What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-04 compared with 2024-04-01 · 93 added, 138 removed, 218 unchanged (51% of the section changed)

11 unchanged sentences

Executive Overview

There have been a number of strategic changes that have occurred throughout 2023, including the permanent cessation of operations and closure of the Munhall facility and the sale of substantially all of assets of Specialty Pipe & Tube, Inc.

("SPT"), which are discussed below.

These strategic changes have been implemented to allow the Company to focus on core competencies that drive growth and long-term value creation for our shareholders.

As a result of these decisions, Munhall and SPT results have been reclassified from the Tubular Products segment and are reflected as discontinued operations in all periods presented.

The discussion and analysis of our results of operations refers to continuing operations only unless noted.

Consolidated net sales decreased 26.3%, or $68.8 million, compared to 2022 driven by decreases in average selling price and pounds shipped.

Consolidated net loss increased to $34.2 million in 2023, compared to net income of $17.6 million in 2022.

Diluted loss per share increased to $3.37 for the full-year 2023 compared to diluted earnings per share of $1.69 for the full-year 2022.

For 2023, cash flows from operating activities were $6.6 million, with $2.9 million used for capital expenditures.

During the year, we also repurchased 143,108 shares for $1.3 million through our share repurchase program as part of our continued efforts to create sustainable value for our shareholders.

Ascent Industries Co.

is a diverse industrials company focused on the production of specialty chemicals and stainless steel pipe and tube.

Ascent Industries Co.

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

The Specialty Chemicals segment produces critical ingredients and process aids for the oil & gas, household, industrial and institutional ("HII"), personal care, coatings, adhesives, sealants and elastomers (CASE), pulp and paper, textile, automotive, agricultural, water treatment, construction and other industries.

The Tubular Products segment serves markets through pipe and tube production 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.

Fiscal 2024 was a year of stabilization, recapitalization of talent and aggressive self-help to establish a foundation for organic and inorganic growth.

The team rallied to overcome soft market conditions across both segments, delivering positive bottom line improvements while establishing a more predictable, reliable and profitable operating model.

We ended the year with no outstanding debt, $16.1 million of cash and cash equivalents as well as $47.4 million of remaining available capacity on our revolving line of credit, allowing flexibility to continue to execute our strategy and future growth opportunities.

Munhall Closure

1 unchanged sentence

This strategic decision is part of the Company’s ongoing efforts to consolidate manufacturing to drive an increased focus on its core operations and to improve profitability while driving operational efficiencies.

As a result of this decision, the Company incurred asset impairment charges of $8.8 million related to the write down of inventory to net realizable value and the impairment of long-lived assets as well as $2.8 million in increased reserves on accounts receivable and other current assets at the facility during the year ended December 31, 2023.

Munhall results are included within discontinued operations in all periods presented.

Divestiture of Specialty Pipe & Tube, Inc.

3 unchanged sentences

The transaction closed on December 22, 2023.

The sale of SPT is a tremendous value-creating outcome for Ascent shareholders while greatly reducing the complexity associated with our tubular operations and allowing our tubular leadership and operational teams to focus on core competencies that best position the Company for long-term growth.

The transaction also provided the Company the ability to significantly reduce its debt, while providing additional available capital to pursue growth opportunities within our focused businesses.

The Company recognized a pre-tax gain on the sale of the SPT assets of $26.3 million.

Goodwill Impairment Review

During the third quarter of 2023, as described in Note 1 - Summary of Significant Accounting Policies , we tested our goodwill for impairment.

The Company determined potential indicators of impairment existed within the Specialty Chemicals reporting unit.

Macroeconomic conditions and pressures, increased risks within the broader specialty chemicals business, reporting unit operating losses and a decline in the reporting unit's net sales compared to forecast, collectively, indicated that the reporting unit had experienced a triggering event and the need to perform a quantitative evaluation of goodwill.

The Company performed a discounted cash flow analysis and a market multiple analysis for the Specialty Chemicals reporting unit to determine the reporting unit's fair value.

The discounted cash flow analysis included management assumptions for expected sales growth, capital expenditures and overall operational forecasts while the market multiple analysis included historical and projected performance, market capitalization, volatility and multiples for industry peers.

Determining the fair value of the reporting unit and allocation of that fair value to individual assets and liabilities within the reporting unit to determine the implied fair value of the goodwill is judgmental in nature and requires the use of significant management estimates and assumptions.

