Hudson Technologies Reports Third Quarter 2018 Results

 

 

PEARL RIVER, N.Y., Dec. 05, 2018 (GLOBE NEWSWIRE) -- Hudson Technologies, Inc. (NASDAQ:HDSN) announced results for the third quarter and nine months ended September 30, 2018.

For the quarter ended September 30, 2018 Hudson reported revenues of $40.5 million, an increase of 64% compared to $24.7 million in the comparable 2017 period.  Revenues for the 2018 period included revenues from Aspen Refrigerants, Inc. ("ARI") which was acquired in October 2017.  Excluding the impact of ARI, revenues for the quarter ended September 30, 2018 decreased by $5.8 million from the comparable quarter in 2017.  This decline was attributable to a decrease in the selling price per pound of certain refrigerants sold, which accounted for a decrease in revenues of $2.3 million and a decrease in the number of pounds of certain refrigerants sold, which accounted for a decrease in revenues of $3.5 million.  The Company recorded a net loss of $13.9 million or ($0.33) per basic and diluted share in the third quarter of 2018, as compared to net income of $2.1 million or $0.05 per basic and diluted share in the same period of 2017.  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.   Non-GAAP adjusted net loss for the quarter ended September 30, 2018 was ($0.5) million, or ($0.01) per diluted share, compared to non-GAAP adjusted net income of $3.8 million, or $0.09 per diluted share during the third quarter of 2017.  Adjusted EBITDA was $5.0 million for the third quarter of 2018, as compared to adjusted EBITDA of $3.0 million for the third quarter of 2017.

For the nine months ended September 30, 2018, Hudson reported revenues of $140.8 million, an increase of 22% compared to $115.8 million in the comparable 2017 period.  Revenues for the 2018 period included revenues from ARI.  Excluding the impact of ARI, revenues for the first nine months of 2018 decreased by $44 million from the comparable 2017 period. The decline was attributable to a decrease in the selling price per pound of certain refrigerants sold, which accounted for a decrease in revenues of $29 million and a decrease in the number of pounds of certain refrigerants sold, which accounted for a decrease in revenues of $15 million.  The Company experienced negative gross margins for the first nine months of 2018 compared to gross margin of 30% in the first nine months of 2017.  The Company's net loss for the first nine months of 2018 was $47.6 million, or ($1.12) per basic and diluted share, which included a non-cash inventory write down of approximately $35 million, an approximately $9 million non-cash tax effect for reserve allowance, and approximately $6 million in non-recurring charges related to the acquisition and integration of ARI, as compared to net income of $16.4 million or $0.39 per basic and $0.38 per diluted share in the first nine months of 2017.  Non-GAAP adjusted net loss for the nine months ended September 30, 2018, which excludes any inventory write downs, was ($1.1) million, or ($0.03) per diluted share, compared to non-GAAP adjusted net income of $18.2 million, or $0.42 per diluted share during the first nine months of 2017.  Adjusted EBITDA was $12.6 million for the first nine months of 2018, as compared to adjusted EBITDA of $28.9 million for the first nine months of 2017.

Reconciliations of net income (loss) to non-GAAP adjusted net income (loss), diluted net income (loss) per share to non-GAAP adjusted diluted net income (loss) per share, and net income (loss) to non-GAAP adjusted EBITDA, respectively, are provided in the tables immediately following the consolidated statement of operations. Additional information about the Company's non-GAAP financial measures can be found under the caption "Use of Non-GAAP Measures" below.

Following the close of the quarter, Hudson announced that it has entered into definitive amendments to its term loan and revolving loan credit facilities.  These amendments have been implemented pursuant to a Waiver and Third Amendment to its Term Loan Credit and Security Agreement (the "Third Amendment"), as well as a Second Amendment to its Amended and Restated Revolving Credit and Security Agreement (the "Second Revolver Amendment").  Additionally, on November 30, 2018 the Company filed its Form 10-Q for the period ended June 30, 2018, together with its Form 10-Q for the period ended September 30, 2018. With those filings, the Company has regained compliance with the periodic filing requirement of the Nasdaq Stock Market.

