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EX-99.3 - EX-99.3 - KMG CHEMICALS INCkmg-ex993_161.htm
EX-99.1 - EX-99.1 - KMG CHEMICALS INCkmg-ex991_6.htm
EX-23.1 - EX-23.1 - KMG CHEMICALS INCkmg-ex231_187.htm
8-K/A - 8-K/A - KMG CHEMICALS INCkmg-8ka_20170615.htm

Exhibit 99.2

FLOWCHEM HOLDINGS, LLC

AND SUBSIDIARIES

 

Condensed Consolidated Financial Statements

 

As of March 31, 2017 and December 31, 2016 and for the Three Months

Ended March 31, 2017 and 2016

(Unaudited)

 

 

 

 


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Contents

 

 

Page

 

 

Condensed Consolidated Financial Statements (Unaudited)

 

 

 

Condensed Consolidated Balance Sheets

   as of March 31, 2017 and December 31, 2016

3

 

 

Condensed Consolidated Statements of Income

   for the Three Months Ended March 31, 2017 and 2016

4

 

 

Condensed Consolidated Statements of Cash Flows

   for the Three Months Ended March 31, 2017 and 2016

5

 

 

Notes to Condensed Consolidated Financial Statements

6 - 11

 

 

 

2


 

Condensed Consolidated Financial Statements

(Unaudited)

 

 

 

 


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,636,622

 

 

$

6,592,281

 

Receivables, net of allowance of $108,000, respectively

 

 

15,662,440

 

 

 

16,187,180

 

Inventories

 

 

6,316,708

 

 

 

4,304,426

 

Other current assets

 

 

580,998

 

 

 

309,282

 

 

 

 

 

 

 

 

 

 

Total Current Assets

 

 

26,196,768

 

 

 

27,393,169

 

 

 

 

 

 

 

 

 

 

Property, Plant, and Equipment, net

 

 

21,041,474

 

 

 

20,585,565

 

 

 

 

 

 

 

 

 

 

Other Intangible Assets, net

 

 

51,653,969

 

 

 

53,337,633

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

116,369,900

 

 

 

116,369,900

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

215,262,111

 

 

$

217,686,267

 

 

 

 

 

 

 

 

 

 

Liabilities and Members’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,694,498

 

 

$

3,901,351

 

Accrued expenses

 

 

798,345

 

 

 

1,188,416

 

Accrued interest

 

 

509,991

 

 

 

555,413

 

Income taxes payable

 

 

131,070

 

 

 

109,885

 

Capital lease obligations

 

 

-

 

 

 

146,371

 

Current maturities of debt, net of debt discount and debt issuance costs

 

 

5,655,300

 

 

 

6,219,357

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

10,789,204

 

 

 

12,120,793

 

 

 

 

 

 

 

 

 

 

Long-Term Debt, net of current maturities and debt discount

   and debt issuance costs

 

 

82,070,330

 

 

 

89,738,286

 

 

 

 

 

 

 

 

 

 

Deferred Income Taxes

 

 

1,269,632

 

 

 

1,144,379

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

94,129,166

 

 

 

103,003,458

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Members’ Equity

 

 

121,132,945

 

 

 

114,682,809

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Members’ Equity

 

$

215,262,111

 

 

$

217,686,267

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

3


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Condensed Consolidated Statements of Income

(Unaudited)

 

 

Three Months Ended March 31,

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

Net Sales

 

$

21,758,807

 

 

$

19,382,434

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

10,204,084

 

 

 

9,227,316

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

11,554,723

 

 

 

10,155,118

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

1,283,592

 

 

 

1,153,782

 

Management fees

 

 

243,883

 

 

 

213,265

 

Amortization expense

 

 

1,683,664

 

 

 

1,683,664

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

 

3,211,139

 

 

 

3,050,711

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

 

8,343,584

 

 

 

7,104,407

 

 

 

 

 

 

 

 

 

 

Other (Income) Expenses

 

 

 

 

 

 

 

 

Interest expense

 

 

1,658,914

 

 

