Third quarter numbers as follows...
I also listened to the conference call, came away less than impressed, but not ready to throw in the towel either. Guidance from management lowers Q4 revenue again. I was hoping that in lieu of the dramatically heightened awareness surrounding water quality, that would translate into increased sales.
Guidance for FY2001 is a return to profitable growth. They were very leery of getting pinned down on a top line number for next year, however, they gave cautious guidance to expect 20%+ revenue growth.
Any one else have differing thoughts?
Trojan Technologies Announces Improved Third Quarter Results: Revenue growth leads to narrowed loss
LONDON, ONTARIO, CANADA--Trojan Technologies Inc. (TSE/TUV) today
announced its financial and operating results for the third
quarter of fiscal 2000, ended May 31st. Revenue for the quarter
increased to $18.0 million compared to $12.8 million in the second
quarter. In the third quarter Trojan reported a reduced net loss,
after tax and a special charge, of $1.6 million compared to $1.7
million after tax in the prior quarter. On a per share basis,
there was a loss of $0.09 per share compared to a loss of $0.10 in
the prior quarter. For the quarter ended May 31, 1999, Trojan had
a restated net loss of $2.0 million or $0.12 per share.
Revenues in the third quarter were $18.0 million compared to $12.8
million in the second quarter and $24.5 million in the third
quarter of last year. In the second quarter, the Company had
curtailed production to better align its production schedule to
customer delivery dates. All staff members that had been on
temporary layoff have been recalled.
Gross margin was 28% in the quarter. Gross margin benefitted
during the quarter from the efficiency of increased production
levels, the initial introduction of cost reduced systems and the
Company's overall cost reduction program. These benefits were
offset by the adverse impact of the weak Euro that reduced the
gross margin of projects in Europe. The Company continues to make
provisions, at the time of sale, at higher-than-normal levels for
potential warranty claims on its systems. The Company is very
focussed on improving the quality and reliability of its systems
and has experienced lower than budgeted levels of warranty claims
in the year to date.
Total expenses excluding interest and amortization this quarter
were 34.9% of sales compared to 38.9% in the second quarter and
30.4% in the third quarter of last year.
During the quarter, Trojan increased its restructuring charge by
$355,000. In November 1999, when announcing its restructuring,
the Company stated it was suspending its activities in the air
treatment business. On further review, the Company, while still
believing this to be an attractive long-term business opportunity,
decided not to continue with its existing licensed technologies.
The Company believes there are alternative strategies that will
provide the opportunity to succeed in the air treatment business.
As a consequence, the Company has written-off its investment in
this acquired technology.
For the nine months ended May 31, 2000, after tax and a special
charge, the net loss was $7.4 million compared to a restated net
loss of $1.5 million in fiscal 1999. On a per share basis, there
was a loss of $0.43 compared to a loss of $0.09 for the same
period last year. Revenues in the nine months were $47.3 million
compared to $69.5 million while gross margin declined to $12.7
million compared to $19.9 million in the comparable period in
fiscal 1999.
At May 31, 2000, the Company's working capital position, excluding
cash and bank indebtedness stood at $37.4 million. During the
quarter, the Company's net cash position decreased by $2.2 million
largely reflecting the loss for the quarter.
New Products
In the third quarter, Trojan strengthened its line of drinking
water disinfection products for residential and commercial
applications with the launch of its new Trojan UVMax(TM)system.
This line of five innovative high-performance residential and
commercial drinking water disinfection systems effectively kills
viruses, bacteria (including E.coli), Giardia, Cryptosporidium and
other protozoa found in contaminated drinking water faster and
more efficiently than any other system today. Demand in this
market segment has grown rapidly: orders received in the month of
June have increased 2.5 times over the same month last year.
On June 12th, Trojan's new municipal drinking water disinfection
product, Trojan UVSwift(TM) was introduced at the American Water
Works Association Annual Conference and Exposition in Denver
Colorado. Approximately 14,000 consulting engineers, regulators,
operators and key decision-makers from the municipal sector across
North America were in attendance. Trojan UVSwift(TM) uses leading
edge UV technology to kill viruses, bacteria, Giardia,
Cryptosporidium and other protozoa found in municipal drinking
water supplies and is extremely effective in dealing with E.coli
bacteria.
Trojan hosted a luncheon presentation to introduce the product.
At the luncheon, a research paper was presented by Dr. Karl Linden
of Duke University titled "UV Disinfection for Giardia and
Cryptosporidium." concluding that UV is extremely efficient in
protecting against these organisms. This critical finding, which
positions UV to effectively disinfect drinking water where
chlorine is ineffective, has received significant interest from
regulatory bodies in the United States. A representative from the
US Environmental Protection Agency described plans to see UV
utilised as part of a multi-barrier approach to drinking water
disinfection.
A preview of the UVSwift(TM) was also hosted at the Federation of
Canadian Municipalities Annual Conference and Exhibition held in
London Ontario. Over 2000 municipal representatives from across
Canada were in attendance.
Other Developments
The recent tragedy of deaths resulting from contaminated drinking
water in Ontario, as well as incidents in other provinces and
countries, has significantly raised the public's awareness that
the quality of our drinking water cannot be taken for granted.
Upon hearing of the news of the Walkerton situation, Trojan
reached out to the community in a number of tangible ways. We
provided technical advice to officials in the community and have
donated UV disinfection systems to a number of institutions caring
for those most vulnerable. While the quality of the drinking water
is currently not yet safe due to high concentrations of chemical
disinfectants, we believe these Trojan systems will complement
existing treatments and provide additional confidence in the
drinking water.
Outlook
Trojan is confident that its performance will continue to improve
through increased production levels, the implementation of
strengthened performance management systems and cost reduction
initiatives. Order backlogs currently stand at $33.6 million for
the remainder of fiscal 2000 and fiscal 2001. Production in the
fourth quarter is expected to show continued growth resulting in
full year revenues in excess of $70 million.
While the Company's share of the growing UV wastewater market
continues to exceed 70%, bidding activity for wastewater projects
remains at levels below those which had been forecast. In
addition, Trojan is seeing very aggressive pricing and risk taking
by European competitors who are looking to increase market share.
While this competitive activity has impacted Trojan's revenues in
the European market, Trojan remains committed to doing business at
margins that provide appropriate returns to shareholders.
New product introductions and the Company's entry into the
municipal drinking water market are expected to contribute to
profitable growth in the coming quarters. A strong market exists
at the present time in Europe. In the United States, the
Environmental Protection Agency's Technical Advisory Subcommittee
on Disinfection Standards is completing recommendations to the US
Government on ways to improve the effectiveness of disinfection of
drinking water while reducing the level of disinfection
by-products present in the water. These recommendations are likely
to include the use of UV disinfection as an additional treatment
method.
"I am pleased with the progress Trojan has made in recent months.
We are meeting challenges to improve our cost structures and have
introduced new products that position us to succeed in the growing
drinking water market." said Hank Vander Laan, President and CEO.
"The significant changes occurring in the regulatory framework in
the United States, we believe, will see increased acceptance and
use of UV technology around the globe. These developments,
together with an intense focus on customer service and quality,
position the company for a rapid return to profitable growth."
Water quality and the protection of public drinking water supplies
remains a global issue. Trojan will intensify its efforts to
raise awareness of the issues and the understanding that a
solution is available in Canadian developed UV technology. Trojan
will meet with Canadian government officials at all three levels
in the coming months, and will be speaking publicly on the matter
this fall, beginning with a keynote speech to the Empire Club in
Toronto in October. |
