	42			—			46			—
		Earn-out adjustments	—			160			(7)			1,430

		Stock-based compensation	40			(7)			64			75				Stock-based compensation	11			34			2			53
		Non-cash lease expense	—			—			(1)			—				Non-cash lease expense	36			—			109			(1)
		Retention expense	—			18			—			494
		Restructuring and severance costs	—			313			—			363				Restructuring and severance costs	—			—			97			—
Tubular Products Adjusted EBITDA	Tubular Products Adjusted EBITDA		$	6,267		$	14,169		$	37,408		$	29,153		Tubular Products Adjusted EBITDA		$	2,637		$	8,887		$	6,088		$	38,540
		% of segment sales	8.6		%	20.2		%	15.1		%	15.1		%		% of segment sales	7.3		%	17.6		%	5.1		%	23.8		%

Specialty Chemicals EBITDA and Adjusted EBITDA are as follows:


			Three Months Ended September 30,						Nine Months Ended September 30,								Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	($ in thousands)		2022			2021			2022			2021			($ in thousands)		2023			2022			2023			2022
Specialty Chemicals	Specialty Chemicals														Specialty Chemicals
Net income			$	1,088		$	1,360		$	6,083		$	2,001
Net income (loss)															Net income (loss)		$	(11,498)		$	1,088		$	(10,974)		$	6,083
Adjustments:	Adjustments:														Adjustments:
		Interest expense	9			—			28			1				Interest expense	21			9			52			28
		Depreciation	1,097			389			2,897			1,165				Depreciation	942			1,097			2,850			2,897
		Amortization	520			—			712			—				Amortization	159			520			475			712
EBITDA	EBITDA		2,714			1,749			9,720			3,167			EBITDA		(10,376)			2,714			(7,597)			9,720
		Asset impairments	—			—			—			233				Acquisition costs and other	—			—			2			—
		Stock-based compensation	12			5			29			172				Goodwill impairment	11,389			—			11,389			—
		Non-cash lease expense	—			—			1			—				Stock-based compensation	3			12			(13)			29
		Restructuring and severance costs	—			—			—			427				Non-cash lease expense	23			—			69			1

Specialty Chemicals Adjusted EBITDA	Specialty Chemicals Adjusted EBITDA		$	2,726		$	1,754		$	9,750		$	3,999		Specialty Chemicals Adjusted EBITDA		$	1,039		$	2,726		$	3,850		$	9,750
		% of segment sales	10.0		%	10.9		%	11.6		%	8.8		%		% of segment sales	5.2		%	10.0		%	5.9		%	11.6		%

Liquidity and Capital Resources

We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including level of investment required to support our business strategies, the performance of our business, capital expenditures, credit facilities and working capital management. Capital expenditures and share repurchases are a component of our cash flow and capital management strategy which we can adjust in response to economic and other changes in our business environment. We have a disciplined approach to capital allocation focusing on priorities that support our business and growth.

Sources of Liquidity

Funds generated by operating activities supplemented by our available cash and cash equivalents and our credit facilities are our most significant sources of liquidity. As of September 30, ~~2022,~~2023, we held ~~$0.5~~$0.7 million of cash and cash equivalents, as well as ~~$36.7~~$41.8 million of remaining available capacity on our revolving line of credit. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures as well as repay our debt obligations as they become due over the next 12 months and beyond.

Cash Flows

Cash flows from ~~total~~continuing operations were as follows:


		Nine Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Total cash provided by (used in):	Total cash provided by (used in):					Total cash provided by (used in):
Operating activities	Operating activities	$	993	$	16,186	Operating activities	$	4,132	$	5,672
Investing activities	Investing activities	(3,462)		293		Investing activities	(2,660)		(2,870)
Financing activities	Financing activities	980		(15,541)		Financing activities	(19,433)		1,788
Net (decrease) increase in cash and cash equivalents		$	(1,489)	$	938
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	$	(17,961)	$	4,590

Operating Activities

The decrease in cash provided by operating activities for the nine months ended September 30, ~~2022,~~2023, compared to cash provided by operating activities in the nine months ended September 30, ~~2021,~~2022, was primarily driven by the decrease in earnings in the current year partially offset changes in working capital. Changes in working capital can vary significantly depending on factors such as the timing of inventory production and purchases, customer payments of accounts receivable and payments to vendors in the regular course of business. Inventory ~~decreased~~increased operating cash flows for the first nine months of ~~2022~~