 

1,973,578

 

Other expenses

 

 

88,198

 

 

 

88,264

 

Gain on insurance claim

 

 

-

 

 

 

(609,204

)

 

 

 

 

 

 

 

 

 

Total Other Expenses

 

 

1,747,112

 

 

 

1,452,638

 

 

 

 

 

 

 

 

 

 

Income Before Income Tax Expense

 

 

6,596,472

 

 

 

5,651,769

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

 

146,336

 

 

 

7,553

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

6,450,136

 

 

$

5,644,216

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

 

4


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended March 31,

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

Net income

 

$

6,450,136

 

 

$

5,644,216

 

Adjustments to reconcile net income to net cash

   provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

522,828

 

 

 

387,070

 

Amortization of intangible assets

 

 

1,683,664

 

 

 

1,683,664

 

Amortization of debt discount and debt issuance costs

 

 

222,479

 

 

 

222,478

 

Deferred tax expense (benefit)

 

 

125,253

 

 

 

(16,878

)

(Gain) on insurance claim

 

 

-

 

 

 

(609,204

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

524,740

 

 

 

526,842

 

Inventories

 

 

(2,012,282

)

 

 

(1,881,720

)

Other current assets

 

 

(271,716

)

 

 

(1,556,815

)

Accounts payable

 

 

(206,853

)

 

 

(2,510,094

)

Accrued expenses

 

 

(390,071

)

 

 

(1,249,787

)

Accrued interest

 

 

(45,422

)

 

 

(30,855

)

Income taxes payable

 

 

21,185

 

 

 

24,430

 

 

 

 

 

 

 

 

 

 

Net Cash Provided By Operating Activities

 

 

6,623,941

 

 

 

633,347

 

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

Proceeds from disposal of assets

 

 

113,750

 

 

 

-

 

Proceeds from insurance claim

 

 

-

 

 

 

2,358,438

 

Purchases of property, plant, and equipment

 

 

(1,092,487

)

 

 

(1,937,451

)

 

 

 

 

 

 

 

 

 

Net Cash Used In Investing Activities

 

 

(978,737

)

 

 

420,987

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Principal payments for capital lease obligations

 

 

(146,371

)

 

 

(15,477

)

Payments on long-term debt

 

 

(8,454,492

)

 

 

(5,461,867

)

 

 

 

 

 

 

 

 

 

Net Cash Used In Financing Activities

 

 

(8,600,863

)

 

 

(5,477,344

)

 

 

 

 

 

 

 

 

 

Net Decrease in Cash and Cash Equivalents

 

 

(2,955,659

)

 

 

(4,423,010

)

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents - Beginning of Period

 

 

6,592,281

 

 

 

7,657,718

 

 

 

 

 

 

 

 

 

 

Cash and Cash Equivalents - End of Period

 

$

3,636,622

 

 

$

3,234,708

 

 

 

 

 

 

 

 

 

 

Supplemental Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,595,798

 

 

$

1,949,323

 

 

 

 

 

 

 

 

 

 

Cash paid (refund) for income taxes

 

$

(102

)

 

$

-

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

5


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

1.

Organization and Nature of Operations

 

Flowchem Holdings, LLC (“Holdings”) is a Delaware limited liability company which was formed in October 2013. Effective December 6, 2013, Holdings acquired Flowchem Ltd. and Subsidiaries and then simultaneously merged Flowchem Ltd. into Flowchem, LLC (“Flowchem”) at which time planned principal operations commenced. Holdings is primarily engaged in manufacturing and distribution of chemical drag reduction agents for use in the crude and refined oil pipeline industry worldwide as well as providing field and delivery services for its customers. The Company is headquartered in Waller, Texas.

 

The Holdings operating agreement states that Holdings will remain in existence until termination and dissolution in accordance with the Members’ agreement.

 

2.

