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EX-99.1 - EXHIBIT 99.1 - HUDSON TECHNOLOGIES INC /NY | tv484486_ex99-1.htm |
8-K - FORM 8-K - HUDSON TECHNOLOGIES INC /NY | tv484486_8k.htm |
Exhibit 99.2
Pro forma Condensed Consolidated Financial Statements
Hudson Technologies, Inc. and Subsidiaries
As of and for the Nine Months Ended September 30, 2017, and for the 12 Months ended December 31, 2016
HUDSON TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On October 10, 2017, Hudson Technologies, Inc. and Subsidiaries (“Hudson” or the “Company”) and its wholly-owned subsidiary, Hudson Holdings, Inc. (“Holdings”) completed the acquisition (the “Acquisition”) from Airgas, Inc. (“Airgas”) of all of the outstanding stock of Airgas-Refrigerants, Inc., a Delaware corporation (“ARI”). On October 11, 2017, ARI changed its name to Aspen Refrigerants, Inc. (“Aspen”).
At closing, Holdings paid net cash consideration to Airgas of approximately $209 million, which includes preliminary post-closing adjustments relating to: (i) changes in the net working capital of ARI as of the closing relative to a net working capital target, (ii) the actual amount of specified types of R-22 refrigerant inventory on hand at closing relative to a target amount thereof, and (iii) other consideration pursuant to the Stock Purchase Agreement.
The cash consideration paid by Holdings at closing was financed with available cash balances, plus $80 million of borrowings under an enhanced asset based lending facility of $150 million from PNC Bank and a new term loan of $105 million from funds advised by FS Investments and sub-advised by GSO Capital Partners LP.
Basis of Pro Forma Presentation
The unaudited pro forma condensed consolidated financial statements are based on the historical financial statements of Hudson and ARI, after giving effect to the cash paid and financing used to consummate the acquisition of ARI as well as certain pro forma adjustments.
The unaudited pro forma consolidated balance sheet as of September 30, 2017 is presented as if the acquisition occurred on September 30, 2017. The unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2017 and the 12 months ended December 31, 2016 are based on the historical consolidated statements of operations of Hudson, except as noted below, and ARI and give pro forma effect assuming the transaction occurred at the beginning of the earliest period presented. During the third quarter of 2017, the Company changed its presentation of its Consolidated Statements of Operations to more closely align its results with the acquisition of ARI. Certain balances in Selling and Marketing, and General and Administrative expenses have been reclassified to conform to the current presentation of Selling, general and administrative expenses, and Amortization.
The allocation of the purchase price of the Acquisition used in these unaudited pro forma consolidated financial statements is based upon the Company’s estimates and assumptions at the date of preparation, which have been made for the purpose of developing such pro forma consolidated financial statements. The purchase price allocation and related adjustments are preliminary and may change prior to the issuance of Hudson’s 2017 Annual Report on Form 10-K to be filed in 2018.
The unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with the historical financial statements and accompanying notes contained in the Hudson Technologies, Inc. Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 10, 2017, and Quarterly Report on Form 10-Q filed with the SEC on November 9, 2017. The unaudited pro forma consolidated financial statements are presented for informational purposes only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the acquisition been consummated as of the date indicated or of the results that may be obtained in the future.
