Hudson Technologies, Inc. (NASDAQ: HDSN) announced results for the
second quarter and six months ended June 30, 2019.
For the quarter ended June 30, 2019 Hudson
reported revenues of $56.0 million compared to $57.8 million in the
comparable 2018 period. Refrigerant average selling prices
declined by approximately 19%, partially offset by a 12% increase
in volume. Revenue from the Defense Logistics Agency (“DLA”)
increased by approximately $2.3 million in the quarter. The
Company recorded lower of cost or net realizable value (“NRV”)
adjustments to its inventory of $9.2 million and $34.7 million
during the second quarter of 2019 and 2018, respectively. The
2019 NRV adjustment was primarily attributed to the remaining R-22
inventory purchased in connection with the acquisition of Aspen
Refrigerants, Inc. (“ARI”). Selling, general and
administrative (“SG&A”) expenses for the three-month period
ended June 30, 2019 were $6.8 million, a decrease of $3.8 million
from the $10.6 million reported during the comparable 2018 period.
The reduction in SG&A was primarily attributable to
professional fees pertaining to integration and services relating
to the acquisition of ARI, which declined by approximately $2.5
million from the second quarter of 2018, as well as a reduction in
payroll-related expenses, advertising and other professional fees
in the second quarter of 2019 compared to the 2018 period.
The Company’s net loss for the second quarter of 2019, which
includes the above mentioned $9.2 million inventory adjustment, was
$13.8 million, or $(0.32) per basic and diluted share. This
compares to a net loss for the second quarter of 2018, which
includes the above mentioned $34.7 million inventory adjustment, of
$30.6 million or $(0.72) per basic and diluted share.
For the six months ended June 30, 2019, Hudson
reported revenues of $90.7 million compared to $100.3 million in
the comparable 2018 period. Refrigerant average selling
prices declined by approximately 19%, partially offset by a 3%
increase in refrigerant volume. Revenue from the DLA also
increased by approximately $4.1 million. Net loss for the
first half of 2019, which includes the above mentioned $9.2 million
inventory adjustment, was $17.8 million, or ($0.42) per basic and
diluted share. This compares to a net loss in the first half
of 2018, which includes the above mentioned $34.7 million inventory
adjustment, of $33.7 million, or $(0.79) per basic and diluted
share.
In August 2019, following the end of the second
quarter, the Company successfully completed the working capital
adjustment process arising from the acquisition of ARI, including
the settlement of related litigation, which resulted in Airgas
agreeing to make a cash payment to Hudson of $8.9 million.
Loan Covenant Defaults
The Company failed to comply with the financial
covenants contained in its term loan facility and its revolving
credit facility at June 30, 2019 and is currently in default under
those agreements. Other than the financial covenants, the
Company has fully complied with all of its debt payment and other
obligations on a timely basis and had over $21 million of
availability pursuant to the borrowing base formula in its
revolving loan facility as of June 30, 2019. As such, the
Company does not believe that the covenant defaults relate to a
liquidity issue but relate to a leverage issue under the current
covenant structure. The Company is currently seeking a waiver and
amendment from its lenders to waive the covenant defaults and reset
the financial covenants under both the term loan facility and the
revolving credit facility. However, the lenders have the
right to declare all amounts under these facilities to be
immediately due and payable, and there can be no assurance that the
Company will be able to obtain any such waivers or amendments on
acceptable terms or at all.
Kevin J. Zugibe, Chairman and Chief Executive
Officer of Hudson Technologies commented, “This was a disappointing
quarter as we continued to encounter lower prices, primarily on
R-22, when compared to 2018. Temperatures remained cool for
much of the quarter, which reduced urgency for customers and a
‘just in time’ buying pattern continued. On a positive note,
even with poor weather conditions, we did see refrigerant sales
volumes increase meaningfully during the second quarter, and, as we
move through the third fiscal quarter, temperatures have risen to
more seasonal levels.
“A benefit of our experience in this industry is
that we have faced and managed through price corrections and
disappointing sales seasons before and as we sell through the
higher priced layers within our FIFO inventory, we expect to return
to more historical margin levels. We remain optimistic about
the long-term market opportunity and remain focused on driving
growth by leveraging our positioning at two key points in the
supply chain and our ability to provide any refrigerant, anywhere
at any time.”
Conference Call Information
The Company will host a conference call and
webcast today, Wednesday, August 14, 2019 at 5:00 p.m. Eastern
Time, to discuss the Company’s second quarter results.
