PEARL RIVER, NY – FEBRUARY 26, 2014 – Hudson Technologies, Inc. (NASDAQ: HDSN), announced results for the quarter and year ended December 31, 2013.
Revenues for the three months ended December 31, 2013 were down slightly to $4.8 million from $4.9 million in the comparable 2012 period. During the fourth quarter of 2013, the Company recorded a slightly higher sales volume from refrigerant sales offset by slightly lower services revenues when compared to the 2012 quarter. The reduction in services revenues was primarily related to timing as a few jobs started in the fourth quarter were completed early in the first quarter of 2014.
Net loss for the quarter was $1.5 million, or a loss of $0.06 per basic and diluted share, compared to net income of $3.0 million, or $0.12 per basic share and $0.11 per diluted share, for 2012. The difference between the net loss of 2013 compared to the net income in 2012 was primarily due to the Company’s recognition of a non-cash deferred tax benefit in 2012, which did not reoccur in 2013.
For the year ended December 31, 2013, revenues increased 4% to a record $58.6 million as compared to revenues of $56.4 million in 2012. During the third quarter of 2013, the Company recorded a lower-of-cost-or-market inventory adjustment (“LCM inventory adjustment”) of $14.7 million. This LCM inventory adjustment, which significantly increased our cost of sales, was due to an approximately 50% decline in R-22 pricing from March to September 2013 following the issuance of the EPA’s final rule in April 2013 which permitted higher than expected virgin R-22 allowances for 2013 and 2014. With the inclusion of the $14.7 million LCM inventory adjustment, Hudson’s operating loss was $8.5 million in 2013, as compared to operating income of $14.9 million in 2012. For the year ended December 31, 2013, the Company reported a net loss, including the LCM inventory adjustment, of $5.8 million, or a loss of $0.24 per basic and diluted share, as compared to net income of $12.8 million, or $0.54 per basic share and $0.49 per diluted share, in the comparable period of 2012. Excluding the $14.7 million LCM inventory adjustment, for the year ended December 31, 2013, as defined in the tables below, the Company achieved non-GAAP gross profit of $14.0 million and non-GAAP operating income of $6.2 million.
Kevin J. Zugibe, Chairman and Chief Executive Officer of Hudson Technologies commented, “Our Company encountered a turbulent pricing dynamic in 2013. We began the year with a record first quarter but were negatively impacted during the peak refrigerant sales season when R-22 prices declined 50% following the EPA’s issuance of its final rule for 2013 and 2014 allowances. The EPA’s April 2013 rule making, which unpredictably increased R-22 allowances for 2013 and 2014, unfavorably impacted Hudson’s business plans and those of many in our industry. However, despite the EPA’s actions, we were able to achieve modest growth in both revenues and volumes during the later part of the 2013 selling season, resulting in overall revenue gains for the year.
“As we previously reported, in December 2013 the EPA issued a proposed rule for R-22 allowances for the 2015 through 2019 time frame. Under the EPA’s preferred option expressed in the proposed rule, the 2015 allowances would be 30 million pounds, which would represent an approximate 40% reduction from the 2014 levels, and there would be annual straight-line reductions ending in zero allowances by 2020. The public comment period on this proposed rule ends in early March, and we look forward to the issuance of a final rule for the years 2015-2019 which we expect later this year. We continue to believe that as the R-22 phase-out progresses, the aftermarket demand for R-22 will exceed the total allowances and that reclaimed R-22 will be needed to bridge the supply and demand gap. We believe that R-22 prices will again increase and we are internally developing and testing additional proprietary technology to address the anticipated growth in reclamation. We continue to believe that market reliance on reclaimed R-22 will create a significant long- term opportunity for Hudson as one of the largest reclaimers in the U.S.”
Mr. Zugibe concluded, “The April 2013 EPA ruling was a setback for Hudson and for many in this industry, but our ability to focus on meeting the needs of our customers allowed our Company to navigate the changing pricing dynamics of our industry. With the straight-line step down approach included in the proposed rule, we believe we will return to the positive industry dynamics we experienced in 2012. We also remain optimistic that the EPA will be more aggressive in its final rule. Many industry leaders have urged the EPA to adopt a more aggressive five-year phase-out. In addition, there is strong support on Capitol Hill for the EPA to be more aggressive. Earlier this week, more than thirty-five members of Congress signed a letter to urge the EPA to adopt a faster phase down schedule. The group includes Senator Barbara Boxer, Chair of the Senate Environment and Public Works Committee and Henry Waxman, the lead Democrat on the House Energy and Commerce Committee.”
CONFERENCE CALL INFORMATION
The Company will host a conference call to discuss the fourth quarter and year end results today, February 26, 2014 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 March 26, 2014 and may be accessed by dialing (877) 660-6853. International callers may dial (201) 612-7415. Callers should use conference ID: 13576886. A transcript of the call will be available