Purchase Price and Purchase Price Allocation
The following table presents (in thousands) the estimated fair values of the net assets acquired and the excess of such net assets over the purchase price at Acquisition date:
Assets acquired | $ | 135,090 | ||
Liabilities assumed | (13,636 | ) | ||
Inventory step up in basis | 19,080 | |||
Fixed assets fair value adjustment | (355 | ) | ||
Customer relationships | 29,660 | |||
Above market leases | 567 | |||
Assembled workforce (Goodwill) | 1,758 | |||
Goodwill (remaining balance) | 36,805 | |||
$ | 208,969 |
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Hudson Technologies, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2017
(in thousands, except per share data)
Historical Hudson | Historical | Carve-Out | Historical Aspen Refrigerants, Inc. | Pro Forma | Pro Forma | |||||||||||||||||||
Assets | Technologies | Aspen Refrigerants, Inc.(1) | Adjustment (2) | Standalone (3) | Adjustments | Consolidated | ||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 43,994 | $ | 157 | $ | - | $ | 157 | $ | (23,969 | )A | $ | 20,182 | |||||||||||
Trade accounts receivable - net | 13,948 | 16,001 | - | 16,001 | - | 29,949 | ||||||||||||||||||
Inventories | 63,810 | 96,958 | - | 96,958 | 19,080 | B | 179,848 | |||||||||||||||||
Prepaid expenses and other current assets | 6,555 | 192 | - | 192 | (74 | )C | 6,673 | |||||||||||||||||
Total current assets | 128,307 | 113,308 | - | 113,308 | (4,963 | ) | 236,652 | |||||||||||||||||
Property, plant and equipment, less accumulated depreciation | 7,069 | 21,678 | - | 21,678 | (355 | )D | 28,392 | |||||||||||||||||
Deferred tax asset | 1,874 | - | - | - | - | 1,874 | ||||||||||||||||||
Goodwill | 856 | 87,895 | (87,895 | ) | - | 38,563 | E | 39,419 | ||||||||||||||||
Intangible assets, less accumulated amortization | 2,935 | 4,876 | (4,876 | ) | - | 30,227 | E | 33,162 | ||||||||||||||||
Debt issuance costs (revolver) | - | 2,382 | C,F | 2,382 | ||||||||||||||||||||
Other assets | 88 | 104 | - | 104 | - | 192 | ||||||||||||||||||
Total Assets | $ | 141,129 | $ | 227,861 | $ | (92,771 | ) | $ | 135,090 | $ | 65,854 | $ | 342,073 | |||||||||||
Liabilities and Stockholders' Equity | ||||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||||
Trade accounts payable | $ | 8,528 | $ | 1,012 | $ | - | $ | 1,012 | $ | - | $ | 9,540 | ||||||||||||
Accrued expenses and other current liabilities | 2,589 | 1,473 | - | 1,473 | 8,649 | F, I | 12,711 | |||||||||||||||||
Accrued payroll | 824 | - | - | - | - | 824 | ||||||||||||||||||
Income taxes payable | 1,115 | - | - | - | - | 1,115 | ||||||||||||||||||
Other current liabilities | - | 11,123 | - | 11,123 | - | 11,123 | ||||||||||||||||||
Short-term debt and current maturities of long-term debt | 97 | - | - | - | 80,000 | G | 80,097 | |||||||||||||||||
Total current liabilities | 13,153 | 13,608 | - | 13,608 | 88,649 | 115,410 | ||||||||||||||||||
Deferred tax liability | - | 23,888 | (23,888 | ) | - | - | - | |||||||||||||||||
Other liabilities- noncurrent | 28 | - | 28 | - | 28 | |||||||||||||||||||
Long-term debt, less current maturities and term loan debt issuance costs | 83 | - | - | 105,000 | G | 105,083 | ||||||||||||||||||
Debt issuance costs (term loan) | - | (2,932 | )C,F | (2,932 | ) | |||||||||||||||||||
Total Liabilities | 13,236 | 37,524 | (23,888 | ) | 13,636 | 190,717 | 217,589 | |||||||||||||||||
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 42,039,452 and 41,465,820 | 420 | - | - | - | - | 420 | ||||||||||||||||||
Additional paid-in capital | 113,540 | - | - | - | - | 113,540 | ||||||||||||||||||
Net parent investment | 190,337 | (68,883 | ) | 121,454 | (121,454 | )H | - | |||||||||||||||||
Retained earnings | 13,933 | - | - | (3,409 | )I | 10,524 | ||||||||||||||||||
Total Stockholders' Equity | 127,893 | 190,337 | (68,883 | ) | 121,454 | (124,863 | ) | 124,484 | ||||||||||||||||
Total Liabilities and Stockholders' Equity | $ | 141,129 | $ | 227,861 | $ | (92,771 | ) | $ | 135,090 | $ | 65,854 | $ | 342,073 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
(1) | Reflects Aspen Refrigerants, Inc. historical unaudited balance sheet as of September 30, 2017. |
(2) | Entry to remove historical Aspen Refrigerants, Inc. intangible, goodwill and deferred tax balances. |
(3) | Represents the historical amounts related to the assets acquired and liabilities assumed from Aspen Refrigerants, Inc. |
