AXION Reports Second Quarter 2014 Financial Results

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Aug 15, 2014, 04:01 ET

ZANESVILLE, Ohio, Aug. 15, 2014 /PRNewswire/ -- AXION International Holdings, Inc. (OTCQB: AXIH), a leader in recycled plastic and plastic composite technologies used to produce ECOTRAX® rail ties/sleepers and STRUXURE® building products, including heavy construction and laminated temporary road mats, today announced financial results for the second quarter ended June 30, 2014.

Second Quarter Highlights:

$4.1 million in revenue for second quarter 2014, representing a 170% year-over-year increase over second quarter 2013
$2.2 million of revenue attributed to the engineered products for the second quarter 2014, an increase of 46% over the second quarter 2013
For the three months ended June 30, 2014, we recognized the final sales of $668,900 to our Class 1 railroad customer pursuant to a three year supply agreement completed during this quarter
Received third purchase order for ECOTRAX® rail ties from Russia, the second largest rail network in the world and third purchase order from major transit system in Europe
Saw continued growth in international business with multiple purchase orders for ECOTRAX® rail ties
Expanded interest in STRUXURE® heavy construction and laminated temporary road mats with multiple test orders shipped

AXION's Vice Chairman, Steve Silverman commented, "We reported a triple digit year-over-year growth this quarter and recognized an increase in the sale of our engineered products which continue to rise. Our ECOTRAX® rail ties performed extremely well in the US and worldwide leading to larger and more substantial orders as we continued to diversify our customer base. As we completed our three-year supply agreement this quarter, only 16% of sales were to one Class 1 railroad customer as compared to 66% from the second quarter of 2013. We continue to stay committed to opening up new market segments for our STRUXURE® products. Our mat trials have gone exceedingly well and we have higher demand for these products. Wood timbers used to fabricate mats are in short supply and the time has come to begin building the inventory for sale."

"We also recently announced that we are converting our Zanesville, OH facility to support the increasing demand for our engineered products. Our strategy initiated with the acquisition of the plastics reprocessing business late last year was to convert scrap to engineered products thereby allowing us to realize higher per pound sell prices. We had planned for this conversion in Zanesville to happen during the first quarter 2015 on a gradual basis but now have strategically chosen to accelerate the alignment time table."

"This conversion will add capacity to process raw materials, and allow us to increase manufacturing capacity for our engineered products, which historically have provided higher gross margins. With the shift in the reprocessed market place and the completion of many trials for our engineered products, we will increase our capacity to a level that will allow us to meet the anticipated demand we foresee for our engineered products. The plastics reprocessing assets we acquired and have invested further in over the last eight months have yielded much higher throughput and reduced down time. Now it is time to put these assets to good use in driving higher per pound sales realizations. We are currently finalizing multiple supply agreements around the world as the test projects previously initiated by our rail customers, are now leading to new orders that will be quite significant for our business. Since our Waco, TX facility is nearing full capacity with the equipment we have in place, we are undergoing the expansion now in order to meet the anticipated demand for our engineered products."

"This is an exciting time for AXION as we are realigning our operational process to better focus on our core activities and definitive strategy which will drive long-term growth. We've recently appointed our Chief Operating Officer, Claude Brown Jr., to Chief Executive Officer. His extensive background in engineered products will be critical in his new role which should drive this Company to an operating profit."

Second Quarter 2014 Financial Summary

AXION reported $ 4,054,054 in revenue for the second quarter of 2014, a 170% increase over revenues of $ 1,499,950 for the second quarter of 2013. Revenue from the sale of our engineered products was $2.2 million and $1.5 million for the second quarter of 2014 and 2013, respectively, with the balance of revenue for the second quarter of 2014 coming from sales of reprocessed plastics. As the Company transitions its Zanesville facility to provide increased production capacity for its engineered products, revenue from the sale of reprocessed plastics is expected to decrease.

The Company continued to operate at a negative gross margin due to challenges with elevating price per pound realizations in the reprocessing business associated with increases in the raw scrap market. Higher scrap costs are more difficult to absorb when selling reprocessed products as compared to engineered products.

Total operating expenses were $20.6 million and $1.3 million for the second quarter ended June 30, 2014 and 2013, respectively. The increase in the current year resulted from a non-cash charge for the warrant tender offer undertaken during the second quarter of 2014 to enhance the Company's capital structure to better position the Company to raise capital in the future and move the trading in its common stock to a national exchange.

Other income and expenses, consisting of interest and amortization of discount expenses on debt securities and the change in the fair values of the various derivative liabilities primarily associated with the Company's convertible debt, resulted in other income of $2.3 million for the second quarter ended June 30, 2014 compared to other income of $4.8 million for the same period in 2013. The resulting net other income in both periods resulted from a reduction in the carrying value of derivative liabilities associated with the Company's convertible debt.

Net loss for the second quarter ended June 30, 2014 was $20.4 million, as compared to net income of $3.5 million for the corresponding period of 2013.

Six Months Ended June 30, 2014 Financial Summary

AXION reported $8.9 million in revenues for the six months ended June 30, 2014, a 173% increase from $3.3 million for the same period in 2013, of which $5.0 million was attributable to engineered products with the remainder attributable to reprocessed plastics sales. For the six months ended June 30, 2014 and 2013, 23% and 43%, respectively of sales were to one Class 1 railroad customer pursuant to the three- year supply agreement. Over the term of this supply agreement, the Company recognized $10.3 million of revenue, representing over 104,000 rail ties.

The negative gross margins for the six months ended June 30, 2014 of $3.4 million compares to a gross margin of $203,000 for the six months ended June 30, 2013. The impact of under-utilized capacity at both facilities, difficulties within the reprocessing plastics operations and the adjustment of certain engineered products inventory contributed to the negative gross margin for the current year.

Total operating expense were $22.0 million and $2.5 million for the six months ended June 30, 2014 and 2013, respectively. The significant increase in year over year comparison is a result of the aforementioned non-cash charge resulting from the warrant tender offer.

Other income and expense for the six months ended June 30, 2014 and 2013, was other income of $8.5 million and other expense of $1.1 million, respectively. For the six months ended June 30, 2014, the Company recognized a non-cash gain from the decrease in the fair value of the derivative liabilities of $11.0 million and net expense of $476,100 for the six months ended June 30, 2013.

For the six months ended June 30, 2014 and 2013, net loss was $16.9 million and $3.4 million, respectively.

About AXION International Holdings, Inc.
AXION (OTCQB: AXIH) is a green technology company, transforming waste plastics into structural building materials. Using 100%-recycled consumer and industrial plastics, AXION develops, markets and sells its recycled structural composite products through its ECOTRAX® composite rail tie and STRUXURE® building material lines. From the railroading industry to the military to global engineering firms, AXION delivers tested, proven and superior green solutions to infrastructure needs around the world. www.AXIH.com

Forward-Looking Statements
This release contains "forward-looking statements" for purposes of the Securities and Exchange Commission's "safe harbor" provisions under the Private Securities Litigation Reform Act of 1995 and Rule 3b-6 under the Securities Exchange Act of 1934. These forward-looking statements are subject to various risks and uncertainties that could cause AXION's actual results to differ materially from those currently anticipated, including the availability of materials at favorable pricing, sufficient manufacturing capability and the risk factors identified in AXION's filings with the Securities and Exchange Commission.

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SOURCE AXION International Holdings, Inc.