acnt-20240331

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the Quarterly Period Ended March 31, 2024


☐			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

Non-accelerated filer

☐

Smaller reporting company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

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

The number of shares outstanding of the registrant's common stock as of May 6, 2024 was 10,129,683

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Ascent Industries Co.

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PART I. FINANCIAL INFORMATION
Disclosure Regarding Forward Looking Statements		2
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023	3
	Condensed Consolidated Statements of Income (Loss) for the Three Months Ended March 31, 2024 and 2023 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)	5
	Condensed Consolidated Statements of Shareholders' Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)
	Note 1: Basis of Presentation	7
	Note 2: Discontinued Operations	8
	Note 3: Revenue Recognition	9
	Note 4: Fair Value of Financial Instruments	10
	Note 5: Inventories	11
	Note 6: Property, Plant and Equipment	11
	Note 7: Intangible Assets and Deferred Charges	12
	Note 8: Debt	13
	Note 9: Leases	14
	Note 10: Shareholders' Equity	15
	Note 11: Earnings Per Share	16
	Note 12: Income Taxes	16
	Note 13: Commitments and Contingencies	17
	Note 14: Industry Segments	17
	Note 15: Subsequent Events	18
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28

	Signatures	29

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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.

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Part I - Financial Information

Item 1. Financial Statements

Ascent Industries Co.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)


	(Unaudited)
	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	1,299	$	1,851
Accounts receivable, net of allowance for credit losses of $792 and $463, respectively	28,160		26,604
Inventories	51,197		52,306
Prepaid expenses and other current assets	4,146		4,879
Assets held for sale	1,792		2,912
Current assets of discontinued operations	46		861
Total current assets	86,640		89,413
Property, plant and equipment, net	28,648		29,755
Right-of-use assets, operating leases, net	27,431		27,784

Intangible assets, net	8,129		8,496
Deferred income taxes	7,366		5,808
Deferred charges, net	79		104
Other non-current assets, net	2,678		1,935

Total assets	$	160,971	$	163,295

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	20,549	$	16,416

Accrued expenses and other current liabilities	4,824		5,108
Current portion of note payable	88		360


Current portion of operating lease liabilities	1,170		1,140
Current portion of finance lease liabilities	288		292
Current liabilities of discontinued operations	1,376		1,473
Total current liabilities	28,295		24,789


Long-term portion of operating lease liabilities	29,419		29,729
Long-term portion of finance lease liabilities	1,236		1,307

Other long-term liabilities	57		60
Total non-current liabilities	30,712		31,096
Total liabilities	$	59,007	$	55,885

Commitments and contingencies – See Note 13

Shareholders' equity:
Common stock, par value $1 per share; 24,000,000 shares authorized; 11,085,103 and 10,124,781 shares issued and outstanding, respectively	$	11,085	$	11,085
Capital in excess of par value	47,097		47,333
Retained earnings	53,024		58,517
	111,206		116,935
Less: cost of common stock in treasury - 960,323 and 990,282 shares, respectively	(9,242)		(9,525)
Total shareholders' equity	101,964		107,410
Total liabilities and shareholders' equity	$	160,971	$	163,295

Note: The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date. See accompanying notes to condensed consolidated financial statements.

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Ascent Industries Co.

Condensed Consolidated Statements of Income (Loss) (Unaudited)

(in thousands, except per share data)


	Three Months Ended March 31,
	2024		2023
Net sales	$	44,110	$	54,860
Cost of sales	41,582		53,394
Gross profit	2,528		1,466
Selling, general and administrative	7,759		7,588
Acquisition costs and other	22		261





Operating loss from continuing operations	(5,253)		(6,383)
Other expense (income)
Interest expense	127		1,107


Other, net	(120)		(95)
Loss from continuing operations before income taxes	(5,260)		(7,395)
Income tax benefit	(1,166)		(1,607)
Loss from continuing operations	(4,094)		(5,788)
(Loss) income from discontinued operations, net of tax	(1,399)		589
Net loss	$	(5,493)	$	(5,199)







Net loss per common share from continuing operations:
Basic	$	(0.41)	$	(0.57)
Diluted	$	(0.41)	$	(0.57)

Net (loss) income per common share from discontinued operations:
Basic	$	(0.14)	$	0.06
Diluted	$	(0.14)	$	0.06

Net loss per common share:
Basic	$	(0.54)	$	(0.51)
Diluted	$	(0.54)	$	(0.51)

Weighted average shares outstanding:
Basic	10,094		10,148

Diluted	10,094		10,148

See accompanying notes to condensed consolidated financial statements.

