Ascent Industries Co. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

Acquisitions

3 Months Ended

Mar. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition of DanChem Technologies, Inc.

On October 22, 2021, the Company completed the acquisition of DanChem, a contract manufacturer of chemical products located in Danville, Virginia. The Company accounted for the transaction as a business combination using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805 - "Business Combinations." The preliminary purchase price was $34.1 million including $1.5 million in cash obtained through the acquisition. The purchase price was paid in cash and funded through a drawdown of $34.5 million on the Company’s existing revolving credit facility. Amounts outstanding under the revolving line of credit portion of the facility currently bear interest, at the Company's option, at (a) the Base Rate (as defined in the Credit Agreement) plus 0.50%, or (b) LIBOR plus 150%. See Note 8 for more information on the Company's long-term debt.

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
Cash and cash equivalents	$	1,533
Accounts receivable, net of allowance for credit losses	5,358
Inventories, net	1,561
Prepaid expenses and other current assets	454
Property, plant and equipment, net	15,697
Right of use asset, operating leases, net	208
Intangible assets, net	5,750
Total identifiable assets acquired	30,561

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

Net identifiable assets acquired	22,815
Transaction price	34,097
Goodwill	$	11,282

The Company is in various phases of valuing the assets and liabilities assumed, including deferred tax balances, and the Company's estimates of these values was still preliminary on March 31, 2022. 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.

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired. The recognized goodwill is attributable to operational synergies, assembled workforce and growth opportunities and was allocated to the Company's Specialty Chemicals Segment. Substantially all of the goodwill resulting from this acquisition is not expected to be deductible for tax purposes.

Approximately $0.3 million of one-time, acquisition-related costs, is recognized in acquisition costs and other expenses in the condensed consolidated statement of operations for the three months ended March 31, 2022.

The Company identified DanChem’s customer relationships, product development know-how, and tradename as finite-lived assets with estimated fair values as of the acquisition date of $5.1 million, $0.5 million, and $0.2 million, respectively. The finite-lived assets are subject to amortization using the straight-line method over 15 years.

Total net sales and operating income for DanChem for the three months ended March 31, 2022 were as follows:


(in thousands)	Three Months Ended March 31, 2022
Net sales	$	7,474
Operating income	$	235