Trojan Technologies Announces Second Quarter Results; Strong Revenue Growth And Improved Margins Drive Return To Profitability.Business Editors LONDON London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. , ONTARIO--(BUSINESS WIRE)--April 2, 2002 Trojan A program that appears legitimate, but performs some illicit activity when it is run. It may be used to locate password information or make the system more vulnerable to future entry or simply destroy programs or data on the hard disk. Technologies Inc. (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :TUV (Technischer Überwachungs-Verein) Literally "Technical Watch-Over Association." A German certifying body involved with product safety for the European community. .) today announced its financial and operating results for the six-month period ended February February: see month. 28, 2002. "I am delighted that Trojan Technologies has returned to profitability", said Allan Allan can refer to:
Highlights include: -- Municipal wastewater disinfection revenue was $31.4 million, compared to $28.8 million last year. Revenue from after market sales and service increased by over $3 million to $7.5 million. Production revenue was particularly strong in the quarter, more than 50% ahead of last year, reflecting the Company's large order backlog in the municipal market. -- Municipal drinking water disinfection revenue was $1.7 million compared to zero last year. The demand for Ultraviolet disinfection solutions continues to be very strong in North America as municipalities move toward implementation of multi barrier approaches to disinfection strategy. In the first six months of the year, Trojan has bid on more projects than in all of fiscal 2001. -- Environmental Contaminant treatment revenue was $1.8 million. This is a new market segment for Trojan; accelerated market entry was achieved through the acquisition of Advanced Ultraviolet Solutions in March 2001. Trojan has recently been recommended for selection on a large project in Orange County, California. If awarded at the bid value of approximately $15 million, this will bring the total of contracts awarded to over $20 million since AUVS was acquired. -- Industrial and commercial revenue, increased to $4.2 million from $2.6 million. The segment continues to show strong year over year growth resulting from the efforts to build distribution and leverage the acquisition of Pureflow Ultraviolet Inc. completed in September 2001. -- Residential market revenue was $2.2 million compared to $1.9 million last year. Revenue growth in the second quarter was particularly strong increasing by 59% year over year as a result of good response to a winter sales promotion for distributors. "Our six-month results are very encouraging. Having reported losses for three years, I am very pleased to see the efforts of our staff and the patience Patience, poem Patience: see Pearl, The. patience, card game patience: see solitaire. Patience See also Longsuffering. of our shareholders being rewarded with much improved performance." said Allan Bulckaert, President and Chief Executive Officer of Trojan Technologies Inc. "Our order backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. is in excess of $40 million and we are enjoying success in penetrating penetrating breaching the tissues of the body. growth markets. Following the successful completion of our equity issue, our financial fundamentals are strong and we are well positioned to win in the market. " More details about Trojan Technologies financial performance are contained in the following Report to Shareholders. Report to Shareholders for the Six Months ended February 28, 2002 President's Message To Our Shareholders During the second quarter, Trojan Technologies returned to profitability. This is a significant milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. . Our revenue growth together with an emphasis on quality and cost control is reflected in dramatically improved results. We are also enjoying success in the marketplace - all of our businesses are delivering growth in revenues. At the beginning of this year, I set out four objectives that would establish a solid foundation upon which we would build value for all our stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. . Our first objective is to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution our plans to grow revenues this year in excess of 15%. In addition we are committed to establishing the platform to deliver long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth of closer to 30% per annum Per annum Yearly. . On a year to date basis our revenues have grown by 24%. As expected, growth in our core wastewater Wastewater is any water that has been adversely affected in quality by anthropogenic influence. It comprises liquid waste discharged by domestic residences, commercial properties, industry, and/or agriculture and can encompass a wide range of potential contaminants and business is running at approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 9%, but we are experiencing solid growth in our other businesses. There are significant growth opportunities in our four other market segments and I am encouraged by developments during the quarter. As well as success in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , we have made good progress in both Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Asia.Second, we must ensure we continue to supply the right products by expanding our technology leadership and actively pursuing the acquisition of complementary technologies. The markets in both Europe and North America are requiring products to be validated val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. by recognized 3rd party regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. bodies such as NSF NSF - National Science Foundation or NWRI NWRI National Water Research Institute in North America or DVGW DVGW Deutsche Vereinigung des Gas- und Wasserfaches E.v. - Technisch-Wissenschaftlicher Verein in Europe. We have made good