2023 by ~~$36.1~~$0.5 million compared to a decrease of ~~$15.5~~$30.3 million for the first nine months of ~~2021.~~2022, while accounts payable increased operating cash flows by $5.9 million for the first nine months of 2023, compared to $10.2 million in the first nine months of 2022. The ~~increase~~decrease in inventory and accounts payable is primarily ~~due~~driven by lower inventory purchases to ~~product cost~~match inventory levels with sales partially and ~~freight inflation over the prior year, partially offset by~~ slightly higher inventory turns ~~year-over-year.~~year-over-year offset by decrease in days payables outstanding. Accounts receivable increased operating cash flows by $3.8 million in the first nine months of 2023 compared to a $6.2 million decrease in the first nine months of 2022. The increase in cash generated by accounts receivable is primarily driven by a decrease in days sales outstanding compared to the first nine 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 nine months ended September 30, ~~2022,~~2023, compared to the cash ~~provided by~~used in investing activities for the nine months ended September 30, ~~2021,~~2022, was primarily due to ~~increases~~decreases in capital expenditures in the current year compared to the prior ~~year and lower proceeds received from property, plant and equipment disposal activities in the current~~ year.

Financing Activities

Net cash ~~provided by~~used in financing activities primarily consists of transactions related to our long-term ~~debt and earn-out liabilities.~~debt. The increase in cash ~~provided by~~used in financing activities for the nine months ended September 30, ~~2022,~~2023, compared to cash used in financing activities for the nine months ended September 30, ~~2021,~~2022, was primarily due to decreased borrowings and increased ~~borrowings~~repayments under the Company's credit facility ~~proceeds received under~~compared to the ~~note payable associated with the Company's insurance financing agreement and decreased payments for the Company's earnout liabilities.~~

prior year.

Short-term Debt

The Company has a note payable in the amount of ~~$1.0~~$0.9 million with an annual interest rate of ~~2.77%~~3.70% maturing April 1, ~~2023,~~2024, associated with the financing of the Company's insurance premium in the current year. As of September 30, ~~2022,~~2023, the outstanding balance was $0.6 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 September 30, ~~2022,~~2023, the Company had ~~$72.6~~$53.0 million of total borrowings outstanding with its lender, ~~an increase~~a decrease of ~~$2.2~~$18.5 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 September 30, ~~2022,~~2023, the Company was in compliance with all financial debt covenants. See Note 8 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. ~~During~~

Shares repurchased for the three and nine months ended September 30, 2023 and 2022 the Company purchased 30,200 shares under the stock repurchase program at an average price of approximately $16.29 per share for an aggregate amount of $0.5 million. During the three and nine months ended September 30, 2021, the Company purchased no shares under the stock repurchase program.were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Number of shares repurchased	44,799		30		95,955		30
Average price per share	$	8.87	$	16.29	$	9.38	$	16.59
Total cost of shares repurchased	$	398,861	$	493	$	903,012	$	493

As of September 30, ~~2022,~~2023, the Company has ~~760,183~~584,024 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:


		September 30, 2022	December 31, 2021		September 30, 2023	December 31, 2022
Current ratio	Current ratio	3.3	3.3	Current ratio	3.7	4.4
Debt to capital	Debt to capital	35%	39%	Debt to capital	35%	44%
Return on average equity	Return on average equity	26.3%	21.1%	Return on average equity	(20.8)%	33.7%

Material Cash Requirements from Contractual and Other Obligations

As of September 30, ~~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 ~~$68.3~~$49.4 million and ~~$4.3~~$3.6 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 $0.6 million, which matures within 12 months. Interest payments on the remaining note payable borrowings will be based on an interest rate of ~~2.77%~~3.70%. See Note 8 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 ~~$33.8~~$32.9 million, with ~~$1.3~~$1.4 million payable within 12 months. See Note 9 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 ~~$3.5~~$1.0 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.~~fiscal 2022, except as discussed below.

