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 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:

Current wording

This discussion and analysis summarizes the significant factors affecting our consolidated operating results, liquidity, and capital resources during the three and nine months ended September 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

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.

Current wording

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

Previous 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.

Current wording

Consolidated net sales for the third quarter of 2026 were $27.1 million, an increase of$7.4 million, or 37.8%, compared to net sales for the third quarter of 2025. The increase in net sales was primarily driven by a 17.4% increase in pounds shipped and a 21.1% increase in average selling prices. Excluding Midwest, consolidated net sales for the third quarter of 2026 were $24.9 million, an increase of $5.2 million, or 26.3%, compared to net sales for the third quarter of 2025. The increase in net sales excluding Midwest was primarily driven by a 21.1% increase in average selling prices and a 7.0% increase in pounds shipped.

Previous wording

Consolidated net sales for the six months ended June 30, 2026 were $45.1 million, an increase of $8.6 million, or 23.6%, compared to net sales for the six months ended June 30, 2025. The increase in net sales was primarily driven by an 11.5% increase in pounds shipped and a 14.6% increase in average selling prices.

Current wording

Consolidated net sales for the nine months ended September 30, 2026 were $72.2 million, an increase of $16.0 million, or 28.5%, compared to net sales for the nine months ended September 30, 2025. The increase in net sales was primarily driven by a 13.4% increase in pounds shipped and a 17.2% increase in average selling prices. Excluding Midwest, consolidated net sales for the nine months ended September 30, 2026 were $68.1 million, and increase of $11.9 million, or 21.2%, compared to the nine months ended September 30, 2025. The increase in net sales excluding Midwest was primarily driven by a 16.6% increase in average selling prices and a 7.0% increase in pounds shipped.

Previous wording

For the second quarter of 2026, consolidated gross profit increased 14.0% to $5.5 million, or 21.6% of sales, compared to $4.9 million, or 26.1% of sales in the second quarter of 2025. For the six months ended June 30, 2026, consolidated gross profit increased 5.4% to $8.4 million, or 18.5% of sales, compared to $7.9 million, or 21.7% of sales in the six months ended June 30, 2025. The increase in dollars for the second quarter and first six months was primarily driven by increases in cost recovery in the period due to increased production, reductions in utilities and repairs and maintenance partially offset by increases in labor and overhead.

Current wording

For the third quarter of 2026, consolidated gross profit increased 21.9% to $7.1 million, or 26.2% of sales, compared to $5.8 million, or 29.7% of sales in the third quarter of 2025. Excluding Midwest, gross profit for the third quarter of 2026 increased 14.1% to $6.7 million, or 26.8% of sales. For the nine months ended September 30, 2026, consolidated gross profit increased 12.4% to $15.5 million, or 21.4% of sales, compared to $13.8 million, or 24.5% of sales in the nine months ended September 30, 2025. Excluding Midwest, gross profit increased 5.6% to $14.5 million, or 21.4% of sales, for the nine months ended September 30, 2026. The increase in dollars for the three and nine months ended September 30, 2026 was primarily driven by increases in cost recovery in the period due to increased production and reductions in incentive bonus and waste disposal expense partially offset by increases in repairs and maintenance, supplies and insurance expense.

Previous 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.

Current wording

Consolidated selling, general, and administrative expense (SG&A) for the third quarter of 2026 decreased $0.9 million to $5.3 million, or 19.6% of sales, compared to $6.3 million, or 31.7% of sales in the third quarter of 2025. Consolidated selling, general, and administrative expense (SG&A) for the nine months ended September 30, 2026 decreased $1.6 million to $16.0 million, or 22.1% of sales, compared to $17.6 million, or 31.3% of sales in the nine months ended September 30, 2025. Excluding Midwest, SG&A expenses decreased $2.1 million to $4.2 million, or 16.7% of sales, for the third quarter of 2026 and decreased $3.3 million to $14.3 million, or 21.0% of sales, for the nine months ended September 30, 2026. The decrease in SG&A expense for the three and nine months ended September 30, 2026 was primarily driven by decreases in rent, incentive bonus and professional fees partially offset by increase in salaries, wages and benefits and amortization expense.

Previous 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.

Current wording

Consolidated operating income in the third quarter of 2026 totaled $1.6 million compared to an operating loss of $0.8 million in the third quarter of 2025. Consolidated operating loss in the nine months ended September 30, 2026 totaled $1.0 million compared to an operating loss of $5.5 million in the nine months ended September 30, 2025. Excluding Midwest, operating income increased $3.2 million to $2.3 million for the third quarter of 2026 while operating loss decreased $2.3 million to $0.3 million for the nine months ended September 30, 2026. The operating income increase in the three months ended September 30, 2026 and operating loss decrease in the nine months ended September 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 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.

Current wording

SG&A expense for the third quarter of 2026 was $4.5 million, or 16.4% of sales, compared to $3.7 million, or 18.8% of sales in the third quarter of 2025. SG&A expense for the nine months ended September 30, 2026 was $14.1 million, or 19.6% of sales, compared to $9.3 million, or 16.5% of sales in the nine months ended September 30, 2025. Excluding Midwest, SG&A expense increased $1.1 million to $3.3 million, or 13.2% of sales, for the third quarter and 2026 and increased $3.2 million to $12.5 million, or 18.3% of sales, for the nine months ended September 30, 2026. The increase in dollars for the three and nine months ended September 30, 2026 was primarily driven by increases in corporate expense allocation, salaries, wages and benefits and amortization expense partially offset by reductions in incentive bonus expense.

