Disclosures

Hudson Technologies Inc.

I, Sarkis Sherbetchyan , certify that this report reflects my personal beliefs about this company and that no portion of my compensation was, is or will be directly or indirectly related to the specific recommendations or views discussed in this report.

Disclosure

  • B. Riley & Co., LLC does and seeks to do business with companies covered in its research reports.
  • A portion of this analyst’s compensation is based on the sales, trading and investment banking activities of B. Riley & Co., LLC.
  • B. Riley & Co., LLC makes a market in the securities of the company covered in this report.
  • This company currently is, or within the past 12 months was, a client of B. Riley & Co., LLC. The services provided were Investment Banking Services.
  • B. Riley & Co., LLC, or any of its affiliates, has received compensation for investment banking services from this company in the past 12 months.
  • B. Riley & Co., LLC, or any of its affiliates, has managed or co-managed a public offering of securities for this company in the past 12 months.
  • This report may be distributed by FBR Capital Markets & Co., an affiliate of B. Riley & Co., LLC and as such constitutes third party research. For additional information, please visit http://www.fbr.com/disclosures.
Disclosure Chart

Ratings Distribution as of June 23, 2017 % with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 148 73.3%
Neutral 53 26.2%
Sell 1 0.5%
Total 202 100%
Ratings Distribution as of October 4, 2016 % with Investment Banking Relationships
Rating Number of Companies Percent of Total
Buy 21 95.5%
Neutral 1 4.5%
Sell 0 0.0%
Total 22 100%

Explanation of B. Riley & Co. LLC's Rating System

  • Buy: We generally expect "Buy" rated stocks to materially outperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly attractive.
  • Neutral: We generally believe "Neutral" rated stocks will perform roughly in line with the S&P 500 and Russell 2000 over the intermediate and long term.
  • Sell: We generally expect "Sell" rated stocks to materially underperform both the S&P 500 and Russell 2000 as well as other stocks in their sector. Further, we believe that the potential reward relative to the potential risk is particularly unattractive.

Risks and Considerations

  • Acquisition/Integration - The Company actively evaluates potential acquisitions as part of its growth strategy. Acquisitions pursued by the Company could be dilutive to financial results and result in a difficult, dilutive or expensive integration.
  • Asset Quality - Puerto Rico is in the midst of a recession that shows no signs of ending soon. The longer the recession continues, the greater the likelihood that credit quality issues will get deeper and last longer.
  • Commodity Costs - Should commodity prices for the Company's resources increase, the Company's operating margins could be harmed.
  • Competition - The industry is highly competitive and many of the Company's competitors have greater resources.
  • Cyclical Nature of the Company's Business - Revenue from the Company's businesses have historically correlated positively with both US and world GDP. A cyclical downturn in GDP growth domestically and/or abroad may lead to a material deterioration in the Company's results.
  • Discretionary Spending - The products the Company sells are largely discretionary in nature and any slowdown in consumer spending would have an unfavorable impact on the Company.
  • Distribution/Sales Dependency - The Company relies heavily on its indirect sales channel for much of its sales. A loss of a major distributor or changes in a distributor's payment practices could prove to be detrimental to future sales growth.
  • Economy - Macro-economic issues such as increasing oil and gas prices and a possible drop in consumer spending could have a negative impact on the Company's business.
  • Financial Results - Any slow down or other changes in the capital spending pattern of the industry may negatively affect the Company's sales.
  • Financial Results - The Company has raised money via public offerings several times in the past and may need to do so again if it can not sustain positive cash flow.
  • Financial Results - Unpredictable timing of customer orders.
  • Growth Plan - There are many factors that may impact the company's ability to achieve its stated growth objectives.
  • Insider Ownership - Directors and executive officers collectively own a significant percentage of the Company. While this may align interest with other shareholders, investors might view a future sale by any director or officer negatively.
  • Inventory risk - Depending on market conditions, the Company's gross margins could come under pressure if market prices quickly fall within a three to five week time frame.
  • Liquidity and Solvency - The Company has a significant debt load and interest expense, which may hamper its ability to invest in the business. Also, the Company may need to raise additional capital in the future and access to such capital is difficult to predict.
  • Loss of Key Personnel - In our opinion, the current management team will be instrumental in executing the Company's growth strategy. The resignation of a key member of management would have a negative impact on the Company.
  • Manufacturer/Supplier Dependency - The Company relies on a few key manufacturers/suppliers. This lack of diversification could create interruptions in the Company's supply of products and a corresponding loss of revenues.
  • Operating leases - The Company is subject to significant lease liability. Should results deteriorate and the Company be forced to close stores, cash costs to get out of leases could be considerable.
  • Pricing Pressure - The Company's business could be affected by pricing pressure within the market.
  • Product Concentration - A large percentage of the Company's revenues are from one line of products. Any weakness in those sales would have a significant negative impact on the Company's results.
  • Recruitment and Retention - The Company depends on its consultants to generate business. Should the Company experience difficulties in recruiting new talent or retaining current employees, the Company's operating results may suffer.
  • Seasonality - The Company's results are highly seasonal.
  • Weather - The weather can significantly impact the Company's results.
  • General Industry - The Company could miss our estimates and/or their financial guidance.
  • Sales Cycle - The Company's sales cycle could lengthen beyond what is normal.
  • Further Potential Risks - See the Company's SEC filings, particularly its 10-K filing, for a discussion of further potential risks.

Additional Risks and Considerations

    • Regulation - The Clean Air Act - 1996 amendment and later amendments - commercial production and consumption limitations are imposed by the Act and legislative limitations have been placed on HCFC refrigerants and CFC-based refrigerants under the Act. Regulations are subject to unexpected change.
    • Regulation - most refrigerants handled by the company are considered hazardous materials or substances by several reglatory agencies, and the company must abide by requirements for handling, packaging, labeling and transporting of these refrigerants.
    • Regulation - Other Government (Federal, State, Local) agencies - proposed legislation which, if enacted, could impose limitations on production and consumption of HFC refrigerants; changes in government regulation on the use and production of refrigerants.
    • Legal Proceedings - On April 1, 1999, the Company reported a release of approximately 7,800 lbs. of R-11 refrigerant (the “1999 Release”), at its former leased facility in Hillburn, NY (the “Hillburn Facility”), which the Company vacated in June 2006. The Company accrued, as an expense in its consolidated financial statements, the costs that the Company believes it will incur in connection with its compliance with the Order of Consent through December 31, 2018. There can be no assurance that additional testing will not be required or that the Company will not incur additional costs.