Ascent Industries (ACNT) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and related management discussion and analysis for the period Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2020, including balance sheets, statements of operations, cash flows, and equity, with explanatory notes Condensed Consolidated Statements of Operations (Q1 2020 vs Q1 2019) | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net sales | $74,697 thousand | $84,804 thousand | | Gross profit | $7,151 thousand | $8,684 thousand | | Operating loss | $(927) thousand | $(556) thousand | | Net loss | $(1,178) thousand | $(927) thousand | | Diluted loss per share | $(0.13) | $(0.10) | Condensed Consolidated Balance Sheet Highlights (As of March 31, 2020) | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total current assets | $154,275 thousand | $147,115 thousand | | Total assets | $262,504 thousand | $257,197 thousand | | Total current liabilities | $42,424 thousand | $40,578 thousand | | Total liabilities | $157,920 thousand | $150,686 thousand | | Total shareholders' equity | $104,584 thousand | $106,511 thousand | Condensed Consolidated Statement of Cash Flows (Q1 2020 vs Q1 2019) | Cash Flow Activity | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(642) thousand | $6,099 thousand | | Net cash used in investing activities | $(587) thousand | $(22,553) thousand | | Net cash provided by financing activities | $625 thousand | $14,839 thousand | | Decrease in cash and cash equivalents | $(604) thousand | $(1,615) thousand | Notes to Condensed Consolidated Financial Statements This subsection details accounting policies, fair value measurements, segment performance, debt, leases, acquisitions, shareholder equity, revenue disaggregation, and subsequent events including COVID-19 impact - On January 1, 2020, the Company adopted new accounting standards for Fair Value Measurement (Topic 820), Goodwill Impairment (Topic 350), and Financial Instruments - Credit Losses (Topic 326), resulting in a $0.4 million cumulative effect adjustment to Retained Earnings from the credit loss standard adoption[16] Segment Net Sales (Q1 2020 vs Q1 2019) | Segment | Q1 2020 Net Sales | Q1 2019 Net Sales | | :--- | :--- | :--- | | Metals Segment | $60,664 thousand | $71,103 thousand | | Specialty Chemicals Segment | $14,033 thousand | $13,701 thousand | | Total | $74,697 thousand | $84,804 thousand | - On March 31, 2020, the Board of Directors adopted a limited duration shareholder rights plan (a "poison pill") with a 15% ownership trigger, expiring on March 31, 2021[61] - Subsequent to the quarter's end, on April 1, 2020, the company suspended manufacturing operations at its Palmer of Texas Tanks business due to the impact of the COVID-19 pandemic on the oil and gas industry, and the Board also committed to a comprehensive review of strategic alternatives[67][68] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2020 financial performance, highlighting an 11.9% consolidated net sales decrease, segment performance, COVID-19 impact, liquidity, capital resources, and Adjusted EBITDA reconciliation - Consolidated net sales for Q1 2020 decreased by 11.9% to $74.7 million compared to Q1 2019, driven by a $10.4 million decline in the Metals Segment[75][76] - The Metals Segment's sales decline was significantly impacted by a $6.4 million drop in sales for Palmer, leading to the indefinite curtailment of its production due to the COVID-19 pandemic's effect on the oil and gas industry[81] Consolidated Adjusted EBITDA Reconciliation (Q1 2020 vs Q1 2019) | Metric (in thousands) | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net loss | $(1,178) | $(927) | | EBITDA | $1,014 | $2,553 | | Adjusted EBITDA | $2,638 | $4,769 | | Adjusted EBITDA % of sales | 3.5% | 5.6% | - As of March 31, 2020, the company had $18.8 million of available capacity under its line of credit and was in compliance with all debt covenants[98][115] Quantitative and Qualitative Disclosures About Market Risk This section reports no material changes in the company's market risk exposure since the 2019 Annual Report on Form 10-K - There have been no material changes in market risk exposure since the company's 2019 Annual Report on Form 10-K[127] Controls and Procedures The CEO and CFO concluded disclosure controls were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[128] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's control over financial reporting[129] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and other required disclosures Legal Proceedings The company reports involvement in ordinary course legal actions, with no expected material adverse effects or changes since the 2019 Annual Report - The company is involved in various legal actions in the ordinary course of business but does not expect the outcomes to have a material adverse effect on its financial condition or results of operations[131] Risk Factors This section introduces new risk factors, including the adverse effects of COVID-19, risks from the shareholder rights plan, and potential negative impacts of activist shareholder actions - A new risk factor was added concerning the adverse effects of global public health pandemics, specifically the COVID-19 outbreak, on the company's business, financial condition, and operations[132] - The adoption of a limited duration shareholder rights plan on March 31, 2020, is identified as a new risk factor that could delay or discourage a merger, tender offer, or assumption of control not approved by the Board of Directors[136] - A new risk factor was added regarding the potential for the business to be negatively affected by the actions of activist shareholders, which can be costly and divert management's attention[140] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's Q1 2020 stock repurchase activity, including the number of shares bought back and average price Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 1 - Jan 31, 2020 | — | — | | Feb 1 - Feb 29, 2020 | — | — | | Mar 1 - Mar 31, 2020 | 59,617 | $10.65 | | Total Q1 2020 | 59,617 | $10.65 | - As of March 31, 2020, 790,383 shares remained available for purchase under the company's stock repurchase program[141] Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None reported[141] Mine Safety Disclosures The company reports no mine safety disclosures - None[142] Other Information The company reports no other information for the period - None[142] Exhibits This section lists exhibits filed with the Form 10-Q, including the Shareholder Rights Agreement, CEO/CFO certifications, and XBRL data - Exhibits filed include the Rights Agreement dated March 31, 2020, CEO and CFO certifications pursuant to Rule 13a-14(a)/15d-14(a), and XBRL instance documents[143] Signatures This section contains the authorized signatures for the Form 10-Q filing Signatures The Form 10-Q was signed on May 5, 2020, by the President and CEO, and the Senior Vice President and CFO of Synalloy Corporation - The Form 10-Q was signed and authorized by the company's CEO and CFO on May 5, 2020[146]