CONSOLIDATED STATEMENTS OF
CASH FLOWS
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FANTOM TECHNOLOGIES INC.
Six Months Ended Three Months Ended
December 31 (Unaudited) December 31 (Unaudited)
1999 1998 1999 1998
CASH PROVIDED BY (USED FOR):
Operations:
Net income $ 6,910,205 $ 6,868,179 $ 3,504,675 $ 3,595,123
Items not
requiring cash:
Depreciation 1,785,196 1,087,776 902,290 562,605
Deferred taxes 601,573 436,881 452,733 (126,000)
Amortization of deferred
development costs 174,643 51,049 87,322 25,524
Change in non-cash
operating working
capital (3,633,938) (8,649,321) (240,168) (4,844,711)
Increase (decrease)
in currency hedging
exchange gains (2,625,191) 968,059 (1,628,785) 968,059
- ----------------------------------------------------------------------------------------
3,212,488 762,623 3,078,067 180,600
Financing:
Payments on
capital leases (13,898) (138,265) (3,594) (69,884)
Issuance of common
shares and warrants 674,021 839,447 -- --
Dividends paid (905,395) (270,093) (453,495) --
- ----------------------------------------------------------------------------------------
(245,272) 431,089 (457,089) (69,884)
Investments:
Additions to property,
plant and equipment (4,545,536) (5,047,353) (2,426,283) (1,932,480)
Additions to deferred
development costs (662,407) (754,840) (509,219) (263,506)
- ----------------------------------------------------------------------------------------
(5,207,943) (5,802,193) (2,935,502) (2,195,986)
Decrease in cash
position (2,240,727) (4,608,481) (314,524) (2,085,270)
Cash position at
beginning of period 9,439,206 4,609,798 7,513,003 2,086,587
- ----------------------------------------------------------------------------------------
Cash position
at end of period $ 7,198,479 $ 1,317 $ 7,198,479 $ 1,317
- ----------------------------------------------------------------------------------------
WHAT MAKES
US FANTOM?
DON'T FOLLOW
WHERE THE PATH
MAY LEAD.
GO WHERE THERE
IS NO PATH AND
LEAVE A TRAIL
[LOGO OF FANTOM(R)]
FANTOM TECHNOLOGIES INC.
Head office and Canadian manufacturing facility:
1110 Hansler Road, P.O. Box 1004
Welland, Ontario L3B 5S1
Voice: (905) 734-7476 Fax: (905) 734-9955
United States manufacturing facility:
102 Corporate Blvd., Carolina Center Business Park
West Columbia, South Carolina 29169
Voice: (803) 739-1151 Fax: (803) 939-0730
Toronto sales office:
Suite 414, 1 Eva Road, Toronto, Ontario M9C 4Z5
Voice: (416) 622-9740 Fax: (416) 626-0674
Toronto Stock Exchange: FTM NASDAQ: FTMTF
Website: www.fantom.com E-mail: fantom@fantom.com
Transfer Agent & Registrar:
CIBC Mellon Trust Company
320 Bay Street, P.O. Box 1, Toronto, Ontario M5H 4A1
FANTOM(R) is a trademark of FANTOM TECHNOLOGIES INC.
[GRAPHIC]
SECOND QUARTER
REPORT TO
SHAREHOLDERS
FOR THE SIX MONTHS
ENDED DECEMBER 31, 1999
[LOGO OF FANTOM(R)]
TO OUR SHAREHOLDERS
- --------------------------------------------------------------------------------
FANTOM TECHNOLOGIES INC.
For the three months ended December 31, 1999 (Q2 fiscal 2000), revenue increased
to $60.9 million from $60.0 million for the year-earlier period. Net income was
$3.5 million or $0.39 per share (based on 9,098,008 shares outstanding)
compared with $3.6 million or $0.40 per share (based on 9,003,108 shares
outstanding) for the year-earlier period.
For the six months ended December 31, 1999, revenue increased to $118.0 million
from $115.1 million for the same period in the previous year. Net income was
$6.9 million or $0.76 per share (based on 9,072,063 shares outstanding)
compared with $6.9 million or $0.76 per share (based on 8,991,763 shares
outstanding) for the year-earlier period.
While our revenue for the first half of the current fiscal year represented a
record performance, our rate of growth slowed due to the increasingly
competitive environment for "bagless" vacuums.
During the most recently completed quarter, the Company's FANTOM(R) vacuums were
tested in several hundred of the largest Wal-Mart stores in the United States.
We are very pleased with the results of this test and are optimistic about the
potential for future sales with this key retailer.
On January 20, 2000 the Board of Directors declared a quarterly cash dividend of
5 cents per share payable on March 31, 2000 to shareholders of record at the
close of business on February 29, 2000.
The Company continued to make excellent progress during the quarter in
developing its "next-generation" products. We believe these efforts are
positioning us well for significant growth. In mid- January, our new
microbiological water-treatment system was displayed to major retailers and
trade media from the United States and Canada at the International Housewares
Show in Chicago. It received a very enthusiastic response. This innovative
counter-top appliance - scheduled for introduction in summer 2000 - utilizes
activated oxygen, known as ozone, to kill micro-organisms. This same process is
used in more than 3,000 state-of-the-art municipal water-treatment systems
around the world, including over 200 in the United States.
The Company also plans to launch a major new floor-care product, designed to
create a new market segment, shortly following the introduction of its water-
treatment entry. This breakthrough development has been exposed to key
retailers on a confidential basis and is being regarded with much excitement.
