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Abtech Holdings, Inc. (ABHD.OB)

Q2 2013 Earnings Conference Call

August 14, 2013, 01:00 PM, ET


Yvonne Zappulla - IR, Grannus Financial Advisors, Inc.

Glenn R. Rink - Founder, President and Chief Executive Officer

Jonathan Thatcher - Chief Operating Officer

Lane J. Castleton - Chief Financial Officer, Vice President and Treasurer

Bjornulf White - Executive Vice President of Corporate Strategy and Business Development


Damian Harniess - Prosdocimi Ltd

Chris Lahiji - LD Micro

Philip Anderson - Pinnacle China Advisers, L.P

Peter Okin - Stifel Nicolaus

Jay Harris - Axiom Capital Management, Inc.



Thank you for waiting. Today's event is being recorded and will be available for replay. I would now like to turn the conference over to Yvonne Zappulla. Please go ahead.

Yvonne Zappulla

Thank you. Good afternoon and thank you all for joining us for Abtech's second quarter 2013 financial results conference call. I'm Yvonne Zappulla of Grannus Financial Advisors, Abtech's Investor Relations Consultant. Second quarter financial report press release was issued last evening August 13, 2013, after the market close. The press release is available on the company's website, on both the homepage and the investor tab at A copy of this call will be available for review approximately one hour after its completion through the webcast link found on Abtech's homepage, as well as in the earnings press release.

Before we begin I'd like to state the following. During this call the management and representatives of Abtech Holdings Inc. may make comments that may deemed to be forward-looking statements which are not purely historical and include any statements regarding beliefs, plans, expectations or intentions regarding the future. Such forward-looking statements include, among other things, the development, costs and results of new business opportunities. Actual results could differ from those projected in any forward-looking statements due to numerous factors.

Such factors include risks associated with the company's business involving the company's products, development and distribution, economic and competitive factors and the company's key strategic relationships and other risks detailed in the company's filings with the Securities and Exchange Commission. Abtech assumes no obligation to update any forward-looking statement information with respect to the announcements described herein.

With us today is Glenn Rink, Founder and CEO of Abtech Holdings, Inc.; Bjornulf White, Executive Vice President of Business Development; and Jonathan Thatcher, Chief Operating Officer and Lane Castleton; Abtech's Chief Financial Officer, who will review the second quarter financials before handing the call over to Glenn for an overall business update. Following these opening remarks, Glenn will be joined by Lane, Jonathan and Bjornulf for a question-and-answer period.

I'd now like to turn the call over to Lane Castleton, CFO and Treasurer of Abtech Holdings.

Lane J. Castleton

Thank you, Yvonne and thank you all for joining us today. We reported second quarter revenue of just under $134,000 this year, slightly higher than first quarter revenues but lower than the $240,000 of revenues reported for last year’s second quarter. The company revenue today has been small.

However as we indicated on our last investor call we have focused our resources on very large opportunities over the past year and that strategy appears to be about ready to pay-off with the commencement of the company’s first large scale design-build-operate contract that was announced in July. We will provide more information regarding this project later in the call. This Northeastern municipal project is expected to begin to impact our revenue in the current quarter.

Abtech reported a net loss for the second quarter ended June 30, 2013 of $1.5 million. After accounting for the portion of the net loss attributable to the non-controlling interest of $182,000 the net loss attributable to the controlling interest was $1.3 million or $0.02 per basic share. This compares to net losses attributable to controlling interest of $2.4 million or $0.05 per basic share for the second quarter of 2012 and $1.2 million or $0.02 per basic share for the first quarter of 2013.

The loss from operations for the second quarter of 2013 was $1.5 million approximately equal to a loss from operations reported for last year’s second quarter and just slightly higher than the $1.4 million loss reported for the first quarter of 2013. The gross margin reported for the second quarter of 2013 was 32% compared to 36% in the prior year’s second quarter.

While we expect gross margins to improve significantly for Smart Sponge product sales as our operations reached full capacity, our business model has diversified to include revenue from design, installation and maintenance services as well sales of equipment from other manufacturers which will serve to expand revenue growth and profitability that could affect the overall gross margin percentage going forward.

The company’s selling, general and administrative cost, SG&A during the second quarter of 2013 totaled $1.3 million, a decrease of $59,000 from the prior year’s second quarter and just slightly higher than SG&A expenses for the first quarter of 2013. Our efforts to closely manage costs have enabled us to contain expense levels even with an expanded business development effort and a new engineering subsidiary.

Interest expense during the second quarter of 2013 remained low at only $13,000, about the same as the $12,000 reported in the first quarter of 2013 but dramatically less than the $1.3 million of interest expense reported for the second quarter of 2012.

Since June of 2012 the company has eliminated approximately $7 million of debt some of which carried interest rates at 12%. Interest expense reported for last year’s second quarter included interest accrued on that debt as well as imputed interest attributable to the amortization of note discounts, deferred financing cost, [inaudible] of note discounts, deferred financing costs and beneficial conversion features related to that debt.

As of June 30, 2013 we had outstandings of 480,000 of short term convertible debt with an interest rate of only 6% and a promissory note for $250,000 at 6.5% interest. Our balance sheet has been significantly improved to pave the way for more favorable work capital funding to support awarded projects going forward.

For the six months ended June 30, 2013 -- this is the six month period now Abtech revenues were $234,000 versus 480,000 for the comparable period of 2012. The net loss attributable to controlling interest for the first half of 2013 totaled $2.5 million or $0.04 per basic share, representing an improvement of approximately $2.6 million when compared to the net loss attributable to controlling interest of $5.1 million or $0.11 per basic share reported for the same period of the previous year which included a non-cash loss of $679,000 for the revaluation of a warrant liability that was on the company’s books at that time.

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