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Leases | 9 Months Ended
--- | ---
Sep. 30, 2024
Leases [Abstract] |
Leases | Leases The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC (“Store”), an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the American Stainless acquisition in 2019 as well as the sale of land at the Munhall facility in 2020. During the third quarter of 2024, the Company and Store closed on a transaction pursuant to which Store sold to a third party approximately 20,200 square feet of warehouse space located at Ascent’s facility in Cleveland, Tennessee. As a result of the sale, the Company and Store entered into a Fourth Amended and Restated Master Lease Agreement (the “Fourth Master Lease”) to reduce the Company's rent at the Cleveland facility pursuant to the terms and conditions of the Third Amended and Restated Master Lease Agreement between the parties dated September 10, 2020. The Fourth Master Lease was determined to be a lease modification that qualified for a remeasurement of the existing lease and not a separate contract. Upon modification of the Fourth Master Lease, the right-of-use asset and operating lease liability were remeasured using an incremental borrowing rate determined on the date of modification. As such, the Company recognized an increase in the right-of-use asset and operating lease liability related to the Fourth Master Lease of $1.3 million and recognized a gain on the modification of $0.1 million, which is reported within operating expenses on the unaudited consolidated statements of income (loss). As of September 30, 2024, operating lease liabilities related to the master lease agreement with Store Capital totaled $31.2 million, or 94% of the total lease liabilities on the consolidated balance sheet. On July 16, 2024, the Company entered into a sixty-five month operating lease agreement with respect to certain office property commencing November 1, 2024 with one option to extend an additional sixty months at the end of the lease term. Pursuant to the terms of the lease agreement, the Company will pay a base rent in the first year of the agreement of $9,606 monthly with an annual increase in November each year of 3.0% through the term of the agreement. The total amount of rent and rent adjustments shall be abated for a period of five months from the period commencing November 1, 2024 and expiring March 31, 2025. In addition, the Company remitted a security deposit of $52,353 to the landlord at execution and is also responsible for taxes and other operating expenses related to the space. The Company has treated tenancy for the period prior to rent commencement as a free rental period for accounting purposes. During the three months and nine months ended September 30, 2024, the Company did not enter into any new finance lease agreements. Operating and finance lease amounts from continuing operations included in the unaudited condensed consolidated balance sheet are as follows (in thousands):
Classification |  | Financial Statement Line Item |  | September 30, 2024 |  | December 31, 2023
Long-term Assets |  | Right-of-use assets, operating leases |  | $ | 28,623 |  |  | $ | 27,784 |
Long-term Assets |  | Property, plant and equipment |  | 1,303 |  |  | 1,543 |
Current liabilities |  | Current portion of lease liabilities, operating leases |  | 1,448 |  |  | 1,140 |
Current liabilities |  | Current portion of lease liabilities, finance leases |  | 288 |  |  | 292 |
Non-current liabilities |  | Non-current portion of lease liabilities, operating leases |  | 30,433 |  |  | 29,729 |
Non-current liabilities |  | Non-current portion of lease liabilities, finance leases |  | 1,089 |  |  | 1,307 |
Total Lease Cost Individual components of the total lease cost incurred by the Company are as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease cost 1 | $ | 1,007 |  |  | $ | 985 |  |  | $ | 2,978 |  |  | $ | 2,956 |
Finance lease cost: |  |  |  |  |  |  |
Amortization of right-of-use assets | 79 |  |  | 87 |  |  | 237 |  |  | 263 |
Interest on finance lease liabilities | 22 |  |  | 24 |  |  | 65 |  |  | 61 |
Sublease income | (92) |  |  | (91) |  |  | (276) |  |  | (273) |
Total lease cost | $ | 1,016 |  |  | $ | 1,005 |  |  | $ | 3,004 |  |  | $ | 3,007 |
1 Includes short term leases, which are immaterial Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the unaudited condensed consolidated statements of income (loss). Maturity of Leases The amounts of undiscounted future minimum lease payments under leases in continuing operations as of September 30, 2024 are as follows:
(in thousands) | Operating |  | Finance
Remainder of 2024 | $ | 898 |  |  | $ | 90 |
2025 | 3,698 |  |  | 361 |
2026 | 3,750 |  |  | 361 |
2027 | 3,825 |  |  | 361 |
2028 | 3,903 |  |  | 303 |
Thereafter | 31,937 |  |  | 85 |
Total undiscounted minimum future lease payments | 48,011 |  |  | 1,561 |
Imputed interest | (16,130) |  |  | (184) |
