Hudson Technologies, Inc. (NASDAQ: HDSN) announced results for the
third quarter and nine months ended September 30, 2019.
For the quarter ended September 30, 2019 Hudson
reported revenues of $45.6 million, an increase of 13% compared to
$40.5 million in the comparable 2018 period. The increase in
revenues was due to an increase in refrigerant volumes and growth
with the DLA contract, offset by a decline in prices of certain
refrigerants sold during the 2019 quarter when compared to
2018. Selling, general and administrative (“SG&A”)
expenses for the three-month period ended September 30, 2019 were
$8.3 million, compared to $7.4 million in the comparable 2018
period. The increase in SG&A was primarily attributable to
professional fees and insurance expense. The Company’s net
income for the third quarter of 2019, was $2.7 million, or $0.06
per basic and diluted share. During the third quarter of
2019, the Company received $8.9 million in proceeds from the
working capital settlement arising from the acquisition of Aspen
Refrigerants, Inc. (“ARI”). Net loss for the third quarter of
2018 was $13.9 million or $(0.33) per basic and diluted share.
Included in the $13.9 million third quarter 2018 loss are
approximately $9 million in non-cash charges related to a deferred
tax reserve and approximately $2 million in non-recurring charges
related to the acquisition and integration of ARI.
For the nine months ended September 30, 2019,
Hudson reported revenues of $136.3 million compared to $140.8
million in the comparable 2018 period. Refrigerant selling
prices declined in 2019 when compared with 2018. The overall
decline in revenues was partially offset by an increase in overall
refrigerant volumes and revenue from the DLA contract.
SG&A expenses for the nine-month period ended September 30,
2019 were $21.2 million, compared to $26.0 million in the
comparable 2018 period. The decrease in SG&A was primarily
attributable to reduced payroll-related expenses, advertising and
other professional fees in the first nine months of 2019. Net
loss for the first nine months of 2019, which includes a $9.2
million inventory adjustment offset by the $8.9 million of
settlement proceeds, was $15.2 million, or ($0.36) per basic and
diluted share. Net loss in the first nine months of 2018,
which included a $34.7 million inventory adjustment, was $47.6
million, or $(1.12) per basic and diluted share.
Loan Covenant Defaults
The Company failed to comply with the financial
covenants contained in its term loan facility and its revolving
credit facility at September 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. Despite the covenant
violations, the Company had over $23 million of availability
pursuant to the borrowing base formula in its revolving loan
facility as of September 30, 2019. During the third quarter
of 2019, the Company utilized its cash from operations to pay over
$18 million of debt. 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, “During the third
quarter, we saw an increase in volume due to Hudson’s ability be
more competitive as we sold through a large portion of our higher
priced inventory. Pricing through the third quarter remained
relatively consistent with pricing throughout the selling season,
but was lower when compared to pricing in the third quarter of
2018. Moreover, during the 2019 sales season, one large
allocation holder indicated that it is no longer supporting R-22
sales. Additionally, the remaining large allocation holders
recently raised their R-22 price and we are currently experiencing
the first price increase this year. We believe those actions,
coupled with the ban of R-22 production and importation after 2019,
will result in a tightening of R-22 supply for the 2020 selling
season.
“We remain confident in the long-term
opportunities for our business, particularly as we sell through the
higher priced R-22 acquired with the Airgas acquisition, which we
expect will result in a margin level more in line with our
historical performance. The demand for cooling systems
remains strong and our positioning at two key points in the supply
chain, along with our ability to provide any refrigerant, anywhere
at any time, remains a competitive strength as we close out 2019
and move into 2020.”
Conference Call Information
The Company will host a conference call and
webcast today, Thursday, November 14, 2019 at 5:00 p.m. Eastern
Time, to discuss the Company’s third 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 December 14, 2019 and may be accessed by dialing (877)
481-4010. International callers may dial (919) 882-2331.
Callers should use conference ID: 56807.