Any changes in the judgments, estimates, or assumptions could produce significantly different results.

As a result of the goodwill impairment evaluation, it was concluded that the estimated fair value of the Specialty Chemicals reporting unit was below its carrying value by 27.6% resulting in a goodwill impairment charge of $11.4 million for the year ended December 31, 2023.

Macroeconomic Events

We experienced challenges in 2023 related to ongoing economic factors driving volatility in global markets.

Inflationary pressures have negatively impacted our revenue, operating margins and net income in 2023, including increased costs of labor, raw materials and freight.

During the year, we also experienced reduced demand from inventory management measures being pursued by our customers driving reductions in volume.

The ongoing factors driving volatility in global markets that could impact our business' earnings and cash flows include, but are not limited to, the misalignment of supply and demand for labor, energy, raw materials and other inputs, the inflation of (or unavailability of) raw material inputs and transportation and logistics services, currency fluctuations, rising interest rates and extreme weather, the purchasing of commodities and relative commodity prices.

The Company continues efforts to offset these inflationary pressures and continues to take action to improve working capital and evaluate other opportunities to maintain and improve financial performance in the short and long term, however, if these inflationary and demand pressures continue, our revenue, gross and operating margins and net income will be impacted in 2024.

In February 2022, the United States announced targeted economic sanctions on Russia in response to the military conflict in Ukraine.

This conflict and the associated sanctions have disrupted the global economy, causing heightened cybersecurity risks, supply chain challenges, higher energy costs, and an exacerbation of existing inflationary pressures.

As our operations are located in North America, we have no direct exposure to Russia and Ukraine, however, we are actively monitoring the broader economic impact of the crisis, especially the potential impact on commodity and fuel prices, and the potential decreased demand for our products.

As result of the sale, SPT results of operations are classified under discontinued operations for all periods presented.

Prior to the divestiture, SPT was reported under the Company's Tubular Products segment.

The discussion and analysis of our results of operations refers to continuing operations unless noted.

Results of Operations

Comparison of 2023 to 2022 – Consolidated

Consolidated net sales for the full-year 2023 decreased $68.8 million, or 26.3%, over the full-year 2022 to $193.2 million.

The decrease in net sales was primarily driven by a 8.5% decrease in average price coupled with a 18.7% decrease in pounds shipped.

Full-year 2023 consolidated gross profit decreased 96.5% to $1.5 million, or 0.8% of sales, compared to $43.3 million, or 16.5% of sales, in the full-year 2022.

The decrease in dollars and percentage of sales for the full-year 2023 were attributable to the decrease in pounds shipped and average selling price.

Consolidated selling, general and administrative expense (SG&A) for the full-year 2023 decreased $0.9 million to $26.7 million compared to $27.6 million for the full-year 2022.

Comparison of 2024 to 2023 – Continuing Operations

Net sales from continuing operations for the full-year 2024 decreased $15.3 million, or 7.9%, over the full-year 2023 to $177.9 million.

The decrease in net sales was primarily driven by an 8.8% decrease in average selling prices coupled with a 0.9% decrease in pounds shipped.

Full-year 2024 gross profit from continuing operations increased 1349.1% to $22.1 million, or 12.4% of sales, compared to $1.5 million, or 0.8% of sales, in the full-year 2023.

The increase in dollars and percentage of sales for the full-year 2024 were primarily driven by improved strategic sourcing initiatives and product line management resulting in lower raw material costs.

Selling, general and administrative expense (SG&A) from continuing operations for the full-year 2024 decreased $0.1 million to $26.6 million compared to $26.7 million for the full-year 2023.

SG&A as a percentage of sales was 14.9% of sales for 2024 and 13.8% of sales for 2023.

The changes in SG&A expense were primarily driven by:

• decrease in incentive bonus driven by lower attainment of performance goals in the current year over the prior year;

• decrease in repair and maintenance expenses;

• decreases in other expenses primarily driven by decreases in salaries, wages and benefits, share-based compensation, amortization expense, bad debt expense and utilities

• decreases in salaries, wages and benefits driven by lower headcount in the current year;

• decreases in taxes and licenses;

• decreases in other expenses primarily driven by decreases in share-based compensation expense

The full-year decreases were partially offset by:

• Increases in professional fees;

• Increases and taxes and licenses.