Since May 1998, sixty-three utility patent applications have been filed for
technologies the Company is either acquiring or exclusively licensing through
its association with Omachron Technologies, Inc.
The Company is also pleased to advise of the appointments of James D. Meekison
and Joseph H. Wright III as Directors, bringing the number of Board members to
eight. Mr. Meekison is Chairman of Trimin Enterprises Inc. and Trimin Capital
Corp., publicly-traded management companies, and Tritech Precision Inc. and
Haley Industries Limited, publicly-traded manufacturing companies. He is a past
and current member of several Boards and brings extensive experience and
expertise in the financial and manufacturing sectors. Mr. Wright is currently
Managing Partner of Crosbie & Company Inc., a specialty investment-banking
firm. He has over 30 years of in-depth experience managing and transacting in
investment and corporate banking in Canada, the United States and Switzerland,
and has served on numerous Boards.
The foregoing information includes certain statements relating to the Company
which are forward-looking statements under Section 21E of the UNITED STATES
SECURITIES EXCHANGE ACT OF 1934. The words "believe", "scheduled", "plans", and
similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. Such statements are based on
assumptions made by, and information available to, the Company. However, there
are important factors that could cause actual results to differ materially from
those in such forward-looking statements including, among others, the
contingencies arising from the uncertainties which are inherent in the
development of new technology and the unanticipated costs and time delays which
often arise in the process of developing new products based on innovative
technology. The Company does not intend, and assumes no obligation, to update
the forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting such statements.
On behalf of the Board,
/s/ Rikki Meggeson /s/ Allan D. Millman
Rikki Meggeson Allan D. Millman,
Chair of the Board President and Chief Executive Officer
February 7, 2000
CONSOLIDATED STATEMENTS OF
INCOME AND RETAINED EARNINGS
- --------------------------------------------------------------------------------
FANTOM TECHNOLOGIES INC.
Six Months Ended Three Months Ended
December 31 (Unaudited) December 31 (Unaudited)
1999 1998 1999 1998
Sales $117,964,689 $115,119,510 $60,920,152 $60,005,350
Cost of goods sold 74,155,615 73,165,695 38,391,416 36,997,491
- ------------------------------------------------------------------------------------
43,809,074 41,953,815 22,528,736 23,007,859
Expenses:
Selling,
general and
administrative 32,055,471 30,287,407 16,900,116 16,693,394
Research and
development 936,303 997,560 151,929 660,741
Finance charges (152,111) (65,331) (87,190) 34,601
- ------------------------------------------------------------------------------------
32,839,663 31,219,636 16,964,855 17,388,736
Income before
income taxes 10,969,411 10,734,179 5,563,881 5,619,123
Income taxes 4,059,206 3,866,000 2,059,206 2,024,000
- ------------------------------------------------------------------------------------
Net income 6,910,205 6,868,179 3,504,675 3,595,123
Retained earnings
at beginning
of period 31,116,910 18,015,632 34,070,540 21,018,595
Dividends (905,395) (540,186) (453,495) (270,093)
Retained earnings
at end of period $ 37,121,720 $ 24,343,625 $37,121,720 $24,343,625
- ------------------------------------------------------------------------------------
Net income
per share
- Basic* $ 0.76 $ 0.76 $ 0.39 $ 0.40
- Fully Diluted $ 0.73 $ 0.73 $ 0.37 $ 0.38
- ------------------------------------------------------------------------------------
*Basic net income per share has been calculated using the weighted average
number of common shares outstanding during the respective periods. For the six
months ended December 31, these were 9,072,063 shares for 1999 and 8,991,763
shares for 1998. For the three months ended December 31, these were 9,098,008
shares for 1999 and 9,003,108 shares for 1998.
Certain comparative figures have been reclassified to conform with the financial
statement presentation adopted in the current year.
Financial information in this report is expressed in Canadian dollars, unless
otherwise noted.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
FANTOM TECHNOLOGIES INC.
December 31
(Unaudited)
1999 1998
ASSETS
Current assets:
Cash and short term deposits $ 7,198,478 $ 1,317
Trade accounts receivable 34,220,461 34,340,706
Other receivables 3,447,271 2,133,455
Inventories 22,647,781 17,840,036
Prepaid expenses 2,995,556 3,051,826
Deferred income taxes 1,114,344 228,200
- --------------------------------------------------------------------------------
71,623,891 57,595,540
Deferred development costs,
net of amortization 2,549,941 1,558,028
Property, plant and equipment,
at cost 41,954,289 30,518,893
Less accumulated depreciation (9,271,601) (6,082,677)
- --------------------------------------------------------------------------------
32,682,688 24,436,216
- --------------------------------------------------------------------------------
$106,856,520 $83,589,784
- --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 25,709,320 $17,889,951
Other payables and accruals 8,953,488 8,675,060
Currency hedging exchange gains 3,011,259 600,528
Current portion of capital
lease obligations 7,958 101,210
- --------------------------------------------------------------------------------
37,682,025 27,266,749
Currency hedging exchange gains 357,171 968,059
Deferred income taxes 3,072,297 3,174,314
Shareholders' equity:
Share capital 28,623,307 27,837,037
Retained earnings 37,121,720 24,343,625
- --------------------------------------------------------------------------------
65,745,027 52,180,662
- --------------------------------------------------------------------------------
$106,856,520 $83,589,784
- --------------------------------------------------------------------------------