progress during the last three months meeting the needs of these validation See validate. validation - The stage in the software life-cycle at the end of the development process where software is evaluated to ensure that it complies with the requirements. processes. Our research team continues to develop enhancements to our existing product line that we anticipate will be well received in the market. Our third objective is to translate (1) To change one language into another; for example, assemblers, compilers and interpreters translate source language into machine language. (2) In computer graphics, to move an image on screen without rotating it. revenue growth into profits by delivering after tax earnings this year in the range of 4% to 5% of revenue. Our revenue growth in the quarter has confirmed our ability to deliver profits when we attain reasonable production levels. With our order backlog in place, much of it requiring delivery in the current fiscal year, I anticipate that revenues will continue to be at levels to meet our profitability targets. Finally, I have made good progress in further developing management and performance measurement processes to ensure we achieve our plans. Our financial position is very much improved. Since September September: see month. 1, 2001, shareholders' Equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. has increased by over $20 million from a combination of our successful equity issue, shares issued to acquire Pureflow Ultraviolet An invisible band of radiation at the upper end of the visible light spectrum. With wavelengths from 10 to 400 nm, ultraviolet starts at the end of visible light and ends at the beginning of X-rays. The primary source of ultraviolet light is the sun. Inc. and from earnings. In addition, our business continues to be cash flow positive and during the quarter we were able to retire retire v. 1) to stop working at one's occupation. 2) to pay off a promissory note, and thus "retire" the loan. 3) for a jury to go into the jury room to decide on a verdict after all evidence, argument and jury instructions have been completed. all of our short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. . Outlook Our six-month results are very encouraging. Having reported losses for three years, I am very pleased to see the efforts of our staff and the patience of our shareholders being rewarded with much improved performance. Our order backlog is in excess of $40 million and we are enjoying success in penetrating growth markets. Following the successful completion of our equity issue, our financial fundamentals are strong and we are well positioned to win in the market and to achieve our objectives for the current year. ----------------------------- Allan Bulckaert President and Chief Executive Officer April 2, 2002 Financial Analysis of Results For the six months ended February 28, 2002, revenues grew 24% from $33.3 million in the prior year to $41.3 million. Revenue for the quarter was $22.7 million; an increase of 52% compared to $14.9 million in the second quarter of fiscal 2001. On a year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. basis, earnings before interest, taxes, amortization and income from equity investment amounted to $2,870,400 compared to $94,300 in fiscal 2001. For the quarter, the earnings amounted to $2,374,700 compared to a loss of $177,200 in the same quarter last year. For the second quarter, Trojan reported net income after tax of $1,143,400 compared to an $881,600 loss in the same quarter last year. On a per share basis, the company reported net earnings of $0.06 compared to a loss of $0.05 per share last year. For the six-month period, the net income after tax was $731,000 million as compared to a loss of $1,471,200 million in the prior year. On a per share basis, the Company reported earnings per share of $0.04 compared to a loss of $0.09 per share in last fiscal year. Analysis by Market Production in all business segments has increased over the prior year. In addition to growth in the core wastewater business, revenue has grown in all other segments as the Company implements its strategy to further penetrate each of these exciting market opportunities and, by focussed efforts, grow each of these businesses to critical mass. Results by segment are as follows: -- Municipal wastewater disinfection revenue was $31.4 million, compared to $28.8 million last year. Revenue from after market sales and service increased by over $3 million to $7.5 million. Production revenue was particularly strong in the quarter, more than 50% ahead of last year, reflecting the Company's large order backlog in the municipal market. -- Municipal drinking water disinfection revenue was $1.7 million compared to zero last year. The demand for Ultraviolet disinfection solutions continues to be very strong in North America as municipalities move toward implementation of multi barrier approaches to disinfection strategy. In the first six months of the year, Trojan has bid on more projects than in all of fiscal 2001. -- Environmental Contaminant treatment revenue was $1.8 million. This is a new market segment for Trojan; accelerated market entry was achieved through the acquisition of Advanced Ultraviolet Solutions in March 2001. Trojan has recently been recommended for selection on a large project in Orange County, California. If awarded at the bid value of approximately $15 million, this will bring the total of contracts awarded to over $20 million since AUVS was acquired. -- Industrial and commercial revenue, increased to $4.2 million from $2.6 million. The segment continues to show strong year over year growth resulting from the efforts to build distribution and leverage the acquisition of Pureflow Ultraviolet Inc. completed in September 2001. -- Residential market revenue was $2.2 million compared to $1.9 million last year. Revenue growth in the second quarter was particularly strong increasing by 59% year over year as a result of good response to a winter sales promotion for distributors. Gross Margin Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: gross margin for the six-month period increased to 39.7% or $16.4 million compared to 36.0% or $12.0 million in the prior year reflecting the implementation of the cost reduction and process improvement program. Consolidated gross margin for the quarter increased to 42.1% or $9.6 million from 35.6% or $5.3 million in comparison to the same quarter last year. Gross margin benefited from increased production volumes that permitted manufacturing overheads to be spread over a larger business base. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. Quarterly operating expenses, specifically administrative, selling and net research and development costs, increased over fiscal 2001 from $5.5 million or 36.8% of sales to $7.2 million or 31.6% of sales. On a year-to-date basis, operating expenses were $13.5 million or 32.8% of sales as compared to $11.9 million or 35.7% of sales last year. The increase in expenses is in part attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to increased commissions and selling costs as a result of higher revenues. Other general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. were also higher caused by insurance costs, reflecting higher market rates as well as expanded cover following a comprehensive review, and increased staff costs. Liquidity and Capital Resources The Company's net cash position improved significantly during the quarter reflecting the return to profitability, continuing careful management of working capital and the successful completion of the Company's equity issue. Cash on hand at February 28, 2002 was $2 million compared to net indebtedness of $15.1 million at the end of the prior fiscal year in August 2001. Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the quarter was $2.1 million compared to an outflow of $1.7 million in the prior year. In addition to the improvement generated by the return to profitability, the Company's tax expense does not require the payment of cash taxes because of the availability of tax loss carryforwards tax loss carryforward See carryforward. . For the six-month period, cash flow from operations was $3.2 million compared to $3.8 million in the prior year. Cash used in investment activities declined to $0.6 million from $1.2 million because of reduced capital expenditures. During the quarter, Trojan completed the issue and sale of 2,110,000 units for gross proceeds of $15.8 million. Each unit consists of one common share and one-half of one warrant to purchase an additional common share within 18 months at an exercise price of $8.25. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of the sale of the common shares were used to repay in full the borrowings drawn under the Company's operating credit facility. The issue of shares increased the capital of the Company to approximately 19.7 million shares, and if all warrants are exercised, approximately 20.8 million shares. A conference call will be held for investors, analysts and media at 4:30pm EST EST electroshock therapy. EST abbr. electroshock therapy on April 2, 2002. The conference call will be hosted by Allan Bulckaert, President & CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , and will include Douglas Douglas, city, Isle of Man Douglas, city (1991 pop. 19,950), capital of the Isle of Man, Great Britain. It is a popular resort, connected by rail to Ramsey and Port Erin, on the Irish Sea. Tourism is the chief industry. Alexander, Chief Financial Officer and Marvin DeVries, Executive Vice President. The phone number to call is (416) 695-5806 or (800) 273-9672. A taped version of the call will be available until midnight Tuesday Tuesday: see week. , April 9, 2002 by calling (416) 695-5800 or 1-800-408-3053 and dialing passcode number 1113609. Trojan Technologies is a Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. based, high technology environmental company operating internationally. With more than 20 years of experience, Trojan has the largest installed base of UV disinfection disinfection, n the process of destroying pathogenic organisms or rendering them inert. disinfection, full oral cavity, n a procedure used to reduce active periodontal disease, usually completed within a certain short time frame. systems operating around the world. Trojan designs, manufactures and sells ultraviolet disinfection Ultraviolet disinfection is a form of wastewater treatment. It is commonly used in garden pond filtration systems to kill algae. Large scale urban UV wastewater treatment is performed in cities such as Edmonton, Alberta. systems for municipal wastewater, drinking water drinking water supply of water available to animals for drinking supplied via nipples, in troughs, dams, ponds and larger natural water sources; an insufficient supply leads to dehydration; it can be the source of infection, e.g. leptospirosis, salmonellosis, or of poisoning, e.g. systems for residential, municipal and commercial use, and industrial systems for food and beverage F&B is a common abbreviation in the United States and Commonwealth countries, including Hong Kong. F&B is typically the widely accepted abbreviation for "Food and Beverage," which is the sector/industry that specializes in the conceptualization, the making of, and delivery of foods. , pharmaceutical, and semiconductor applications. Trojan also designs and installs treatment technology for the environmental contaminant contaminant /con·tam·i·nant/ (kon-tam´in-int) something that causes contamination. contaminant something that causes contamination. and micropollutant destruction market. This document contains certain statements that are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. relative to the company's future strategy and performance. They involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to be materially different from any future performance suggested in this document. Further, the Company operates in an industry where it may be influenced by economic and other factors beyond the Company's control.