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Hudson Technologies, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 2017
(Amounts in thousands, except per share amounts)
Historical | ||||||||||||||||||||||||
Historical Hudson | Carve-Out | Aspen Refrigerants, Inc. | Pro Forma | Pro Forma | ||||||||||||||||||||
Technologies (1) | Aspen Refrigerants, Inc.(2) | Adjustment (3) | Standalone (4) | Adjustments | Consolidated | |||||||||||||||||||
Revenues | $ | 115,766 | $ | 112,382 | $ | - | $ | 112,382 | $ | - | $ | 228,148 | ||||||||||||
Cost of sales | 80,811 | 68,841 | - | 68,841 | 5,323 | J | 154,975 | |||||||||||||||||
Gross profit | 34,955 | 43,541 | - | 43,541 | (5,323 | ) | 73,173 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling, general and administrative | 9,823 | 13,492 | - | 13,492 | (2,387 | )K, L | 20,928 | |||||||||||||||||
Amortization | 364 | 1,343 | (1,343 | ) | - | 1,854 | M | 2,218 | ||||||||||||||||
Total Operating expenses | 10,187 | 14,835 | (1,343 | ) | 13,492 | (533 | ) | 23,146 | ||||||||||||||||
Operating income (loss) | 24,768 | 28,706 | 1,343 | 30,049 | (4,790 | ) | 50,027 | |||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest expense | (170 | ) | (81 | ) | - | (81 | ) | (9,265 | )N | (9,516 | ) | |||||||||||||
Other income (expense) | - | 13 | - | 13 | - | 13 | ||||||||||||||||||
Total other income (expense) | (170 | ) | (68 | ) | - | (68 | ) | (9,265 | ) | (9,503 | ) | |||||||||||||
Income (loss) before income taxes | 24,598 | 28,638 | 1,343 | 29,981 | (14,055 | ) | 40,524 | |||||||||||||||||
Income tax expense (benefit) | 8,236 | 10,229 | - | 10,229 | (5,341 | )Q | 13,124 | |||||||||||||||||
Net income (loss) | $ | 16,362 | $ | 18,409 | $ | 1,343 | $ | 19,752 | $ | (8,714 | ) | $ | 27,400 | |||||||||||
Net income per common share - Basic | $ | 0.39 | $ | 0.66 | ||||||||||||||||||||
Net income per common share - Diluted | $ | 0.38 | $ | 0.63 | ||||||||||||||||||||
Weighted average number of shares outstanding - Basic | 41,648,439 | 41,648,439 | ||||||||||||||||||||||
Weighted average number of shares outstanding - Diluted | 43,173,427 | 43,173,427 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
(1) | Reflects Hudson's unaudited Statement of Operations for the nine months ended September 30, 2017. |
(2) | Reflect Aspen Refrigerants, Inc. unaudited Statement of Operations amounts reported for the nine months ended September 30, 2017 after reclassifications to conform to current Hudson presentation. Prior to these reclassifications, Aspen Refrigerants, Inc. reported Cost of sales (excluding depreciation) of $65,117, Selling, distribution and administrative expenses of $15,750 and Depreciation of $1,466 for the nine month period ended September 30, 2017. |
(3) | Reflects adjustments to remove expenses related to historical Aspen Refrigerants, Inc. intangibles not assumed. |
(4) | Represents the unaudited historical acquired company Statement of Operations for the nine months ended September 30, 2017. |
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Hudson Technologies, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
12 Months Ended December 31, 2016
(Amounts in thousands, except per share amounts)
Historical Hudson | Historical | Carve-Out | Historical Aspen Refrigerants, Inc. | Pro Forma | Pro Forma Consolidated | |||||||||||||||||||
Technologies (1) | Aspen Refrigerants, Inc.(2) | Adjustment (3) | Standalone (4) | Adjustments | Standalone | |||||||||||||||||||
Revenues | $ | 105,481 | $ | 134,145 | $ | - | $ | 134,145 | $ | - | $ | 239,626 | ||||||||||||
Cost of sales | 74,395 | 84,784 | - | 84,784 | 7,098 | J | 166,277 | |||||||||||||||||
Gross profit | 31,086 | 49,361 | - | 49,361 | (7,098 | ) | 73,349 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling, general and administrative | 11,651 | 18,290 | - | 18,290 | 14 | L | 29,955 | |||||||||||||||||
Amortization | 488 | 1,844 | (1,844 | ) | - | 2,472 | M | 2,960 | ||||||||||||||||
Total Operating expenses | 12,139 | 20,134 | (1,844 | ) | 18,290 | 2,486 | 32,915 | |||||||||||||||||
Operating income (loss) | 18,947 | 29,227 | 1,844 | 31,071 | (9,584 | ) | 40,434 | |||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||
Interest expense | (1,118 | ) | (65 | ) | - | (65 | ) | (12,353 | )N | (13,536 | ) | |||||||||||||
Other income (expense) | (564 | ) | 8 | - | 8 | - | (556 | ) | ||||||||||||||||
Total other income (expense) | (1,682 | ) | (57 | ) | - | (57 | ) | (12,353 | ) | (14,092 | ) | |||||||||||||