Consolidated operating loss for the full-year 2023 totaled $37.4 million compared to operating income of $14.5 million for the full-year 2022.

The operating loss increase for the full-year 2023 was primarily driven by aforementioned decrease in pounds shipped and average selling price.

Comparison of 2023 to 2022 - Tubular Products

Net sales for the Tubular Products segment totaled $109.5 million for the full year of 2023, a decrease of 28.9% compared to the full-year 2022.

The decrease in net sales was primarily driven by a 21.4% decrease in pounds shipped and a 9.2% decrease in average selling price.

SG&A expense decreased $0.6 million, or 7.3%, for the full-year 2023 when compared to 2022.

SG&A as a percentage of sales was 6.9% of sales for 2023 and 5.3% of sales for 2022.

The changes in SG&A expense were primarily driven by decreases in salaries, wages and benefits and lower travel expense partially offset by increases in taxes and licenses expense.

Operating loss for the full-year 2023 totaled $11.2 million compared to operating income of $22.2 million for the full-year 2022.

The operating loss increase for the full-year 2023 was primarily driven by aforementioned decreases in pounds shipped and lower selling price as well as higher material costs.

The following table summarizes operating results for the two years indicated.

Reference should be made to Note 13 to the consolidated financial statements included in Item 8 of this Form 10-K.

(in thousands) Amount % Amount %

Net sales $ 109,513 100.0 % $ 154,040 100.0 %

Cost of goods sold 113,187 103.4 % 123,726 80.3 %

Gross profit (3,674) (3.4) % 30,314 19.7 %

Selling, general and administrative expense

7,536 6.9 % 8,132 5.3 %

Operating (loss) income $ (11,210) (10.2) % $ 22,182 14.4 %

• increases in incentive bonus driven by higher attainment of performance goals in the current year over the prior year;

• increases in professional fees driven by increased IT and legal expenses in the current year

Operating loss from continuing operations for the full-year 2024 improved to $5.1 million compared to an operating loss of $37.4 million for the full-year 2023.

The operating loss decrease for the full-year 2024 was primarily driven by aforementioned increase in gross profit as well as the prior year goodwill impairment not present in the current year.

Comparison of 2024 to 2023 – Specialty Chemicals

3 unchanged sentences

SG&A as a percentage of sales increased to 11.8% in 2024 from 8.3% in 2023.

The changes in SG&A expense were primarily driven by increases in salaries, wages and benefits and professional fees partially offset by lower incentive bonus and amortization expense.

Operating loss for the full-year 2023 totaled $12.6 million compared to operating income of $7.0 million for the full-year 2022.

The increase in operating loss was primarily driven by aforementioned decreases in pounds shipped and lower selling price

The changes in SG&A expense were primarily driven by increases in corporate allocation, incentive bonus expense and professional fees, partially offset by decreases in salaries, wages and benefits and taxes and license fees.

Operating income for the full-year 2024 totaled $1.2 million compared to an operating loss of $12.6 million for the full-year 2023.

The increase in operating income was primarily driven by improved strategic sourcing initiatives and product line management resulting in lower raw material costs.

The following tables summarize operating results for the two years indicated.

8 unchanged sentences

Goodwill impairment — — % 11,389 13.6 %

Operating (loss) income $ (12,558) (15.0) % $ 6,971 6.5 %

Operating income (loss) $ 1,167 1.4 % $ (12,558) (15.0) %

Comparison of 2024 to 2023 - Tubular Products

Net sales for the Tubular Products segment totaled $97.1 million for the full year of 2024, a decrease of 11.3% compared to the full-year 2023.

The decrease in net sales was primarily driven by a 16.8% decrease in average selling prices offset by a 5.5% increase in pounds shipped.

SG&A expense increased $1.2 million, or 16.0%, for the full-year 2024 when compared to 2023.

SG&A as a percentage of sales was 9.0% of sales for 2024 and 6.9% of sales for 2023.

The changes in SG&A expense were primarily driven by increases in corporate allocation partially offset by decreases in salaries, wages and benefits, taxes and license fees and professional fees.

Operating income for the full-year 2024 totaled $2.6 million compared to an operating loss of $11.2 million for the full-year 2023.

The operating income increase for the full-year 2024 was primarily driven by increases in gross profit partially offset by the aforementioned increases in SG&A expenses.