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Ascent Industries Co.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Three Months Ended March 31,
	2024		2023
Operating activities
Net loss	$	(5,493)	$	(5,199)
(Loss) income from discontinued operations, net of tax	(1,399)		589
Net loss from continuing operations	(4,094)		(5,788)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense	1,522		1,549
Amortization expense	367		376
Amortization of debt issuance costs	25		25





Deferred income taxes	(1,166)		353




Provision for (reduction of) losses on accounts receivable	330		(57)
(Reduction of) provision for losses on inventories	(73)		791
Loss on disposal of property, plant and equipment	—		182
Non-cash lease expense	55		64




Stock-based compensation expense	209		319
Changes in operating assets and liabilities:
Accounts receivable	(1,885)		(1,072)
Inventories	1,182		9,492
Other assets and liabilities	(73)		297
Accounts payable	4,022		6,827

Accrued expenses	(283)		1,629
Accrued income taxes	78		(2,577)
Net cash provided by operating activities - continuing operations	216		12,410
Net cash provided by operating activities - discontinued operations	47		980
Net cash provided by operating activities	263		13,390
Investing activities
Purchases of property, plant and equipment	(305)		(586)




Net cash used in investing activities - continuing operations	(305)		(586)
Net cash used in investing activities - discontinued operations	—		(238)
Net cash used in investing activities	(305)		(824)
Financing activities
Borrowings from long-term debt	50,950		67,488


Payments on long-term debt	(50,950)		(80,384)
Payments on note payable	(271)		(289)
Principal payments on finance lease obligations	(76)		(74)


Repurchase of common stock	(163)		(327)
Net cash used in financing activities	(510)		(13,586)
Decrease in cash and cash equivalents	(552)		(1,020)
Less: Cash and cash equivalents of discontinued operations	—		1
Cash and cash equivalents at beginning of period	1,851		1,440
Cash and cash equivalents at end of period	$	1,299	$	421


Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest	$	68	$	1,061
Income taxes	—		817
Noncash Investing Activities:
Capital expenditures, not yet paid	$	583	$	266

See accompanying notes to condensed consolidated financial statements.

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Ascent Industries Co.

Condensed Consolidated Statements of Shareholders' Equity (Unaudited)

(in thousands)


	Three Months Ended March 31, 2024

	Common Stock			Capital in Excess of Par Value		Retained Earnings		Treasury Stock			Total
	Shares	Amount						Shares	Amount
Balance December 31, 2023	11,085	$	11,085	$	47,333	$	58,517	990	$	(9,525)	$	107,410
Net loss	—	—		—		(5,493)			—		(5,493)
Issuance of 46,289 shares of common stock from treasury	—	—		(445)		—		(46)	445		—

Stock-based compensation	—	—		209		—			—		209
Repurchase of 16,330 shares of common stock	—	—		—		—		16	(162)		(162)
Balance as of March 31, 2024	11,085	$	11,085	$	47,097	$	53,024	960	$	(9,242)	$	101,964

See accompanying notes to condensed consolidated financial statements.


	Three Months Ended March 31, 2023

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

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

See accompanying notes to condensed consolidated financial statements.

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Ascent Industries Co.

Notes to 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 March 31, 2024, the statements of income (loss) and shareholders’ equity for the three months ended March 31, 2024 and 2023, and the statements of cash flows for the three months ended March 31, 2024 and 2023. The December 31, 2023 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, 2023 (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 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 accordance with accounting principles generally accepted in the United States of America requires management to make estimates that affect the reported amounts of assets, liabilities, sales and 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 basis for making estimates concerning the carrying value of assets and liabilities that are readily available from other sources. Actual results may differ from these estimates.

Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation, including the Company's Munhall and Specialty Pipe and Tube operations within the Tubular Products segment to discontinued operations.

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and footnote disclosures.

In December 2023, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments also require that all entities disclose more detailed information about income taxes paid, including by jurisdiction; pretax income (or loss) from continuing operations; and income tax expense (or benefit). The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, and subsequent interim periods, with early

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Ascent Industries Co.

Notes to Consolidated Financial Statements (Unaudited)

adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and footnote disclosures.