Assets Held for Sale

We classify long-lived assets or disposal groups as held for sale in the period when all of the following conditions have been met:

•the Board of Directors have approved and committed to a plan to sell the assets or disposal group;

•the asset or disposal group is available for immediate sale in its present condition;

•an active program to locate a buyer and other actions required to complete the sale have been initiated;

•the sale of the asset or disposal group is probable and expected to be completed within one year;

•the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and,

•it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

We initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell and recognize any loss in the period in which the held for sale criteria are met. Gains are not recognized until the date of sale. We cease depreciation and amortization of a long-lived asset, or assets within a disposal group, upon their designation as held for sale and subsequently assess fair value less any costs to sell at each reporting period until the asset or disposal group is no longer classified as held for sale.

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

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 September 30, ~~2022.~~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 September 30, ~~2022,~~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

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15f-15(f). As reported in our ~~2021~~2022 Form 10-K, we did not maintain effective internal control over financial reporting as of December 31, ~~2021~~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 ~~2021~~2022 Form 10-K for a description of our material weaknesses.

Ongoing Remediation Efforts to Address Material Weaknesses

Our material weaknesses were not remediated at September 30, 2022; however, during the nine months ended September 30, 2022, management has undertaken steps toward remediation of our material weaknesses identified in our internal control over financial reporting.2023. Our Board of Directors and management are committed to the continued implementation of remediation efforts to address the material weaknesses. ~~As part of the overall~~The Company has a remediation plan ~~the Company is~~which includes designing and implementing review and approval controls over the data utilized in various accounting ~~processes. These~~processes, controls that will address the accuracy, timely recording and completeness of data used in the determination of significant accounting estimates, reserves and valuations ~~as well as presentation and disclosures~~ in accordance with U.S. ~~GAAP.~~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 being 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. ~~Because of these efforts, as of the date of this filing, the Company believes it has made progress toward remediating the underlying causes of the remaining material weaknesses.~~ The steps ~~taken during the nine months ended September 30, 2022~~ to remediate the deficiencies underlying the material weaknesses include:

•~~Engaging an outside service provider to assist management with the remediation efforts including to help review~~Hiring adequate accounting, finance and ~~make recommendations with respect to the redesign and implementation of our internal controls over financial reporting.~~

•~~Engaging Senior Leadership across the organization to better define its ownership of areas of internal controls and remediation.~~

•~~Hiring accounting and finance~~information technology resources ~~with relevant public company experience as well as filling key leadership roles in accounting and finance~~ to enhance the capabilities of ~~accounting and finance~~these functions across the organization.

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

•Evaluating and realigning roles and responsibilities of 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.

•~~Designing and~~ Enhancing/designing/implementing ~~enhanced procedures and~~ controls over the inventory, revenue recognition and accounts receivable, period-end ~~close process~~financial reporting, account analyses, and ~~related documentation including but not limited to, period end checklists, review and approval of~~ journal entries, account reconciliations and account analysis and financial statement analysis and thresholds. Additional time is needed to demonstrate sustainability as it relates to the effectiveness of the revised controls.entry processes

•~~Designing and enhancing procedures to ensure critical inputs affecting the accuracy and timeliness of revenue recognition. We are in the process of~~ Enhancing/designing/implementing ~~these enhancements and additional time is needed to demonstrate sustainability as it relates to the effectiveness of the revised controls.~~controls over accounting for complex areas

•~~Designing~~Enhancing/designing/implementing controls over general information technology controls, including user access provisioning and enhancing improved review and approval controls across the Company to ensure that revenue, including nonroutine revenue transactions, is recognized consistently in accordance with the terms of the customer contracts and U.S. GAAP. We are in the process of implementing these enhancements and additional time is needed to demonstrate sustainability as it relates to the effectiveness of the revised controls.cyber-security

•
Designing and enhancing improved procedures over the Company's review and approval of obsolescence of inventories. We are in the process of implementing these enhancements and additional time is needed to demonstrate sustainability as it relates to the effectiveness of the revised controls.