Income (loss) before income taxes | 17,265 | 29,170 | 1,844 | 31,014 | (21,937 | ) | 26,342 | |||||||||||||||||
Income tax expense (benefit) | 6,628 | 10,941 | - | 10,941 | (8,336 | )O | 9,233 | |||||||||||||||||
Net income (loss) | $ | 10,637 | $ | 18,229 | $ | 1,844 | $ | 20,073 | $ | (13,601 | ) | $ | 17,109 | |||||||||||
Net income per common share - Basic | $ | 0.31 | $ | 0.50 | ||||||||||||||||||||
Net income per common share - Diluted | $ | 0.30 | $ | 0.48 | ||||||||||||||||||||
Weighted average number of shares outstanding - Basic | 34,104,476 | 34,104,476 | ||||||||||||||||||||||
Weighted average number of shares outstanding - Diluted | 35,416,910 | 35,416,910 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
(1) | Reflects Hudson's unaudited Statement of Operations for the 12 months ended December 31, 2016. The table below reconciles Operating Income between amounts previously reported to the current reporting format: |
12 Months Ended December 31, 2016 | As Reported | Reclassifications | As Adjusted | |||||||||
Revenue | $ | 105,481 | $ | - | $ | 105,481 | ||||||
Cost of Sales (including depreciation) | 74,395 | - | 74,395 | |||||||||
Gross Profit | 31,086 | - | 31,086 | |||||||||
Selling and Marketing | 4,310 | (4,310 | ) | - | ||||||||
General and Administrative | 7,829 | (7,829 | ) | - | ||||||||
Selling, general and administrative | - | 11,651 | 11,651 | |||||||||
Amortization | - | 488 | 488 | |||||||||
Total Operating Expenses | $ | 12,139 | $ | - | $ | 12,139 | ||||||
Operating Income | $ | 18,947 | $ | - | $ | 18,947 |
(2) | Reflect Aspen Refrigerants, Inc. unaudited Statement of Operations amounts reported for the 12 months ended December 31, 2016 after reclassifications to conform to current Hudson presentation. |
(3) | Reflects adjustments to remove expenses related to historical Aspen Refrigerants, Inc.'s intangibles not assumed. |
(4) | Represents the unaudited historical acquired company Statement of Operations for the 12 months ended December 31, 2016. |
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Hudson Technologies, Inc. and Subsidiaries
Pro Forma Adjustments
The following adjustments have been reflected in the unaudited pro forma consolidated balance sheet as of September 30, 2017:
A | Represents on-hand cash consideration paid by Hudson for the net assets acquired. |
B | Represents the step up in inventory to reflect the estimated fair value resulting from purchase accounting. |
C | Represents reclassification of debt issuance costs from prepaid expenses to Debt Issuance Costs (revolver). |
D | Represents the adjustment of fixed assets to fair market value. |
E | To record the fair value of goodwill and identifiable intangible assets arising from purchase accounting, including $29.7 million of customer relationships and $0.6 million of above market leases. |
F | Represents the accrual of debt issuance costs of $5.3 million at the acquisition date. The debt issuance costs related to the revolving credit facility are reflected as an asset, and the debt issuance costs related to the term loan are recorded as a reduction of the term loan. |
G | Represents financing obtained to fund the Acquisition, including $105 million of a term loan and $80 million drawn on a revolving line of credit facility. |
H | Represents elimination of Aspen Refrigerants, Inc.'s equity. |
I | Represents nonrecurring transaction fees related to the Acquisition. |
The following adjustments have been reflected in the unaudited pro forma consolidated Statements of Operations for the Nine Months Ended September 30, 2017 and 12 Months Ended December 31, 2016, as though the Acquisition occurred as of the beginning of the earliest period presented herein:
J | To record the amortization of the step-up in inventory to its estimated fair value. |
K | Represents the elimination of $2.4 million of nonrecurring transaction fees incurred during the first nine months of 2017. |
L | To record the amortization of above market leases and effect of fair market adjustment of fixed assets. |
M | To record the amortization of customer relationships on a straight-line basis over a 12 year useful life. |
N | To record interest and amortization of deferred financing fees related to the financing of the Acquisition. |
O | To record the tax effect of the proforma adjustments. |
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