Basis of Presentation

 

Interim Financial Information

 

The unaudited condensed consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, for interim financial reporting. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Therefore, these condensed consolidated financial statements should be read along with the annual audited consolidated financial statements and notes thereto for the years ended December 31, 2016, 2015 and 2014. The balances as of December 31, 2016, were derived from the audited consolidated financial statements. In management’s opinion, all adjustments necessary for a fair statement are reflected in the interim periods presented.

 

3.

Recent Accounting Pronouncement

 

In May 2014, the Financial Accounting Standards Board (‘‘FASB’’) issued Accounting Standards Update (‘‘ASU’’) 2014-09, Revenue from Contracts with Customers. ASU 2014-09 supersedes existing revenue recognition requirements in GAAP and requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Additionally, it requires expanded disclosures regarding the nature, amount, timing, and certainty of revenue and cash flows from contracts with customers. The ASU is effective for annual and interim reporting periods beginning after December 15, 2016, using either a full or a modified retrospective application approach. The Company is in the initial stages of evaluating the effect of the standard on the consolidated financial statements and continues to evaluate the available transition methods.

 

In February 2016, the FASB issued ASU No, 2016-02, Leases, amending the current accounting for leases. Under the new provisions, all lessees will report a right-of-use asset and a liability for the obligation to make payments for all leases with the exception of those leases with a term of 12 months or less. All other leases will fall into one of two categories: (i) a financing lease or (ii) an operating lease. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. For sale leaseback transactions, a sale will only be recognized if the criteria in the new revenue recognition standard are met. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim within that reporting period, using a modified retrospective approach. Early adoption is permitted. The Company is in the initial stages of evaluating the effect of the standard on the consolidated financial statements.

6


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses. The amendments in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. In addition, ASU 2016-13 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The amendment is effective for public entities for annual reporting periods beginning after December 15, 2019, however early application is permitted for reporting periods beginning after December 15, 2018. The Company is in the initial stages of evaluating the effect of the standard on the consolidated financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 reduces diversity in practice in how certain transactions are classified in the statement of cash flows. The guidance addresses specific cash flow issues for which current GAAP is either unclear or does not include specific guidance. ASU 2016-15 is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessing the potential impact of ASU 2016-15 on the consolidated financial statements of cash flows.

 

In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The ASU is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The ASU will be applied prospectively. We currently do not expect that the adoption of this standard will have a material impact on our consolidated financial statements.

 

4.

Inventories

 

Inventories consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

Finished goods

 

$

2,858,370

 

 

$

1,281,340

 

Work-in-progress

 

 

2,517,026

 

 

 

2,372,000

 

Raw materials

 

 

941,312

 

 

 

651,086

 

 

 

 

 

 

 

 

 

 

Inventories

 

$

6,316,708

 

 

$

4,304,426

 

 

The Company’s policy is to record inventory obsolescence as a reduction to its inventory based on a review of inventory quantities on hand and estimated sales forecasts based on sales history and anticipated future demand. At March 31, 2017 and December 31, 2016, no inventory obsolescence reserves were established by the Company.

 

7


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

5.

Property, Plant, and Equipment

 

Property, plant, and equipment consist of the following:

 

 

 

Estimated

 

 

March 31,

 

 

December 31,

 

 

 

Useful Lives

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

 

-

 

 

$

1,533,482

 

 

$

1,426,547

 

Plant

 

33 years

 

 

 

5,607,801

 

 

 

2,505,350

 

Building

 

15 years

 

 

 

3,323,576

 

 

 

3,323,576

 

Equipment & machinery

 

3-10 years

 

 

 

10,948,719

 

 

 

10,584,612

 

Autos & trucks

 

5 years

 

 

 

2,393,996

 

 

 

2,133,952

 

 

 

 

 

 

 

 

23,807,574

 

 

 

19,974,037

 

Less: accumulated depreciation

 

 

 

 

 

 

(4,238,213

)

 

 

(3,926,637

)

 

 

 

 

 

 

 

19,569,361

 

 

 

16,047,400

 

Equipment not yet placed in service

 

 

 

 

 

 

1,472,113

 

 

 

4,538,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant, and equipment, net

 

 

 

 

 

$

21,041,474

 

 

$

20,585,565

 

 

Provisions for depreciation have been computed, on a straight-line basis, over the estimated useful lives of the assets. Depreciation expense was approximately $523,000 and $387,000 for the three months ended March 31, 2017 and 2016, respectively, and is included in cost of sales in the condensed consolidated statements of income.