Present value of lease liabilities | $ | 31,881 |  |  | $ | 1,377 |
Lease Term and Discount Rate
Weighted-average remaining lease term | September 30, 2024 |  | December 31, 2023
Operating leases | 11.85 years |  | 12.67 years
Finance leases | 4.37 years |  | 5.07 years
Weighted-average discount rate |  |  |
Operating leases | 7.17 | % |  | 8.33 | %
Finance leases | 5.93 | % |  | 5.92 | %
Subleases During the second quarter of 2024, the Company entered into a sublease agreement with a third party to sublease the former Specialty Pipe and Tube, Inc. facilities in Mineral Ridge, Ohio and Houston, Texas. The sublease agreement continues through the remaining term of the Master Lease Agreement and will expire on September 30, 2036, unless terminated in accordance with the sublease agreement. The sublease provides for an annual base rent of approximately $0.1 million in the first year, which increases on an annual basis by 2.0%. The sublessee is responsible for taxes and all operating expenses related to the subleased space. The Company also currently subleases the former Palmer facility and records cash receipts related to the subleases in other expense (income) on the unaudited condensed consolidated statements of income (loss). Future expected cash receipts from the Company's subleases as of September 30, 2024 are as follows:
(in thousands) | Sublease Receipts
Remainder of 2024 | $ | 145 |
2025 | 582 |
2026 | 594 |
2027 | 606 |
2028 | 618 |
Thereafter | 5,229 |
Total sublease receipts | $ | 7,774 |
Leases | Leases The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC (“Store”), an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the American Stainless acquisition in 2019 as well as the sale of land at the Munhall facility in 2020. During the third quarter of 2024, the Company and Store closed on a transaction pursuant to which Store sold to a third party approximately 20,200 square feet of warehouse space located at Ascent’s facility in Cleveland, Tennessee. As a result of the sale, the Company and Store entered into a Fourth Amended and Restated Master Lease Agreement (the “Fourth Master Lease”) to reduce the Company's rent at the Cleveland facility pursuant to the terms and conditions of the Third Amended and Restated Master Lease Agreement between the parties dated September 10, 2020. The Fourth Master Lease was determined to be a lease modification that qualified for a remeasurement of the existing lease and not a separate contract. Upon modification of the Fourth Master Lease, the right-of-use asset and operating lease liability were remeasured using an incremental borrowing rate determined on the date of modification. As such, the Company recognized an increase in the right-of-use asset and operating lease liability related to the Fourth Master Lease of $1.3 million and recognized a gain on the modification of $0.1 million, which is reported within operating expenses on the unaudited consolidated statements of income (loss). As of September 30, 2024, operating lease liabilities related to the master lease agreement with Store Capital totaled $31.2 million, or 94% of the total lease liabilities on the consolidated balance sheet. On July 16, 2024, the Company entered into a sixty-five month operating lease agreement with respect to certain office property commencing November 1, 2024 with one option to extend an additional sixty months at the end of the lease term. Pursuant to the terms of the lease agreement, the Company will pay a base rent in the first year of the agreement of $9,606 monthly with an annual increase in November each year of 3.0% through the term of the agreement. The total amount of rent and rent adjustments shall be abated for a period of five months from the period commencing November 1, 2024 and expiring March 31, 2025. In addition, the Company remitted a security deposit of $52,353 to the landlord at execution and is also responsible for taxes and other operating expenses related to the space. The Company has treated tenancy for the period prior to rent commencement as a free rental period for accounting purposes. During the three months and nine months ended September 30, 2024, the Company did not enter into any new finance lease agreements. Operating and finance lease amounts from continuing operations included in the unaudited condensed consolidated balance sheet are as follows (in thousands):
Classification |  | Financial Statement Line Item |  | September 30, 2024 |  | December 31, 2023
Long-term Assets |  | Right-of-use assets, operating leases |  | $ | 28,623 |  |  | $ | 27,784 |
Long-term Assets |  | Property, plant and equipment |  | 1,303 |  |  | 1,543 |
Current liabilities |  | Current portion of lease liabilities, operating leases |  | 1,448 |  |  | 1,140 |
Current liabilities |  | Current portion of lease liabilities, finance leases |  | 288 |  |  | 292 |
