Trojan Technologies Announces Revised Earnings Expectations

Nov 11, 2003, 00:00 ET from Trojan Technologies Inc.

    LONDON, ON, Nov. 11 /PRNewswire-FirstCall/ - Trojan Technologies Inc.
 (TSX/TUV) announced today that the Company will record an additional provision
 of between $2.0 million and $2.5 million against additional start-up and
 warranty costs on certain wastewater systems. As a result, the Company's
 earnings will be below analysts' expectations for the third quarter ended
 September 30, 2003, and for the full fiscal year.
     The extra provisions are required at this time because of costs related
 to two separate component performance issues. These two issues manifested
 themselves on the start-up of one of the Company's largest systems during the
 third quarter.
     On identifying these issues, the Company quickly determined the root
 causes, resolved the problems to the satisfaction of customers and took all
 necessary steps to ensure any future exposure is contained. The failures that
 were experienced in some systems built prior to 2003 and the components and
 designs that have failed have not been used since 2002.
     "We have moved very quickly to address this challenge," stated
 Marvin DeVries, President and CEO. "We have identified and contained the
 issues at a minimal inconvenience to our customers. Improving quality and
 satisfying customers are critical objectives for our Company. We are
 positioning to move forward from here to deliver positive results to meet our
 shareholders' expectations. We are making good progress in building our
 business and, despite this setback, have been improving the quality of our
 products and processes. The replacement designs and components are
 demonstrating stable and reliable performance in the field."
     The provision taken for the third quarter reflects the cost of rectifying
 the two component quality items, including related labour costs, an additional
 $700,000 to cover cost increases seen in start-ups during this period, and a
 general strengthening of warranty provisions.
     Most warranties are offered for periods of a year although, in some
 situations, warranties of certain components take effect for up to 5 years.
 Total provision for start-up, performance testing, warranty and retrofit,
 after the adjustments referred to in this release, will be approximately
 $4.4 million.
     Broadly speaking, the component issues relate to two items: quartz
 sleeves and high-pressure hose fittings.
     Quartz sleeves: Moisture getting into some UV4000 sleeves, built prior to
 2003, that contain medium-pressure lamps has led to some premature lamp
 failures. Late last year, new designs made to improve the systems have since
 led to stable performance in both new installations and in retrofits at older
     High-pressure hose fittings: A total of 8 UV4000 systems made between
 March and May 2001 have experienced hose-fitting failures inside the ballast
 compartment. This caused failure of the electronic ballasts. Failure of a
 single fitting can cause up to $25,000 in repair expenses per module. While
 about 20 fittings have failed in the field, this problem has been corrected in
 all systems made since mid-2001. Fittings have been changed at customer sites
 where failures have taken place.
     Trojan will release its financial results for the three-month and
 nine-month periods ended September 30, 2003 on Wednesday, November 19, 2003.
 Revenue for the quarter will be approximately $28 million, up from
 $26.3 million in the corresponding three-month period. The Company's financial
 position is strong with Shareholders' Equity exceeding $79 million, cash and
 marketable securities on hand of over $14 million and long term debt of
 $3.2 million.
     A conference call and webcast for investors and analysts will be held
 following the release of the quarter's financial results on:
            Date:          Wednesday, November 19, 2003
            Time:          2:00 p.m. EST
            Access No.:    (416) 640-4127 or (800) 814-3911
                           (Please call ten minutes prior to start.)
     The conference call will be hosted by Marvin DeVries, President and CEO
 and will include Doug Alexander, Executive Vice President and CFO.
     Media: Marvin DeVries, President and CEO, will be available for
 interviews between 3:30 p.m. and 4:30 p.m. by telephone on November 19, 2003.
     Please call to arrange a time.

SOURCE Trojan Technologies Inc.