ASCENT INDUSTRIES CO.

Previous wording

This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity, and capital resources during the three and three months ended March 31, 2026 and 2025, respectively. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the Annual Report), as well as the condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) contained in this report. Unless otherwise specified, all comparisons made are to the corresponding period of 2025. This discussion and analysis is presented in five sections:

Current wording

This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity, and capital resources during the three and six months ended June 30, 2026 and 2025, respectively. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. This discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements that are included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the Annual Report), as well as the condensed consolidated financial statements (unaudited) and notes to the condensed consolidated financial statements (unaudited) contained in this report. Unless otherwise specified, all comparisons made are to the corresponding period of 2025. This discussion and analysis is presented in five sections:

Previous wording

We continue to monitor macroeconomic trends and uncertainties such as key material inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs, which may have adverse effects on net sales and profitability. As a result of the tariffs announced by the U.S. presidential administration and continued tariff modifications or the imposition of tariffs or export controls by other countries, we have worked with our suppliers to mitigate supply chain challenges, cost volatility, and consumer and economic uncertainty due to rapid changes in global trade policies. Much of our raw material used in production is domestically sourced and we are continuing to evaluate these factors and their potential effects as well as our ability to potentially offset all or a portion of cost increases through pricing actions and additional cost savings efforts. Economic pressures on customers and consumers, including the challenges of inflation and the effects of increased tariffs, may negatively affect our net sales and profitability in the future. In addition, geopolitical conflicts, including the continuation or escalation of events like the U.S.-Israel-Iran conflict may also disrupt business operations of suppliers and/or customers, causing supply chain constraints or delays, increased pricing or delayed spending by our customers. The full impact of such events are not known at this time, but they could have a material adverse impact on our business, financial condition, results of operations, and stock price.

Current wording

We continue to monitor macroeconomic trends and uncertainties such as key material inflation, the effects of recently implemented tariffs, and the potential imposition of modified or additional tariffs, which may have adverse effects on net sales and profitability. Following the February 20, 2026, Supreme Court ruling regarding the imposition of tariffs under the International Emergency Economic Powers Act (IEEPA), U.S. Customs and Border Protection is issuing refunds for tariffs previously paid under IEEPA. Concurrently, the Administration imposed a temporary 10% general tariff under Section 122 of the Trade Act of 1974 subject to several exemptions, including the import into the United States of certain aerospace products. As a result of the tariffs announced by the U.S. presidential administration and continued tariff modifications or the imposition of tariffs or export controls by other countries, we have worked with our suppliers to mitigate supply chain challenges, cost volatility, and consumer and economic uncertainty due to rapid changes in global trade policies. Much of our raw material used in production is domestically sourced and we are continuing to evaluate these factors and their potential effects as well as our ability to potentially offset all or a portion of cost increases through pricing actions and additional cost savings efforts. Economic pressures on customers and consumers, including the challenges of inflation and the effects of increased tariffs, may negatively affect our net sales and profitability in the future.

Previous wording

Following the February 20, 2026, Supreme Court ruling regarding the imposition of tariffs under the International Emergency Economic Powers Act (IEEPA), U.S. Customs and Border Protection is developing refund procedures for tariffs previously paid under IEEPA. Concurrently, the Administration imposed a temporary 10% general tariff under Section 122 of the Trade Act of 1974 subject to several exemptions, including the import into the United States of certain aerospace products. These developments did not have a material impact on our financial position, results of operations and cash flows during the first quarter of 2026.

Current wording

These developments did not have a material impact on our financial position, results of operations and cash flows during the three and six months ended June 30, 2026.

Previous wording

Consolidated net sales for the first quarter of 2026 were $19.4 million, an increase of$1.6 million, or 8.9%, compared to net sales for the first quarter of 2025. The increase in net sales was primarily driven by a 7.6% increase in pounds shipped and a 5.2% increase in average selling prices.

Current wording

Consolidated net sales for the second quarter of 2026 were $25.7 million, an increase of$7.0 million, or 37.6%, compared to net sales for the second quarter of 2025. The increase in net sales was primarily driven by a 15.2% increase in pounds shipped and a 23.0% increase in average selling prices.

Previous wording

Consolidated selling, general, and administrative expense (SG&A) for the first quarter of 2026 increased $0.3 million to $5.1 million, or 26.4% of sales, compared to $4.9 million, or 27.3% of sales in the first quarter of 2025. The increase in SG&A expense for the first quarter of 2026 was primarily driven by increases in salaries, wages and benefits, rent expense and stock compensation expense partially offset by decreases in incentive bonus.