TROJAN TECHNOLOGIES INC.
FINANCIAL HIGHLIGHTS
(in thousands of dollars)
For the six months For the three months
(unaudited) ended ended
----------------------------------------------
February February February February
28 2002 28 2001 28 2002 28 2001
--------------------------------------------------------------------
Revenue $ 41,294.7 $ 33,337.9 $ 22,738.5 $ 14,919.4
Earnings before
interest, taxes,
amortization and
income from equity
investment $ 2,870.4 $ 94.3 $ 2,374.7 $ (177.2)
Net earnings (loss) $ 731.0 $ (1,471.2) $ 1,143.4 $ (881.6)
Earnings per share
(in dollars)
Basic $ 0.04 $ (0.09) $ 0.06 $ (0.05)
Fully diluted $ 0.04 $ (0.09) $ 0.06 $ (0.05)
Number of shares
Basic 18,462.4 17,168.4 19,382.3 17,168.4
Fully diluted 18,558.0 17,175.8 19,447.3 17,186.2
TROJAN TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars)
(unaudited)
For the six months For the three months
ended ended
---------------------------------------------------------------------
February 28 February 28 February 28 February 28
2002 2001 2002 2001
---------------------------------------------------------------------
REVENUE $ 41,294.7 $ 33,337.9 $ 22,738.5 $ 14,919.4
Cost of goods sold 24,891.4 21,328.5 13,171.7 9,608.9
---------------------------------------------------------------------
Gross Margin 16,403.3 12,009.4 9,566.8 5,310.5
---------------------------------------------------------------------
EXPENSES
Administrative and
selling expenses 11,658.5 10,123.3 6,267.9 4,625.1
Research and
development 1,874.4 1,791.8 924.2 862.6
---------------------------------------------------------------------
13,532.9 11,915.1 7,192.1 5,487.7
---------------------------------------------------------------------
Earnings (loss)
before interest,
taxes,
amortization,
income from equity
investment 2,870.4 94.3 2,374.7 (177.2)
Other expenses
(income)
Interest on
long-term debt 261.5 130.2 139.9 61.5
Interest and bank
charges 438.7 799.4 98.2 351.7
Amortization 1,381.6 1,537.2 680.7 772.8
Interest income (14.3) (61.3) (4.4) (26.6)
Income from equity
investment (255.0) (390.0) (160.0) (195.0)
---------------------------------------------------------------------
Operating earnings
(loss) 1,058.0 (1,921.2) 1,620.4 (1,141.6)
Income taxes -
current 56.0 85.0 26.0 34.0
Income taxes -
future 271.0 (535.0) 451.0 (294.0)
---------------------------------------------------------------------
Net earnings
(loss) 731.0 (1,471.2) 1,143.4 (881.6)
Retained earnings
(deficit),
beginning of
period (1,919.2) 3,190.1 (2,331.6) 2,600.5
Share issue costs,
net of taxes (892.0) -- (892.0) --
Retained earnings
(deficit), end of
period (2,080.2) 1,718.9 (2,080.2) 1,718.9
---------------------------------------------------------------------
Earnings (loss)
per share (in
dollars)
Basic and fully
diluted 0.04 (0.09) 0.06 (0.05)
---------------------------------------------------------------------
Number of shares
(in thousands)
Basic 18,462.4 17,168.4 19,382.3 17,168.4
Fully diluted 18,558.0 17,175.8 19,447.3 17,186.2
---------------------------------------------------------------------
See accompanying notes
TROJAN TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(unaudited)
February 28 August 31
2002 2001
---------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 2,007.1 $ 977.8
Accounts receivable 25,049.5 25,419.0
Accounts receivable -
government funding 356.6 -
Accrued revenue on contracts in
progress (net of progress
payments of $11,799.6;
$13,212.8 at August 31) 10,073.9 8,790.4
Inventory 10,347.3 10,920.2
Prepaid expenses 541.6 331.5
Income taxes receivable 695.8 771.1
---------------------------------------------------------------------
Total current assets 49,071.8 47,210.0
Investments in other company 1,752.1 1,497.1
Investment tax credits
recoverable 4,889.7 4,628.0
Future income taxes 3,277.4 3,208.1
Capital assets 21,625.0 22,316.8
Patents, trademarks and
