Tokheim Corp Q3, '96
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Tokheim Corp Q3, '96
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(FOOL CONFERENCE CALL SYNOPSIS)* By Debora Tidwell (MF Debit)
Tokheim Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOK)") else Response.Write("(NYSE: TOK)") end if %> BACKGROUND Tokheim Corporation has been in business since 1901 and went public in 1948. Its founder, John Tokheim, developed a pump to dispense kerosene and gasoline from drums in 1898. The company designs, manufactures, and services electronic and mechanical petroleum dispensing marketing systems including service station equipment, point-of-sale control systems, and card/cash activated transaction systems. Tokheim and its subsidiary, Gasboy International, sell their systems to major oil companies for their gas stations and to independent retail gas station owners. Q3 1996 FINANCIAL HIGHLIGHTS
Tokheim Corporation and Subsidiaries
Consolidated Selected Financial Data for Q3 1996
(Amounts in thousands except amounts per share)
Quarter Ended Nine Months Ended
August 31 August 31
1996 1995 1996 1995
Net sales $59,044 $52,935 $166,212 $152,907
Net loss $ (112) $ (941) $ (244) $ (1,778)
Net loss applicable to
common stock $ (497) $ (1,333) $ (1,403) $ (2,966)
Net loss per share $ (.06)$ (.17) $ (.18)$ (.38)
Weighted average
shares outstanding 7,939 7,913 7,938 7,880
MANAGEMENT DISCUSSION
The company announced that NatWest and Paine Webber are initiating coverage on the company. The company closed the Sofitam acquisition on September 6th and have filed the 8-K. The acquisition was financed by the $100 million high-yield offering completed at the end of August.
To reflect the new organizational requirements and the new opportunities, they have gone through a substantial and very focused reorganization of the company. They have broken the company into two major operating units -- Tokheim North America and Tokheim Sofitam in Europe.
Sales grew approximately 11.5% and the latest market share statistics show that they are gaining market share. They have reduced their losses year over year.
OPERATIONAL MATTERS
Some of the highlights of the quarter include a significant improvement in sales. They began shipping to Shell Asia/Pacific in Q3. That represented about $2 million. The first major segment of that $75 million award was $6 million of orders which they already have in hand. Tokheim's success with Shell continued during the quarter and they were awarded all of Shell Central and Eastern Africa. This is in conjunction with an award Shell gave to Sofitam of all of Northern Africa. Tokheim Sofitam, therefore, now has 100% of Shell on the entire African continent which mirrors an equally strong position with the other major oil companies in Africa, where they currently estimate they have about 65-70% of the market.
Tokheim has about 21% of the market now in Europe and are the #1 player there. This obviously is having very favorable strong market reaction with their customers as they move forward. Also during the quarter, some of Tokheim's existing relationships continued to expand. They have had a 100% alliance with Amoco US for quite some time. That alliance is now extending internationally as Amoco starts expanding its horizons, particularly in Mexico where they are the first major oil company to enter Mexico. Amoco has equally ambitious plans in Central and Eastern Europe and Tokheim has been advised by Amoco that they will also receive 100% of that business.
Productivity continued to improve in the quarter. Sales per employee in the quarter were $139,000 versus $128,000 last year and are on their way toward Tokheim's goal of $150,000 per employee in the short term and $175,000 per employee in the intermediate term.
The Sofitam acquisition has given Tokheim very strong positioning in the marketplace, not only in terms of their ability to attract more major oil company business, but also in their presence in the market. They are announcing a price increase of 5% that will be effective January 1, 1997. The increase will be both domestically and internationally. This will be the first price increase in the industry since 1992. Hopefully it will stick. Obviously they will respond to the appropriate market reaction of their competition, but they believe the market is in a position where the price increases are certainly justified and they hope will be supported.
They are continuing their developmental efforts both in the production and the product development end. They initiated a $12 million capital investment plan. The bulk of that program is being installed now with 9 out of the 11 machining centers in. They anticipate that the bulk of that machinery will be installed and fully functioning by the end of this year and the balance to be installed in Q1. They are anticipating savings of about $1 million in Q4 from the installation of that equipment.
They are continuing to stress very strongly their strong technological development that has occurred over the last several years. They will be exhibiting that at their annual industry trade show which happens next week. At that show they will be introducing the first totally robotic pump in the industry. They are introducing it initially for commercial applications only, but they foresee retail applications as following shortly behind (18-24 months later). They will also be introducing their graphic display and their first "talking" pump which will instruct the customer verbally in the intricacies of card reading and cash acceptance. Their talking pumps will be addressing the appropriate audience not only in English, but Spanish, French, and they can convert it to any language they feel is required.
Their Columbus development in the POS continues very strongly. They are undergoing lab testing at Amoco, Texaco, Conoco, and anticipate that the first installation will happen some time in the first quarter. They are developing a retrofit kit in conjunction with Amoco that will now allow them to start retrofitting some of their competitors' pumps. This is in the initial stages, but they anticipate that product will be out somewhere around the end of Q1 or beginning of Q2.
The customer response to the acquisition and merger of Sofitam is nothing short of highly enthusiastic and supportive. They had visits in September from the international procurement departments of both Mobil and Exxon. This is the first time either team has called on Tokheim and they are very seriously interested in exploring some potential for global relationships. Shell continues to be highly enthusiastic, not only in terms of their position that recently developed very strongly in Asia/Pacific, but the further ramifications of the alliance in Europe, the Middle East, and what they have done in Africa. That interest in the European customers is extending to Sofitam customers.
They have already begun to put their management in place in Europe. Many of the consolidation savings issues that they had identified to be important to the synergies of the company are already starting to go into effect. They are beginning entity consolidation with consolidation of Sofitam's German and UK operations, which along with the Moroccan operation will be shuttered during the months of October through December. The net result will be a reduction of about 50 people by the end of November. They believe that is a very good start in a very short period of time toward their goal of eliminating about 300 people overall (which should occur by the middle of 1997).
They identified a large area of opportunity last quarter in the cash area in improving receivables. They have started addressing that issue and are pleased to discover that while the DSO was quite large and presented quite significant opportunities for reduction, it really occurred, once they got into it, in areas that they can quickly control. This was not occurring with the major oil companies, but was essentially occurring with the entities in which Sofitam has an interest (subs in Spain, Italy, Morocco, and Switzerland). They believe they will see some substantial cash impact related to their efforts in the very near future.
In addition to the highly enthusiastic customer response they have received, they have also received strong support from their French colleagues at Sofitam.
They are seeing a very strong Q4 in terms of bookings at Tokheim US and are witnessing the same situation on the European side where they just received a surprisingly large Q4 buy.They are seeing a very strong Q4 in terms of bookings at Tokheim US and are witnessing the same situation on the European side where they just received a surprisingly large Q4 buy. * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. |
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Copyright 1996, The Motley Fool |