Current wording

Consolidated selling, general, and administrative expense (SG&A) for the second quarter of 2026 decreased $0.9 million to $5.5 million, or 21.5% of sales, compared to $6.4 million, or 34.5% of sales in the second quarter of 2025. Consolidated selling, general, and administrative expense (SG&A) for the six months ended June 30, 2026 decreased $0.7 million to $10.7 million, or 23.6% of sales, compared to $11.3 million, or 31.0% of sales in the six months ended June 30, 2025. The decrease in SG&A expense for the second quarter of 2026 and six months ended June 30, 2026 was primarily driven by decreases in incentive bonus, professional fees and repairs and maintenance partially offset by increase in salaries, wages and benefits.

Previous wording

Consolidated operating loss in the first quarter of 2026 totaled $2.4 million compared to an operating loss of $2.0 million in the first quarter of 2025. The operating loss increase in the first quarter of 2026 was primarily driven by aforementioned decrease in gross profit and increase in SG&A expense.

Current wording

Consolidated operating loss in the second quarter of 2026 totaled $0.3 million compared to an operating loss of $2.7 million in the second quarter of 2025. Consolidated operating loss in the six months ended June 30, 2026 totaled $2.6 million compared to an operating loss of $4.7 million in the six months ended June 30, 2025. The operating loss decrease in the six months ended June 30, 2026 was primarily driven by aforementioned increase in gross profit and decrease in SG&A expense as well as decreases in asset impairments and gain on lease modification in the prior year not in the current year.

Previous wording

SG&A expense for the first quarter of 2026 was $4.9 million, or 25.1% of sales, compared to $2.9 million, or 16.3% of sales in the first quarter of 2025. The increase in dollars for the first quarter of 2026 was primarily driven by increases in corporate expense allocation, salaries, wages and benefits and miscellaneous expense partially offset by decreases in incentive bonus.

Current wording

SG&A expense for the second quarter of 2026 was $4.8 million, or 18.7% of sales, compared to $2.7 million, or 14.3% of sales in the second quarter of 2025. SG&A expense for the six months ended June 30, 2026 was $9.7 million, or 21.5% of sales, compared to $5.6 million, or 15.3% of sales in the six months ended June 30, 2025. The increase in dollars for the three and six months ended June 30, 2026 was primarily driven by increases in corporate expense allocation, salaries, wages and benefits and amortization expense partially offset by decreases in incentive bonus.

Previous wording

Operating loss increased to $2.1 million for the first quarter of 2026 compared to operating income of $0.8 million for the first quarter of 2025. The current year increase in operating loss was primarily driven by the aforementioned decreases in gross profit and increase in SG&A expense.

Current wording

Operating income decreased to $0.6 million for the second quarter of 2026 compared to operating income of $1.5 million for the second quarter of 2025. The current year decrease in operating income was primarily driven by the aforementioned increase in SG&A expense. Operating loss increased to $1.5 million for the six months ended June 30, 2026 compared to operating income of $2.3 million for the six months ended June 30, 2025. The current year increase in operating loss was primarily driven by the aforementioned increase in SG&A expense.

Previous wording

Unallocated corporate and other expenses for the first quarter of 2026 decreased $2.6 million, or 91.4%, to $0.2 million, or 1.2% of sales, compared to $2.8 million, or 15.7% of sales, in the prior year. The first quarter of 2026 decrease in dollars was primarily driven by increases corporate allocation as well as decreases in incentive bonus, professional fees, taxes and licenses partially offset by increases in salaries, wages and benefits.

Current wording

Unallocated corporate and other expenses for the second quarter of 2026 decreased $2.4 million, or 76.5%, to $0.7 million, or 2.8% of sales, compared to $3.1 million, or 16.6% of sales, in the prior year. The second quarter of 2026 decrease in dollars was primarily driven by increases corporate allocation as well as decreases in incentive bonus, professional fees, taxes and licenses partially offset by increases in salaries, wages and benefits.

Previous wording

Interest income was $0.3 million for the first quarter of 2026 compared to interest expense of $0.1 million for the first quarter of 2025. The change was driven by a higher interest-bearing cash balance in the current year compared to the prior year. The Company had no debt outstanding under its credit facilities in either period.

Current wording

Interest income was $0.2 million for the second quarter of 2026 compared to diminimus interest income for the second quarter of 2025. Interest income was $0.5 million for the six months ended June 30, 2026 compared to interest expense of $0.1 million for the six months ended June 30, 2025. The change was driven by a higher interest-bearing cash balance in the current year compared to the prior year. The Company had no debt outstanding under its credit facilities in either period.

Previous wording

The effective tax rate for continuing operations was (6.1)% and (8.4)% for the three months ended March 31, 2026 and 2025, respectively. The three months ended March 31, 2026 effective tax rate was lower than the U.S. statutory rate of 21.0% primarily due to changes in the valuation allowance over federal and U.S. state deferred tax assets.The three months ended March 31, 2025 effective tax rate was lower than the U.S. statutory rate of 21.0% primarily due to the valuation allowance over federal and U.S state deferred tax assets.

Current wording

The effective tax rate for continuing operations was (869.2)% and 27.1% for the three and six months ended June 30, 2026, respectively. The three months ended June 30, 2026 effective tax rate was lower than the U.S. statutory rate of 21.0%, primarily due to changes in forecasted income (loss) and the resulting changes in the valuation allowance on federal and state deferred tax assets. The six months ended June 30, 2026 effective tax rate was higher than the U.S. statutory rate of 21.0% primarily due to changes in the valuation allowance over federal and U.S. state deferred tax assets.

Previous wording

We define "EBITDA" as earnings before interest, income taxes, depreciation and amortization. We define "Adjusted EBITDA" as EBITDA further adjusted for the impact of non-cash and other items we do not consider in our evaluation of ongoing performance. 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, retention costs and restructuring and severance costs from net 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. We present

Current wording

We define "EBITDA" as earnings before interest, income taxes, depreciation and amortization. We define "Adjusted EBITDA" as EBITDA further adjusted for the impact of non-cash and other items we do not consider in our evaluation of ongoing performance. 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, retention costs and restructuring and severance costs from net 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. We present EBITDA and Adjusted EBITDA because we consider them to be important supplemental measures of our performance and investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

Previous wording

Funds generated by operating activities supplemented by our available cash and cash equivalents and our credit facilities are our most significant sources of liquidity. As of March 31, 2026, we held $47.8 million of cash and cash equivalents, as well as $14.2 million of remaining available capacity on our revolving line of credit. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures as well as repay our debt obligations as they become due over the next 12 months and beyond.

Current wording

Funds generated by operating activities supplemented by our available cash and cash equivalents and our credit facilities are our most significant sources of liquidity. As of June 30, 2026, we held $28.1 million of cash and cash equivalents, as well as $17.9 million of remaining available capacity on our revolving line of credit. We believe our sources of liquidity will be sufficient to fund operations and anticipated capital expenditures as well as repay our debt obligations as they become due over the next 12 months and beyond.

Previous wording

The increase in cash used in operating activities for the three months ended March 31, 2026, compared to cash used in operating activities in the three months ended March 31, 2025, was primarily driven by changes in working capital. 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. Accounts payable decreased operating cash flows by $1.2 million for the first three months of 2026, compared to increase of $0.2 million in the first three months of 2025. The change in accounts payable is primarily due to a decrease in days payables outstanding. Accounts receivable and advances decreased operating cash flows by $2.5 million in the first three months of 2026 compared to a $1.1 million decrease in the first three months of 2025. The decrease in cash generated by accounts receivable and advances is primarily driven by an increase in net sales in the current period partially offset by a decrease in days sales outstanding compared to the first three months of 2025. Inventory increased operating cash flows for the first three months of 2026 by $1.3 million compared to a decrease of $1.1 million for the first three months of 2025. The change in inventory is primarily driven by lower inventory purchases in the first three months of 2026 compared to the first three months of 2025 coupled with similar days inventory outstanding year over year.

Current wording

The decrease in cash used in operating activities for the six months ended June 30, 2026, compared to cash used in operating activities in the six months ended June 30, 2025, was primarily driven by decreases in net loss from $4.5 million in the six months ended June 30, 2025 to $1.3 million in the six months ended June 30, 2026 and changes in working capital. 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. Accounts payable increased operating cash flows by $2.6 million for the first six months of 2026, compared to a decrease of $1.7 million in the first six months of 2025. The change in accounts payable is primarily due to increased inventory purchases to match increases in sales. Accounts receivable and advances decreased operating cash flows by $6.5 million in the first six months of 2026 compared to a $4.9 million decrease in the first six months of 2025. The decrease in cash generated by accounts receivable and advances is primarily driven by an increase in net sales in the current period and increased days sales outstanding in the current period. Inventory decreased operating cash flows for the first six months of 2026 by $1.1 million compared to a decrease of $0.9 million for the first six months of 2025. The change in inventory is primarily driven by higher inventory purchases in the first six months of 2026 compared to the first six months of 2025 coupled with and increase in days inventory outstanding year over year.

Previous wording

Net cash used in investing activities primarily consists of transactions related to capital expenditures. The increase in cash used in investing activities for the three months ended March 31, 2026 compared to the cash used in investing activities for the three months ended March 31, 2025 was primarily due to increases in capital expenditures in the current year compared to the prior year.

Current wording

Net cash used in investing activities primarily consists of transactions related to capital expenditures and acquisitions. The increase in cash used in investing activities for the six months ended June 30, 2026 compared to the cash used in investing activities for the six months ended June 30, 2025 was primarily due to the purchase of Midwest Graphic Sales in the second quarter of 2026 as well as increases in capital expenditures in the current year compared to the prior year.

Previous wording

Net cash used in financing activities primarily consists of transactions related to our credit facilities and share repurchases. The increase in cash used in financing activities for the three months ended March 31, 2026 compared to cash used in financing activities for the three months ended March 31, 2025 was primarily due to increased repurchases of common stock. The Company had no debt outstanding under its credit facilities as of March 31, 2026 and December 31, 2025.

Current wording

Net cash used in financing activities primarily consists of transactions related to our credit facilities and share repurchases. The decrease in cash used in financing activities for the six months ended June 30, 2026 compared to cash used in financing activities for the six months ended June 30, 2025 was primarily due to decreased repurchases of common stock in the current year. The Company had no debt outstanding under its credit facilities as of June 30, 2026 and December 31, 2025.

Previous wording

The Company has a note payable in the amount of $1.1 million with an annual interest rate of 3.68% maturing April 1, 2026, associated with the financing of the Company's insurance premium in 2025. As of March 31, 2026, the outstanding balance was $0.1 million.

Current wording

The Company has a note payable in the amount of $1.0 million with an annual interest rate of 2.57% maturing April 1, 2027, associated with the financing of the Company's insurance premium in 2026. As of June 30, 2026, the outstanding balance was $1.0 million.

Previous wording

On December 10, 2025, Ascent Industries Co. (“Ascent”) entered into a Limited Waiver, Consent and Sixth Amendment to Credit Agreement and Omnibus Amendment to Loan Documents with BMO Bank N.A. and the other lenders under Ascent’s credit facility (the “Sixth Credit Facility Amendment”). The maximum revolving loan commitment under the credit facility remains $30 million with an interest rate between 1.85% and 2.35%, depending on average availability under the credit facility and the Company's consolidated fixed charge coverage ratio. The term of the credit facility remains through December 31, 2027.

Current wording

On December 10, 2025, the Company entered into a Limited Waiver, Consent and Sixth 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 “Sixth Credit Facility Amendment”). The maximum revolving loan commitment under the credit facility remains $30 million with an interest rate between 1.85% and 2.35%, depending on average availability under the credit facility and the Company's consolidated fixed charge coverage ratio. The term of the credit facility remains through December 31, 2027.

Previous wording

The Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $4.5 million and (ii) 15% of the revolving credit facility. As of March 31, 2026, the Company was in compliance with all financial debt covenants.

Current wording

The Facility contains covenants requiring the maintenance of a minimum consolidated fixed charge coverage ratio if excess availability falls below the greater of (i) $4.5 million and (ii) 15% of the revolving credit facility. As of June 30, 2026, the Company was in compliance with all financial debt covenants. As of June 30, 2026, the Company had no principal payments outstanding under its credit facilities. See Note 9 in the unaudited notes to the consolidated financial statements for additional information on the Company's credit facilities.

Previous wording

We have a share repurchase program, authorized by the Company's Board of Directors, that is executed through purchases made from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Shares repurchased are returned to status of authorized, but unissued shares of common stock or held in treasury. As of March 31, 2026, the Company has 1,702,809 shares of its share repurchase authorization remaining.

Current wording

We have a share repurchase program, authorized by the Company's Board of Directors, that is executed through purchases made from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. Shares repurchased are returned to status of authorized, but unissued shares of common stock or held in treasury. As of June 30, 2026, the Company has 1,492,941 shares of its share repurchase authorization remaining.

Previous wording

Shares repurchased for the three months ended March 31, 2026 and 2025 were as follows:

Current wording

Shares repurchased for the three and six months ended June 30, 2026 and 2025 were as follows:

Previous wording

•Operating and Finance Leases - The Company enters into various lease agreements for the real estate and manufacturing equipment used in the normal course of business. Operating and finance lease obligations were $13.1 million, with $1.1 million payable within 12 months. See Note 9 for further detail of our lease obligations and the timing of expected future payments.

Current wording

•Operating and Finance Leases - The Company enters into various lease agreements for the real estate and manufacturing equipment used in the normal course of business. Operating and finance lease obligations were $12.8 million, with $1.1 million payable within 12 months. See Note 10 for further detail of our lease obligations and the timing of expected future payments.

Previous wording

The Company has no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on the Company's financial position, revenues, results of operations, liquidity, or capital expenditures. We expect capital spending to be as much as $5.1 million for the remainder of fiscal 2026.

Current wording

The Company has no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on the Company's financial position, revenues, results of operations, liquidity, or capital expenditures. We expect capital spending to be as much as $3.0 million for the remainder of fiscal 2026.

Previous wording

We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements presented in the Annual Report on Form 10-K for the year ended December 31, 2025. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Annual Report on Form 10-K for the year ended December 31, 2025. There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2025.

Current wording

We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements presented in the Annual Report on Form 10-K for the year ended December 31, 2025. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Annual Report on Form 10-K for the year ended December 31, 2025. Other than those listed below, there have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2025.