Previous 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.

Current wording

Operating income increased to $2.6 million for the third quarter of 2026 compared to operating income of $2.1 million for the third quarter of 2025. Excluding Midwest, operating income increased $1.1 million to $3.3 million for the third quarter of 2026. The third quarter of 2026 increase in operating income was primarily driven by the aforementioned increase in gross profit, partially offset by increase in SG&A expense. Operating income decreased to $1.1 million for the nine months ended September 30, 2026 compared to operating income of $4.4 million for the nine months ended September 30, 2025. Excluding Midwest, operating income decreased to $1.8 million for the nine months ended September 30, 2026. The current year decrease in operating income was primarily driven by the aforementioned increase in SG&A expense partially offset by increase in gross profit.

Previous 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.

Current wording

Unallocated corporate and other expenses for the third quarter of 2026 decreased $1.7 million, or 66.3%, to $0.9 million, or 3.2% of sales, compared to $2.6 million, or 13.0% of sales, in the prior year. The third quarter of 2026 decrease in dollars was primarily driven by increases corporate allocation as well as decreases in incentive bonus, professional fees and rent expense.

Previous wording

Unallocated corporate and other expenses for the six months ended June 30, 2026 decreased $5.9 million, or 83.7%, to $1.1 million, or 2.5% of sales, compared to $7.0 million, or 19.2% of sales, in the prior year. The six months ended June 30, 2026 decrease in dollars was primarily driven by increases in corporate allocation to Chemicals locations as well as decreases in professional fees, taxes and licenses, incentive bonus and IT software costs partially offset by increases in salaries, wages and benefits and dues and subscriptions.

Current wording

Unallocated corporate and other expenses for the nine months ended September 30, 2026 decreased $7.9 million, or 79.1%, to $2.1 million, or 2.9% of sales, compared to $10.0 million, or 17.7% of sales, in the prior year. The nine months ended September 30, 2026 decrease in dollars was primarily driven by increases in corporate allocation as well as decreases in professional fees, taxes and licenses, incentive bonus and IT software costs partially offset by increases in salaries, wages and benefits, dues and subscriptions and travel expense.

Previous 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.

Current wording

Interest income was $0.1 million for the third quarter of 2026 compared to $0.5 million interest income for the third quarter of 2025. Interest income was $0.6 million for the nine months ended September 30, 2026 compared to interest expense of $0.4 million for the nine months ended September 30, 2025. The third quarter change was driven by a lower interest-bearing cash balance after acquisition of Midwest Graphics Sales in the second quarter of 2026. The Company had no debt outstanding under its credit facilities in either period.

Previous 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.

Current wording

The effective tax rate for continuing operations was 26.1% and 7.8% for the three and nine months ended September 30, 2026, respectively. The three months ended September 30, 2026 effective tax rate was higher 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 nine months ended September 30, 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.

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 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.

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 September 30, 2026, we held $28.7 million of cash and cash equivalents, as well as $21.1 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 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.

Current wording

The decrease in cash used in operating activities for the nine months ended September 30, 2026, compared to cash used in operating activities in the nine months ended September 30, 2025, was primarily driven by decreases in net loss from $4.6 million in the nine months ended September 30, 2025 to $0.1 million in net income in the nine months ended September 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 $3.1 million for the first nine months of 2026, compared to a decrease of $1.5 million in the first nine months of 2025. The change in accounts payable is primarily due to increased inventory purchases to match increases in sales partially offset by a reduction in days payables outstanding in the period. Accounts receivable and advances decreased operating cash flows by $8.1 million in the first nine months of 2026 compared to a $5.2 million decrease in the first nine 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 flat days sales outstanding in the current period compared to the prior period. Inventory decreased operating cash flows for the first nine months of 2026 by $1.6 million compared to a decrease of $1.5 million for the first nine months of 2025. The change in inventory is primarily driven by higher inventory purchases in the first nine months of 2026 compared to the first nine months of 2025 coupled with and increases in days inventory outstanding year over year.

Previous 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.

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 nine months ended September 30, 2026 compared to the cash used in investing activities for the nine months ended September 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 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.

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 nine months ended September 30, 2026 compared to cash used in financing activities for the nine months ended September 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 September 30, 2026 and December 31, 2025.

Previous 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.

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 September 30, 2026, the outstanding balance was $0.6 million.

Previous wording

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

Current wording

Shares repurchased for the three and nine months ended September 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 $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.

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

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 $3.0 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 $1.9 million for the remainder of fiscal 2026.

Previous wording

Business combinations are accounted for using the acquisition method of accounting in accordance with GAAP. Under this method, the total consideration transferred to consummate the business combination is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the transaction.

Current wording

Business combinations are accounted for using the acquisition method of accounting. Under this method, the identifiable tangible and intangible assets acquired and liabilities assumed are recognized based on their fair values as of the closing date of the transaction. The acquisition method of accounting requires extensive use of estimates and judgments to estimate the fair values of the identifiable tangible and intangible assets acquired, if any, and liabilities assumed.

Previous wording

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. As of June 30, 2026, the Company's goodwill balance is $4.7 million.

Current wording

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. As of September 30, 2026, the Company's goodwill balance is $4.8 million.