Annual report pursuant to Section 13 and 15(d)

Discontinued Operations

v3.24.1
Discontinued Operations
 12 Months Ended
Dec. 31, 2023
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations Discontinued Operations
Munhall Closure
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 ("Munhall").
During the second quarter of 2023, the Board of Directors of the Company made the decision to permanently cease operations at Munhall. The Company ceased operations effective August 31, 2023. It is anticipated that the complete exit and disposal of all assets at Munhall will be completed within one year from the date the decision was made to permanently cease operations. The strategic decision to cease operations at Munhall is part of the Company’s ongoing efforts to consolidate manufacturing to drive an increased focus on its core operations and to improve profitability while driving operational efficiencies.
As a result of this decision, during the second quarter of 2023, the Company incurred asset impairment charges of $6.4 million related to the write down of inventory and long-lived assets as well as $1.4 million in increased reserves on accounts receivable at the facility. During the third quarter of 2023, the Company incurred additional asset impairment charges of $2.4 million related to the write down of inventory to net realizable value. Certain assets of Munhall were also classified as held for sale and the results of operations previously reported under the Tubular Products segment have been classified as discontinued operations for all periods presented. See Note 4 for further discussion of the assets held for sale and related fair value measurements.

Divestiture of Specialty Pipe & Tube, Inc.
On December 22, 2023, the Company and its wholly-owned subsidiary Specialty Pipe & Tube, Inc. (“SPT”) entered into an Asset Purchase Agreement pursuant to which Ascent and SPT sold substantially all of the assets primarily related to SPT to Specialty Pipe & Tube Operations, LLC, a Delaware limited liability company. The consideration for the transaction was approximately $55 million of cash proceeds subject to certain closing adjustments. The transaction closed on December 22, 2023. Ascent and Purchaser also entered into a Transition Services Agreement (the “TSA”) and an Employee Leasing Agreement (the “ELA”) each dated December 22, 2023, pursuant to which Ascent has agreed to provide certain transition services and to lease certain employees to Purchaser immediately after the closing for certain agreed upon transition periods. As result of the sale, SPT results of operations are classified under discontinued operations for all periods presented. Prior to the divestiture, SPT was reported under the Company's Tubular Products segment.
The following table presents the aggregate carrying amounts of the classes of assets and liabilities of the Company's discontinued operations:
(in thousands) December 31, 2023 December 31, 2022
Carrying amounts of assets included as part of discontinued operations:
Cash and cash equivalents $ —  $ 1 
Accounts receivable, net 778  11,918 
Inventories —  46,781 
Prepaid expenses and other current assets 83  1,212 
Current assets classified as discontinued operations 861  59,912 
Property, plant and equipment, net —  6,812 
Right-of-use assets, operating leases, net —  82 
Intangible assets, net —  386
Other non-current assets, net —  1,904 
Long-term assets classified as discontinued operations —  9,184 
Total assets classified as discontinued operations $ 861  $ 69,096 
Carrying amounts of current liabilities included as part of discontinued operations:
Accounts payable $ 107  $ 8,617 
Accrued expenses and other current liabilities 1,366  1,051 
Current portion of operating lease liabilities —  41 
Total current liabilities classified as discontinued operations $ 1,473  $ 9,709 
Carrying amounts of long-term liabilities included as part of discontinued operations:
Long-term portion of operating lease liabilities $ —  $ 42 
Total liabilities classified as discontinued operations $ 1,473  $ 9,751 
In May of 2023, the Company was named as a defendant in a lawsuit filed in the U.S. District Court for the Western District of Pennsylvania, asserting various claims for breach of contracts resulting in losses to the plaintiff and seeking damages in the amount of $0.8 million plus prejudgment interest and attorney's fees. Although we continue to defend ourselves against the claims, we believe we may incur a material loss in this matter and that our financial statements could be materially affected by an adverse decision regarding the assessment of damages incurred by the plaintiff. Accordingly, the Company has an estimated liability of $1.0 million for expected losses related to this lawsuit as of December 31, 2023.
The financial results of the Company's discontinued operations are presented as income from discontinued operations, net of tax on the consolidated statements of income (loss). The following table summarizes the results of the Company's discontinued operations:
(Unaudited)
Three Months Ended December 31, Year Ended
December 31,
(in thousands) 2023 2022 2023 2022
Net sales $ 7,214  $ 27,381  $ 64,760  $ 152,154 
Cost of sales 8,115  30,674  64,507  138,909 
Gross profit (901) (3,293) 253  13,245 
Selling, general and administrative expense 1,261  2,088  7,587  7,311 
Acquisition costs and other 355  96  568  96 
Gain on sale of assets (26,348) —  (26,348) — 
Asset impairments —  —  8,720  — 
Earnout adjustments —  —  —  (7)
Operating income (loss) of discontinued operations 23,831  (5,477) 9,726  5,845 
Loss on classification as held for sale —  —  83  — 
Income (loss) from discontinued operations before income taxes 23,831  (5,477) 9,643  5,845 
Income tax provision (benefit) 5,157  (1,102) 2,121  1,357 
Net income (loss) from discontinued operations $ 18,674  $ (4,375) $ 7,522  $ 4,488