Recent accounting pronouncements pending adoption not discussed in this Form 10-Q are either not applicable to the Company or are not expected to have a material impact on the Company.

Note 2: Discontinued Operations

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. It is anticipated that the complete exit and disposal of all assets at Munhall 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 of 2023, the Company incurred additional asset impairment charges of $2.4 million related to the write down of inventory to net realizable value. During the first quarter of 2024, the Company incurred additional asset impairment charges of $1.1 million related to the write down of the remaining long-lived assets at the facility. 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.

Divestiture of Specialty Pipe & Tube, Inc.

On December 22, 2023, the Company and its wholly-owned subsidiary Specialty Pipe & Tube, Inc. (“SPT”) entered into an Asset Purchase Agreement pursuant to which Ascent and SPT sold substantially all of the assets primarily related to SPT to Specialty Pipe & Tube Operations, LLC, a Delaware limited liability company. The consideration for the transaction was approximately $55 million of cash proceeds subject to certain closing adjustments. The transaction closed on December 22, 2023. Ascent and Purchaser also entered into a Transition Services Agreement (the “TSA”) and an Employee Leasing Agreement (the “ELA”) each dated December 22, 2023, pursuant to which Ascent has agreed to provide certain transition services and to lease certain employees to Purchaser immediately after the closing for certain agreed upon transition periods. As result of the sale, SPT results of operations are classified under discontinued operations for all periods presented. Prior to the divestiture, SPT was reported under the Company's Tubular Products segment.

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


(in thousands)	March 31, 2024		December 31, 2023
Carrying amounts of assets included as part of discontinued operations:

Accounts receivable, net	$	—	$	778

Prepaid expenses and other current assets	46		83
Current assets classified as discontinued operations	46		861






Carrying amounts of current liabilities included as part of discontinued operations:
Accounts payable	90		107
Accrued expenses and other current liabilities	1,286		1,366

Total current liabilities classified as discontinued operations	$	1,376	$	1,473

In May of 2023, the Company was named as a defendant in a lawsuit filed in the U.S. District Court for the Western District of Pennsylvania, asserting various claims for breach of contracts resulting in losses to the plaintiff and seeking damages in the amount of $0.8 million plus prejudgment interest and attorney's fees. Although we continue to defend ourselves against the claims, we believe we may incur a material loss in this matter and that our financial statements could be materially affected by an adverse decision regarding the assessment of damages incurred by the plaintiff. Accordingly, the Company has an estimated liability of $1.0 million for expected losses related to this lawsuit as of March 31, 2024 and December 31, 2023.

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Ascent Industries Co.

Notes to Consolidated Financial Statements (Unaudited)

The financial results 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 the Company's discontinued operations:


	Three Months Ended March 31,
(in thousands)	2024		2023
Net sales	$	242	$	27,592
Cost of sales	647		24,765
Gross profit	(405)		2,827

Selling, general and administrative expense	182		1,964
Acquisition costs and other	89		74
Asset impairments	1,115		—
(Loss) income on discontinued operations before income taxes	(1,791)		789
Income tax (benefit) expense	(392)		200
Net (loss) income from discontinued operations	$	(1,399)	$	589

Note 3: Revenue Recognition

Revenue is generated primarily from contracts to produce, ship and deliver steel and specialty chemical products. Revenues are recognized when control of the promised goods or services is transferred to our 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 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 from continuing operations:


	Three Months Ended March 31,
(in thousands)	2024		2023
Fiberglass and steel liquid storage tanks and separation equipment	$	—	$	50

Stainless steel pipe and tube	23,814		31,061

Specialty chemicals	20,296		23,749
Net sales	$	44,110	$	54,860

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Ascent Industries Co.

Notes to Consolidated Financial Statements (Unaudited)

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


	Three Months Ended March 31,
(in thousands)	2024		2023
Point-in-time	$	40,139	$	49,437
Over-time	$	3,971	$	5,423

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:

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

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

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

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

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

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

During the three months ended March 31, 2024, 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 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. During the first quarter of 2024, the Company incurred additional asset impairment charges of $1.1 million related to the write down of the remaining long-lived assets at the facility. See Note 2 for further information on the Company's discontinued operations.

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Ascent Industries Co.