licenses 1,385.7 1,367.1
Goodwill 5,023.5 953.5
---------------------------------------------------------------------
$ 87,025.2 $ 81,180.6
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Bank indebtedness $ - $ 16,046.6
Accounts payable and accrued
charges 14,996.2 13,736.5
Current portion of
long-term debt 1,532.5 1,493.1
---------------------------------------------------------------------
Total current liabilities 16,528.7 31,276.2
---------------------------------------------------------------------
Long-term debt 6,340.7 7,266.1
---------------------------------------------------------------------
Deferred technology credit 1,216.4 -
---------------------------------------------------------------------
Pension obligation 1,200.0 1,200.0
---------------------------------------------------------------------
Shareholders' equity
Share capital 63,819.6 43,357.5
Deficit (2,080.2) (1,919.2)
---------------------------------------------------------------------
61,739.4 41,438.3
---------------------------------------------------------------------
$ 87,025.2 $ 81,180.6
---------------------------------------------------------------------
---------------------------------------------------------------------
See accompanying notes
TROJAN TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
For the six months For the three months
ended ended
---------------------------------------------------------------------
February 28 February 28 February 28 February 28
2002 2001 2002 2001
---------------------------------------------------------------------
OPERATING
ACTIVITIES
Net income (loss) $ 731.0 $ (1,471.2) $ 1,143.4 $ (881.6)
Add (deduct)
charges (credits)
to operations
not involving cash
Amortization 1,381.6 1,537.2 680.7 772.8
Income from equity
investment (255.0) (390.0) (160.0) (195.0)
Future income
taxes 271.0 (535.0) 451.0 (294.0)
Investment tax
credits
recoverable (261.7) (310.0) (121.7) (110.0)
Net change in
non-cash working
capital
balances related
to operations 1,285.6 4,966.1 (132.4) (954.5)
---------------------------------------------------------------------
3,152.5 3,797.1 2,125.8 (1,662.3)
---------------------------------------------------------------------
INVESTMENT
ACTIVITIES
Additions to
capital assets,
net (578.7) (949.3) (383.8) (511.1)
Additions to
patents,
trademarks and
licenses (86.7) (121.8) (31.9) (52.3)
Acquisitions 18.1 (115.2) - -
---------------------------------------------------------------------
(647.3) (1,186.3) (415.7) (563.4)
---------------------------------------------------------------------
FINANCING
ACTIVITIES
Decrease in bank
indebtedness (16,046.6) (1,814.8) (15,568.3) 1,900.8
Issuance of common
shares 15,825.0 - 15,825.0 -
Share issue costs (1,228.1) - (1,228.1) -
Advances of
technology credit 859.8 859.8
Advances of
long-term debt 17.5 - 17.5 -
Repayment of
long-term debt (903.5) (359.9) (627.0) (222.6)
---------------------------------------------------------------------
(1,475.9) (2,174.7) (721.1) 1,678.2
---------------------------------------------------------------------
Net increase
(decrease) in cash
and
cash equivalents
during the period 1,029.3 436.1 989.0 (547.5)
Cash and cash
equivalents,
beginning of
period 977.8 718.0 1,018.1 1,701.6
---------------------------------------------------------------------
Cash and cash
equivalents, end
of period 2,007.1 1,154.1 2,007.1 1,154.1
---------------------------------------------------------------------
See accompanying notes
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared by the Company in accordance with Canadian generally
accepted accounting principles. These unaudited condensed notes to the
consolidated financial statements should be read in conjunction with
the audited financial statements and notes included in the Company's
Annual Report for the fiscal year ended August 31, 2001.