To access the live webcast, log onto the Hudson
Technologies website at www.hudsontech.com, and click on “Investor
Relations”.
To participate in the call by phone, dial (877)
407-9205 approximately five minutes prior to the scheduled start
time. International callers please dial (201) 689-8054.
A replay of the teleconference will be available
until September 14, 2019 and may be accessed by dialing (877)
481-4010. International callers may dial (919) 882-2331.
Callers should use conference ID: 53040.
About Hudson Technologies
Hudson Technologies, Inc. is a leading provider
of innovative and sustainable solutions for optimizing performance
and enhancing reliability of commercial and industrial chiller
plants and refrigeration systems. Hudson's proprietary
RefrigerantSide® Services increase operating efficiency, provide
energy and cost savings, reduce greenhouse gas emissions and the
plant’s carbon footprint while enhancing system life and
reliability of operations at the same time. RefrigerantSide®
Services can be performed at a customer's site as an integral part
of an effective scheduled maintenance program or in response to
emergencies. Hudson also offers SMARTenergy OPS®, which is a
cloud-based Managed Software as a Service for continuous
monitoring, Fault Detection and Diagnostics and real-time
optimization of chilled water plants. In addition, the Company
sells refrigerants and provides traditional reclamation services
for commercial and industrial air conditioning and refrigeration
uses. For further information on Hudson, please visit the Company's
web site at www.hudsontech.com.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995
Statements contained herein which are not
historical facts constitute forward-looking statements. These
include statements regarding management’s intentions, plans,
beliefs, expectations or forecasts for the future including,
without limitation, Hudson’s expectations with respect to the
benefits, costs and other anticipated financial impacts of the ARI
transaction; future financial and operating results of the Company;
the Company’s ability to secure amendments to its credit facilities
and thereafter to remain in compliance with the financial covenants
therein; and the Company’s plans, objectives, expectations and
intentions with respect to future operations and services. Such
forward-looking statements involve a number of known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such factors include, but are not limited to,
changes in the laws and regulations affecting the industry, changes
in the demand and price for refrigerants (including unfavorable
market conditions adversely affecting the demand for, and the price
of, refrigerants), the Company's ability to source refrigerants,
regulatory and economic factors, seasonality, competition,
litigation, the nature of supplier or customer arrangements that
become available to the Company in the future, adverse weather
conditions, possible technological obsolescence of existing
products and services, possible reduction in the carrying value of
long-lived assets, estimates of the useful life of its assets,
potential environmental liability, customer concentration, the
ability to obtain financing, any delays or interruptions in
bringing products and services to market, the timely availability
of any requisite permits and authorizations from governmental
entities and third parties as well as factors relating to doing
business outside the United States, including changes in the laws,
regulations, policies, and political, financial and economic
conditions, including inflation, interest and currency exchange
rates, of countries in which the Company may seek to conduct
business, the Company’s ability to successfully integrate ARI’s
operations and any assets it acquires from other third parties into
its operations, and other risks detailed in the Company's 10-K for
the year ended December 31, 2018 and other subsequent filings with
the Securities and Exchange Commission. Examples of such risks and
uncertainties specific to the ARI transaction include, but are not
limited to, the possibility that the expected benefits will not be
realized, or will not be realized within the expected time period.
The words "believe", "expect", "anticipate", "may", "plan",
"should" and similar expressions identify forward-looking
statements. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the
date the statement was made.