Non-current liabilities |  | Non-current portion of lease liabilities, operating leases |  | 30,433 |  |  | 29,729 |
Non-current liabilities |  | Non-current portion of lease liabilities, finance leases |  | 1,089 |  |  | 1,307 |
Total Lease Cost Individual components of the total lease cost incurred by the Company are as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease cost 1 | $ | 1,007 |  |  | $ | 985 |  |  | $ | 2,978 |  |  | $ | 2,956 |
Finance lease cost: |  |  |  |  |  |  |
Amortization of right-of-use assets | 79 |  |  | 87 |  |  | 237 |  |  | 263 |
Interest on finance lease liabilities | 22 |  |  | 24 |  |  | 65 |  |  | 61 |
Sublease income | (92) |  |  | (91) |  |  | (276) |  |  | (273) |
Total lease cost | $ | 1,016 |  |  | $ | 1,005 |  |  | $ | 3,004 |  |  | $ | 3,007 |
1 Includes short term leases, which are immaterial Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the unaudited condensed consolidated statements of income (loss). Maturity of Leases The amounts of undiscounted future minimum lease payments under leases in continuing operations as of September 30, 2024 are as follows:
(in thousands) | Operating |  | Finance
Remainder of 2024 | $ | 898 |  |  | $ | 90 |
2025 | 3,698 |  |  | 361 |
2026 | 3,750 |  |  | 361 |
2027 | 3,825 |  |  | 361 |
2028 | 3,903 |  |  | 303 |
Thereafter | 31,937 |  |  | 85 |
Total undiscounted minimum future lease payments | 48,011 |  |  | 1,561 |
Imputed interest | (16,130) |  |  | (184) |
Present value of lease liabilities | $ | 31,881 |  |  | $ | 1,377 |
Lease Term and Discount Rate
Weighted-average remaining lease term | September 30, 2024 |  | December 31, 2023
Operating leases | 11.85 years |  | 12.67 years
Finance leases | 4.37 years |  | 5.07 years
Weighted-average discount rate |  |  |
Operating leases | 7.17 | % |  | 8.33 | %
Finance leases | 5.93 | % |  | 5.92 | %
Subleases During the second quarter of 2024, the Company entered into a sublease agreement with a third party to sublease the former Specialty Pipe and Tube, Inc. facilities in Mineral Ridge, Ohio and Houston, Texas. The sublease agreement continues through the remaining term of the Master Lease Agreement and will expire on September 30, 2036, unless terminated in accordance with the sublease agreement. The sublease provides for an annual base rent of approximately $0.1 million in the first year, which increases on an annual basis by 2.0%. The sublessee is responsible for taxes and all operating expenses related to the subleased space. The Company also currently subleases the former Palmer facility and records cash receipts related to the subleases in other expense (income) on the unaudited condensed consolidated statements of income (loss). Future expected cash receipts from the Company's subleases as of September 30, 2024 are as follows:
(in thousands) | Sublease Receipts
Remainder of 2024 | $ | 145 |
2025 | 582 |
2026 | 594 |
2027 | 606 |
2028 | 618 |
Thereafter | 5,229 |
Total sublease receipts | $ | 7,774 |
Leases | Leases The Company's portfolio of leases contains both finance and operating leases that relate to real estate and manufacturing equipment. Substantially all of the value of the Company's lease portfolio relates to the Master Lease with Store Master Funding XII, LLC (“Store”), an affiliate of Store Capital Corporation ("Store Capital") that was entered into in 2016 and amended with the American Stainless acquisition in 2019 as well as the sale of land at the Munhall facility in 2020. During the third quarter of 2024, the Company and Store closed on a transaction pursuant to which Store sold to a third party approximately 20,200 square feet of warehouse space located at Ascent’s facility in Cleveland, Tennessee. As a result of the sale, the Company and Store entered into a Fourth Amended and Restated Master Lease Agreement (the “Fourth Master Lease”) to reduce the Company's rent at the Cleveland facility pursuant to the terms and conditions of the Third Amended and Restated Master Lease Agreement between the parties dated September 10, 2020. The Fourth Master Lease was determined to be a lease modification that qualified for a remeasurement of the existing lease and not a separate contract. Upon modification of the Fourth Master Lease, the right-of-use asset and operating lease liability were remeasured using an incremental borrowing rate determined on the date of modification. As such, the Company recognized an increase in the right-of-use asset and operating lease liability related to the Fourth Master Lease of $1.3 million and recognized a gain on the modification of $0.1 million, which is reported within operating expenses on the unaudited consolidated statements of income (loss). As of September 30, 2024, operating lease liabilities related to the master lease agreement with Store Capital totaled $31.2 million, or 94% of the total lease liabilities on the consolidated balance sheet. On July 16, 2024, the Company entered into a sixty-five month operating lease