2. TECHNOLOGY CREDIT
During 2001, the Company entered into an agreement with Technology
Partnerships Canada ("TPC"), which will provide funding from TPC for a
three-year period up to a maximum of approximately $3.3 million
relating to specific research projects having a total estimated cost
of $10 million. The Company is obligated under its agreement to repay
TPC by way of a royalty commencing in 2004 based upon the total
revenue of the Company. The agreement contemplates that this royalty
will have both a minimum and a maximum amount. Amounts owing for
claims made under the TPC agreement have been reflected in the
accounts as a current asset, and the repayment obligation has been
recorded as a deferred technology credit.
3. INCOME TAXES
At February 28, 2002, the Company has approximately $9,600,000 of
federal and $15,200,000 of Ontario non-capital losses that will expire
in 2006 through to 2009. The Company also has undeducted Scientific
Research and Experimental Development deductions of approximately
$8,400,000 that have no expiry date. For financial reporting purposes,
a future tax asset has been recorded in respect of these losses
carrying forward.
4. ACQUISITION
Effective September 1, 2001, the Company purchased 100% of the
issued shares of Pureflow Ultraviolet Inc. for consideration and
related costs of approximately $5,860,000.
Pureflow Ultraviolet Inc., established in 1978, is a distributor
of ultraviolet equipment to the industrial and commercial market in
North America.
Consideration consisted of 479,040 shares of the Company valued at
$4,637,107 and cash of $1,222,893, including expenses. The acquisition
has been accounted for as a purchase transaction. The fair values of
the assets acquired and liabilities assumed were as follows:
$000's
--------------------------------------------------------------------
Cash 1,241.0
Total assets other than cash 642.0
Total liabilities (93.0)
Excess of purchase price over fair value of net
assets (goodwill) 4,070.0
--------------------------------------------------------------------
Total purchase price 5,860.0
Less cash of Pureflow acquired (1,241.0)
--------------------------------------------------------------------
Purchase price paid net of cash acquired 4,619.0
Less consideration paid through share issuance (4,637.1)
--------------------------------------------------------------------
Net cash acquired on purchase 18.1
--------------------------------------------------------------------
--------------------------------------------------------------------
The results of Pureflow from September 1, 2001 have been included
in these consolidated financial statements.
5. CHANGE IN ACCOUNTING POLICY
(a) The Canadian Institute of Chartered Accountants (CICA) has
issued new accounting recommendations for the measurement,
presentation and disclosure for goodwill and other intangible assets.
The Company has adopted these recommendations effective September 1,
2001 as permitted by the CICA Handbook section. The most significant
change under the new recommendations is that goodwill is not
amortized. Instead, it must be tested annually for impairment.
Accordingly, goodwill is no longer amortized. If goodwill amortization
had not been recorded for the same period last year, the net loss for
the first six months in fiscal 2001 would have decreased by $50,000
and would have had no impact on the loss of $0.09 per share.
Amortization amounting to $68,000 is provided on patents, trademarks
and licenses over their estimated useful lives ranging from five to 17
years.
(b) The CICA has also issued new accounting recommendations for
the presentation and disclosure of basic and fully diluted earnings
per share. The Company has adopted these recommendations on a
retroactive basis effective September 1, 2001. The most significant
change under the new recommendations is the use of the treasury stock
method instead of the imputed earnings approach to computing diluted
earnings per share. Under the treasury stock method:
-- The exercise of options is assumed to have taken place at the
beginning of the period (or at the time of issuance, if
later);
-- The proceeds from the exercise are assumed to be used to
purchase common stock at the average market price during the
period; and
-- The incremental shares (the difference between the number of
shares assumed issued and the number of shares assumed
purchased) are included in the denominator of the diluted
earnings per share calculation.
6. SHARE CAPITAL
On December 17, 2001, the Company issued 2,110,000 units at a
price of $7.50 per unit, for total gross proceeds of $15,825,000. Each
unit consisted of one common share of the Company and one-half of one
warrant to purchase a common share. Each whole warrant is exercisable
for a period of 18 months from its date of issue and entitles the
holder to purchase one common share at a price of $8.25. The net
proceeds after costs were used to repay the bank indebtedness.