 

In July 2015, the Company’s Brookshire facility suffered a loss due to fire.  Facility building and equipment were destroyed in the fire.  The loss was covered by the Company’s insurance policy.  The Company recognized a gain of approximately $609,000 from insurance proceed net of related costs for the three months ended March 31, 2016.  The insurance claims were fully settled in August 2016.

 

6.

Other Intangible Assets

 

Other intangible assets consist of the following:

 

 

 

March 31, 2017

 

 

 

Estimated

 

Original

 

 

Accumulated

 

 

Net

 

 

 

Useful Lives

 

Amount

 

 

Amortization

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

Indefinite

 

$

12,314,000

 

 

$

-

 

 

$

12,314,000

 

Customer relationships

 

8 years

 

 

37,529,000

 

 

 

(15,584,959

)

 

 

21,944,041

 

Patents

 

12 years

 

 

23,944,000

 

 

 

(6,628,940

)

 

 

17,315,060

 

Non-compete covenant

 

5 years

 

 

241,000

 

 

 

(160,132

)

 

 

80,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

74,028,000

 

 

$

(22,374,031

)

 

$

51,653,969

 

 

8


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

 

 

December 31, 2016

 

 

 

Estimated

 

Original

 

 

Accumulated

 

 

Net

 

 

 

Useful Lives

 

Amount

 

 

Amortization

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

Indefinite

 

$

12,314,000

 

 

$

-

 

 

$

12,314,000

 

Customer relationships

 

8 years

 

 

37,529,000

 

 

 

(14,412,178

)

 

 

23,116,822

 

Patents

 

12 years

 

 

23,944,000

 

 

 

(6,130,107

)

 

 

17,813,893

 

Non-compete covenant

 

5 years

 

 

241,000

 

 

 

(148,082

)

 

 

92,918

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

$

74,028,000

 

 

$

(20,690,367

)

 

$

53,337,633

 

 

Amortization expense for the finite-lived other intangible assets was approximately $1,684,000 for each of the three months ended March 31, 2017 and 2016.

 

As of March 31, 2017, future amortization expense for other intangible assets is as follows:

 

12 Months Period Ending March 31,

 

 

 

 

 

 

 

 

 

2018

 

$

6,734,658

 

2019

 

 

6,719,127

 

2020

 

 

6,686,458

 

2021

 

 

6,686,458

 

2022

 

 

5,174,874

 

Thereafter

 

 

7,338,394

 

 

 

 

 

 

 

 

$

39,339,969

 

 

7.

Long-Term Debt

 

On December 6, 2013, the Company entered into a Senior Secured Credit Agreement (“Credit Agreement”) with various financial institutions for an original amount of $77,000,000. On October 9, 2015, the Company modified its Credit Agreement to increase the original amount borrowed. The modified agreement allowed the Company to borrow an additional amount of approximately $62,000,000 before fees paid to the institutions of approximately $1,400,000. As part of the modification, the $1,400,000 was treated as a discount to the principal balance and is being amortized to interest expense over the life of the Credit Agreement using the straight line method which approximates the effective interest method. Amortization expense related to the debt discount was approximately $111,000 for the three months ended March 31, 2017 and 2016, and is included in interest expense in the condensed consolidated statements of income. A portion of the proceeds were used to pay off long-term debt with an affiliate, as well as make equity distributions to its members. The Company had approximately $89,209,000 and $97,663,000 outstanding under the Credit Agreement as of March 31, 2017 and December 31, 2016, respectively.