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: John Nesbett/Jennifer
BelodeauIMS Investor Relations (203)
972-9200jnesbett@institutionalms.com |
Company Contact: Brian F. Coleman, President &
COO Hudson Technologies, Inc. (845) 735-6000
bcoleman@hudsontech.com |
Hudson Technologies, Inc. and
SubsidiariesConsolidated Balance
Sheets(Amounts in thousands, except for share and par
value amounts)
|
|
September 30, |
|
|
December 31, |
|
|
|
2019 |
|
|
2018 |
|
|
|
(unaudited) |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
14,686 |
|
|
$ |
2,272 |
|
Trade accounts receivable – net |
|
|
19,765 |
|
|
|
14,065 |
|
Inventories – net |
|
|
59,352 |
|
|
|
101,962 |
|
Prepaid expenses and other current assets |
|
|
4,690 |
|
|
|
5,287 |
|
Total current
assets |
|
|
98,493 |
|
|
|
123,586 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment,
less accumulated depreciation |
|
|
24,543 |
|
|
|
27,395 |
|
Goodwill |
|
|
47,803 |
|
|
|
47,803 |
|
Intangible assets, less
accumulated amortization |
|
|
26,728 |
|
|
|
29,451 |
|
Right of use asset |
|
|
6,481 |
|
|
|
- |
|
Other assets |
|
|
158 |
|
|
|
106 |
|
Total
Assets |
|
$ |
204,206 |
|
|
$ |
228,341 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Trade accounts payable |
|
$ |
8,091 |
|
|
$ |
8,671 |
|
Accrued expenses and other current liabilities |
|
|
20,202 |
|
|
|
19,023 |
|
Accrued payroll |
|
|
857 |
|
|
|
1,046 |
|
Short-term debt |
|
|
15,183 |
|
|
|
29,000 |
|
Current maturities of long-term debt |
|
|
99,321 |
|
|
|
2,672 |
|
Total current
liabilities |
|
|
143,654 |
|
|
|
60,412 |
|
Deferred tax liability |
|
|
1,134 |
|
|
|
443 |
|
Long-term lease liabilities |
|
|
4,460 |
|
|
|
— |
|
Long-term debt, less current maturities |
|
|
5 |
|
|
|
98,273 |
|
Total
Liabilities |
|
|
149,253 |
|
|
|
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 42,628,560 at September 30, 2019 and
42,602,431 at December 31, 2018 |
|
|
426 |
|
|
|
426 |
|
Additional paid-in capital |
|
|
116,628 |
|
|
|
115,719 |
|
Accumulated deficit |
|
|
(62,101 |
) |
|
|
(46,932 |
) |
Total Stockholders’
Equity |
|
|
54,953 |
|
|
|
69,213 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and
Stockholders’ Equity |
|
$ |
204,206 |
|
|
$ |
228,341 |
|
Hudson Technologies, Inc. and
SubsidiariesConsolidated Statements of
Operations(unaudited)(Amounts in
thousands, except for share and per share amounts)
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Revenues |
|
$ |
45,631 |
|
|
$ |
40,545 |
|
|
$ |
136,306 |
|
|
$ |
140,804 |
|
Cost of
sales |
|
|
37,849 |
|
|
|
32,816 |
|
|
|
123,905 |
|
|
|
151,252 |
|
Gross
profit |
|
|
7,782 |
|
|
|
7,729 |
|
|
|
12,401 |
|
|
|
(10,448 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
8,282 |
|
|
|
7,356 |
|
|
|
21,154 |
|
|
|
26,038 |
|
Amortization |
|
|
742 |
|
|
|
742 |
|
|
|
2,216 |
|
|
|
2,225 |
|
Total operating expenses |
|
|
9,024 |
|
|
|
8,098 |
|
|
|
23,370 |
|
|
|
28,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss |
|
|
(1,242 |
) |
|
|
(369 |
) |
|
|
(10,969 |
) |
|
|
(38,711 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(4,447 |
) |
|
|
(4,064 |
) |
|
|
(12,921 |
) |
|
|
(10,616 |
) |
Other income |
|
|
8,904 |
|
|
|
— |
|
|
|
9,412 |
|
|
|
— |
|
Total other income
(expense) |
|
|
4,457 |
|
|
|
(4,064 |
) |
|
|
(3,509 |
) |
|
|
(10,616 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
|
3,215 |
|
|
|
(4,433 |
) |
|
|
(14,478 |
) |
|
|
(49,327 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense |
|
|
548 |
|
|
|
9,447 |
|
|
|
691 |
|
|
|
(1,775 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
2,667 |
|
|
$ |
(13,880 |
) |
|
$ |
(15,169 |
) |
|
$ |
(47,552 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share – Basic and Diluted |
|
$ |
0.06 |
|
|
$ |
(0.33 |
) |
|
$ |
(0.36 |
) |
|
$ |
(1.12 |
) |
Weighted average number of shares outstanding – Basic and
Diluted |
|
|
42,618,391 |
|
|
|
42,530,476 |
|
|
|
42,608,396 |
|
|
|
42,445,926 |
|
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