EX-99.2 3 tv484486_ex99-2.htm EXHIBIT 99.2

 

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    5,323J    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)   -    1,854M    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    7,098J    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    14L    29,955 
Amortization   488    1,844    (1,844)   -    2,472M    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:

 

ARepresents on-hand cash consideration paid by Hudson for the net assets acquired.
BRepresents the step up in inventory to reflect the estimated fair value resulting from purchase accounting.
CRepresents reclassification of debt issuance costs from prepaid expenses to Debt Issuance Costs (revolver).
DRepresents the adjustment of fixed assets to fair market value.
ETo 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.
FRepresents 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.
GRepresents financing obtained to fund the Acquisition, including $105 million of a term loan and $80 million drawn on a revolving line of credit facility.
HRepresents elimination of Aspen Refrigerants, Inc.'s equity.
IRepresents 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:

 

JTo record the amortization of the step-up in inventory to its estimated fair value.
KRepresents the elimination of $2.4 million of nonrecurring transaction fees incurred during the first nine months of 2017.
LTo record the amortization of above market leases and effect of fair market adjustment of fixed assets.
MTo record the amortization of customer relationships on a straight-line basis over a 12 year useful life.
NTo record interest and amortization of deferred financing fees related to the financing of the Acquisition.
OTo record the tax effect of the proforma adjustments.

 

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