What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-29 · 468 added, 529 removed, 666 unchanged (60% of the section changed)

2 unchanged sentences

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

Richmond, VA ;

Report of Independent Registered Public Accounting Firm ( KPMG, LLP ;

Richmond, VA ;

Chicago, IL ;

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

Consolidated Statements of Income for the years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021

5 unchanged sentences

Property, Plant and Equipment

Long-term Debt

Accrued Expenses

1 unchanged sentence

Accounting for Share-Based Payments

Earnings (Loss) Per Share

Earnings Per Share

Industry Segments

1 unchanged sentence

Commitments and Contingencies

Proxy Contest Costs and Recoveries

Related Party Transactions

Subsequent Events

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Synalloy Corporation

Richmond, Virginia

Ascent Industries Co.

Oak Brook, Illinois

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Synalloy Corporation (the “Company”) as of December 31, 2021, the related consolidated statements of operations, shareholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes and schedules (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited the adjustments to the 2020 consolidated financial statements described in Note 9 and 12 to the consolidated financial statements to retrospectively apply the change in presentation of earnings per share for a deemed stock dividend related to a rights offering.

In our opinion, such retrospective adjustments are appropriate and have been properly applied.

However, we were not engaged to audit, review, or apply any procedures to the 2020 financial statements of the Company other than with respect to the retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2020 financial statements taken as a whole.

We have audited the accompanying consolidated balance sheets of Ascent Industries Co.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years then ended, and the related notes and schedules (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) ] issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 31, 2023, expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Business Combination

As described in Notes 1 and 2 of the consolidated financial statements, the Company completed its acquisition of DanChem Technologies, Inc on October 22, 2021, for a preliminary purchase price of $34.1 million.

As a result of the acquisition, management was required to estimate the preliminary fair values of the assets acquired, including certain identifiable intangible and tangible assets, and liabilities assumed.

Estimates and assumptions that the Company made in estimating the preliminary fair value of the customer relationship and the machinery, fixtures, and equipment required use of estimates and judgments.

We identified the determination of the preliminary fair values of the customer relationships and machinery, fixtures, and equipment assets, as a critical audit matter.

The principal considerations for our determination included the following:

(i) significant unobservable inputs and assumptions utilized by management in determining the fair value of customer relationships, including future revenue growth, customer attrition rate, and the weighted average cost of capital;

and (ii) significant estimates and assumptions to determine the estimated fair value of the machinery, fixtures, and equipment by considering the loss in value caused by physical deterioration, functional obsolescence, and economic obsolescence.

Auditing these elements involved especially challenging and subjective auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Tax Benefits Associated with Closure of Palmer of Texas Tanks, Inc

As described in Note 11 to the consolidated financial statements, the Company's effective tax rate for 2022 was less than the U.S.

statutory rate of 21% primarily driven by tax benefits associated with losses on the investment in Palmer of Texas Tanks, Inc.

(“Palmer”) and its ultimate wind down and closure.

The tax benefits associated with the investment in Palmer which amounted to $5.7 million during the year related to a deduction claimed for the tax basis in the Company’s stock in Palmer.

We identified accounting for the tax benefits associated with the Company’s investment in Palmer as a critical audit matter.

Determining the timing of recognition and measurement of the tax benefits associated with Palmer closure required

significant management judgment, including the determination of whether the tax positions’ technical merits are more likely than not to be sustained in an audit by a taxing authority based on the application and interpretation of the relevant tax laws to the facts of the specific transaction.

Auditing these elements involved especially complex auditor judgment due to the nature and extent of audit effort required to address these matters, including the need to involve personnel with specialized skill and knowledge.

The primary procedures we performed to address this critical audit matter included:

• Assessing the reasonableness of significant underlying assumptions used to calculate the preliminary fair value of customer relationships through (i) evaluating the earnings before interest, taxes, depreciation and amortization (“EBITDA”) margin utilizing the historical performance of the acquired entity, (ii) evaluating the reasonableness of the revenue growth rate utilizing historical performance of the acquired entity and external and industry data, and (iii) evaluating the reasonableness of customer attrition including testing and validating the underlying data utilized in estimating future customer attrition and considering the potential effect of changes in the assumption on future cash flows.

• Testing and validating the existence of machinery, fixtures, and equipment assets.

• Utilizing professionals with specialized knowledge and skill in valuation to assist in (i) evaluating the qualifications of the valuation specialists used by management, (ii) evaluating the valuation methodology applied by management to estimate the preliminary fair value of customer relationships, (iii) testing specific assumptions including the weighted average cost of capital, (iv) evaluating the valuation methodology applied by management to estimate the preliminary fair value of the machinery, fixtures, and equipment, (v) comparing the asset categories selected by management to the asset descriptions in the fixed asset listing, (vi) independently recalculating the estimated current reproduction cost new (“CRN”) of certain assets in the fixed asset listing, and (vii) independently recalculating the estimated CRN, less depreciation of certain assets in the fixed asset listing, to account for physical deterioration, functional obsolescence, and economic obsolescence.

• Utilizing personnel with specialized tax knowledge and skill to assist in the following:

• Evaluating the appropriateness of management’s interpretation and application of relevant tax laws in the U.S.

and the conclusions within management’s tax opinions, memoranda and other relevant documents.

• Testing the completeness and accuracy of the gross receipts test used to determine the qualification for tax benefits associated with Palmer closure.

• Testing the completeness and accuracy of the outside tax stock basis calculation used to determine the amount of the tax benefits recognized.

• Assessing the appropriateness of the timing of recognition of the tax benefits associated with Palmer closure.

Valuation of goodwill related to the Specialty Chemicals Reporting Unit

As described in Note 1 to the consolidated financial statements, the Company’s goodwill balance was $11.4 million at December 31, 2022, which pertains to its Specialty Chemicals reporting unit.

The Company’s evaluation of goodwill for impairment involves comparison of the fair value of the reporting unit to its carrying value.

Management conducted an annual quantitative impairment assessment of the Specialty Chemicals reporting unit as of October 1, 2022.

During the fourth quarter of 2022, the Company determined potential impairment indicators existed within the Specialty Chemicals reporting unit and therefore, performed another quantitative impairment assessment.

The Company determined the fair value of the reporting unit using an equal weighting of the income and market approaches, which required management to make significant estimates and assumptions related to discount rate and forecasts of revenue and profits.

We identified the valuation of goodwill for the Specialty Chemicals reporting unit as a critical audit matter.

Auditing management’s impairment assessment is complex and highly judgmental due to the significant estimation required in determining the fair value of the Specialty Chemicals reporting unit.

The determination of the fair value of the Specialty Chemicals reporting unit is sensitive to certain assumptions, which are affected by expected future market and economic conditions.

Auditing management’s impairment assessment involved especially challenging and subjective auditor judgment due to the uncertainty surrounding future events and the extent of specialized skill required to test certain valuation assumptions.

The primary procedures we performed to address this critical audit matter included:

• Evaluating the reasonableness of assumptions used in the Company’s impairment assessment, including the revenue growth rate and profit margins.

• Testing the accuracy and completeness of the data used by management to develop its projections.

• Utilizing personnel with specialized skills and knowledge in valuation approach and methodologies to assist in:

(i) assessing the appropriateness of the fair value methodology, and (ii) evaluating the reasonableness of certain valuation assumptions used, including the discount rate.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2021.

Richmond, Virginia

Chicago, Illinois

March 31, 2023

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Synalloy Corporation:

Opinion on the Consolidated Financial Statements

We have audited, before the effects of the retrospective application of the 2021 Rights Offering described in Note 9 and Note 12 (the earnings per share retrospective adjustment), the consolidated balance sheet of Synalloy Corporation and subsidiaries (the Company) as of December 31, 2020, the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for the year then ended, and the related notes and financial statement Schedule II (collectively, the consolidated financial statements).

The 2020 consolidated financial statements before the effects of the earnings per share retrospective adjustment are not presented herein.

In our opinion, except for the effects of the earnings per share retrospective adjustment, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

We were not engaged to audit, review, or apply any procedures to the earnings per share retrospective adjustment, accordingly, we do not express an opinion or any other form of assurance about whether such adjustment is appropriate and has been properly applied.

This adjustment was audited by other auditors.

Shareholders and Board of Directors

Ascent Industries Co.

Oak Brook, Illinois

Opinion on Internal Control Over Financial Reporting

We have audited Ascent Industries Co.'s (the "Company's") internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO criteria").

In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management's statements referring to any corrective actions taken by the Company after the date of management's assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, shareholders’ equity, and cash flows for the years then ended and the related notes (collectively referred to as "the financial statements") and our report dated March 31, 2023, expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

/s/ KPMG, LLP

We served as the Company's auditor from 2015 to 2021.

Richmond, Virginia

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material weaknesses were identified regarding the following:

Entity Level Activities - Management did not maintain appropriately designed entity-level controls impacting:

• Control Environment:

Lack of structure and responsibility, insufficient number of qualified resources due to significant turnover in key personnel leading to insufficient oversight and accountability over the performance of controls;

• Monitoring:

Insufficient evaluation and determination as to whether the components of internal control were present and functioning based upon evidence maintained for certain management review controls and activity level controls across a significant portion of the Company's financial statement areas.

Control Activities - Management did not have effective policies and procedures or adequate selection and development of effective control activities, which resulted in the following additional material weaknesses:

• Management did not appropriately design and implement controls over the existence, accuracy, completeness, and valuation of inventory.

• Management did not maintain effectively designed and implemented controls over recorded revenue and accounts receivable, including procedures over the existence and accuracy of data input for price and quantity, review of sales contracts, as well as appropriate allocation of transaction price across identified performance obligations within the Company's contracts with customers.

• Management did not maintain effectively designed and implemented controls to detect potential material misstatements to period-end financial statements through review of account reconciliations and account analyses on a timely basis as well as other aspects of the financial statement preparation and review process.

Additionally, management did not maintain effectively designed and implemented controls over the review of journal entries.

• Management did not appropriately design and implement management review controls at a sufficient level of precision around complex accounting areas including goodwill impairment, long-lived asset impairment, and income taxes.

• Management did not fully design, implement and monitor general information technology controls in the areas of user access, cyber-security and segregation of duties for systems supporting many of the Company’s internal control processes.

As a result of these segregation of duties deficiencies the related manual business process controls were determined to be ineffective.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 financial statements, and this report does not affect our report dated March 31, 2023 on those financial statements.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Chicago, Illinois

March 31, 2023

SYNALLOY CORPORATION

Ascent Industries Co.

Consolidated Balance Sheets

17 unchanged sentences

Intangible assets, net 10,387 14,382

Deferred income taxes 1,353 —

Deferred charges, net 203 302

6 unchanged sentences

Accrued expenses and other current liabilities 6,560 12,407

Current portion of note payable 387 —

Current portion of long-term debt 2,464 2,464

4 unchanged sentences

Long-term debt 69,085 67,928

Long-term portion of earn-out liability — 287

Long-term portion of operating lease liabilities 30,911 32,059

6 unchanged sentences

Common stock - $ 1 par value:

Authorized 24,000,000 shares;

issued 11,085,103 and 10,300,000 shares, respectively

24,000,000 shares authorized;

11,085,103 and 10,160,599 shares issued and outstanding, respectively

11,085 11,085

3 unchanged sentences

Less cost of common stock in treasury - 924,504 and 918,471 shares, respectively

( 8,993 ) ( 8,633 )

Total shareholders' equity 134,259 111,590

1 unchanged sentence

See accompanying notes to consolidated financial statements.

