Acquisition

6 Months Ended

Jun. 30, 2024

Acquisition

Acquisition

Note 10 – Acquisition

On June 6, 2024, the Company’s subsidiary Hudson Technologies Company completed the acquisition of substantially all the business assets of USA United Suppliers of America, Inc. (d/b/a USA Refrigerants) (“USA Refrigerants”) and B&B Jobber Services, Inc. (collectively, the “USA Refrigerants Acquisition”).  The consideration for the USA Refrigerants Acquisition was approximately $20.7 million in cash, paid at the closing, subject to customary escrow holdbacks and inventory adjustments, and also provides for a further contingent payment of up to $2.0 million payable, to the extent earned, approximately 18 months from the closing date. The Company estimated the fair value of this contingent earn-out liability to be $1.6 million as of June 6, 2024 and June 30, 2024. The Company is in the process of finalizing its allocation and this may result in potential adjustments to the carrying value of the respective recorded assets and liabilities, establishment of certain additional intangible assets, revisions of useful lives of intangible assets, and the determination of any residual amount that will be allocated to goodwill.

The following table summarizes the fair values of the assets acquired and liabilities assumed from the USA Refrigerants Acquisition:

	Amortization life		Fair Value
	(in months)		(in thousands)
Inventories			$	5,073
Covenant not to compete		60		50
Customer relationships		24		1,110
Tradename		60		1,420
Earn-out liability				(1,600)
Goodwill				14,617
Total purchase price			$	20,670

The fair values of the acquired intangibles were determined using discounted cash flow models using a discount factor based on an estimated risk-adjusted weighted average cost of capital. The customer relationships were valued using the multi-period excess-earnings method, a form of the income approach.

The acquisition resulted in the recognition of $14.6 million of goodwill, which will be deductible for tax purposes. Goodwill largely consists of expected growth in revenue from new customer acquisitions over time.

The Company reflected revenue and net income in its condensed consolidated statement of operations related to the USA Refrigerants Acquisition as follows:

Twenty three days ended June 30,	2024
(in thousands)
Revenues	$	770
Net income	$	137

The following table provides unaudited pro forma total revenues and results of operations for the 6 months ended June 30, 2024 and 2023 as if USA Refrigerants had been acquired on January 1, 2023. The unaudited pro forma results reflect certain adjustments related to the acquisition, such as a step-up in basis in inventory, and amortization expense on intangible assets arising from the acquisition. The pro forma results do not include any anticipated cost synergies or other effects of any planned integration. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had the USA Refrigerants Acquisition been completed at the beginning of 2023, nor are they indicative of the future operating results of the combined companies (dollars in thousands):

	Three Months				Six Months
	ended June 30,				ended June 30,
	2024		2023		2024		2023
Revenues	$	79,749	$	93,891	$	149,465	$	174,507
Net income	$	10,757	$	20,481	$	21,491	$	37,303

In relation to the USA Refrigerants Acquisition, the Company incurred $0.3 million of acquisition costs which are included in selling, general and administrative expenses within the consolidated statement of income.