Notes to Consolidated Financial Statements (Unaudited)

Assets Held for Sale

As a result of the Company's decision to cease operations and exit Munhall, during the three months ended March 31, 2024, 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 as are as follows:


(in thousands)	March 31, 2024		December 31, 2023

Property, plant and equipment, net	1,259		2,374
Other assets, net	533		538
Assets held for sale	$	1,792	$	2,912

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 March 31, 2024. 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)	March 31, 2024		December 31, 2023
Raw materials	$	20,497	$	22,321
Work-in-process	16,164		14,740
Finished goods	20,581		21,364
	57,242		58,425
Less: inventory reserves	(6,045)		(6,119)
Inventories	$	51,197	$	52,306

Note 6: Property, Plant and Equipment

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


(in thousands)	March 31, 2024		December 31, 2023
Land	$	723	$	723
Leasehold improvements	3,079		3,079
Buildings	1,534		1,534
Machinery, fixtures and equipment	93,863		93,758
Construction-in-progress	1,237		1,330
	100,436		100,424
Less: accumulated depreciation and amortization	(71,788)		(70,669)
Property, plant and equipment, net	$	28,648	$	29,755

Table of Contents

Ascent Industries Co.

Notes to Consolidated Financial Statements (Unaudited)

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


	Three Months Ended March 31,
(in thousands)	2024		2023
Cost of sales	$	1,454	$	1,489
Selling, general and administrative	68		60
Total depreciation	$	1,522	$	1,549

Note 7: Intangible Assets and Deferred Charges

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 15 years.

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


	March 31, 2024				December 31, 2023
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Definite-lived intangible assets:
Customer related	$	14,604	$	(7,052)	$	14,604	$	(6,685)
Trademarks and trade names	150		(17)		150		(17)
Other	500		(56)		500		(56)
Total definite-lived intangible assets	$	15,254	$	(7,125)	$	15,254	$	(6,758)

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


(in thousands)
Remainder of 2024	$	1,121
2025	1,324
2026	1,102
2027	930
2028	786
2029	673
Thereafter	2,193

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)	March 31, 2024		December 31, 2023
Deferred charges, gross	$	398	$	398
Accumulated amortization of deferred charges	(319)		(294)
Deferred charges, net	$	79	$	104

Table of Contents

Ascent Industries Co.

Notes to Consolidated Financial Statements (Unaudited)

Note 8: Debt

Short-term debt

On June 13, 2023, the Company entered into a note payable in the amount of $0.9 million with an interest rate of 3.70% maturing April 1, 2024. The agreement is associated with the financing of the Company's insurance premium in the current year. As of March 31, 2024, the outstanding balance was $0.1 million.

Credit Facilities

During the first quarter of 2023, the Company entered into an Amended and Restated Credit Agreement with BMO Harris Bank, N.A. ("BMO") to replace LIBOR with the Secured Overnight Funding Rate ("SOFR").

During the fourth quarter of 2023, the Company entered into a Limited Consent, Second Amendment to Credit Agreement and Omnibus Amendment to Loan Documents with BMO Bank N.A. and the other lenders under the Company’s credit facility (the “Credit Facility Amendment”). The Credit Facility Amendment contains a consent for the SPT divestiture, released the lien on the assets of SPT and removed SPT as a loan party. The Credit Facility Amendment also reduced the maximum revolving loan commitment under the credit facility from $105 million to $80 million, and increased the interest rate for the credit facility from SOFR plus an interest rate margin of between 1.60% and 1.70% to SOFR plus an interest rate margin of between 1.85% and 2.10%, depending on average availability under the credit facility and the Company’s consolidated fixed charge coverage ratio. As required by the Credit Facility Amendment, the Company used the proceeds from the SPT divestiture to prepay in full the term loan in the original principal amount of $5 million under the credit facility and used the remaining proceeds to prepay in part the revolving loans under the credit facility.

The borrowing capacity under the credit facility totals $80.0 million consisting of a $80.0 million revolving line of credit which includes a $17.5 million machinery and equipment sub-limit. The Company had no debt outstanding under its credit facilities as of March 31, 2024 and December 31, 2023.

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 currently bear interest at (a) the Base Rate (as defined in the Credit Agreement) plus 0.75%, or (b) SOFR plus 1.85%. The Credit Agreement also provides an unused commitment fee based on the daily used portion of the credit facility.

Pursuant to the Credit Agree

SEC Form 10-Q filed by Ascent Industries Co.