The following table summarizes operating results for the two years indicated.

Reference should be made to Note 13 to the consolidated financial statements included in Item 8 of this Form 10-K.

(in thousands) Amount % Amount %

Net sales $ 97,108 100.0 % $ 109,513 100.0 %

Cost of goods sold 85,686 88.2 % 113,187 103.4 %

Gross profit 11,422 11.8 % (3,674) (3.4) %

Selling, general and administrative expense

8,743 9.0 % 7,536 6.9 %

Acquisition costs and other 30 0.1 % — — %

Operating income (loss) from continuing operations $ 2,649 2.7 % $ (11,210) (10.2) %

Comparison of 2024 to 2023 - Corporate

Corporate expenses decreased $4.1 million to $8.8 million in 2024 down from $12.9 million in 2023.

The full-year decrease resulted primarily from decreases in salaries, wages and benefit, stock-based compensation, incentive bonuses due to lower attainment of performance goals, as well as decreases in other corporate overhead.

The decreases were partially offset by increases in professional fees related to accounting, tax and other advisory related costs, taxes and licenses and insurance expenses.

The full-year decrease resulted primarily from allocating corporate expense to locations and decreases in stock compensation expense partially offset by increases in incentive bonus, professional fees, taxes and license expense and insurance expense.

Interest expense was $0.3 million and $4.2 million for the full-years of 2024 and 2023, respectively.

The increase was primarily driven by higher interest rates in 2023 compared to 2022.

As discussed in Note 6 , the Company used the proceeds from the SPT divestiture to prepay in full the term loan in the original principal amount of $5 million under the Company's credit facility and used the remaining proceeds to prepay in part the revolving loans under the credit facility.

The Company has no debt outstanding as of December 31, 2023.

The decrease was driven by lower debt outstanding in the current year compared to the prior year.

The Company had no debt outstanding as of December 31, 2024.

The Company's effective tax rate for 2024 was less than the U.S.

statutory rate of 21% primarily driven by tax benefits associated with non-deductible goodwill impairment.

statutory rate of 21% primarily due to discrete tax charges associated with recording a valuation allowance on cumulative US Federal and state deferred tax assets.

The Company's effective tax rate for 2023 was less than the U.S.

statutory rate of 21% primarily driven by tax benefits associated with the closure of Palmer and the release of valuation allowances on certain deferred tax assets, partially offset by state taxes.

statutory rate of 21% primarily driven by tax benefits associated with non-deductible goodwill impairment.

Non-GAAP Financial Measures

8 unchanged sentences

These items include:

goodwill impairment, asset impairment, gain on lease modification, stock-based compensation, non-cash lease cost, acquisition costs and other fees, shelf registration costs, loss on extinguishment of debt, earn-out adjustments, retention costs and restructuring and severance costs from net (loss) income.

goodwill impairment, asset impairment, gain on lease modification, stock-based compensation, non-cash lease cost, acquisition costs and other fees, shelf registration costs, loss on extinguishment of debt, retention costs and restructuring and severance costs from net (loss) income.

We caution investors that amounts presented in accordance with our definitions of EBITDA and Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies calculate EBITDA and Adjusted EBITDA in the same manner.

3 unchanged sentences

($ in thousands) 2024 2023

Net (loss) income from continuing operations $ (34,151) $ 17,578

Net loss from continuing operations $ (11,225) $ (34,151)

Interest expense 418 4,238

4 unchanged sentences

Acquisition costs and other 692 856

Shelf registration costs — 12

Goodwill impairment — 11,389

6 unchanged sentences

% sales 2.3 % (8.2) %

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

Specialty Chemicals EBITDA and Adjusted EBITDA are as follows:

Year Ended December 31,

($ in thousands) 2024 2023

Tubular Products

Net (loss) income from continuing operations $ (11,210) $ 22,182

Specialty Chemicals

Net income (loss) $ 1,093 $ (12,619)

Interest expense 75 74

Depreciation 3,809 3,798

1 unchanged sentence

EBITDA 5,672 (8,113)

Acquisition costs and other 477 12

Goodwill impairment — 11,389

Stock-based compensation 7 8

Non-cash lease expense 66 88

Retention expense 8 —

Restructuring and severance costs 110 40

Tubular Products Adjusted EBITDA $ (7,797) $ 25,699

Specialty Chemicals Adjusted EBITDA $ 6,332 $ 3,424

% of segment sales 7.8 % 4.1 %

Specialty Chemicals EBITDA and Adjusted EBITDA are as follows:

