Hudson Technologies, Inc., incorporated under the laws of New York on January
11, 1991, is a refrigerant services company providing innovative solutions to
recurring problems within the refrigeration industry. The Company's products
and services are primarily used in commercial air conditioning, industrial processing
and refrigeration systems, and include (i) refrigerant sales, (ii) refrigerant
management services consisting primarily of reclamation of refrigerants and
(iii) RefrigerantSide® Services performed at a customer's site, consisting
of system decontamination to remove moisture, oils and other contaminants. In
addition, RefrigerantSide® Services include predictive and diagnostic services
for industrial and commercial refrigeration applications, which are designed
to predict potential catastrophic problems and identify inefficiencies in an
operating system. The Company’s SmartEnergy OPSTM service is a web-based
real time continuous monitoring service applicable to a facility’s refrigeration
systems and other energy systems. The Company’s Chiller Chemistry®,
Chill Smart®, Fluid Chemistry® and Performance Optimization are predictive
and diagnostic service offerings. As a component of the Company’s products
and services, the Company also participates in the generation of carbon offset
projects. The Company operates principally through its wholly-owned subsidiary,
Hudson Technologies Company.
The Company participates in an industry that is highly regulated, and changes
in the regulations affecting our business could affect our operating results.
Currently the Company purchases virgin, hydro chlorofluorocarbon (“HCFC”)
and hydro fluorocarbon (“HFC”) refrigerants and reclaimable, primarily
HCFC, HFC and chlorofluorocarbon (“CFC”) refrigerants from suppliers
and its customers. Effective January 1, 1996, the Clean Air Act, as amended
(the “Act”) prohibited the production of virgin CFC refrigerants
and limited the production of virgin HCFC refrigerants. Effective January 2004,
the Act further limited the production of virgin HCFC refrigerants and federal
regulations were enacted which established production and consumption allowances
for HCFC refrigerants and which imposed limitations on the importation of certain
virgin HCFC refrigerants. Under the Act, production of certain virgin HCFC refrigerants
is scheduled to be phased out during the period 2010 through 2020, and production
of all virgin HCFC refrigerants is scheduled to be phased out by 2030. As a
result of litigation, the federal regulations implementing the January 2010
phase down schedule were vacated, and in April 2013, the Environmental Protection
Agency (“EPA”) published a final rule providing for the production
or importation of 63 million and 51 million pounds of HCFC-22 in 2013 and 2014,
respectively. The Company believes that the production permitted by the final
rule created an oversupply of HCFC-22 during the 2013 cooling season. The Company
believes that this oversupply resulted in a reduction in the market price of
HCFC-22 during 2013, which resulted in the Company having to record a lower
of cost or market adjustment in the amount of $14,700,000 for the three and
nine months ended September 30, 2013 (the “LCM”). On October 16,
2014, the Administrator of the EPA signed a final rule providing further reductions
in the production and consumption allowances for virgin HCFC refrigerants for
the years 2015 through 2019 (the “Final Rule”). In the Final Rule,
the EPA has established a linear annual phase down schedule for the production
or importation of virgin HCFC-22 that will start at approximately 22 million
pounds in 2015 and reduce by approximately 4.5 million pounds each year and
end at zero in 2020.
HFC refrigerants are used as substitutes for CFC and HCFC refrigerants in certain
applications. As a result of the increasing restrictions and limitations on
the production and use of CFC and HCFC refrigerants, various segments of the
air conditioning and refrigeration industry have been replacing or modifying
equipment that utilize CFC and HCFC refrigerants and have been transitioning
to equipment that utilize HFC refrigerants and a certain type of HFC’s
known as hydrofluoro-olefins (“HFO”). HFC refrigerants are not ozone
depleting chemicals and are not currently regulated under the Act. However,
certain HFC refrigerants are highly weighted greenhouse gases that are believed
to contribute to global warming and climate change and, as a result, are now
subject to various state and federal regulations relating to the sale, use and
emissions of HFC refrigerants. In addition, federal legislation has been proposed
that, if enacted, would impose limitations on the production and importation
of certain virgin HFC refrigerants. The Company expects that HFC refrigerants
eventually will be replaced by HFOs or other types of products with lower global
warming potentials.
From its inception, the Company has sold refrigerants, and has provided refrigerant
reclamation and refrigerant management services that are designed to recover
and reuse refrigerants, thereby protecting the environment from release to the
atmosphere and the corresponding ozone depletion and global warming impact.
The reclamation process allows the refrigerant to be re-used thereby eliminating
the need to destroy or manufacture additional refrigerant and eliminating the
corresponding impact to the environment associated with the destruction and
manufacturing. The Company believes it is the largest refrigerant reclaimer
in the United States. Additionally, the Company has created alternative solutions
to reactive and preventative maintenance procedures that are performed on commercial
and industrial refrigeration systems. These services, known as RefrigerantSide®
Services, complement the Company’s refrigerant sales and refrigerant reclamation
and management services. The Company has also developed Performance Optimization
services that identify inefficiencies in the operation of air conditioning and
refrigeration systems and assists companies to improve the efficiency of their
systems and save energy. In addition, the Company is pursuing potential opportunities
for the creation and monetization of verified emission reductions.