Kevin J. Zugibe, Chairman and Chief Executive Officer of Hudson Technologies commented, "We were pleased to announce definitive amendments to our credit facilities, which we believe provide us with the financial flexibility and liquidity to drive improved operating performance moving forward.  Despite a selling season characterized by just-in-time buying patterns, diminished pricing of most refrigerants and seasonably cooler temperatures, we achieved $35 million in cash flow from operations during the first nine months of 2018, compared to $12.1 million for the comparable period in 2017.  Additionally, we've reduced our debt by $37 million year-to-date and had approximately $45 million of availability as of September 30, 2018.

"The 2018 selling season was one of the most challenging for the industry and our company.  The severe price corrections across nearly all refrigerants were unprecedented.  That said, with our visibility today, we believe that pricing has stabilized and our margins should improve as we replace the higher priced inventory with lower priced product.  Likewise, operationally we are better prepared to more effectively address just-in-time buying patterns, should that pattern continue in 2019."  

Mr. Zugibe concluded, "Our acquisition of ARI has enhanced our customer base and product offerings, giving us added flexibility to navigate the current refrigerant market.  With our solid, longstanding customer base, more diverse product portfolio and expanded distribution network, we remain optimistic about the market opportunity ahead.  As we move forward, we remain focused on strengthening our leadership position in the refrigerant and reclamation industry." 

Conference Call Information

The Company will host a conference call and webcast to discuss the third quarter results today, December 5, 2018 at 5:00 P.M. Eastern Time.

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 January 5, 2019 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331.  Callers should use conference ID: 41503.

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 an amendment to the Term Loan and to remain in compliance with the Term Loan's financial covenants; 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, 2017 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.

Use of Non-GAAP Measures

The Company has presented the following non-GAAP financial measures in this press release: EBITDA, Adjusted EBITDA, Adjusted Net Income (Loss) and Adjusted Net Income (Loss) Per Share (Adjusted EPS). The Company defines EBITDA as the net income (loss) as reported under GAAP, plus income tax expense (benefit), interest expense and depreciation and amortization expense. The Company defines Adjusted EBITDA as EBITDA plus the amortization of the inventory step-up in basis arising from inventory purchased in the ARI acquisition, lower of cost or net realizable value adjustment, non-cash stock compensation expense, and non-recurring transaction fees and integration costs related to the ARI acquisition.  The Company defines Adjusted Net Income (Loss) as the net income (loss) as reported under GAAP plus income tax expense (benefit), the amortization of the inventory step-up in basis arising from inventory purchased in the ARI acquisition, lower of cost or net realizable value adjustment, amortization expense, non-cash stock compensation expense, and non-recurring transaction fees and integration costs related to the ARI acquisition and adjusted for effective tax rates.  The Company defines Adjusted EPS as Adjusted Net Income (Loss) per share.

We present these non-GAAP measures because we believe these measures are useful indicators of our operating performance, particularly in light of the impact of the recent ARI acquisition. Our management believes that detail as to the impact of the specified acquisition-related matters and other matters is useful in understanding the overall change in the consolidated results of operations for Hudson Technologies from one reporting period to another. Our management uses these non-GAAP measures principally as a measure of our operating performance and believes that these measures are useful to investors because they are frequently used by analysts, investors and other interested parties to evaluate the operating performance of companies in our industry. We also believe that these measures will be useful to our management and investors during 2018 as the impact of the ARI acquisition continues to be reflected in the Company's financial results.

Hudson Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except for share and par value amounts)

    September 30,     December 31,  
    2018     2017  
    (unaudited)        
Assets                
Current assets:                
Cash and cash equivalents   $ 1,378     $ 5,002  
Trade accounts receivable – net     23,166       14,831  
Inventories     106,508       172,485  
Income tax receivable     -       9,664  
Prepaid expenses and other current assets     3,560       6,934  
Total current assets     134,612       208,916  
                 
Property, plant and equipment, less accumulated depreciation     28,330       30,461  
Deferred tax asset     -       -  
Goodwill     47,803       49,464  
Intangible assets, less accumulated amortization     30,194       32,419  
Other assets     72       184  
Total Assets   $ 241,011     $ 321,444  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Trade accounts payable   $ 10,836     $ 10,885  
Accrued expenses and other current liabilities     21,545       15,221  
Accrued payroll     1,916       3,052  
Current maturities of long-term debt     1,050       1,050  
Short-term debt     29,065       65,152  
Total current liabilities     64,412       95,360  
Deferred tax liability     372       1,473  
Long-term debt, less current maturities     99,675       101,158  
Total Liabilities     164,459       197,991  
                 