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

Year Ended December 31,

($ in thousands) 2024 2023

Specialty Chemicals

Net (loss) income $ (12,619) $ 6,935

Tubular Products

Net income (loss) from continuing operations $ 2,649 $ (11,210)

Interest expense 1 —

3 unchanged sentences

Acquisition costs and other 30 —

Goodwill impairment 11,389 —

Stock-based compensation 10 58

Non-cash lease expense 88 118

Retention expense — 8

Restructuring and severance costs 30 84

Specialty Chemicals Adjusted EBITDA $ 3,424 $ 11,771

Tubular Products Adjusted EBITDA $ 5,652 $ (7,797)

% of segment sales 5.8 % (7.1) %

16 unchanged sentences

Financing activities (1,329) (73,169)

Net decrease in cash and cash equivalents $ (69,410) $ (8,931)

Net increase (decrease) in cash and cash equivalents $ 13,786 $ (69,410)

Operating Activities

1 unchanged sentence

Changes in working capital can vary significantly depending on factors such as the timing of inventory production and purchases, customer payments of accounts receivable and payments to vendors in the regular course of business.

Inventory increased operating cash flows for the year ended December 31, 2023 by approximately $12.2 million compared to a decrease of approximately $13.7 million for 2022, while accounts payable increased operating cash flows by approximately $1.6 million for the year ended December 31, 2023 compared to an decrease of approximately $6.3 million for the year ended December 31, 2022.

The increase in operating cash flows from inventory is primarily due to lower inventory turns year over year while the increase in accounts payable is primarily driven by a slight increase in days payables outstanding.

Accounts receivable increased operating cash flow by approximately $6.8 million compared to a decrease of $0.3 million driven by lower sales in the current year partially offset by slightly higher days sales outstanding.

In addition to the working capital changes, changes in income taxes increased cash flows by approximately $3.1 million compared to cash used in operations of approximately $7.9 million in 2022.

This was driven by the receipt of a cash refund from the Company's 2022 tax return.

Inventory increased operating cash flows for the year ended December 31, 2024 by approximately $11.6 million compared to a decrease of approximately $12.2 million for 2023, while accounts payable decreased operating cash flows by approximately $3.6 million for the year ended December 31, 2024 compared to an increase of approximately $1.6 million for the year ended December 31, 2023.

The increase in operating cash flows from inventory is primarily due to lower average inventory and higher inventory turns year over year while the decrease in accounts payable is primarily driven by a decreases in days payables outstanding within our Specialty Chemicals segment.

Accounts receivable increased operating cash flow by approximately $2.8 million compared to an increase of $6.8 million driven by lower sales in the current year partially offset by lower days sales outstanding.

In addition to the working capital changes, changes in deferred income taxes increased cash flows by approximately $6.2 million compared to cash used in operations of approximately $6.9 million in 2023.

This was primarily due to discrete tax charges associated with the recording of a valuation allowance on cumulative U.S.

federal and state tax assets in the third quarter of 2024.

Investing Activities

3 unchanged sentences

Net cash used in financing activities primarily consist of transactions related to our long-term debt.

The increase in net cash used in financing activities for the full-year 2023 compared to the full-year 2022 was primarily due to the repayment of the Company's asset backed line of credit and delayed draw term loan in the fourth quarter of 2023 driven by the sale of substantially all of the assets of SPT.

The decrease in net cash used in financing activities for the full-year 2024 compared to the full-year 2023 was primarily due to the repayment of the

Company's asset backed line of credit and delayed draw term loan in the fourth quarter of 2023 driven by the sale of substantially all of the assets of SPT.

Short-term Debt

2 unchanged sentences

Long-term Debt

During the fourth quarter of 2023, the Company entered into a Limited Consent, Second Amendment to Credit Agreement and Omnibus Amendment to Loan Documents with BMO Bank N.A.

and the other lenders under the Company’s credit facility (the “Credit Facility Amendment”).

The Credit Facility Amendment contained a consent for the SPT divestiture, released the lien on the assets of SPT and removed SPT as a loan party.

