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Hudson Technologies Reports Fourth Quarter 2018 Results

PEARL RIVER, N.Y., March 06, 2019 (GLOBE NEWSWIRE) -- Hudson Technologies, Inc. (HDSN) announced results for the fourth quarter and year ended December 31, 2018.  The financial results for both 2018 and 2017 include the operations of Aspen Refrigerants, Inc. (“ARI”) which was acquired on October 10, 2017.

For the quarter ended December 31, 2018 Hudson reported revenues of $25.7 million, an increase of 5% compared to $24.6 million in the comparable 2017 period, which was primarily attributable to a 38% increase in the number of pounds of certain refrigerants sold, partially offset by price declines of certain refrigerants.  Gross margin in the fourth quarter of 2018 was 12%, essentially consistent with gross margin of 12.3% in the fourth quarter of 2017. The Company recorded a net loss of $8.1 million or ($0.19) per basic and diluted share in the fourth quarter of 2018, as compared to a net loss of $5.2 million or ($0.12) per basic and diluted share in the same period of 2017.  During the fourth quarter of 2018 there were no benefits for income taxes, compared to a $7.4 million income tax benefit during the fourth quarter of 2017 related to the Tax Cuts & Jobs Act. 
    
For the year ended December 31, 2018, Hudson reported revenues of $166.5 million, an increase of 19% compared to $140.4 million for full year 2017.  The Company had negative gross margin for 2018 due to a non-cash inventory write down of approximately $35.9 million and an additional amortization of inventory step-up in basis of approximately $3.7 million, as compared to a gross margin of 27% in 2017.  The Company’s net loss for 2018 was $55.7 million, or ($1.31) per basic and diluted share, which included non-cash inventory adjustments totaling approximately $39.6 million and non-recurring expense of approximately $6.1 million primarily related to the acquisition and integration of ARI, as compared to net income of $11.2 million or $0.27 per basic and $0.26 per diluted share in 2017.  Full year 2017 net income includes the aforementioned $7.4 million benefit related to the Tax Cuts & Jobs Act.    

Kevin J. Zugibe, Chairman and Chief Executive Officer of Hudson Technologies commented, “2018 was a challenging year, characterized by one of the most difficult selling seasons we’ve experienced to date.  In addition to severe price corrections in nearly all of the refrigerants we sell, a ‘just-in-time’ buying pattern emerged, which resulted in lower than expected demand throughout the traditional nine-month selling season.  During the fourth quarter of 2018 however, we saw an increase in demand for certain refrigerants, an unusual development as our fourth quarter is typically characterized by negligible sales volume.  While the demand increase was offset by lower pricing, we were pleased to see this increased order activity from our customer base. 

“During the fourth quarter we implemented several efficiency initiatives which we expect to complete by the end of March 2019.  The resulting annual benefit from these initiatives is expected to be over $3 million in cost reductions.  Additionally, we believe we have the opportunity to drive improved margins in 2019 as we replace higher priced inventory with lower priced product.  In addition, despite the headwinds we faced in 2018, the Company generated $36 million of cash flow from operations and paid down $37 million of debt in 2018.

“We’re optimistic about the positive momentum we’re seeing for the regulation of HFC refrigerants.  With the anticipated phase down of HFCs, we expect to see the establishment of an allocation system as well as a tightening in the supply/demand balance that will likely result in increased pricing.  We believe the phase out of R-22 and phase down of HFCs continue to represent tremendous growth opportunities for our company.”  

Mr. Zugibe concluded, “As we progress through 2019, we believe our longstanding customer base, diversified product offerings and efficient and expanded distribution network leave us well positioned to capitalize on the market opportunities we are seeing with existing and next generation refrigerants.  We remain focused on meeting the needs of our customers and exceeding their expectations in terms of product availability and delivery as we work to increase our market share and advance our leadership position in the marketplace.”

Conference Call Information

The Company will host a conference call and webcast to discuss the fourth quarter results today, March 6, 2019 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 April 6, 2019 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331.  Callers should use conference ID: 44519. 

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  remain in compliance with the financial covenants in its loan agreements; 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.

Investor Relations Contact:
John Nesbett/Jennifer Belodeau
IMS Investor Relations
(203) 972-9200
jnesbett@institutionalms.com
Company Contact:
Brian F. Coleman, President & COO
Hudson Technologies, Inc.
(845) 735-6000
bcoleman@hudsontech.com


   
Hudson Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in thousands, except for share and par value amounts)
 
   
    December 31,  
    2018     2017  
Assets                
Current assets:                
Cash and cash equivalents   $ 2,272     $ 5,002  
Trade accounts receivable – net     14,065       14,831  
Inventories     101,962       172,485  
Income tax receivable           9,664  
Prepaid expenses and other current assets     5,287       6,934  
Total current assets     123,586       208,916  
                 
Property, plant and equipment, less accumulated depreciation     27,395       30,461  
Goodwill     47,803       49,464  
Intangible assets, less accumulated amortization     29,451       32,419  
Other assets     106       184  
Total Assets   $ 228,341     $ 321,444  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
Trade accounts payable   $ 8,671     $ 10,885  
Accrued expenses and other current liabilities     19,023       15,221  
Accrued payroll     1,046       3,052  
Current maturities of long-term debt     2,672       1,050  
Short-term debt     29,000       65,152  
Total current liabilities     60,412       95,360  
Deferred tax liability     443       1,473  
Long-term debt, less current maturities, net of deferred financing costs     98,273       101,158  
Total Liabilities     159,128       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 42,602,431 and 42,398,140     426       424  
Additional paid-in capital     115,719       114,302  
Retained earnings (Accumulated deficit)     (46,932     8,727  
Total Stockholders' Equity     69,213       123,453  
                 
Total Liabilities and Stockholders' Equity   $ 228,341     $ 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 December 31,
    Twelve months
ended December 31,
 
    2018     2017     2018     2017  
                         
Revenues   $ 25,721     $ 24,613     $ 166,525     $ 140,380  
Cost of sales     22,638       21,586       173,890       102,396  
Gross profit (loss)     3,083       3,027       (7,365 )     37,984  
                                 
Operating expenses:                                
Selling, general and administrative     6,232       11,921       32,270       21,745  
Amortization     748       743       2,973       1,107  
Total operating expenses     6,980       12,664       35,243       22,852  
                                 
Operating income (loss)     (3,897 )     (9,637 )     (42,608 )     15,132  
                                 
Interest expense     4,139       2,958       14,755       3,128    
                                   
(Loss) income before income taxes     (8,036 )     (12,595 )     (57,363 )     12,004    
                                   
Income tax expense (benefit)     71       (7,389 )     (1,704 )     847    
                                   
Net (loss) income   $ (8,107 )   $ (5,206   $ (55,659 )   $ 11,157    
                                   
Net (loss) income per common share – Basic   $ (0.19 )   $ (0.12 )   $ (1.31 )   $ 0.27    
Net (loss) income per common share – Diluted   $ (0.19 )   $ (0.12 )   $ (1.31 )   $ 0.26    
Weighted average number of shares outstanding – Basic     42,600,898       42,216,987       42,484,972       41,764,230    
Weighted average number of shares outstanding – Diluted     42,600,898       42,216,987       42,484,972       42,766,843