TSX Symbol: SQP                                                                     For Immediate Release

Strongco Reports Record Profits for a First Quarter

Mississauga, Ontario – April 28 th, 2005: Strongco Inc. today released its financial results for the first quarter of 2005.

Strongco recorded net income of $1.7 million or $0.18 per share - during the first quarter, versus a loss of $0.1 million, $0.01 per share, for the comparable quarter in 2004. In the first quarter of 2005, $1.1 million was expensed to cover costs of the conversion to an Income Fund. Had this expense not been incurred, net income would have been $0.26 per share. All sectors of the company contributed to the improvement in profitability.

Mr. Larry Pirnak, President, commented, “The results were in line with our expectations and reflect the numerous operating changes that we have implemented in the past few years. We expect higher profits in each of the remaining quarters of 2005.”

Strongco will host a conference call at 3:30 p.m. on Thursday April 28 th, to further discuss its first quarter. To participate in the conference call, dial 416.641.6701 or 888.633.8341, reservation number is 21241051. A taped version of the call will be available until May 12 th, 2005. Dial 416.626.4100 or 800.633.8284 and enter the reservation number of 21241051.

Strongco is a full-line equipment sales and service company with operations from Alberta through Atlantic Canada. Its shares are listed on the Toronto Stock Exchange and its website can be accessed at www.strongco.com

For further information contact:

Len Phillips,
Vice President Administration
and Corporate Secretary

Telephone No.: 905.565.3840

Email: lphillips@strongco.com
 
 
Strongco Inc.
CONSOLIDATED BALANCE SHEETS
As at As at As at
March 31 March 31 December 31
[unaudited - in thousands of dollars] $ 2005 $ 2004 $ 2004
ASSETS
Current
Accounts receivable 37,795 27,250 27,447
Inventories 103,946 87,156 91,659
Prepaid expenses and deposits 1,365 1,566 1,090
Total current assets 143,106 115,972 120,196
Rental equipment, net 5,503 15,935 5,975
Capital assets, net 16,331 17,371 16,779
Capital assets held for sale, net — 3,980 —
Other assets 64 — —
Accrued benefit asset 4,510 3,610 4,297
169,514 156,868 147,247
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness 1,831 17,770 1,025
Accounts payable and accrued liabilities 33,282 27,352 27,241
Equipment notes payable - non-interest bearing 45,648 16,351 29,828
Equipment notes payable - interest bearing 23,846 38,133 26,642
Current portion of long-term debt 656 4,416 1,183
Income and other taxes payable 1,369 464 110
Total current liabilities 106,632 104,486 86,029
Long-term debt — 1,106 —
Future income taxes 3,036 229 3,301
Accrued benefit liability 1,442 1,393 1,199
Total liabilities 111,110 107,214 90,529
Shareholders' equity
Share capital [note 2] 52,771 52,143 52,342
Contributed surplus [note 2] 35 9 27
Retained earnings (deficit) 5,598 -2,498 4,349
Total shareholders' equity 58,404 49,654 56,718
169,514 156,868 147,247
See accompanying notes
 
Strongco Inc.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND RETAINED EARNINGS (DEFICIT)
Three months
ended March 31
[unaudited - in thousands of dollars, except per share amounts] $ 2005 $ 2004
Revenue 89,145 65,281
Cost of sales 72,753 51,857
Gross margin 16,392 13,424
Expenses
Administration, distribution and selling 12,716 13,167
Plan of arrangement expense [note 5] 1,100 —
Other income -575 -439
Income before the following 3,151 696
Interest 385 869
Income (loss) before income taxes 2,766 -173
Provision for (recovery of) income taxes 1,040 -55
Net income (loss) 1,726 -118
Reatined earnings (deficit), beginning of period 4,349 -2,380
Common share dividends 477 —
Retained earnings (deficit), end of period 5,598 -2,498
Basic earnings (loss) per share
Earnings (loss) per share $ 0.18 $ (0.01)
Weighted average number of shares 9,518,217   9,413,827
Diluted earnings (loss) per share
Earnings (loss) per share $ 0.18 $ (0.01)
Weighted average number of shares 9,758,269   9,413,827
See accompanying notes
 
Strongco Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months
ended March 31
[unaudited - in thousands of dollars] $ 2005 $ 2004
OPERATING ACTIVITIES
Net income (loss) 1,726 -118
Add (deduct) items not involving a current outlay (inflow) of cash
Amortization of rental equipment 383 890
Amortization of capital assets 225 236
Gain on disposal of capital assets and rental equipment -119 -16
Stock based compensation 8 9
Future income taxes -265 —
Other -34 -198
1,924 803
Net change in non-cash working capital balances
related to operations -2,586 3,184
Cash (used in) provided by operating activities -662 3,987
INVESTING ACTIVITIES
Purchase of rental equipment -19 -11
Purchase of capital assets -102 -59
Proceeds on disposal of capital assets and rental equipment 552 627
Cash provided by investing activities 431 557
FINANCING ACTIVITIES
Increase (decrease) in bank indebtedness 806 -3,695
Repayment of long-term debt — -206
Decrease in rental equipment financing -527 -655
Common share dividends -477 —
Issuance of share capital 429 12
Cash provided by (used in) financing activities 231 -4,544
Net increase in cash and cash equivalents during the period — —
Cash and cash equivalents, beginning of period — —
Cash and cash equivalents, end of period — —
Supplemental cash flow information
Interest paid 409 931
Income taxes paid (received) 47 -95
See accompanying notes
 

March 31, 2005

 

Notes to Unaudited Interim Consolidated Financial Statements

 

[in thousands of dollars, except where otherwise indicated]

 

1. Basis of Presentation

 

Management is required to make estimates and assumptions that affect the amounts reported in the unaudited interim consolidated financial statements. Management believes that the estimates are reasonable, however, actual results could differ from these estimates. The unaudited interim consolidated financial statements do not conform in all respect to the disclosure requirements of Canadian GAAP for annual financial statements and should, therefore, be read in conjunction with the Company’s 2004 Annual Report.

 

Certain items in the March 31, 2004 comparative unaudited interim consolidated financial statements have been reclassified to conform to the presentation adopted in the current period.

 

2. Share Capital and Contributed Surplus

 

Details of issued share capital and contributed surplus are as follows:

 

 

Contributed surplus is comprised of stock based compensation.

 

3. Post Retirement Obligations

 

Net benefit plan expense for the three months ended March 31, 2005 and March 31, 2004 is as follows:

 

 

4. Segmented Information

 

Segmented information for the three months ended March 31, 2005 and March 31, 2004 is as follows:

 

 

[a]  The reconciling items to adjust segment profit (loss) represent common corporate costs not allocated to the segments and corporate head office costs incurred during the period.

[b]  The reconciling items to adjust segment total assets includes prepaid expenses and accrued benefit assets carried on the corporate head office ledger, offset by the elimination of the intercompany receivables at the corporate head office.

5. Income Trust

 

On February 24, 2005, the Company announced that it had engaged BMO Nesbitt Burns Inc. as its financial advisor in connection with the review of a proposal to transform Strongco Inc. (‘Strongco’) into a new publicly traded income fund that will carry on the existing Strongco business. The Board of Directors approved a Plan of Arrangement to proceed with such transformation and an announcement to that effect was made by Strongco on March 16, 2005.

 

6. Subsequent Event

 

As a result of the Plan of Arrangement, in accordance with the provisions of the Company’s stock based compensation plan, the holders of options have the right to exercise all outstanding options during a twenty day period following April 13, 2005, after which, all rights of optionholders to such options and to exercise same will terminate and cease to have further force or effect.