agreement with respect to certain office property commencing November 1, 2024 with one option to extend an additional sixty months at the end of the lease term. Pursuant to the terms of the lease agreement, the Company will pay a base rent in the first year of the agreement of $9,606 monthly with an annual increase in November each year of 3.0% through the term of the agreement. The total amount of rent and rent adjustments shall be abated for a period of five months from the period commencing November 1, 2024 and expiring March 31, 2025. In addition, the Company remitted a security deposit of $52,353 to the landlord at execution and is also responsible for taxes and other operating expenses related to the space. The Company has treated tenancy for the period prior to rent commencement as a free rental period for accounting purposes. During the three months and nine months ended September 30, 2024, the Company did not enter into any new finance lease agreements. Operating and finance lease amounts from continuing operations included in the unaudited condensed consolidated balance sheet are as follows (in thousands):
Classification |  | Financial Statement Line Item |  | September 30, 2024 |  | December 31, 2023
Long-term Assets |  | Right-of-use assets, operating leases |  | $ | 28,623 |  |  | $ | 27,784 |
Long-term Assets |  | Property, plant and equipment |  | 1,303 |  |  | 1,543 |
Current liabilities |  | Current portion of lease liabilities, operating leases |  | 1,448 |  |  | 1,140 |
Current liabilities |  | Current portion of lease liabilities, finance leases |  | 288 |  |  | 292 |
Non-current liabilities |  | Non-current portion of lease liabilities, operating leases |  | 30,433 |  |  | 29,729 |
Non-current liabilities |  | Non-current portion of lease liabilities, finance leases |  | 1,089 |  |  | 1,307 |
Total Lease Cost Individual components of the total lease cost incurred by the Company are as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Operating lease cost 1 | $ | 1,007 |  |  | $ | 985 |  |  | $ | 2,978 |  |  | $ | 2,956 |
Finance lease cost: |  |  |  |  |  |  |
Amortization of right-of-use assets | 79 |  |  | 87 |  |  | 237 |  |  | 263 |
Interest on finance lease liabilities | 22 |  |  | 24 |  |  | 65 |  |  | 61 |
Sublease income | (92) |  |  | (91) |  |  | (276) |  |  | (273) |
Total lease cost | $ | 1,016 |  |  | $ | 1,005 |  |  | $ | 3,004 |  |  | $ | 3,007 |
1 Includes short term leases, which are immaterial Reduction in carrying amounts of right-of-use assets held under finance leases is included in depreciation expense. Minimum rental payments under operating leases are recognized on a straight-line method over the term of the lease including any periods of free rent and are included in selling, general, and administrative expense on the unaudited condensed consolidated statements of income (loss). Maturity of Leases The amounts of undiscounted future minimum lease payments under leases in continuing operations as of September 30, 2024 are as follows:
(in thousands) | Operating |  | Finance
Remainder of 2024 | $ | 898 |  |  | $ | 90 |
2025 | 3,698 |  |  | 361 |
2026 | 3,750 |  |  | 361 |
2027 | 3,825 |  |  | 361 |
2028 | 3,903 |  |  | 303 |
Thereafter | 31,937 |  |  | 85 |
Total undiscounted minimum future lease payments | 48,011 |  |  | 1,561 |
Imputed interest | (16,130) |  |  | (184) |
Present value of lease liabilities | $ | 31,881 |  |  | $ | 1,377 |
Lease Term and Discount Rate
Weighted-average remaining lease term | September 30, 2024 |  | December 31, 2023
Operating leases | 11.85 years |  | 12.67 years
Finance leases | 4.37 years |  | 5.07 years
Weighted-average discount rate |  |  |
Operating leases | 7.17 | % |  | 8.33 | %
Finance leases | 5.93 | % |  | 5.92 | %
Subleases During the second quarter of 2024, the Company entered into a sublease agreement with a third party to sublease the former Specialty Pipe and Tube, Inc. facilities in Mineral Ridge, Ohio and Houston, Texas. The sublease agreement continues through the remaining term of the Master Lease Agreement and will expire on September 30, 2036, unless terminated in accordance with the sublease agreement. The sublease provides for an annual base rent of approximately $0.1 million in the first year, which increases on an annual basis by 2.0%. The sublessee is responsible for taxes and all operating expenses related to the subleased space. The Company also currently subleases the former Palmer facility and records cash receipts related to the subleases in other expense (income) on the unaudited condensed consolidated statements of income (loss). Future expected cash receipts from the Company's subleases as of September 30, 2024 are as follows:
(in thousands) | Sublease Receipts
Remainder of 2024 | $ | 145 |
2025 | 582 |
2026 | 594 |
2027 | 606 |
2028 | 618 |
Thereafter | 5,229 |
Total sublease receipts | $ | 7,774 |

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