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 42,599,431 and 42,398,140     426       424  
Additional paid-in capital     114,951       114,302  
Retained earnings (accumulated deficit)     (38,825 )     8,727  
Total Stockholders' Equity     76,552       123,453  
                 
Total Liabilities and Stockholders' Equity   $ 241,011     $ 321,444  
 
 

Hudson Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited)
(Amounts in thousands, except for share and per share amounts)

    Three months
ended September 30,
    Nine months
ended September 30,
 
    2018     2017     2018     2017  
                         
Revenues   $ 40,545     $ 24,706     $ 140,804     $ 115,766  
Cost of sales     32,816       19,636       151,252       80,811  
Gross profit     7,729       5,070       (10,448 )     34,955  
                                 
Operating expenses:                                
Selling, general and administrative     7,356       3,473       26,038       9,823  
Amortization     742       121       2,225       364  
Total operating expenses     8,098       3,594       28,263       10,187  
                                 
Operating income (loss)     (369 )     1,476       (38,711 )     24,768  
                                 
Interest expense     4,064       24       10,616       170  
                                 
(Loss) income before income taxes     (4,433 )     1,452       (49,327 )     24,598  
                                 
Income tax expense (benefit)     9,447       (652 )     (1,775 )     8,236  
                                 
Net (loss) income   $ (13,880 )   $ 2,104     $ (47,552 )   $ 16,362  
                                 
Net (loss) income per common share – Basic   $ (0.33 )   $ 0.05     $ (1.12 )   $ 0.39  
Net (loss) income per common share – Diluted   $ (0.33 )   $ 0.05     $ (1.12 )   $ 0.38  
Weighted average number of shares outstanding – Basic     42,530,476       41,869,528       42,445,926       41,648,439  
Weighted average number of shares outstanding – Diluted     42,530,476       43,463,982       42,445,926       43,173,427  

  

Appendix – Non GAAP Reconciliations (unaudited) 

Adjusted EBITDA   Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2018     2017       2018     2017  
                         
Net (loss) income   $   (13,880   $   2,104       $   (47,552   $   16,362  
Income tax (benefit) expense     9,447       (652 )       (1,775     8,236  
Interest expense     4,064       24         10,616       170  
Depreciation expense      1,043        358          3,123        1,324  
Amortization expense      742        121          2,225        364  
EBITDA     1,416       1,955         (33,363     26,456  
Inventory step-up in basis     --       --         3,654       --  
Lower of cost or net realizable value adjustment     1,192       --         35,905       --  
Stock compensation expense     119       28         332       28  
Nonrecurring expenses      2,227        1,041          6,094        2,398  
  Adjusted EBITDA    $ 4,954      $ 3,024        $ 12,622      $ 28,882  
                                 
 Adjusted Net Income (Loss) and Net Income (Loss) Per Share   Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2018       2017       2018       2017  
                         
Net (loss) income   $ (13,880 )     $   2,104       $ (47,552 )     $   16,362  
Income tax (benefit) expense     9,447         (652 )       (1,775 )       8,236  
Pretax income (loss)     (4,433 )       1,452         (49,327 )       24,598  
Inventory step-up in basis     --         --         3,654         --  
Lower of cost or net realizable value adjustment     1,192         --         35,905         --  
Amortization expense     742         121         2,225         364  
Stock compensation expense     119         28         332         28  
Nonrecurring expenses     2,227         1,041         6,094         2,398  
Adjusted pretax income (loss)     (153 )       2,642         (1,117 )       27,388  
Income tax expense (benefit)     326         (1,186 )       (40 )       9,170  
  Adjusted net income (loss)   $ (479 )      $ 3,828       $ (1,077 )      $ 18,218  
                                 
Net income (loss) per share                                
  Diluted net income (loss) per common share   (0.33 )     0.05       (1.12 )     0.38  
 Adjustment to diluted net income (loss) per common share   $ 0.32       $ 0.04       $ 1.09       $ 0.04  
  Adjusted diluted net income (loss) per common share   $ (0.01 )     $ 0.09       $ (0.03 )     $ 0.42  
                                 
                                 

 

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