SYNALLOY CORPORATION

Consolidated Statements of Operations

Ascent Industries Co.

Consolidated Statements of Income

For the years ended December 31, 2022 and 2021

8 unchanged sentences

Asset impairment — 233

Goodwill impairment — 16,203

Gain on lease modification — ( 171 )

Operating income (loss) 27,348 ( 31,067 )

Operating income 20,388 27,348

Other (income) and expense

3 unchanged sentences

Other, net ( 209 ) 143

Income (loss) before income taxes 25,498 ( 31,973 )

Income before income taxes 17,855 25,498

Income tax provision (benefit) ( 4,211 ) 5,253

Net income (loss) $ 20,245 $ ( 27,267 )

Net income (loss) per common share:

Net income $ 22,066 $ 20,245

Net income per common share:

Basic $ 2.16 $ 2.17

4 unchanged sentences

See accompanying notes to consolidated financial statements.

SYNALLOY CORPORATION

Ascent Industries Co.

Consolidated Statements of Cash Flows

2 unchanged sentences

Cash flows from operating activities:

Net income (loss) $ 20,245 $ ( 27,267 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net income $ 22,066 $ 20,245

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense 8,722 7,547

2 unchanged sentences

Asset impairment — 233

Goodwill impairment — 16,203

Loss on extinguishment of debt — 223

Unrealized gain on equity securities — ( 208 )

Deferred income taxes ( 4,211 ) ( 2,071 )

Proceeds from business interruption insurance — 1,040

Loss on sale of equity securities — 38

Earn-out adjustments ( 7 ) 1,872

1 unchanged sentence

( 662 ) ( 138 )

(Reduction of) provision for losses on accounts receivable ( 398 ) 890

Provision for (reduction of) losses on accounts receivable 1,034 ( 398 )

Provision for losses on inventories 3,052 1,649

(Gain) loss on disposal of property, plant and equipment ( 848 ) 237

Loss (gain) on disposal of property, plant and equipment 27 ( 848 )

Non-cash lease expense 414 481

Non-cash lease termination loss — 5

Gain on lease modification — ( 171 )

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

14 unchanged sentences

Proceeds from disposal of property, plant and equipment 99 1,400

Proceeds from sale of equity securities — 4,430

Acquisitions, net of cash acquired

Net cash (used in) provided by investing activities ( 32,661 ) 994

Net cash used in investing activities ( 4,975 ) ( 32,661 )

Cash flows from financing activities:

Borrowings from long-term debt 443,363 215,528

Proceeds from note payable 967 —

Proceeds from the issuance of common stock related to Rights Offering — 10,010

1 unchanged sentence

Payments on long-term debt ( 442,206 ) ( 206,505 )

Payments on BB&T line of credit — ( 10,184 )

Payments on note payable ( 580 ) —

Principal payments on finance lease obligations ( 266 ) ( 92 )

Payments for finance lease terminations — ( 204 )

Payments on earn-out liabilities ( 1,292 ) ( 3,494 )

1 unchanged sentence

Payments of deferred financing costs — ( 165 )

Net cash provided by (used in) financing activities 15,391 ( 19,362 )

Increase (Decrease) in cash and cash equivalents 1,785 ( 390 )

Net cash (used in) provided by financing activities ( 1,182 ) 15,391

(Decrease) Increase in cash and cash equivalents ( 580 ) 1,785

Cash and cash equivalents at beginning of year 2,021 236

1 unchanged sentence

See accompanying notes to consolidated financial statements.

SYNALLOY CORPORATION

Ascent Industries Co.

Consolidated Statements of Cash Flows

For the years ended December 31, 2022 and 2021

(in thousands)

Year Ended December 31,

Supplemental Disclosure of Cash Flow Information 2022 2021

Cash paid for:

Interest $ 2,230 $ 1,315

Income taxes 7,859 1,654

Noncash Investing Activities:

Capital expenditures, not yet paid $ 751 $ —

See accompanying notes to consolidated financial statements.

Ascent Industries Co.

Consolidated Statements of Shareholders' Equity

1 unchanged sentence

(in thousands, except share and per share data)

Common Stock Capital in Excess of

Par Value Retained Earnings Cost of Common Stock in Treasury Total

Common Stock Treasury Stock

Shares Amount Capital in Excess of

Par Value Retained Earnings Shares Amount Total

Balance December 31, 2020 10,300 $ 10,300 $ 37,719 $ 42,835 1,123 $ ( 10,559 ) $ 80,295

Net loss — — ( 27,267 ) — ( 27,267 )

Cumulative adjustment due to adoption of ASU 2016-13 — — ( 450 ) — ( 450 )

Net income — — — 20,245 — — 20,245

Issuance of 785,103 shares of common stock - Rights Offering

785 785 9,225 — — — 10,010

Issuance of 191,673 shares of common stock from treasury

— — ( 1,670 ) — ( 192 ) 1,802 132

Exercise of stock options for 13,174 shares, net

— — ( 15 ) — ( 13 ) 124 109

Share-based compensation — — 799 — — — 799

Purchase of common stock — — — ( 635 ) ( 635 )

Balance December 31, 2021 11,085 $ 11,085 $ 46,058 $ 63,080 918 $ ( 8,633 ) $ 111,590

Net income — — — 22,066 — — 22,066

Issuance of 785,103 shares of common stock - Rights Offering

785 9,225 — — 10,010

Issuance of 86,274 shares of common stock from treasury

3 unchanged sentences

Share-based compensation — — 1,407 — — 1,407

Repurchase of common stock — — — — 110 ( 1,343 ) ( 1,343 )

Balance December 31, 2022 11,085 $ 11,085 $ 47,021 $ 85,146 924 $ ( 8,993 ) $ 134,259

See accompanying notes to consolidated financial statements.

SYNALLOY CORPORATION

Ascent Industries Co.

Notes to Consolidated Financial Statements

1 unchanged sentence

Summary of Significant Accounting Policies

Synalloy Corporation (the "Company") was incorporated in Delaware in 1958 as the successor to a chemical manufacturing business founded in 1945.

Its charter is perpetual.

The name was changed on July 31, 1967 from Blackman Uhler Industries, Inc.

The Company's executive office is located at 4510 Cox Road, Suite 201, Richmond, Virginia 23060.

The Company's business is divided into two reportable operating segments, the Metals Segment and the Specialty Chemicals Segment.

As of December 31, 2021, the Metals Segment operates as three reporting units that include Bristol Metals, LLC ("BRISMET") and American Stainless Tubing, LLC ("ASTI") (collectively "Welded Pipe & Tube"), Palmer of Texas Tanks, Inc.

("Palmer") and Specialty Pipe & Tube, Inc.

("Specialty").

As discussed in Note 4 , on February 17, 2021 the Board of Directors authorized the permanent cessation of operations at Palmer and the subleasing of the Palmer facility.

As of December 31, 2021, the Company permanently ceased operations and is in the process of divesting all remaining assets at the facility.

The Specialty Chemicals Segment operates as one reportable unit and is comprised of Manufacturers Chemicals, LLC ("MC"), a wholly-owned subsidiary of Manufacturers Soap and Chemical Company ("MS&C"), CRI Tolling, LLC ("CRI") and DanChem Technologies, Inc.

Ascent Industries Co.

is an industrials company focused on the production and distribution of industrial tubular products including stainless steel and galvanized pipe and tube, seamless carbon pipe and tube, and specialty chemicals.

Ascent Industries Co.

was incorporated in 1958 as the successor to a chemical manufacturing business founded in 1945 known as Blackman Uhler Industries Inc.

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.

The Company's executive office is located at 1400 16th Street, Suite 270, Oak Brook, Illinois 60523.

Unless indicated otherwise, the terms "Ascent", "Company," "we" "us," and "our" refer to Ascent Industries Co.

and its consolidated subsidiaries.

The Company's business is divided into two reportable operating segments, Tubular Products and Specialty Chemicals.

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.

The Specialty Chemicals segment produces specialty products for the pulp and paper, coatings, adhesives, sealants and elastomers (CASE), textile, automotive, household, industrial and institutional ("HII"), agricultural, water and waste-water treatment, construction, oil and gas and other industries.

Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned.

All significant intercompany accounts and transactions have been eliminated.

Intercompany transactions and balances have been eliminated.

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.

Impacts of COVID-19 - During the year ended December 31, 2021, aspects of the Company's business continued to be affected by macroeconomic factors related to the COVID-19 pandemic, including production in our plants and within our supply chain.

The nature of the situation is dynamic and the full extent of any future impacts of the COVID-19 pandemic on the Company's operational and financial performance is currently uncertain and will depend on many factors outside of the Company's control.

Immaterial Out of Period Adjustment - During the fourth quarter of fiscal 2021, the Company identified certain immaterial adjustments in the accounting for inventory and related effect on income taxes that impacted the Company’s quarterly and annual financial statements previously issued .

T herefore, the Company recorded an out of period adjustment which increased cost of sales by $ 2.2 million and decreased inventory by $ 2.2 million resulting in a decrease to operating income and income before income taxes of $ 2.2 million, a decrease to income tax provision of $ 0.5 million and a decrease to net income of $ 1.7 million.

Cash and Cash Equivalents - The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

2 unchanged sentences

Substantially all of the Company's accounts receivable are due from companies located throughout the United States.

The Company provides an allowance for credit losses for projected uncollectible amounts.

The Company provides an allowance for credit losses for expected uncollectible amounts.

The allowance is based upon an analysis of accounts receivable balances with similar risk characteristics on a collective basis, considering factors such as the aging of receivables balances, historical loss experience, current information, and future expectations.

3 unchanged sentences

Delinquent receivables are written off based on individual credit evaluations and specific circumstances of the customer.

The Company had an allowance for credit losses of $ 0.2 million and $ 0.5 million at December 31, 2021 and 2020, respectively.

SYNALLOY CORPORATION

Activity in the allowance for credit losses were as follows:

(in thousands) 2022 2021

Balance at beginning of period $ 216 $ 496

Current period provision for expected credit losses 1,405 ( 68 )

Deductions from allowance ( 371 ) ( 330 )

Acquired allowance — 118

Balance at end of period $ 1,250 $ 216

Ascent Industries Co.

Notes to Consolidated Financial Statements

Inventories - Inventory is stated at the lower of cost or net realizable value.

Inventories - Inventory is stated at the lower of cost or net realizable value ("LCNRV").

Cost is determined by either specific identification or weighted average methods.

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This would indicate that an adjustment would be required.

An LCNRV adjustment is recorded when the Company's inventory cost, based upon a historical price, is greater than the current selling price of that product.

During the year ended December 31, 2022 and 2021, no significant LCNRV adjustments were required by our Specialty Chemicals segment.

Stainless steel, both in its raw material (coil or plate) or finished goods (pipe and tube) state is purchased/sold using a base price plus an additional surcharge which is dependent on current nickel prices.

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When the selling price of the finished pipe is set for the customer, approximately three months later, the then-current nickel surcharge is used to determine the proper selling prices.

A lower of cost or net realizable value ("LCNRV") adjustment is recorded when the Company's inventory cost, based upon a historical nickel price, is greater than the current selling price of that product due to a reduction in the nickel surcharge.

During the years ended December 31, 2021 and 2020, respectively, no material LCNRV adjustments were required by our Metals Segment other than those at our storage tank facility.

During the year ended December 31, 2020, adjustments of $ 3.8 million to inventory cost were required due to the curtailment of operations at our Palmer facility as a result of the COVID-19 pandemic and lower demand for oil and gas products which caused the net realizable value to fall below inventory cost for certain tanks.