7. SEGMENT INFORMATION (in thousands of dollars)
Trojan operates worldwide in five strategic business units:
municipal wastewater, municipal drinking water, environmental
contaminant treatment, industrial /commercial and Residential. The
Municipal Wastewater division sells and services UV systems that serve
as the final step in municipal wastewater treatment that destroy
potentially harmful bacteria and viruses prior to discharge into the
environment. The Municipal Drinking Water division sells UV systems
for use in potable water treatment prior to release into public water
distribution networks. The Environmental Contaminant Treatment
division sells optimized UV light treatment systems to destroy certain
chemicals in contaminated ground water supplies and to provide an
additional barrier against organic micropollutants. The
Industrial/Commercial division sells UV products that destroy
microorganisms in water and other liquids used in many industrial
processes. The Residential division sells UV products for disinfection
of private water supplies for homes, cottages, farms, rural commercial
establishments and resorts.
Municipal Municipal Environmental
Wastewater Drinking Contaminant
Water Treatment
$ $ $
---------------------------------------------------------------------
Six months ended February 28, 2002
---------------------------------------------------------------------
Revenue 31,404.9 1,663.2 1,762.1
---------------------------------------------------------------------
Net contribution 7,156.2 315.2 124.1
---------------------------------------------------------------------
Six months ended February 28, 2001
---------------------------------------------------------------------
Revenue 28,835.0 - -
---------------------------------------------------------------------
Net contribution 4,508.8 - -
---------------------------------------------------------------------
Three months ended February 28, 2002
---------------------------------------------------------------------
Revenue 18,648.3 904.0 -
---------------------------------------------------------------------
Net contribution 5,138.3 176.0 (370.7)
---------------------------------------------------------------------
Three months ended February 28, 2001
---------------------------------------------------------------------
Revenue 12,776.0 - -
---------------------------------------------------------------------
Net contribution 1,967.9 - -
---------------------------------------------------------------------
Industrial / Residential Total
Commercial
$ $ $
---------------------------------------------------------------------
Six months ended February 28, 2002
---------------------------------------------------------------------
Revenue 4,214.6 2,249.9 41,294.7
---------------------------------------------------------------------
Net contribution 1,145.3 486.2 9,227.0
---------------------------------------------------------------------
Six months ended February 28, 2001
---------------------------------------------------------------------
Revenue 2,560.7 1,942.2 33,337.9
---------------------------------------------------------------------
Net contribution 421.3 465.8 5,395.9
---------------------------------------------------------------------
Three months ended February 28, 2002
---------------------------------------------------------------------
Revenue 2,072.3 1,113.9 22,738.5
---------------------------------------------------------------------
Net contribution 651.7 177.9 5,773.2
---------------------------------------------------------------------
Three months ended February 28, 2001
---------------------------------------------------------------------
Revenue 1,442.2 701.2 14,919.4
---------------------------------------------------------------------
Net contribution 226.5 145.3 2,339.7
---------------------------------------------------------------------
Net contribution is defined as gross margin less selling expenses.
Reconciliation of net contribution to net income (loss):
Six months ended Three months ended
February 28 February 28
----------------------------------------
2002 2001 2002 2001
$ $ $ $
------------------------------------------------------------------
Total net contribution 9,227.0 5,395.9 5,773.2 2339.7
Less
Administrative
expenses 4,482.2 3,509.8 2,474.3 1,654.3
Research and
development 1,874.4 1,791.8 924.2 862.6
Interest on long-term
debt 261.4 130.2 139.8 61.5
Interest and bank
charges 438.7 799.4 98.2 351.7
Amortization 1,381.6 1,537.2 680.7 772.8
Interest income (14.3) (61.3) (4.4) (26.6)
Income from equity
investment (255.0) (390.0) (160.0) (195.0)
------------------------------------------------------------------
Operating income (loss) 1,058.0 (1,921.2) 1,620.4 (1,141.6)
Income taxes 327.0 (450.0) 477.0 (260.0)
------------------------------------------------------------------
Net income (loss) 731.0 (1,471.2) 1,143.4 (881.6)
------------------------------------------------------------------
------------------------------------------------------------------
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion