Year end results
Fantom Technologies Inc FTM
Shares issued 8,920,608 1998-09-18 close $11.5
Tuesday Sep 22 1998
Mr. Allan Millman reviews the company
In 1997 net income rose 40 per cent over last year to $10.3-million. Earnings per share grew to $1.18 from last year's 88 cents. Sales climbed 18 per cent to $177.6-million.
Launched in late November, the company's new Lightning vacuum attacked the high priced segment of the retail canister category and, among many leading retailers, instantly dominated it.
This new produce, the company's third in the line of Fantom vacuums and its first canister, delivers many benefits - its powerful, lightweight and offers the unique Stairhugger feature, which allows the machine to sit firmly on steps while the user vacuums stairs.
Work on a new premium upright, the Cyclone XT vacuum, continued throughout the year. This will be the fourth in the company's expanding line of Fantom products, which it plans to launch early in 1999.
It operates with two motors, one to rotate the brush, the other to create air flow, thereby improving the vacuum's cleaning performance through specialization of tasks. Importantly, the brush motor automatically shuts off when an object jams the brush, thus saving the belt from breaking; it also shuts off when the vacuum is in the upright position, thus saving wear and tear on the carpet as the user cleans with the wand. It has improved air flow, a more ergonomically positioned carrying handle, a redesigned collection bin, and a new tool compartment at the top of the vacuum. Net result: superior vacuuming performance.
In May 1998, the company officially opened its new manufacturing centre in West Columbia, South Carolina, and production of the Fantom Fury vacuum began on site June 1. This leased building adds 35,000 square feet of space to support the growth of the company's existing products, as well as those coming out of the aggressive new product development program. The company now has a total of 114,000 square feet of manufacturing space when the new facility is combined with the main plant in Welland, Ontario.
This new facility gives the company a physical presence in the United States, where the majority of sales occur.
The company earned its ISO 9001 registration last November.
The company improved many graphic elements on both the Fury and Thunder vacuums.
At the same time, it upgraded the Fury vacuum from 10 amps to 12 amps.
Again this year, the company increased the number of computer assisted design stations in the engineering department.
In order to expand the information technology functions, which the company will need to meet its future growth demands and to improve performance to end users, the IT department strengthened its systems, by upgrading both its hardware and software.
To start with, the company was successful in negotiating a single bulk price for its ABS resin, plastic being a major raw material in its vacuums. This meant working closely with the company's primary resin supplier and its parts-molding suppliers, so that significant price reductions were generated from increasing economies of scale.
The two motor suppliers found new materials and processes to reduce their costs, while still maintaining the performance efficiency of the motors. Similarly, by using a new material, the company's supplier of collection bins reduced its cost and improved its appearance as well.
The company found two new suppliers of Hepa filters which found ways to reduce the cost of this important part.
The company has reduced its costs in labour assembly and inventorying of component parts, by having its plastics suppliers assemble various parts into subassemblies which is then inventoried until needed by the company.
Through an important redesign of the circuit board in the company's Lightning vacuum, it expects to reduce substantially the cost of it, while improving its performance characteristics. The company will incorporate this circuit board in its new Cyclone XT vacuum, as well.
In August 1998, the company signed a series of agreements with Omachron Technologies, a Delaware company, covering the acquisition and development of a number of technologies for various household appliances, and other consumer and commercial products.
OPERATIONS
The company's revenue in fiscal 1998 increased 18 per cent from the previous year to $177.6-million. Shipments to the United States accounted for 93 per cent of total revenue compared to 97 per cent for fiscal 1997. Unit shipments of vacuums increased 19 per cent, and average revenue per vacuum declined marginally (0.4 per cent) reflecting the net effect of changes in mix, translation gains resulting from a weaker Canadian dollar relative to the U.S. dollar, and price reductions on some models. Sales of Fantom vacuums, including related accessories, accounted for 99 per cent of total revenue compared to 98 per cent for the previous year.
Shipments of Fantom vacuums to retailers in fiscal 1998 increased 27 per cent from the previous year, due mainly to the successful launch of the Fantom Lightning canister vacuum in late November 1997, and the addition of new retailers for the company's line of products in both the United States and Canada. Total sales of all products to the company's five largest customers were $107.4-million in fiscal 1998 compared with $91.1-million in fiscal 1997.
Sales through the company's direct response programs declined 29 per cent. This was due in part to increased exposure of Fantom vacuums in retail outlets and in retail advertising, thereby providing end users with more of an opportunity to buy Fantom vacuums at their local store, and to a shift in media spending from the long from 30 minute format to short form (principally 60 second) spots, which the company believes tend to act more like general advertising. This shift was prompted by escalating costs for high profile, long form avails in attractive time slots, and a desire to expand audience reach beyond that practically available through long form media. Total media spending was $14.8-million in fiscal 1998 compared to $11.3-million in the previous year; essentially all of the spending was for television time.
FINANCIAL
During fiscal 1998, cash generation from operations was $9.6-million. Non-cash operating working capital increased by $3.6-million, due mainly to increases in trade accounts and other receivables ($9.1-million), inventory ($3.4-million), and prepaids ($1.3-million), net of increases in accounts payable ($9.1-million) and other payables and accruals ($2.0-million). The increase in accounts receivable and payables were due mainly to sales in June 1998 being 44 per cent higher than the year earlier period. Items not requiring cash included depreciation of $1.5-million and a deferred tax provision of $1.1-million.
Cash in the amount of $0.3-million was provided through the exercise of stock options. During fiscal 1998, investments in capital expenditures were $9.3-million, and were mainly for tooling and assembly equipment for the company's new Fantom Lightning canister and the forthcoming Fantom Cyclone XT upright (combined total: $6.5-million); to modernize assembly operations at the company's Welland, Ontario plant ($0.7-million); for software and hardware to support advances in information technology ($0.6-million); and to establish the company's new operating facility in West Columbia, South Carolina ($1.0-million). Investments in deferred charges were $1.2-million and were for the new Fantom vacuums and for developmental activities relating to new technologies.
The company's net cash position as at June 30, 1998 was $4.6-million compared with $4.7-million at June 30, 1997.
CONSOLIDATED STATEMENT OF INCOME
Year ended June 30
1998 1997
Sales $177,585,454 $150,213,517
Cost of goods
sold 113,661,329 96,246,860
------------ ------------
63,924,125 53,966,657
------------ ------------
Expenses
Selling,
general and
admin 47,675,507 41,999,459
Finance
charges 48,527 464,595
------------ ------------
47,724,034 42,464,054
------------ ------------
Income before
income taxes 16,200,091 11,502,603
Income taxes
Current 4,799,531 2,675,200
Deferred 1,083,033 1,466,800
------------ ------------
5,882,564 4,142,000
------------ ------------
Net income $ 10,317,527 $ 7,360,603
============ ============
Net income
per share $1.18 88 cents
(c) Copyright 1998 Canjex Publishing Ltd. canada-stockwatch.com
old url (better for printing)
|