Investor Relations Contact: |
Company Contact: |
John Nesbett/Jennifer Belodeau |
Brian F. Coleman, President & COO |
IMS Investor Relations |
Hudson Technologies, Inc. |
(203) 972-9200 |
(845) 735-6000 |
jnesbett@institutionalms.com |
bcoleman@hudsontech.com |
Hudson Technologies, Inc. and
SubsidiariesConsolidated Balance
Sheets(Amounts in thousands, except for share and par
value amounts)
|
|
June 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,302 |
|
|
$ |
2,272 |
|
Trade accounts receivable – net |
|
|
28,050 |
|
|
|
14,065 |
|
Inventories – net |
|
|
75,247 |
|
|
|
101,962 |
|
Prepaid expenses and other current assets |
|
|
6,783 |
|
|
|
5,287 |
|
Total current
assets |
|
|
111,382 |
|
|
|
123,586 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment,
less accumulated depreciation |
|
|
24,973 |
|
|
|
27,395 |
|
Goodwill |
|
|
47,803 |
|
|
|
47,803 |
|
Intangible assets, less
accumulated amortization |
|
|
27,977 |
|
|
|
29,451 |
|
Right of use asset |
|
|
7,014 |
|
|
|
- |
|
Other assets |
|
|
87 |
|
|
|
106 |
|
Total
Assets |
|
$ |
219,236 |
|
|
$ |
228,341 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
9,681 |
|
|
$ |
8,671 |
|
Accrued expenses and other current liabilities |
|
|
18,162 |
|
|
|
19,023 |
|
Accrued payroll |
|
|
1,101 |
|
|
|
1,046 |
|
Short-term debt |
|
|
33,000 |
|
|
|
29,000 |
|
Current maturities of long-term debt |
|
|
99,674 |
|
|
|
2,672 |
|
Total current
liabilities |
|
|
161,618 |
|
|
|
60,412 |
|
Deferred tax liability |
|
|
586 |
|
|
|
443 |
|
Long-term lease liabilities |
|
|
5,012 |
|
|
|
— |
|
Long-term debt, less current maturities |
|
|
6 |
|
|
|
98,273 |
|
Total
Liabilities |
|
|
167,222 |
|
|
|
159,128 |
|
|
|
|
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity: |
|
|
|
|
|
|
|
|
Preferred stock, shares authorized 5,000,000: Series A Convertible
preferred stock, $0.01 par value ($100 liquidation preference
value); shares authorized 150,000; none issued or outstanding |
|
|
— |
|
|
|
— |
|
Common stock, $0.01 par value; shares authorized 100,000,000;
issued and outstanding 42,612,431 at June 30, 2019 and 42,602,431
at December 31, 2018 |
|
|
426 |
|
|
|
426 |
|
Additional paid-in capital |
|
|
116,356 |
|
|
|
115,719 |
|
Accumulated deficit |
|
|
(64,768 |
) |
|
|
(46,932 |
) |
Total Stockholders’
Equity |
|
|
52,014 |
|
|
|
69,213 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
219,236 |
|
|
$ |
228,341 |
|
|
|
|
|
|
|
|
|
|
Hudson Technologies, Inc. and
SubsidiariesConsolidated Statements of
Operations(unaudited)(Amounts in
thousands, except for share and per share amounts)
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
56,011 |
|
|
$ |
57,831 |
|
|
$ |
90,675 |
|
|
$ |
100,259 |
|
Cost of
sales |
|
|
58,377 |
|
|
|
83,913 |
|
|
|
86,056 |
|
|
|
118,436 |
|
Gross
profit |
|
|
(2,366 |
) |
|
|
(26,082 |
) |
|
|
4,619 |
|
|
|
(18,177 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
6,848 |
|
|
|
10,605 |
|
|
|
12,872 |
|
|
|
18,682 |
|
Amortization |
|
|
753 |
|
|
|
741 |
|
|
|
1,474 |
|
|
|
1,483 |
|
Total operating expenses |
|
|
7,601 |
|
|
|
11,346 |
|
|
|
14,346 |
|
|
|
20,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
(9,967 |
) |
|
|
(37,428 |
) |
|
|
(9,727 |
) |
|
|
(38,342 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
(4,267 |
) |
|
|
(3,346 |
|
|
|
(8,474 |
|
|
|
(6,552 |
) |
Other income |
|
|
508 |
|
|
|
-- |
|
|
|
508 |
|
|
|
-- |
|
Total other
expense |
|
|
(3,759 |
|
|
|
(3,346 |
) |
|
|
(7,966 |
) |
|
|
(6,552 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes |
|
|
(13,726 |
) |
|
|
(40,774 |
) |
|
|
(17,693 |
) |
|
|
(44,894 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense |
|
|
71 |
|
|
|
(10,158 |
) |
|
|
143 |
|
|
|
(11,222 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(13,797 |
) |
|
$ |
(30,616 |
) |
|
$ |
(17,836 |
) |
|
$ |
(33,672 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share – Basic and Diluted |
|
$ |
(0.32 |
) |
|
$ |
(0.72 |
) |
|
$ |
(0.42 |
) |
|
$ |
(0.79 |
) |
Weighted average number of shares outstanding – Basic and
Diluted |
|
|
42,604,189 |
|
|
|
42,403,140 |
|
|
|
42,603,315 |
|
|
|
42,403,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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