An LCNRV adjustment is recorded when the Company's inventory cost, based upon a historical nickel price, is greater than the current selling price of that product due to a reduction in the nickel surcharge.

During the years ended December 31, 2022, LCNRV adjustments of $ 0.5 million were required by our Tubular Products segment.

During the year ended December 31, 2021 no significant LCNRV adjustments were required by our Tubular Products segment.

In addition, the Company establishes inventory reserves for:

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The Company reserved $ 3.5 million and $ 1.1 million as of December 31, 2022 and 2021, respectively.

• Estimated quantity losses - The Company performs an annual physical count of inventory during the fourth quarter each year.

For those facilities that complete their physical inventory counts before the end of December, a reserve is established for the potential quantity losses that could occur subsequent to their physical inventory.

• Estimated quantity losses - The Company performs an annual physical count of inventory during the fourth quarter each year for all facilities.

A reserve is established for the potential quantity losses that could occur subsequent to their physical inventory.

This reserve is based upon the most recent physical inventory results.

The Company had $ 0.2 million and $ 0.5 million reserved for physical inventory quantity losses as of December 31, 2021 and 2020, respectively.

The Company had $ 0.2 million reserved for physical inventory quantity losses as of December 31, 2022 and 2021, respectively.

Property, Plant and Equipment - Property, plant and equipment are stated at cost.

Depreciation is determined based on the straight-line method over the estimated useful life of the assets.

Substantially all depreciation is recorded within cost of goods sold on the consolidated statement of operations.

Substantially all depreciation is recorded within cost of goods sold on the consolidated statement of income.

Leasehold improvements are depreciated over the shorter of their useful lives or the remaining non-cancellable lease term, buildings are depreciated over a range of 10 years to 40 years, and machinery, fixtures and equipment are depreciated over a range of three years to 20 years.

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The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired, if any, and liabilities assumed.

See Not e 2 for further discussion on the Company's acquisition of DanChem in 2021.

See Note 2 for further discussion on the Company's acquisition of DanChem.

Goodwill - Goodwill is the excess of the purchase price over the fair value of identifiable assets acquired, less fair value of liabilities assumed, in a business combination.

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The evaluation begins with a qualitative assessment to determine whether a quantitative impairment test is necessary.

If, after assessing qualitative factors, we determine it is more

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

likely than not that the fair value of the reporting unit is less than the carrying amount, then the quantitative goodwill impairment test is performed.

If, after assessing qualitative factors, we determine it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then the quantitative goodwill impairment test is performed.

The quantitative goodwill impairment test used to identify potential impairment compares the fair value of a reporting unit with its carrying amount, including goodwill.

Fair value represents the price a market participant would be willing to pay in a potential sale of the reporting unit and is based on a combination of an income approach, based on discounted future cash flows, and a market approach, based on market multiples applied to free cash flow.

Fair value represents the price a market participant would be willing to pay in a

Ascent Industries Co.

Notes to Consolidated Financial Statements

potential sale of the reporting unit and is based on a combination of an income approach, based on discounted future cash flows, and a market approach, based on market multiples applied to free cash flow.

If the fair value exceeds the carrying value, then no goodwill impairment has occurred.

If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

Any impairment identified is included within "goodwill impairment" in the consolidated statement of operations.

Any impairment identified is included within "goodwill impairment" in the consolidated statements of income.

A reporting unit is an operating segment or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management.

During 2021, goodwill was allocated to the Specialty Chemicals Segment.

During 2020, goodwill was allocated to the Welded Pipe and Tube reporting unit and the Specialty Chemicals Segment.

During 2022 and 2021, goodwill was allocated to the Specialty Chemicals reporting unit.

The changes in the carrying amount of goodwill for the years ended December 31, 2022 and 2021 were as follows:

(in thousands) Specialty Chemicals Segment Metals

Segment Total

Balance December 31, 2019 $ 1,355 $ 16,203 $ 17,558

Impairment charges — ( 16,203 ) ( 16,203 )

(in thousands) Specialty Chemicals

Balance December 31, 2020 $ 1,355

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Balance December 31, 2021 12,637

During the third quarter of 2020, the Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment existed.

Continued declines in the Company's stock price, reporting unit operating losses, and continued declines 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 another quantitative evaluation of goodwill.

As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment.

Fair value of the reporting unit was determined using a combination of an income approach and a market-based approach with equal weighting applied to each approach.

The income approach utilized the estimated discounted cash flows expected to be generated by the reporting unit's assets while the market-based approach utilized comparable company information.

Determining the fair value of 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.

These estimates and assumptions include the discount rate, terminal growth rate, tax rate, projected capital expenditures, and overall operational forecasts, including sales growth, gross margins, and operating margins.

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 Welded Pipe and Tube reporting unit was below its carrying value by 9.7 % resulting in a goodwill impairment charge of $ 10.7 million for the quarter ended September 30, 2020.

During the fourth quarter of 2020, the Company determined potential indicators of impairment within the Welded Pipe & Tube reporting unit included in the Metals Segment existed.

Continued risks within the stainless steel industrial business, reporting unit operating losses, and continued declines 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 another quantitative evaluation of goodwill.

As a result, the Company quantitatively evaluated the Welded Pipe & Tube reporting unit for impairment.

Fair value of the reporting unit was determined using a combination of an income approach and a market-based approach with equal weighting applied to each approach.

The income approach utilized the estimated discounted cash flows expected to be generated by the reporting unit's assets while the market-based approach utilized comparable company information.

Determining the fair value of 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 Welded Pipe and Tube reporting unit was below its carrying value by 24.1 % resulting in the remainder of the

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

goodwill attributable to the Welded Pipe and Tube reporting unit being impaired and a goodwill impairment charge of $ 5.5 million for the quarter ended December 31, 2020.

We conducted our annual impairment test of the Specialty Chemicals Segment as of October 1, 2021.

The Company performed a discounted cash flow analysis and a market multiple analysis for the Specialty Chemicals Segment.

PPA Revisions ( 1,248 )

Balance December 31, 2022 $ 11,389

During the third quarter of 2022, subsequent to the preliminary estimates of fair value of intangible 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, goodwill was decreased by $ 1.2 million and the Company's deferred tax balances were increased $ 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.

During the fourth quarter of 2022, subsequent to the preliminary estimates of fair value of intangible assets acquired and liabilities assumed, management finalized the values of deferred tax balances upon completion of the DanChem pre-acquisition tax returns.

As a result, within the measurement period, the Company's deferred tax balances were decreased by $ 40,475 and goodwill was decreased by $ 40,475 .

We conducted our annual impairment test of the Specialty Chemicals reporting unit as of October 1, 2022.

The Company performed a discounted cash flow analysis and a market multiple analysis for the Specialty Chemicals reporting unit.

The discounted cash flow analysis included management assumptions for expected sales growth, capital expenditures and overall operational forecasts.

the market multiple analysis included historical and projected performance, market capitalization, volatility and multiples for industry peers.

As of December 31, 2021, we determined that no impairment of the carrying value of goodwill for this reporting unit was required.

Intangible Assets - Intangible assets consists primarily of customer relationships and represents the fair value of intellectual, non-physical assets resulting from business acquisitions and are amortized over their estimated useful lives using either an accelerated or straight-line method over a period ranging from eight to 15 years.

Amortization expense is recorded in selling, general and administrative expense on the consolidated statement of operations.

As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Specialty Chemicals reporting unit was greater than its carrying value and, as such, no goodwill impairment was necessary.

During the fourth quarter of 2022, the Company determined potential indicators of impairment within the Specialty Chemicals reporting unit, with an associated goodwill balance of $ 11.4 million, existed.

Significant decreases in the Company's stock price and performance relative to forecast, collectively, indicated that the reporting unit had experienced a triggering event and the need to perform another quantitative evaluation of goodwill.

As a result, the Company quantitatively evaluated the Specialty Chemicals reporting unit for impairment.

As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Specialty Chemicals reporting unit was above its carrying value and, as such, no goodwill impairment was necessary.

Intangible Assets - Intangible assets consists of customer relationships, trademarks and trade names, and Other and represents the fair value of intellectual, non-physical assets resulting from business acquisitions and are amortized over their estimated useful lives using either an accelerated or straight-line method over a period ranging from eight to 15 years.

Ascent Industries Co.

Notes to Consolidated Financial Statements

Amortization expense is recorded in selling, general and administrative expense on the consolidated statements of income.

The weighted average amortization period for the customer relationships is approximately 12 years.

Intangible assets totaled $ 28.9 million and $ 30.9 million as of December 31, 2021 and 2020, respectively.

Accumulated amortization of intangible assets as of December 31, 2021 and 2020 totaled $ 14.5 million and $ 19.5 million, respectively.

The gross carrying amount and accumulated amortization of intangible assets consist of the following:

(in thousands) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

Definite-lived intangible assets:

Customer related $ 28,226 $ ( 18,437 ) $ 28,226 $ ( 14,486 )

Trademarks and trade names 150 ( 12 ) 150 ( 2 )

Other 500 ( 40 ) 500 ( 6 )

Total definite-lived intangible assets $ 28,876 $ ( 18,489 ) $ 28,876 $ ( 14,494 )

The Company recorded amortization expense related to intangible assets of $ 4.0 million and $ 2.8 million for 2022 and 2021, respectively.

Estimated amortization expense for the next five fiscal years based on existing intangible assets is as follows:

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Total $ 10,387

The Company recorded amortization expense related to intangible assets of $ 2.8 million and $ 3.0 million for 2021 and 2020.

respectively.

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 and is recorded in interest expense on the consolidated statement of operations.

On January 15, 2021, the Company and its subsidiaries entered into a new Credit Agreement (the "Credit Agreement") with BMO Harris Bank, N.A ("BMO") providing the Company with a new four-year revolving credit facility and replacing the Company's previous asset based revolving line of credit and term loan with Truist Bank ("Truist").

The Company accounted for this refinance as a debt extinguishment and, as a result, $ 0.2 million of unamortized debt issuance costs associated with the Company's previously existing bank debt were written off as a loss on extinguishment of debt during the year ended December 31, 2021.

Deferred charges totaled $ 0.4 million and $ 0.8 million as of December 31, 2021 and 2020, respectively.

Deferred charges totaled $ 0.4 million as of December 31, 2022 and 2021, respectively.

Accumulated amortization of deferred charges as of December 31, 2022 and 2021 totaled $ 0.2 million and $ 0.1 million, respectively.

The Company recorded amortization expense related to deferred charges of $ 0.1 million for 2021.

The Company recorded amortization expense related to deferred charges of $ 0.1 million for 2022 and 2021.

Long-Lived Asset Impairment - The carrying amounts of long-lived assets are reviewed whenever certain events or changes in circumstances indicate that the carrying amounts may not be recoverable.

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A long-lived asset is not depreciated while its classified as held-for-sale.

SYNALLOY CORPORATION

Ascent Industries Co.

Notes to Consolidated Financial Statements

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Earn-Out Liabilities - In connection with the 2019 American Stainless acquisition, the Company is required to make quarterly earn-out payments to American Stainless for a period of three years following closing equal to six and one-half percent ( 6.5 %) of ASTI’s revenue over the three-year earn-out period.

These quarterly earn-out payments end in 2022.

These quarterly earn-out payments ended in 2022.

In connection with the 2018 MUSA-Galvanized acquisition, the Company is required to make quarterly earn-out payments to MUSA for a period of four years following closing, based on actual sales levels of galvanized pipe and tube.

These quarterly earn-out payments end in 2022.

These quarterly earn-out payments ended in 2022.

In connection with the 2017 MUSA-Stainless acquisition, the Company is required to make quarterly earn-out payments to MUSA for a period of four years following closing, based on actual sales levels of stainless steel pipe and tube (outside diameter of 10 inches or less).

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The fair value of the earn-out liabilities are estimated by applying the probability-weighted expected return method using management's estimates of pounds to be shipped and future price per unit.

Changes to the fair value of the earn-out liabilities are determined each quarter-end and charged to income or expense in the “Earn-Out Adjustments” line item in the consolidated statements of operations.

See Note 4 for additional information on the Company's earn-out liabilities.

Revenue Recognition - 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.

Substantially all of the Company's revenues are derived from contracts with customers where performance obligations are satisfied at a point-in-time.

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.

Our contracts with customers may include multiple performance obligations.

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Shipping Costs - Shipping costs are treated as fulfillment activities at the time control and title of the promised good and services rendered are transferred to the customer.

Shipping costs of approximately $ 9.4 million and $ 8.0 million in 2021 and 2020, respectively, are recorded in cost of goods sold on the consolidated statement of operations.

Share-Based Compensation - Share-based payments to employees, including grants of employee stock options, are recognized in the consolidated statements of operations as compensation expense (based on their estimated fair values at grant date) generally over the vesting period of the awards using the straight-line method.

Shipping costs of approximately $ 11.2 million and $ 9.4 million in 2022 and 2021, respectively, are recorded in cost of goods sold on the consolidated statements of income.

Share-Based Compensation - Share-based payments to employees, including grants of employee stock options, are recognized in the consolidated statements of income as compensation expense (based on their estimated fair values at grant date) generally over the vesting period of the awards using the straight-line method.

Any forfeitures of share-based awards are recorded as they occur.

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A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.

Ascent Industries Co.

Notes to Consolidated Financial Statements

Additionally, the Company maintains reserves for uncertain tax provisions, if necessary.

2 unchanged sentences

Leases - The Company determines whether an arrangement is a lease at contract inception.

For leases in which the Company is the lessee, the Company recognizes a right-of-use asset and corresponding lease liability on the consolidated balance sheets

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

equal to the present value of the fixed lease payments over the lease term.

For leases in which the Company is the lessee, the Company recognizes a right-of-use asset and corresponding lease liability on the consolidated balance sheets equal to the present value of the fixed lease payments over the lease term.

Lease liabilities represent an obligation to make lease payments arising from a lease while right-of-use assets represent a right to use an underlying asset during the lease term.

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The Company subleases portions of certain properties that are not used in its operations.

Sublease income was not significant for any periods presented.

Sublease income was $ 0.2 million for 2022.

Sublease income was not significant for 2021.

Concentrations of Credit Risk - Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash deposits and trade accounts receivable.

The Specialty Chemicals Segment has one customer that accounted for approximately 15 % of the segment's revenues for 2021.

Accounting Pronouncement Recently Adopted - On January 1, 2020, the Company adopted ASU No.

2018-13 Fair Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.

The updated guidance removes disclosure requirements pertaining to the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements.

In addition, the amendment clarifies that the measurement uncertainty disclosure is to communicate information about uncertainty in measurement as of the reporting date.

The guidance also adds disclosure requirements for changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 measurements held at the end of the reporting period as well as the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

The adoption of this standard by the Company did not have a material impact on the consolidated financial statements or footnote disclosures.

See Note 4 for further discussion on the Company's fair value measurements.

On January 1, 2020, the Company adopted ASU No.

2017-04 Intangibles - Goodwill and Other:

Simplifying the Test for Goodwill Impairment.

The updated guidance eliminated step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount.

Additionally, the amount of goodwill allocated to a reporting unit with a zero or negative carrying amount of net assets should be disclosed.

The adoption of this standard by the Company did not have a material impact on the consolidated financial statements.

On January 1, 2020, the Company adopted ASU No.

2016-13 Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The updated guidance amends the current accounting guidance and requires the measurement of all expected losses based on historical experience, current conditions, and reasonable and supportable forecasts rather than the incurred loss model which reflects losses that are probable.

Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

The Company evaluated its financial instruments and determined that its trade accounts receivable are subject to the new current expected credit loss model.

Based upon the application of the new current expected credit loss model, on January 1, 2020, we recorded a cumulative effect adjustment of $ 0.4 million to Retained Earnings.

The adoption of this standard by the Company did not have a material impact on the consolidated statement of operations or cash flows.

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

On September 30, 2020, the Company early adopted ASU No.

2019-12 "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes." This ASU removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences as well as adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for goodwill and allocating taxes to members of a consolidated group.

The most significant impact to the Company is the removal of a limit on the tax benefit recognized on pre-tax losses in interim periods.

The Company monitors the financial institutions where it invests its cash and cash equivalents as well as performs credit reviews of potential customers when extending credit to purchase and periodic reviews of existing customers to mitigate exposure and risk.

The Specialty Chemicals segment has one customer that accounted for approximately 21 % of the segment's revenues for 2022 and 15 % of the segment's revenues for 2021.

Accounting Pronouncements Not Yet Adopted - In March 2020, the Financial Accounting Standards Board (FASB) issued 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.

On December 21, 2022, the FASB issued ASU 2022-06 to defer the sunset date of Topic 848 until December 31, 2024.

The Company intends to use the expedients where needed for reference rate transition.

The Company continues to evaluate this standard update and does not currently expect a material impact to the Company’s financial statements or disclosures.

SYNALLOY CORPORATION

Ascent Industries Co.

Notes to Consolidated Financial Statements

Acquisition of DanChem Technologies, Inc.

On October 22, 2021, the Company completed the acquisition of all of the issued and outstanding shares of common stock of DanChem, a contract manufacturer of chemical products located in Danville, Virginia.

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".

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See Note 6 for more information on the Company's long-term debt.

The table below summarizes the preliminary estimates of fair value of identifiable assets acquired and liabilities assumed in the Acquisition.

These preliminary estimates of the fair value are subject to revisions, which may result in an adjustment to the preliminary values presented below.

(in thousands) October 22, 2021

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 $ 0.4 million.

As a result, within the measurement period, the Company's deferred tax balances were decreased by $ 40,475 and goodwill was decreased by $ 40,475 .

The table below summarizes the fair value of identifiable assets acquired and liabilities assumed in the Acquisition and the revisions made in 2022:

(in thousands) October 22, 2021 Revisions December 31, 2022

Cash and cash equivalents $ 1,533 $ 1,533

Accounts receivable, net of allowance for credit losses 5,358

Inventories 1,561

Accounts receivable, net of allowance for credit losses of $ 118

Inventories, net 1,561 1,561

Prepaid expenses and other current assets 454 454

Property, plant and equipment 15,697

Right of use asset, operating leases 208

Intangible assets 5,750

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

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Goodwill $ 11,282 $ ( 1,248 ) $ 10,034

The Company is in various phases of valuing the assets acquired and liabilities assumed, including deferred tax balances, and the Company's estimate of these values was still preliminary on December 31, 2021.

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 Consolidated Financial Statements

Goodwill is calculated as the excess of the purchase price over the fair value of t he net assets acquired.

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Substantially all of the goodwill resulting from this acquisition is not expected to be deductible for tax purposes.

Approximately $ 1.0 million of one-time, acquisition-related costs, is recognized in acquisition costs and other expenses in the consolidated statement of operations as of December 31, 2021 .

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

Approximately $ 0.5 million and $ 1.0 million of one-time, acquisition-related costs, is recognized in acquisition costs and other expenses in the consolidated statements of income as of December 31, 2022 and 2021, respectively .

The Company identified DanChem’s customer relationships, product development know-how, and tradename as finite-lived assets with estimated fair values as of the acquisition date of $ 5.1 million, $ 0.5 million, and $ 0.2 million, respectively.

The finite-lived assets are subject to amortization using the straight-line method over 15 years.

The finite-lived assets are subject to amortization using either an accelerated or straight-line method over 15 years.

Total net sales and operating income for DanChem for the period from October 22, 2021 through December 31, 2022 were as follows:

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Net sales $ 358,735

Net income (loss) 21,681 ( 26,468 )

Basic net income (loss) per common share 2.32 ( 2.90 )

Diluted net income (loss) per common share $ 2.29 $ ( 2.90 )

Net income 21,681

Basic net income per common share 2.32

Diluted net income per common share $ 2.29

These unaudited pro forma results include adjustments, such as property, plant and equipment step-up, amortization of acquired intangible assets and interest expense on debt financing in connection with the acquisition.

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The Company’s performance obligations are satisfied and revenue is recognized when control and title of the contract promised goods or services is transferred to our cus tomers for product shipped or services rendered.

Revenues are recorded net of any sales incentives and discounts.

Sales tax and other taxes we collect with revenue-producing activities are excluded from revenue.

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The Company offers industry standard payment terms.

SYNALLOY CORPORATION

Ascent Industries Co.

Notes to Consolidated Financial Statements

The following table presents the Company's revenues, disaggregated by product group.

Substantially all of the Company's revenues are derived from contracts with customers where performance obligations are satisfied at a point-in-time.

(in thousands) 2022 2021

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Net sales $ 414,147 $ 334,715

The Company's revenues are derived from contracts with customers where performance obligations are satisfied at a point-in-time or over-time.

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.

(in thousands) 2022 2021

Point-in-time $ 387,498 $ 311,287

Over-time $ 26,649 $ 23,428

Fair Value Measurements

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These values are generally determined using model-based techniques, including option pricing models, discounted cash flow models, probability weighted models, and Monte Carlo simulations.

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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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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.

Ascent Industries Co.

Notes to Consolidated Financial Statements

Contingent consideration (earn-out) liabilities

The fair value of contingent consideration liabilities ("earn-out") resulting from the 2019 American Stainless acquisition, 2018 MUSA-Galvanized acquisition and 2017 MUSA-Stainless acquisition are classified as Level 3.

The fair value as of December 31, 2021 of the MUSA-Galvanized earn-out and the American Stainless earn-out was estimated by applying the probability-weighted expected return method using management's estimates of pounds to be shipped and future price per unit.

The fair value of contingent consideration liabilities ("earn-out") resulting from the 2018 MUSA-Galvanized acquisition and 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 the results of operations in the periods in which they are identified.

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.

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

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 years ended December 31, 2022 and 2021, respectively.

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

The following table summarizes the significant unobservable inputs in the fair value measurement of our contingent consideration (earn-out) liabilities as of December 31, 2021:

Instrument Fair Value

December 31, 2021 Principal Valuation Technique Significant Unobservable Inputs Range Weighted

Contingent consideration (earn-out) liabilities $ 1,961 Probability Weighted Expected Return Discount rate - 5 %

Timing of estimated payouts 2022 -

Future revenue projections $ 9.1 M

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 2022 and 2021:

(in thousands) MUSA-Stainless MUSA-Galvanized American Stainless Total

Balance December 31, 2019 $ 2,403 $ 1,782 $ 4,969 $ 9,154

Earn-out payments during period

( 1,625 ) ( 611 ) ( 2,002 ) $ ( 4,238 )

Changes in fair value during the period

( 403 ) ( 230 ) ( 562 ) $ ( 1,195 )

(in thousands) MUSA-Galvanized American Stainless Total

Balance December 31, 2021 $ 1,106 $ 855 $ 1,961

5 unchanged sentences

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

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

The following table summarizes the significant unobservable inputs in the fair value measurement of our contingent consideration (earn-out) liabilities as of December 31, 2021:

Instrument Fair Value

December 31, 2021 Principal Valuation Technique Significant Unobservable Inputs Range Weighted

Contingent consideration (earn-out) liabilities $ 1,961 Probability Weighted Expected Return Discount rate - 5 %

Timing of estimated payouts 2022 -

Future revenue projections $ 9.1 M

The weighted average discount rate was calculated by applying an equal weighting to each contingent consideration's (earn-out liabilities) discount rate.

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

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

For the fiscal years ended December 31, 2021 and 2020, the Company's only significant measurements of assets and liabilities at fair value on a non-recurring basis subsequent to their initial recognition were certain long-lived assets and goodwill (see Note 1 to the consolidated financial statements for additional information regarding this Level 3 fair value measurement).

For the fiscal year ended December 31, 2022 and 2021, the Company's only significant measurements of assets and liabilities at fair value on a non-recurring basis subsequent to their initial recognition were certain long-lived assets, certain assets held for sale and goodwill (see Note 1 to the consolidated financial statements for additional information regarding this Level 3 fair value measurement).

Long-lived assets

4 unchanged sentences

The Company classifies these fair value measurements as Level 3.

During 2021, the Company determined that technology associated with certain long-lived assets within the Specialty Chemicals Segment was obsolete and, as a result, recognized a $ 0.2 million non-cash, pre-tax asset impairment charge.

SYNALLOY CORPORATION

Ascent Industries Co.

Notes to Consolidated Financial Statements

During 2020, due to the continued curtailment of operations related to the COVID-19 pandemic, inventory of Palmer was written down to its net realizable value of $ 2.1 million and certain long-lived assets of Palmer, including tangible and intangible assets, were written down to their estimated fair value of $ 1.4 million, resulting in asset impairment charges of $ 6.2 million.

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.

It was determined that a significant 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, however, certain long-lived assets and intangible assets related to the galvanized pipe and tube operations were written down to their fair value of zero resulting in accelerated depreciation and amortization charges of $ 0.9 million.

Expenses associated with accelerated depreciation are included in depreciation and amortization expense in the consolidated statements of income.

During 2021, the Company determined that technology associated with certain long-lived assets within the Specialty Chemicals segment was obsolete and, as a result, recognized a $ 0.2 million non-cash, pre-tax asset impairment charge.

Assets Held-for-Sale

On February 17, 2021 the Board of Directors authorized the permanent cessation of operations at Palmer and the subleasing of the Palmer facility.

During the three months ended December 31, 2021 the Company permanently ceased operations at the Palmer facility and is in the process of divesting all remaining assets at the facility.

The Company determined that the remaining asset group is ready for immediate sale, completion of sale is probable within the next year, and no significant changes to the plan to sell are expected to occur.

As of December 31, 2021, the Company determined that the held-for-sale criteria were met and initially measured the remaining assets at the lower of carrying value or fair value less costs to sell.

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 December 31, 2022, the remaining Palmer assets continue to be classified as held for sale with the remaining assets to be disposed of in the first quarter of 2023.

The results of operations for this business are included within the Tubular Products segment for all periods presented in this annual 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.

The assets classified as held for sale as of December 31, 2021 are as follows:

The assets classified as held for sale as of December 31, 2022 and 2021 are as follows:

(in thousands) 2022 2021

3 unchanged sentences

The Company remains obligated under the terms of the leases for the rent and other costs that may be associated with the lease of the facility through 2036.

During the fourth quarter of 2021 the Company entered into a sublease for a portion of the Palmer facility and is actively pursuing a sublease for the remaining portions of the facility.

The Company will continue to dispose of the remaining assets through the first quarter of 2022.

During the fourth quarter of 2022, 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 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.

Fair Value of Financial Instruments

For short-term instruments, other than those required to be reported at fair value on a recurring and non-recurring basis and for which disclosures are included above, management concluded the historical carrying value is a reasonable estimate of the fair value because of the short period of time between origination of such instruments and their expected realization.

Therefore, as of December 31, 2021 and 2020, the carrying amount for cash and cash equivalents, accounts receivable, accounts payable, the Company's revolving line of credit and long-term debt, which is based on a variable rate, approximates fair value.

There were no transfers of assets or liabilities between Level 1, Level 2 and Level 3 or changes in the fair value methodologies used by the Company in the years ended December 31, 2021 or 2020, respectively.

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 approximates fair value as of December 31, 2022.

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 6 for further information on the Company's debt.

Ascent Industries Co.

Notes to Consolidated Financial Statements

Property, Plant and Equipment

9 unchanged sentences

Property, plant and equipment, net $ 42,346 $ 43,720

The Company recorded depreciation expense of $ 7.5 million and $ 7.6 million for 2021 and 2020, respectively .

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

Long-term Debt

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

(in thousands) 2022 2021

Cost of sales $ 8,472 $ 7,293

Selling, general and administrative 250 254

Total depreciation $ 8,722 $ 7,547

Short-term debt

On June 6, 2022, the Company entered into a note payable in the amount of $ 1.0 million with an interest rate of 2.77 % maturing April 1, 2023.

The agreement is associated with the financing of the Company's insurance premium in the current year.

As of December 31, 2022, the outstanding balance was $ 0.4 million.

Credit Facilities

2 unchanged sentences

Term loan, due January 15, 2025 4,107 4,821

Revolving line of credit, due December 20, 2021 — 49,037

Term loan, due February 1, 2024 — 12,333

Total long-term debt 71,549 70,392

1 unchanged sentence

Long-term debt, less current portion $ 69,085 $ 67,928

On January 15, 2021, the Company and its subsidiaries entered into a new Credit Agreement with BMO Harris Bank N.A.

The new Credit Agreement provides the Company with a new four-year revolving credit facility with up to $ 150.0 million of borrowing capacity (the "Facility").

The Facility refinances and replaces the Company's previous $ 100.0 million asset based revolving line of credit with Truist (the "Truist Line"), which was scheduled to mature on December 20, 2021, and the remaining portion of the Company's five-year $ 20 million term loan with Truist (the "Truist term loan"), which was scheduled to mature on February 1, 2024.

The Company and its subsidiaries have a Credit Agreement with BMO Harris Bank N.A.

("BMO") which 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.

6 unchanged sentences

The Facility also provides an unused commitment fee based on the daily used portion of the Facility.

Ascent Industries Co.

Notes to Consolidated Financial Statements

Agreement includes provisions intended to provide for the replacement of LIBOR with the Secured Overnight Financing Rate ("SOFR") upon the cessation of LIBOR.

The Company plans to transition away from LIBOR by June 2023.

The revolving line of credit interest rate was 5.18 % and 2.29 % as of December 31, 2022 and 2021, respectively.

2 unchanged sentences

The Company made interest payments on all credit facilities of $ 2.6 million and 1.4 million in 2022 and 2021, respectively.

Principal payments on long-term debt during the next five fiscal years and thereafter are as follows (in thousands):

Principal payments on long-term debt are as follows (in thousands):

2025 $ 66,621

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 December 31, 2021, the Company was in compliance with all debt covenants.

As of December 31, 2022, the Company was in compliance with all financial debt covenants.

As of December 31, 2022, the Company had $ 37.6 million of remaining availability under it credit facility.

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment.

1 unchanged sentence

As of December 31, 2022, operating lease liabilities related to the master lease agreement with Store Capital totaled $ 31.5 million, or 94 % of the total lease liabilities on the consolidated balance sheet.

On August 30, 2021, the Company entered into a thirty-eight month operating lease agreement for office space with an entity affiliated with the Company's Interim President and Chief Executive Officer.

Pursuant to the terms of the lease agreement, the Company will pay a base rent in the first year of the agreement of $ 5,364 monthly with an annual increase in October each year of 2.5 % through the term of the agreement.

As discussed in Note 2 , on October 22, 2021, the Company completed the DanChem acquisition.

As part of the acquisition, the Company assumed certain operating and finance leases which were recorded net of preliminary purchase price accounting adjustments.

As part of the acquisition, the Company assumed certain operating and finance leases.

As of December 31, 2022, the balances associated with these leases in the consolidated balance sheet include operating lease assets and liabilities of $ 0.3 million and finance lease assets and liabilities of $ 2.9 million.

During the year ended December 31, 2021, the Company had $ 0.3 million of right-of-use assets recognized in exchange for new operating lease liabilities.

During the year ended December 31, 2022, the Company entered into new operating lease agreements resulting in an additional $ 0.2 million of right-of-use assets and lease liabilities.

Balance Sheet Presentation

8 unchanged sentences

Non-current liabilities Non-current portion of lease liabilities, finance leases $ 1,242 $ 1,414

Ascent Industries Co.

Notes to Consolidated Financial Statements

Total Lease Cost

7 unchanged sentences

Interest on finance lease liabilities 36 11

Sublease income ( 187 ) —

Total lease cost $ 4,273 $ 4,210

1 Includes short term leases and sublease income, which is immaterial

1 Includes 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 consolidated statement of operations.

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

Maturity of Leases

18 unchanged sentences

Finance leases 6.06 years 7.07 years

Ascent Industries Co.

Notes to Consolidated Financial Statements

Accrued Expenses

9 unchanged sentences

Benefit plans 426 333

Interest rate swap liability — 45

Customer rebate liability 194 379

1 unchanged sentence

Total accrued expenses $ 6,560 $ 12,407

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

Shareholders' Equity

Authorized shares of common stock were $ 24.0 million ($ 1.00 par value) at December 31, 2022 and 2021.

Share Repurchase Program

On February 17, 2021, 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 on February 21, 2021.

The share repurchase program allows for repurchase of up to 790,383 shares of the Company's outstanding common stock over 24 months.

On 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 was set to expire on February 17, 2023.

The share repurchase program allows for repurchase of up to 790,383 shares of the Company's outstanding common stock 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.

13 unchanged sentences

The proceeds of the Rights Offering was used for general corporate purposes, including in part, certain growth initiatives (including acquisitions) as well as repayment of the revolving credit facility.

Ascent Industries Co.

Notes to Consolidated Financial Statements

At the end of each fiscal year the Board reviews the financial performance and capital needed to support future growth to determine the amount of cash dividend, if any, which is appropriate.

In 2022 and 2021, no dividends were declared or paid by the Company.

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

Accounting for Share-Based Payments

1 unchanged sentence

The Company has a number of active and inactive equity incentive plans (the "Incentive Plans") under which the Company has been authorized to grant share-based awards to key employees and non-employee directors.

A total of 1.5 million shares have been previously authorized for grant to key employees and non-employee directors under the Company's currently active Incentive Plans.

On April 25, 2022, the Board of Directors approved, upon the recommendation of the Compensation & Long-Term Incentive Committee but subject to stockholder approval, adoption of the Ascent Industries Co.

2022 Omnibus Equity Incentive Plan (the "Plan") and directed that the Plan be submitted for approval by our stockholders at our 2022 Annual Meeting of Stockholders (the "Annual Meeting").

On June 8, 2022, at the 2022 Annual Meeting, upon the recommendation of the Company's Board of Directors, a majority of the shareholders of the Company voted to approve the Plan.

A total of 0.8 million shares have been authorized for grant to key employees and non-employee directors under the Company's currently active Incentive Plans.

As of December 31, 2022, there were 0.7 million shares remaining available for grants under the currently active equity Incentive Plans.

The Company recognized share-based compensation expense within SG&A expense on the consolidated statement of operations of $ 0.8 million and $ 1.8 million in 2021 and 2020, respectively.

The Company had $ 0.2 million of associated income tax benefit recognized for 2021 and 2020.

The Company recognized share-based compensation expense within SG&A expense on the consolidated statements of income of $ 1.4 million and $ 0.8 million in 2022 and 2021, respectively.

Total unrecognized share-based payment expense for all share-based payment plans was $ 1.5 million at December 31, 2022, of which $ 1.0 million will be recognized in 2023, $ 0.4 million in 2024, and $ 0.1 million thereafter.

This results in these amounts being recognized over a weighted-average period of 2.04 years.

Stock Options

2011 Long-Term Incentive Stock Option Plan

The 2011 Long-Term Incentive Stock Option Plan (the "2011 Plan") is an incentive stock option plan;

therefore, there are no income tax consequences to the Company when an option is granted or exercised.

Stock options have terms of 10 years and vest in 20 % or 33 % increments annually on a cumulative basis, beginning one year after the date of grant, and are assigned an exercise price equal to the average of the high and low common stock price on the day prior to the date of grant.

Options are expensed on a straight-line basis over the grant vesting period, which is considered to be the requisite service period.

In order for the options to vest, the employee must be in the continuous employment of the Company since the date of the grant.

Except for death, disability, or qualifying retirement, any portion of the grant that has not vested will be forfeited upon termination of employment.

Shares representing grants that have not yet vested will be held in escrow by the Company.

An employee will not be entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.

As of December 31, 2021, the Company has no options authorized for issuance under the 2011 Plan.

Under the 2011 Plan, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

Compensation expense charged against income for options was insignificant for 2022 and 2021

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

When determining expected volatility, the Company considers the historical volatility of the Company’s stock price.

2 unchanged sentences

The Company granted no new options in 2022.

The weighted-average assumptions used in the Black-Scholes option-pricing model and weighted-average grant date fair value for options granted in 2020 are as follows:

February 5, 2020 June 30, 2020

Weighted-average assumptions used:

Expected volatility 35.1 % 38.7 %

Dividend yield 1.79 % 1.89 %

Risk-free interest rate 1.66 % 0.64 %

Expected term, in years 10 10

Weighted-average grant date fair value $ 4.53 $ 2.59

In 2021, options for 13,174 shares were exercised by employees and directors for an aggregate exercise price of $ 109,324 .

There were no options exercised by employees and directors in 2020.

At the 2021 and 2020 respective year ends, options to purchase 129,163 and 86,531 shares, respectively, with weighted average exercise prices of $ 13.05 and $ 13.77 , respectively, were fully exercisable.

Compensation cost charged against income before taxes for the options was approximately $ 0.1 million for 2021 and $ 0.4 million for 2020, respectively.

As of December 31, 2021, there was $ 13,786 of unrecognized compensation cost related to unvested stock options granted under the Company's stock option plans.

The weighted average period over which the stock option compensation cost is expected to be recognized is 1.10 years.

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

A summary of activity for the 2011 Plan is as follows:

Transactions related to stock options for the year ended December 31, 2022 are summarized as follows:

Price Options

1 unchanged sentence

(in years) Intrinsic

December 31, 2019 $ 14.26 55,468 3.8 $ 18,331

Granted February 5, 2020 13.00 123,500

Granted June 30, 2020 7.33 20,000

Exercised — —

Canceled, forfeited, or expired 13.14 ( 19,437 )

December 31, 2020 $ 12.74 179,531 7.2 $ 9,402

Outstanding at December 31, 2021 $ 13.04 143,828 6.0 $ 487,011

Exercised 9.67 ( 18,098 )

Canceled, forfeited, or expired 11.71 ( 7,588 )

December 31, 2021 $ 13.04 143,828 6.0 $ 487,011

Outstanding at December 31, 2022 $ 13.66 118,142 5.2 $ —

Vested and expected to vest at December 31, 2022 1

$ 13.00 5,665 7.1 $ —

Exercisable options $ 13.69 112,477 5.1 $ —

Options expected to vest:

Price Options

Outstanding Weighted

(in years) Grant Date Fair Value

December 31, 2019 $ 16.01 3,723 5.1 $ 6.11

Granted February 5, 2020 13.00 123,500 4.53

Granted June 30, 2020 7.33 20,000 2.59

Vested 13.24 ( 34,786 ) 4.68

Canceled, forfeited, or expired 13.14 ( 19,437 ) 4.62

December 31, 2020 $ 11.78 93,000 9.2 $ 5.53

Vested 10.83 ( 55,806 ) 3.72

Canceled, forfeited, or expired 13.33 ( 22,529 ) 4.80

December 31, 2021 $ 13.00 14,665 8.1 $ 4.99

SYNALLOY CORPORATION

1 Includes outstanding vested and nonvested options

Ascent Industries Co.

Notes to Consolidated Financial Statements

The following table summarizes information about stock options outstanding as of December 31, 2021:

Range of Exercise Prices Outstanding Stock Options Exercisable Stock Options

Shares Weighted Average Shares Weighted Average Exercise Price

Exercise Price Remaining Contractual Life in Years

$ 11.35 9,068 $ 11.35 0.1 9,068 $ 11.35

13.70 12,370 13.70 1.1 12,370 13.70

14.76 8,109 14.76 2.1 8,109 14.76

16.01 18,447 16.01 3.1 18,447 16.01

13.00 85,834 13.00 8.1 71,169 13.00

$ 7.33 10,000 $ 7.33 8.5 10,000 $ 7.33

143,828 129,163

Restricted Stock Awards

2015 Stock Awards Plan

The 2015 Stock Awards Plan (the "2015 Plan") was approved by the Compensation & Long-Term Incentive Committee (the "Compensation Committee") and originally authorized the issuance of up to 250,000 shares.

At the 2018 Annual Meeting, upon the recommendation of the Company's Board of Directors, a majority of the shareholders of the Company voted to amend and restate the 2015 Plan to increase the authorization of issuances from 250,000 shares to 500,000 shares.

At the 2021 Annual Meeting, upon the recommendation of the Company's Board of Directors, a majority of the shareholders of the Company voted to amend and restate the 2015 Plan to increase the authorization of issuances from 500,000 shares to 1.5 million shares.

Shares which can be awarded under the 2015 Plan for a period of 10 years from the effective date of the plan.

Stock awards issued under the 2015 Plan vest in either 20 % or 33 % increments annually on a cumulative basis, beginning one year after the date of grant.

The fair value of the restricted stock awards are determined based on the average of the high and low common stock price on the day prior to the date of grant.

Restricted stock awards are valued based on the average of the high and low common stock price on the day prior to the date of grant.

In general, these awards vest in either 20 % or 33 % increments annually on a cumulative basis, beginning one year after the date of grant.

Certain of these awards vest 100 % at the end of a three-year period from the date of grant.

In order for the awards to vest, the employee must be in the continuous employment of the Company since the date of the award.

Except for death, disability, or qualifying retirement, any portion of an award that has not vested is forfeited upon termination of employment.

The Company may terminate any portion of the award that has not vested upon an employee's failure to comply with all conditions of the award or the 2015 Plan.

An employee is not entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.

A summary of plan activity for the 2015 Plan is as follows:

All awards are expensed on a straight-line basis over the grant vesting period, which is considered to be the requisite service period.

The weighted average period over which the restricted stock awards compensation expense is expected to be recognized is 2.31 years.

Transactions related to restricted stock awards for the year ended December 31, 2022 are summarized as follows:

Shares Weighted Average

Grant Date Fair Value

Outstanding December 31, 2019 100,775 $ 13.28

Granted February 5, 2020 45,418 13.00

Granted November 10, 2020 50,000 5.65

Vested ( 81,233 ) 12.87

Forfeited ( 17,535 ) 13.11

Outstanding December 31, 2020 97,425 $ 11.97

Granted February 10, 2021 15,181 8.57

Granted October 28, 2021 6,751 11.11

Granted November 15, 2021 751 13.32

Nonvested at December 31, 2021 43,581 $ 9.82

Granted 72,110 18.19

Vested ( 24,641 ) 7.75

Forfeited ( 11,947 ) 13.33

Outstanding December 31, 2021 43,581 $ 9.82

SYNALLOY CORPORATION

Nonvested at December 31, 2022 79,103 $ 17.31

Performance Stock Units

The Company issues performance stock units classified as equity awards which contain market conditions that must be satisfied for an employee to earn the right to benefit from the award.

Performance stock units vest upon the achievement of specific thirty-day volume-weighted average price targets of a share of the Company's common stock over a period of three years .

In order for the awards to vest, the employee must be in the continuous employment of the Company since the date of the award.

Except for death, disability, or qualifying retirement, any portion of an award that has not vested is forfeited upon termination of employment.

An employee is not entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.

The performance stock units are divided into tranches, each one vesting on the date the thirty-day volume-weighted average price of the Company's common stock `meets or exceeds the price target as set forth in the table below:

Shares Volume Weighted Average Price Target

Tranche I 9,663 $ 22.50

Tranche II 50,000 25.00

Tranche III 40,000 27.50

Tranche IV 30,000 30.00

Tranche V 30,000 $ 35.00

The fair value of the performance stock units granted with a market performance condition are determined using a Monte Carlo simulation considering historical performance of the Company's stock as well as the probability of attaining the market performance condition determined on the date of grant.

Expense is recognized on a straight-line method over the requisite service period.

Performance stock units do not have dividend rights.

The weighted average period over which the performance stock units compensation expense is expected to be recognized is 2.20 years.

Ascent Industries Co.

Notes to Consolidated Financial Statements

Compensation expense on the grants issued is charged against earnings equally before forfeitures, if any, with the offset recorded in Shareholders' Equity.

Compensation cost charged against income for the awards was approximately $ 0.4 million and $ 1.0 million for 2021 and 2020, respectively.

As of December 31, 2021, there was $ 0.2 million of total unrecognized compensation cost related to unvested restricted stock grants under the Company's 2015 Plan.

The weighted average period over which the stock grant compensation cost is expected to be recognized is 2.89 years.

Performance-Based Restricted Stock Awards

The Company issues performance-based restricted stock classified as equity awards which contain performance and service conditions that must be satisfied for an employee to earn the right to benefit from the award.

The performance condition is based on the achievement of the Company's EBITDA targets.

In November 2020, the Compensation Committee approved stock grants under the 2015 Plan to the Company's Interim President and Chief Executive Officer.

For these awards, the performance condition was based on the achievement of thirty-day volume weighted average price targets of a Company share of stock.

The fair value of the performance-based restricted stock awards are determined based on the average of the high and low common stock price on the day prior to the date of grant.

The fair value of the performance-based restricted stock awards granted with a market performance condition are determined using a Monte Carlo simulation considering historical performance of the Company's stock as well as the probability of attaining the market performance condition determined on the date of grant.

Expense is recognized on a straight-line method over the requisite service period, based on the probability of achieving the performance condition, with changes in expectations recognized as an adjustment to earnings in the period of change.

Compensation cost is not recognized for performance-based restricted stock awards that do not vest because service or performance conditions are not satisfied and any previously recognized compensation cost is reversed.

Performance-based restricted stock awards do not have dividend rights.

The Company recognizes forfeitures as they occur.

In general, 0 % to 150 % of the Company's performance-based restricted stock awards vest at the end of a three year service period from the date of grant based upon achievement of the specified performance condition.

The weighted-average grant-date fair value per unit of performance-based restricted stock classified as equity awards granted was $ 0.69 and $ 13.00 in 2021 and 2020, respectively.

The total fair value of performance-based restricted stock awards vesting was approximately $ 1.1 million and $ 0.6 million in 2021 and 2020, respectively.

A summary of the status of our performance-based restricted stock awards as of December 31, 2021, and changes during fiscal 2021, were as follows:

The weighted-average grant-date fair value per unit of performance stock units granted was $ 3.92 and $ 0.69 in 2022 and 2021, respectively.

There were no performance stock units vesting in 2022.

The total fair value of performance stock units vesting was approximately $ 1.1 million in 2021.

Transactions related to performance stock units for the year ended December 31, 2022 were as follows:

Units Weighted-Average Grant Date Fair Value

Outstanding December 31, 2019 77,986 $ 13.66

( 64,711 ) 13.21

Forfeited ( 20,558 ) 13.73

Outstanding December 31, 2020 29,364 $ 13.76

Vested ( 116,260 ) 3.66

Forfeited ( 3,104 ) 12.99

Outstanding December 31, 2021 — $ —

1 Contingent shares granted excluded from 2020

2 Excludes the vesting of an additional 5,074 shares due to performance conditions of the awards exceeding target.

3 Contingent shares granted in prior year included in 2021

As of December 31, 2021, there was no unrecognized compensation expense related to non-vested performance-based restricted stock awards.

SYNALLOY CORPORATION

Notes to Consolidated Financial Statements

Outstanding at December 31, 2021 — $ —

Granted 159,663 3.92

Outstanding at December 31, 2022 159,663 $ 3.92

Inducement Awards

During the year ended December 31, 2021, the Company granted stock-based awards to incoming executive officers as incentives to enter into an at-will employment agreement with the Company.

The Company has previously granted stock-based awards to incoming executive officers as incentives to enter into an at-will employment agreement with the Company.

These inducement awards were approved by the Compensation Committee of the Board of Directors and did not require shareholder approval in accordance with NASDAQ Rule 5635(c)(4).

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The fair value of the time based portion of inducement awards are determined based on the average of the high and low common stock price on the day prior to the date of grant.

A summary of the status of our inducement stock awards as of December 31, 2021, and changes during fiscal 2021, were as follows:

Transactions related to inducement stock awards as of December 31, 2022 were as follows:

Units Weighted-Average Grant Date Fair Value

Outstanding December 31, 2021 30,856 $ 8.11

Granted 53,696 6.35

Vested ( 9,170 ) 2.21

Forfeited/Canceled ( 10,324 ) 5.96

Outstanding December 31, 2022 21,686 $ 10.61

Compensation expense charged against income for the inducement awards was approximately $ 0.1 million for 2021.

There was no compensation expense related to inducement awards in 2020.

The total fair value of inducement awards vesting was approximately $ 0.2 million in 2021.

There were no inducement awards that vested in 2020.

As of December 31, 2021, there was $ 0.2 million of total unrecognized compensation cost related to inducement awards.

The weighted average period over which the stock grant compensation cost is expected to be recognized is 2.53 years.

The total fair value of inducement awards vesting was approximately $ 0.2 million in 2022 and 2021, respectively.

The weighted average period over which inducement award compensation cost is expected to be recognized is 1.52 years.

Non-Employee Director Compensation Plan

Each year, the Company allows each non-employee director to elect to receive up to 100 % of the director's annual retainer in restricted stock.

The number of restricted shares issued is determined by the average of the high and low common stock price on the day prior to the Annual Meeting of Shareholders or the date prior to the appointment to the Board for those individuals that are appointed mid-term.

Non-employee directors received an aggregate of 22,026 and 43,603 shares, respectively, of restricted stock in lieu of total retainer fees of $ 214,000 and $ 345,000 , respectively.

The Company also issued an aggregate of 20,000 additional shares of restricted stock to the Company's new Chairman of the Board due to the increased responsibilities of the role.

The shares granted to the directors are not registered under the Securities Act of 1933 and are subject to forfeiture in whole or in part upon the occurrence of certain events.

SYNALLOY CORPORATION

Non-employee directors are paid an annual retainer of $ 102,000 , and each director has the opportunity to elect to receive 100 % of the retainer in restricted stock, which vest quarterly over a one year period.

The number of restricted shares is determined by the average of the high and low sale price of the Company's stock on the day prior to the Annual Meeting of Shareholders.

In 2022, the Company issued an aggregate of 17,173 shares of restricted stock to non-employee directors in lieu of $ 0.3 million of their annual cash retainer fees.

The Company also issued an aggregate of 65,000 additional shares of restricted stock to the Company's Executive Chairman of the Board consisting of 15,000 restricted stock units and 50,000 performance stock units.

The restricted stock units will vest 50 % on the first and second anniversary of the award while the performance stock units vest upon the achievement of specific thirty-day volume weighted average price targets of the Company's common stock.

The weighted average period over which the non-employee director award compensation expense is expected to be recognized is 2.04 years.

Ascent Industries Co.

Notes to Consolidated Financial Statements

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Accrued Federal Insurance Contributions Act ("FICA") deferral — 155

Interest Limitation Carryforwards 555 —

Intangible asset basis differences 3,262 2,980

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Lease assets 7,107 7,523

Interest rate swap — 68

Total deferred income tax liabilities 14,709 15,180

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Federal $ ( 189 ) $ 6,786

State 199 538

Total current 10 7,324

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Total $ ( 4,211 ) $ 5,253

SYNALLOY CORPORATION

Ascent Industries Co.

Notes to Consolidated Financial Statements

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Federal and State valuation allowance ( 2,366 ) ( 13.2 ) % ( 539 ) ( 2.1 ) %

CARES Act carryback benefits — — % ( 1,123 ) 3.5 %

Stock option compensation ( 173 ) ( 1.0 ) % ( 196 ) ( 0.8 ) %

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Transaction costs — — % 134 0.5 %

Tax Benefits Associated with Palmer Closure ( 5,707 ) ( 32.0 ) % — — %

Other nondeductible expenses 69 0.4 % 51 0.2 %

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The Company's effective tax rate for 2022 was less than the U.S.

statutory rate of 21% primarily driven by windfall tax benefits associated with share-based compensation and the release of valuation allowances on certain deferred tax assets partially offset by state taxes and transaction costs, net of federal benefit.

The Company made income tax payments of $ 1.6 million and $ 16,000 in 2021 and 2020, respectively.

statutory rate of 21% primarily driven by tax benefits associated with losses on our investment in Palmer of Texas Tanks, Inc.

and its ultimate wind down and closure and the release of valuation allowances on certain deferred tax assets, partially offset by state taxes.

The tax benefits associated with the investment in Palmer relate to a deduction claimed for the tax basis in the Company’s stock in Palmer of Texas Tanks, Inc.

The Company made income tax payments of $ 7.8 million and $ 1.6 million in 2022 and 2021, respectively.

The Company has $ 5.2 million of U.S.

Federal net operating loss carryforwards and no interest limitation carryforwards at the end of 2021 compared with no U.S.

Federal net operating loss carryforwards or interest limitation carryforwards at the end of 2020.

Federal net operating loss carryforwards and $ 2.6 million of interest limitation carryforwards at the end of 2022 compared to $ 4.2 million of U.S.

Federal net operating loss carryforwards and no interest limitation carryforwards at the end of 2021.

The majority of our U.S.

Federal net operating loss carryforwards were acquired in the DanChem acquisition and are subject to certain limitations under IRC Section 382.

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The majority of these losses will expire between the years of 2023 and 2040, while certain losses are not subject to expiration.

During 2021, the Company recognized a combined U.S.

federal and state valuation allowance of $ 3.7 million because it is more likely than not that the underlying deferred tax assets will not be realized.

This represents a $ 0.5 million decrease year over year, primarily driven by deferred tax liabilities acquired in the DanChem acquisition.

In prior years, primarily due to the historical losses, the Company established valuation allowances against certain deferred tax assets.

At each reporting date, the Company considers new and historical evidence, both positive and negative, that could affect its view of the future realization of its deferred tax assets.

When the Company demonstrates that it can generate taxable income on a sustained basis, its conclusion can change regarding the need for a valuation allowance against its deferred tax assets.

During the tax year ended December 31, 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 on deferred tax assets of $ 2.4 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 December 31, 2022.

The Company and its subsidiaries are subject to U.S.

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The Company had no accruals for uncertain tax positions including interest and penalties at the end of 2022.

SYNALLOY CORPORATION

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which, among other things, implemented a CAMT of 15 percent on book income of certain large corporations, a one percent excise tax on net stock repurchases and several tax incentives to promote clean energy.

The provision pertaining to an excise tax on corporate stock repurchases imposes a nondeductible one percent excise tax on a publicly traded corporation for the net value of certain stock that the corporation repurchases.

The value of the repurchases subject to the tax is reduced by the value of any stock issued by the corporation during the tax year, including stock issued or provided to the employees.

The CAMT imposes a minimum tax on net income adjusted for certain items prescribed by the legislation.

Both the CAMT and the excise tax provisions of this

Ascent Industries Co.

Notes to Consolidated Financial Statements

Earnings (Loss) Per Share

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

(in thousands, except per share data) 2021 2020 (a)

Net earnings (loss) $ 20,245 $ ( 27,267 )

Denominator for basic earnings (loss) per share - weighted average shares 9,340 9,140

legislation are effective for tax years beginning after December 31, 2022.

Although management is currently assessing the impact of the law change and awaiting guidance from the Department of Treasury, the Company anticipates being subject to the new excise tax on share repurchases, but does not believe that it will have a material impact on its consolidated financial statements.

Earnings Per Share

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

(in thousands, except per share data) 2022 2021

Net earnings $ 22,066 $ 20,245

Denominator for basic earnings per share - weighted average shares 10,230 9,340

Effect of dilutive securities:

Employee stock options and stock grants 180 116

Denominator for diluted earnings (loss) per share - weighted average shares 9,456 9,140

Net earnings (loss) per share:

Denominator for diluted earnings per share - weighted average shares 10,410 9,456

Net earnings per share:

Basic $ 2.16 $ 2.17

Diluted $ 2.12 $ 2.14

(a) As discussed in Note 9 , the Company distributed subscription rights to holders of common stock, which were priced at a discount to the market value, to acquire additional common shares.

The Rights Offering, because of the discount, contains a bonus element that is similar to a stock dividend.

As such, the basic and diluted EPS has been retroactively adjusted for the bonus element for all prior periods presented.

The diluted earnings 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 and 0.2 million shares of common stock that were anti-dilutive in 2021 and 2020, respectivel y.

The Company had an insignificant number of shares of common stock that were anti-dilutive in 2022.

The Company had 0.1 million shares of common stock that were anti-dilutive in 2021 .

Industry Segments

The Company's business is divided into two operating segments:

Metals and Specialty Chemicals.

The Company identifies such segments based on products and services, long-term financial performance and end markets targeted.

The Metals Segment operates as three reporting units including Welded Pipe & Tube, Palmer and Specialty.

The Specialty Chemicals Segment operates as one reporting unit which includes MC, CRI and DanChem.

The chief operating decision maker evaluates performance and determines resource allocations based on a number of factors, the primary measure being operating income (loss).

The accounting policies of the segments are the same as those described in the summary of significant accounting policies.

Segment operating income (loss) is the segment's total revenue less operating expenses.

Identifiable assets, all of which are located in the U.S., are those assets used in operations by each segment.

Centralized data processing and accounting expenses are allocated to the two segments based upon estimates of their percentage of usage.

Corporate assets consist principally of cash, certain investments and equipment.

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 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 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 Consolidated Financial Statements

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

(in thousands) 2022 2021

Metals Segment $ 267,238 $ 204,459

Specialty Chemicals Segment 67,477 51,541

Tubular Products $ 306,605 $ 267,238

Specialty Chemicals 107,542 67,477

$ 414,147 $ 334,715

Operating income (loss)

Metals Segment $ 33,561 $ ( 24,599 )

Specialty Chemicals Segment 3,656 4,033

Operating income

Tubular Products $ 27,607 $ 33,561

Specialty Chemicals 6,971 3,656

34,578 37,217

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Earn-out adjustments 7 ( 1,872 )

Gain on lease modification — ( 171 )

Operating income (loss) 27,348 ( 31,067 )

Total Corporate ( 14,190 ) ( 9,869 )

Operating income 20,388 27,348

Interest expense 2,742 1,486

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Other income, net ( 209 ) 143

Income (loss) before income taxes $ 25,498 $ ( 31,973 )

Income before income taxes $ 17,855 $ 25,498

Identifiable assets

Metals Segment $ 160,625 $ 141,799

Specialty Chemicals Segment 72,908 25,039

Tubular Products $ 158,664 $ 160,625

Specialty Chemicals 72,990 72,908

Corporate 37,389 32,469

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Depreciation and amortization

Metals Segment $ 8,206 $ 8,883

Specialty Chemicals Segment 2,005 1,552

Tubular Products $ 7,906 $ 8,206

Specialty Chemicals 4,749 2,005

Corporate 62 130

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Capital expenditures

Metals Segment $ 1,011 $ 1,761

Specialty Chemicals Segment 486 866

Tubular Products $ 3,756 $ 1,011

Specialty Chemicals 1,140 486

Corporate 178 —

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$ 414,147 $ 334,715

Ascent Industries Co.

Notes to Consolidated Financial Statements

Benefit Plans and Collective Bargaining Agreements

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The matching contribution is applied to the employee accounts after each payroll.

Matching contributions of approximately $ 0.7 million and $ 0.4 million were made for 2021 and 2020, respectively.

Matching contributions of approximately $ 0.7 million were made for both 2022 and 2021.

The Company may also make a discretionary contribution, which if made, would be distributed to all eligible participants regardless of whether they contribute to the 401(k)/ESOP Plan.

No discretionary contributions were made to the 401(k)/ESOP Plan in 2022 or 2021.

The Company has a 401(k) and Profit Sharing Plan (the "Bristol Plan") covering all employees as part of the United Steel Workers of America, Local Union 4586 Collective Bargaining Agreement (the "Bristol CBA").

Employees could contribute to the Bristol Plan up to 60 % of pretax annual compensation, as defined in the Bristol Plan, with a maximum of $ 20,500 for 2022.

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During 2021, the Company contributed 3 % of a participant's eligible compensation from January to July and increased the amount to 4 % for the remainder of the plan year.

The Company's contributions were $ 0.3 million and $ 0.2 million for 2021 and 2020, respectively.

The Company's contributions were $ 0.3 million for both 2022 and 2021.

Additional profit sharing amounts may also be contributed at the option of the Company's Board of Directors, which if made, would be allocated to participants based on the ratio of the participant's compensation to the total compensation of all participants eligible to participate in the Bristol Plan.

No discretionary contributions were made to the Bristol Plan in 2022 or 2021.

The Company also has a 401(k) Plan (the "DanChem Plan") covering substantially all employees at the DanChem facility.

Employees could contribute to the DanChem Plan up to a maximum of $ 19,500 for 2021.

The Company also has a 401(k) Plan (the "Virginia Plan") covering substantially all employees at the Virginia facility.

Employees could contribute to the Virginia Plan up to a maximum of $ 20,500 for 2022.

Under the Economic Growth and Tax Relief Reconciliation Act, employees who are age 50 or older could contribute an additional $ 6,500 per year for a maximum of $ 27,000 for 2022.

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For 2022 and 2021 the maximum was 100 % of employee contributions up to the first 3 % of their eligible compensation and 50 % for employee contributions from 3 % to 6 %.

The Company also maintains a Collective Bargaining Agreement (the "Danville CBA") with the United Food and Commercial Workers, Local Union 400 (the "Danville Union"), which represents employees at the Danville facility and is required to make additional quarterly contributions for hourly employees who had a hire date prior to June 1, 2013.

Matching contributions of approximately $ 0.4 million were made for 2021.

The Company also maintains a Collective Bargaining Agreement (the "Virginia CBA") with the United Food and Commercial Workers, Local Union 400 (the "Virginia Union"), which represents employees at the Virginia facility and is required to make additional quarterly contributions for hourly employees who had a hire date prior to June 1, 2013.

Matching contributions of approximately $ 0.4 million were made for 2022 and 2021 .

The Company maintains a Collective Bargaining Agreement (the "Munhall CBA") with the United Steel Workers of America, Local Union 5852-22 (the "Munhall Union"), which represents the employees at the Munhall facility.

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Per the most recent available annual funding notice, the plan was at least 90 % funded for the plan year ended December 31, 2021.

Per the terms of the Munhall CBA the Company contributes 4.25 % of each participant's eligible compensation for the 2020 plan year.

Per the terms of the Munhall CBA the Company contributed 4.50 % of each participant's eligible compensation for the 2022 plan year.

Munhall Union employees make no contributions to the Munhall Plan.

The Company's contributions to the Munhall Plan totaled $ 0.2 million for the year ended December 31, 2021 and 2020, respectively.

The Company's contributions to the Munhall Plan totaled $ 0.3 million and $ 0.2 million for the year ended December 31, 2022 and 2021, respectively.

Additionally, as part of the Munhall CBA, members of the union are eligible to make deferral contributions to the Company's 401(k)/ESOP Plan per the plan guidelines;

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Contributions relating to these plans were $ 40,835 and $ 37,208 for 2022 and 2021, respectively.

Ascent Industries Co.

Notes to Consolidated Financial Statements

Commitments and Contingencies

Management is not currently aware of any asserted or unasserted matters which could have a material effect on the financial condition or results of operations of the Company.

Proxy Contest Costs and Recoveries

During the six months ended June 30, 2020, the Company engaged in a proxy contest with Privet Fund Management, LLC ("Privet") and UPG Enterprises, LLC ("UPG"), which parties acted as a group during the proxy contest.

During the year ended December 31, 2020, total costs incurred by the Company relating to the proxy contest were $ 3.1 million.

During the year ended December 31, 2021, the Company incurred proxy contest costs of $ 0.6 million related to the reimbursement of documented out-of-pocket fees and expenses to Privet and UPG.

See Note 17 for further information on this related party transaction.

During the year ended December 31, 2021, the Company received insurance recoveries of $ 0.5 million related to a claim for a portion of the costs associated with the proxy contest.

The Company received no insurance recoveries for the year ended December 31, 2020.

The Company continues to seek coverage under its policies for reimbursement of costs associated with the proxy contest;

however, any future reimbursement under the policies are neither probable nor estimable at this time.

Related Party Transactions

The Company from time-to-time engages in transactions with related parties.

The Company's Board of Directors reviews any related party relationships and approves any significant modifications to any existing related party transactions, as well as any new significant related party transactions.

Expense Reimbursement

During the six months ended June 30, 2020, Privet and UPG, with an ownership interest of approximately 25 % of the Company's outstanding common shares, filed a proxy statement with the Securities and Exchange Commission seeking an election of five of its nominees to the Synalloy Board of Directors at the Company's 2020 Annual Meeting of Shareholders.

At the Annual Meeting held on June 30, 2020, Synalloy shareholders voted to elect three of the five nominees designated by Privet and UPG to serve on Synalloy's Board of Directors.

In May 2021, the Company agreed to reimburse Privet and UPG for up to 90 % of its documented out-of-pocket fees and expenses (including legal expenses) incurred related to the proxy contest through the date of the 2020 Annual Meeting.

During the third quarter of 2021, the Company paid $ 0.6 million related to the reimbursement to Privet and UPG.

As of December 31, 2021, there are no charges outstanding related to this matter.

During the year ended December 31, 2021, the Company paid reimbursable travel expenses of $ 3,140 to an entity affiliated with the Company's Interim President and Chief Executive Officer.

The Company had no such transactions for the year ended December 31, 2020.

Sales to Related Parties

The Company's Interim President and Chief Executive Officer has ownership interests in other entities with which the Company may, from time-to-time, conduct business.

During the year ended December 31, 2021, the Company recorded revenue of $ 31,073 from the sale of product to certain of these entities.

During the year ended December 31, 2021, the Company received $ 40,000 in cash and recognized a loss on disposal of property, plant and equipment of $ 13,000 from the sale of property, plant and equipment to certain of these entities.

The Company had no such transactions for the year ended December 31, 2020.

Lease Agreement

During the year ended December 31, 2021, the Company recognized $ 0.2 million of right-of-use assets in exchange for new operating lease liabilities and incurred $ 23,220 in rent expense associated with this lease agreement.

See Note 7 for additional information on the Company's leases.

Shared Services Agreement

In September 2021, the Company entered into a shared services agreement (the "Shared Services Agreement") with UPG, an entity that has an ownership interest of approximately 8 % of the Company's outstanding common shares and an entity in which the Company's Interim Chief Executive Officer has an ownership interest.

Pursuant to the agreement, UPG provides the Company with certain corporate functions, including human resources and information technology services.

The Shared Services Agreement has an indefinite term, with either party having the right to terminate any or all services with 30 days' prior written notice.

Charges allocated to the Company are based on the Company's actual use of specific services detailed in the Shared Services Agreement at a rate of $ 145 per hour.

The Company will also pay or reimburse UPG for all out-of-pocket fees and expenses incurred by UPG in connection with the rendering of services under the Shared Services Agreement including, (i) reasonable fees and disbursements of any independent professionals and organizations, including independent accountants, outside legal counsel or consultants and (ii) travel expenses or similar expenses not associated with UPG's ordinary operations.

During the year ended December 31, 2021, the Company incurred $ 2,320 of expense related to the Shared Service Agreement.

Subsequent Events

On March 18, 2022, the Compensation Committee approved an equity grant to Christopher Hutter of (i) 50,000 restricted stock units (“RSUs”) and (ii) 150,000 performance stock units (“PSUs”) with a market price of $ 18.89 per share.

The RSUs will vest over two years , with half of such RSUs vesting on March 18, 2023, and the other half vesting on March 18, 2024, subject to continued employment unless provided otherwise under the terms of the Executive Employment Agreement dated October 26, 2020, between the Company and Mr.

Hutter (the “Hutter Employment Agreement”) and/or the Company’s Amended and Restated 2015 Stock Awards Plan (the “2015 Awards Plan”).

The PSUs will vest based on the 30-day volume weighted average price (“VWAP”) of the Company’s common stock, with 33.3 %, 26.7 %, 20 %, and 20 % of such PSUs vesting if the 30-day VWAP equals or exceeds $ 25.00 , $ 27.50 , $ 30.00 , and $ 35.00 , respectively, subject to continued employment unless provided otherwise under the terms of the Hutter Employment Agreement and/or the 2015 Awards Plan.

The PSU award will have a term of three years .

The grant of RSUs and PSUs was made in connection with the decision of the Board to remove the “interim” designation from the title of Mr.

Hutter and approve his position as Chief Executive Officer of the Company.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data