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, our management may decide to take additional measures to address our control deficiencies or to modify the remediation efforts undertaken. Because the reliability of the internal control process requires repeatable execution, our material weaknesses cannot be considered fully remediated until all remedial processes and procedures (including additional remediation 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 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 and nine months ended September 30, ~~2022~~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, in some cases, 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 13 - 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

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 September 30, ~~2022:~~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
July 1, 2022 - July 31, 2022 — $ — — 790,383
August 1, 2022 - August 31, 2022 11,050 17.67 11,050 779,333
September 1, 2022 - September 30, 2022 19,150 15.49 19,150 760,183
As of September 30, 2022 30,200 $ 16.29 30,200 760,183


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
July 1, 2023 - July 31, 2023	22,276	$	8.86	22,276	606,547
August 1, 2023 - August 31, 2023	12,499	9.12		12,499	594,048
September 1, 2023 - September 30, 2023	10,024	8.59		10,024	584,024
As of September 30, 2023	44,799	$	8.87	44,799	584,024

1Pursuant to the 790,383 share stock repurchase program ~~authorized~~re-authorized by the Board of Directors in ~~February 2021.~~December 2022. The stock repurchase program expires in ~~twenty-four months from authorization~~February 2025 and there is no guarantee to the exact number of shares that will be repurchased by the Company over that period. See Note 10 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
~~3.1~~						~~Certificate of Amendment of Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Form 8-K filed on August 10, 2022~~
~~3.2~~						A ~~mended and Restated By-laws, incorporated reference to Exhibit~~ ~~3.2 to Form 8-K filed on August 10, 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.



	ASCENT INDUSTRIES CO.
	(Registrant)


Date:	November 8, ~~2022~~2023	By:	/s/ Christopher G. Hutter
			Christopher G. Hutter
			President and Chief Executive Officer
			(principal executive officer)

Date:	November 8, ~~2022~~2023	By:	/s/ ~~Aaron M. Tam~~William S. Steckel
			~~Aaron M. Tam~~William S. Steckel
			Chief Financial Officer
			(principal accounting officer)


	Three Months Ended September 30, 2021

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Cost of Common Stock in Treasury		Total
	Shares	Amount
Balance June 30, 2021	10,300	$	10,300	$	37,309	$	46,815	$	(9,693)	$	84,731
Net income	—	—		—		8,199		—		8,199
Issuance of 60,494 shares of common stock from treasury	—	—		(511)		—		569		58
Stock-based compensation	—	—		239		—		—		239

Balance September 30, 2021	10,300	$	10,300	$	37,037	$	55,014	$	(9,124)	$	93,227


	Nine Months Ended September 30, 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	—	—		—		12,179		—		12,179
Issuance of 152,666 shares of common stock from treasury	—	—		(1,377)		—		1,435		58
Stock-based compensation	—	—		695		—		—		695

Balance September 30, 2021	10,300	$	10,300	$	37,037	$	55,014	$	(9,124)	$	93,227


(in thousands)	October 22, 2021		Revisions		September 30, 2022
Cash and cash equivalents	$	1,533			$	1,533
Accounts receivable, net of allowance for credit losses of $118	5,358				5,358
Inventories, net	1,561				1,561
Prepaid expenses and other current assets	454				454
Property, plant and equipment, net	15,697		$	1,594	17,291
Right of use asset, operating leases, net	208				208
Intangible assets, net	5,750				5,750
Total identifiable assets acquired	$	30,561	$	1,594	$	32,155

Accounts payable	$	1,751			$	1,751
Accrued expenses and other current liabilities	1,622				1,622
Current portion of operating lease liabilities	51				51
Current portion of finance lease liabilities	215				215
Deferred income taxes	2,542		$	387	2,929
Long-term portion of operating lease liabilities	157				157
Long-term portion of finance lease liabilities	1,408				1,408
Total identifiable liabilities assumed	$	7,746	$	387	$	8,133

Net identifiable assets acquired	$	22,815	$	1,207	$	24,022
Transaction price	34,097				34,097
Goodwill	$	11,282	$	(1,207)	$	10,075


(in thousands)	MUSA-Galvanized		American Stainless		Total
Balance December 31, 2021	$	1,106	$	855	$	1,961
Earn-out payments during the period	(1,099)		(855)		(1,954)
Changes in fair value during the period	(7)		—		(7)
Balance September 30, 2022	$	—	$	—	$	—