 

Under the Credit Agreement, the Company also obtained access to a revolving credit facility in an aggregate principal amount not to exceed $7,500,000, which may be used for general working capital purposes, capital expenditures, and permitted acquisitions. The unused borrowing capacity is subject to a commitment fee of 0.5% per year and all outstanding amounts under the revolving credit facility are due upon maturity of the Credit Agreement on December 6, 2018. There were no amounts outstanding on the revolving credit facility as of March 31, 2017 and December 31, 2016.

 

9


FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

Outstanding amounts under the Credit Agreement bear interest at LIBOR or a base rate, plus an applicable margin that ranges from 7.00% to 7.50% for base rate loans and from 6.00% to 6.50% for LIBOR loans, based upon the Company’s leverage ratio on a consolidated basis. At March 31, 2017, interest on the Credit Agreement was 6.50%.

 

The outstanding principal balance of the Credit Agreement is scheduled to be repaid through varying periodic principal payments with all remaining unpaid interest and principal due upon maturity at December 6, 2018. In addition to the scheduled periodic payments, the Company is required to pay an additional principal amount equal to the difference between (i) 50% of the Excess Cash Flow of
the Company’s fiscal year (as defined in the Credit Agreement) minus (ii) the aggregate amount of optional prepayments of the Credit Agreement made during the fiscal year. As part of the 2015 Credit Agreement modification, the Company received a waiver deferring the Excess Cash Flow requirement until 2017.

 

The Credit Agreement is secured by all property and assets of the Company. Furthermore, the Credit Agreement obligates the Company to comply with customary affirmative, financial, and restrictive covenants including financial reporting, governance, and notification requirements. At March 31, 2017, the Company was in compliance with these requirements.

 

Effective January 1, 2016, the Company adopted ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires debt issuance costs to be presented in the consolidated balance sheet as a direct deduction from the carrying value of the associated debt liabilities, and amortization of those costs should be reported as interest expenses.  Future maturities of long-term debt as of March 31, 2017 are as follows:

 

 

 

 

 

 

 

Unamortized Debt

 

 

 

 

 

 

 

 

 

 

 

Discount and Debt

 

 

 

 

 

12 Months Period Ending March 31,

 

Debt

 

 

Issuance Costs

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

 

$

6,545,214

 

 

$

(889,914

)

 

$

5,655,300

 

2019

 

 

82,663,607

 

 

 

(593,277

)

 

 

82,070,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

89,208,821

 

 

$

(1,483,191

)

 

$

87,725,630

 

 

8.

Commitments and Contingencies

 

From time to time the Company may be involved in claims and litigation arising in the ordinary course of business. Because there are inherent uncertainties in the ultimate outcome of such matters, it is presently not possible to determine the ultimate outcome of any potential claims or litigation against the Company; however, management believes that the outcome of such matters will not have a material adverse effect on the Company’s financial position, results of operation or liquidity.

 

9.

Related Party Transactions

 

For the three months ended March 31, 2017 and 2016, the Company recognized approximately $244,000 and $213,000, respectively, in management fees with the majority member of the Company, which is included in the accompanying condensed consolidated statements of income. At March 31, 2017 and December 31, 2016, approximately $0 and $81,000, respectively, was due to the majority member.

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FLOWCHEM HOLDINGS, LLC AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

Through September 2016, the Company had a shared services arrangement with another portfolio company of the majority member whereby certain administrative services and personnel costs were shared.

 

10.

Concentrations

 

The Company’s customer concentration may impact its overall credit risk, either positively or negatively, in that these entities may be similarly affected by changes in economic or other conditions affecting the chemicals industry.

 

For the three months ended March 31, 2017, the Company generated approximately 31% of its sales from two customers (18% and 14%). The amount due from these customers at March 31, 2017 was approximately $5,135,000. For the three months ended March 31, 2016, the Company generated approximately 24% of its sales from two customers (14% and 10%). The amount due from these customers at March 31, 2016 was approximately $754,000.

 

11.

Subsequent Events

 

Management has evaluated subsequent events through June 14, 2017, the date which the financial statements were available to be issued.

 

The Company entered into an agreement to be acquired by a third party company in April 2017 for cash of $495 million.  The acquisition is anticipated to close in June 2017.

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