The Credit Facility Amendment also reduced the maximum revolving loan commitment under the credit facility from $105 million to $80 million, and increased the interest rate for the credit facility from SOFR plus an interest rate margin of between 1.60% and 1.70% to SOFR plus an interest rate margin of between 1.85% and 2.10%, depending on average availability under the credit facility and the Company’s consolidated fixed charge coverage ratio.

As required by the Credit Facility Amendment, the Company used the proceeds from the SPT divestiture to prepay in full the term loan in the original principal amount of $5 million under the credit facility and used the remaining proceeds to prepay in part the revolving loans under the credit facility.

As of December 31, 2023, the Company had no borrowings outstanding with its lender due to the repayment of the Company's asset backed line of credit and delayed draw term loan in the fourth quarter of 2023 driven by the sale of substantially all of the assets of SPT.

As of December 31, 2023, the Company had $61.8 million of remaining availability under its credit facility.

On November 6, 2024, Ascent entered into a Limited Consent, Third Amendment to Credit Agreement to Loan Documents with BMO Bank N.A.

under Ascent’s credit facility (the “Credit Facility Amendment”).

The Credit Facility Amendment reduced the maximum revolving loan commitment under the credit facility from $80 million to $60 million and extended the term of the credit facility through December 31, 2027.

The Credit Facility Amendment also increased the interest rate for the credit facility from SOFR plus an interest rate margin of between 1.85% and 2.10% to SOFR plus an interest rate margin of between 1.85% and 2.35%, depending on average availability under the credit facility and Ascent’s consolidated fixed charge coverage ratio.

The Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $6.0 million and (ii) 15% of the revolving credit facility (currently $9.0 million).

As of December 31, 2024, the Company was in compliance with all financial debt covenants.

As of December 31, 2024, the Company had no principal payments outstanding on long-term debt.

As of December 31, 2024, the Company had $47.4 million of remaining availability under its credit facility.

See Note 6 in the notes to the consolidated financial statements for additional information on the Company's line of credit.

3 unchanged sentences

Our capital allocation strategy is to first fund operations and investments in growth and then return excess cash over time to shareholders through share repurchases and dividends.

The share repurchase program allows for repurchase of up to 790,383 shares of the Company's outstanding common stock and expires on February 17, 2025.

The Company's previous share repurchase program allowed for repurchase of up to 790,383 shares of the Company's outstanding common stock and expired on February 17, 2025.

On February 17, 2025, the Board of Directors authorized a new share repurchase program allowing for repurchase of up to 1.0 million shares of the Company's outstanding common stock over 24 months.

The shares will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions.

1 unchanged sentence

There is no guarantee as to the exact number of shares that will be repurchased by the Company, and the Company may discontinue purchases at any time that management determines additional purchases are not warranted.

As of December 31, 2023, the Company has 536,871 shares of its share repurchase authorization remaining.

As of December 31, 2024, the Company had 435,608 shares of its previous share repurchase authorization remaining.

Shares repurchased for the year ended December 31, 2024 and 2023 were as follows:

11 unchanged sentences

The current ratio will be determined by the Company using generally accepted accounting principles, consistently applied.

Leverage Measure:

• Debt to capital = Total debt divided by total capital.

The debt to capital ratio will be determined by the Company using generally accepted accounting principles, consistently applied.

Profitability Ratio:

4 unchanged sentences

Current ratio 3.8 3.7

Debt to capital —% 49%

Return on average equity (11.3)% (38.6)%

19 unchanged sentences

There are also different valuation models and inputs for each component, the selection of which requires considerable judgment.

Our estimates and assumptions may be based, in part, on the availability of listed market prices or other transparent market data.

Our estimates and assumptions may be based, in part, on the availability of listed

market prices or other transparent market data.

These determinations will affect the amount of amortization expense recognized in future periods as well the allocation of goodwill, if any, attributable to the transaction.

3 unchanged sentences

Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

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.

The Company reviews goodwill for impairment at the reporting unit level, which is the operating segment level or one level below the operating segment level.

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.

Goodwill is not amortized but is evaluated for impairment at least annually on October 1 or whenever events or changes in circumstances indicate that it is more likely than not that the carrying amount may not be recoverable.

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 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.

Judgments and uncertainties involved in the estimate

We make various estimates and assumptions about our goodwill, including whether any potential impairment events have occurred.

Examples of such events or changes in circumstances, many of which are subjective in nature, include the following:

• Significant negative industry or economic trends;

• A significant change in the use of the acquired assets or our strategy;

• A significant divestiture or other disposition activity;

• A significant decrease in the market value of the asset;

• A significant change in legal factors or the business climate that could affect the value of the asset;

• A change in segment by one or more reporting unit

Additionally, we make estimates and assumptions regarding the inputs used to perform a quantitative assessment of our goodwill, if necessary, and the Company will perform a discounted cash flow analysis and a market multiple analysis.

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

The market multiple analysis includes historical and projected performance, market capitalization, volatility and multiples for industry peers.

Effect if actual results differ from assumptions

We have not made any material changes in our methodology used to determine whether potential impairment events have occurred or any material changes in the estimates and assumptions used in our quantitative goodwill impairment testing.

In the third quarter of 2023, the Company determined potential indicators of impairment within the Specialty Chemicals segment and performed a quantitative evaluation of goodwill.

As a result, it was concluded that the estimated fair value of the Specialty Chemicals reporting unit was below its carrying value by 27.6% resulting in a goodwill impairment charge of $11.4 million.

As of December 31, 2023, the Company's goodwill balance is $0.

See Note 1 for further discussion on the Company's goodwill.

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

3 unchanged sentences

We record an obsolete inventory reserve for identified aged inventory items with slow or no sales activity for finished goods or slow or no usage for raw materials for a certain period of time.

For those inventory items, a reserve is established for a percentage of the inventory cost less any estimated scrap proceed and is based on our current knowledge with respect to inventory levels, sales trends and historical experience.

During 2023, our reserve increased approximately $2.8 million to $5.6 million as of December 31, 2023.

For those inventory items, a reserve is established for a percentage of the inventory cost less any estimated scrap proceeds and is based on our current knowledge with respect to inventory levels, sales trends and historical experience.

During 2024, our reserve decreased approximately $0.1 million to $5.5 million as of December 31, 2024.

We also record an inventory reserve for the estimated shrinkage (quantity losses) between physical inventories.

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

During 2023, the inventory shrink reserve had a $0.4 million increase in response to estimated shrinkage rates based on results from previous physical inventories.

During 2024, the inventory shrink reserve had a $0.3 million decrease in response to estimated shrinkage rates based on results from previous physical inventories.

Our inventory reserve for estimated shrinkage was $0.3 million as of December 31, 2024.

19 unchanged sentences

We assess on a tax jurisdictional basis the likelihood that our deferred tax assets can be recovered.

If recovery is not more likely than not (a likelihood of less than 50 percent), the provision for taxes must be increased by recording a reserve in the form of a valuation allowance for the deferred tax assets that are estimated not to ultimately be recoverable.

If recovery is not expected to exceed a more likely than not (a likelihood of less than 50 percent) threshold, the provision for taxes must be increased by recording a reserve in the form of a valuation allowance for the deferred tax assets that are estimated not to ultimately be recoverable.

In this process, certain relevant criteria are evaluated including:

the amount of income or loss in prior years, the existence of deferred tax

liabilities that can be used to absorb deferred tax assets, the taxable income in prior carryback years that can be used to absorb net operating losses and credit carry backs, future expected taxable income and prudent and feasible tax planning strategies.

the amount of income or loss in prior years, the existence of deferred tax liabilities that can be used to absorb deferred tax assets, the taxable income in prior carryback years that can be used to absorb net operating losses and credit carry backs, future expected taxable income and prudent and feasible tax planning strategies.

Changes in taxable income, market conditions, tax laws and other factors may change our judgment regarding whether we will be able to realize the deferred tax assets.

5 unchanged sentences

These changes, if any, may require material adjustments to the related deferred tax assets or accrued income tax liabilities and an accompanying reduction or increase in income tax expense which will result in a corresponding increase or decrease in net income in the period when such determinations are made.

We have provided valuation allowances as of December 31, 2023, aggregating to $1.6 million, net of federal benefit, against certain state and local net operating loss carryforwards and other deferred tax assets.

We have provided valuation allowances as of December 31, 2024, aggregating to $9.1 million, net of federal benefit, against our federal deferred tax assets as well as certain state and local net operating loss carryforwards and other deferred tax assets.

As of December 31, 2024, the Company has no liability for unrecognized income tax benefits.

4 unchanged sentences

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 7. Management’s Discussion and Analysis