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STRONGCO RELEASES
1999 FIRST QUARTER RESULTS
MISSISSAUGA, ONTARIO - Friday, April 30, 1999, 11:22 AM EDT
Strongco Inc. today released its operating results for the
first three months of 1999. The traditionally slow first
quarter was further impacted by a carryover in some markets of
the economic uncertainty that characterized last year's second
half. The consequent softening of sales, combined with
increasingly competitive equipment markets, resulted in a
nominal loss of $0.01 per share for the quarter.
Consolidated revenue rose to $126.5 million during the first
quarter, an increase of 8.2% over last year's first quarter
revenue of $117.0 million. The gross profit margin increased to
$27.2 million from $24.3 million last year, while the margin
percentage was up slightly to 21.5% from 20.8% due to a shift
in Strongco's sales mix. Operating expenses increased in line
with the increase in revenue and the sales mix shift toward the
higher margin, higher expense aspects of the business. Interest
expense was up $2 million due to several factors, including
debt incurred and assumed in last year's acquisitions, the
interest from which has been fully reflected in this year's
results. Also, interest expense in the 1998 first quarter
results was reduced by the issuance of 1 million shares, the
proceeds of which were not fully spent until the second
quarter.
Strongco's quarterly financial results re summarized below (in
$ millions, except EPS):
1999 1998
Q1 Q4 Q3 Q2 Q1
Revenue 126.5 186.8 141.1 162.9 117.0
EBIT 4.7 7.7 8.8 11.5 4.5
Pre-Tax Income .05 3.0 4.2 7.6 2.0
Net Income (.10) 1.4 2.3 4.4 1.2
Earnings/Share $(0.01) $0.15 $0.23 $0.48 $0.14
"The relative strength of the North American economies compared
to those of Asia, South America and Europe has resulted in most
equipment manufacturers focusing on the North American markets,
thereby heightening the competitiveness of the markets in which
Strongco operates", said Larry Pirnak, Chairman. "Consequently,
although activity levels are high, margin pressures have
reduced the profitability of equipment sales from what we would
normally expect. As local demand in foreign economies improves,
however, we anticipate a return to more profitable conditions
within our markets. Meanwhile, we are continuing to see further
improvements in operating efficiencies within our various
operations."
Mr. Pirnak also confirmed that Strongco completed the
previously-announced acquisition of Edelen & Boyer Equipment
Co. shortly after the end of the quarter. "This profitable
equipment rental and service company located a short distance
north-west of Philadelphia will strengthen our presence in the
south-eastern Pennsylvania and southern New Jersey markets,
which we entered in 1997", said Mr. Pirnak. "It will also add
immediately to our earnings. Existing management and all
employees will remain with the company, which will operate
under the Strongco name. The integration of Edelen & Boyer with
our present operations in this strong economic territory is
virtually complete."
For further information, contact:
Randy Henderson
Senior Vice President & CFO
905-565-3802
STRONGCO INC.
Condensed Consolidated Balance Sheets
As at March 31, 1999
(unaudited - in $ thousands)
1999 1998
Accounts Receivable 86,814 62,887
Inventories 201,501 203,645
Other Current Assets 10,431 7,995
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298,746 274,527
Capital Assets 32,971 28,567
Rental Equipment 57,004 32,154
Goodwill and Other 19,460 14,895
----------------------------
408,181 350,143
=============================
Bank Indebtedness 73,063 54,659
Equipment Notes Payable 116,653 113,491
Accounts Payable and Accruals 47,487 46,665
Other 29,667 16,987
-----------------------------
266,870 231,802
Long-Term Debt 52,899 37,873
Deferred Income Taxes 4,430 2,566
Shareholders' Equity 83,982 77,902
-----------------------------
408,181 350,143
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Note: In April, 1998, Strongco filed a Notice of Intention to
Make a Normal Course Issuer Bid with the Toronto Stock Exchange
and the Montreal Exchange. This program allows Strongco to
purchase up to 300,000 of its common shares during the
period of April 30, 1998 to April 29, 1999. As the total number
of shares eligible for purchase under the Issuer Bid had been
purchased by the end of the first quarter of 1999, the Issuer
Bid was ammended to increase the total number of allowable
shares to 400,000 from 300,000. The expiry date of the Issuer
Bid is still April 30, 1999. A new Issuer Bid is not presently
being contemplated by the Company.
STRONGCO INC.
Consolidated Statements of Income
For the Three Months Ended March 31
(unaudited - in $ thousands)
-- Three Months --
Ended March 31
1999 1,998
Revenue 126,548 116,977
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Gross Margin 27,189 24,289
Administrative, Distribution
and Selling Expenses 22,517 19,767
Interest Expense 4,619 2,566
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27,136 22,333
Pre-Tax Income 53 1,956
Income and Other Taxes 154 771
--------------------------
Net Income (101) 1,185
==========================
Per Share ($0.01) $0.14
==========================
Note: Certain 1998 figures have been reclassified to conform
with the current year's presentation.
STRONGCO INC.
Consolidated Statements of Changes in Financial Position
For the Three Months Ended March 31
(unaudited - in $ thousands)
-- Three Months --
Ended March 31
1999 1998
OPERATING ACTIVITIES
Net Income (101) 1,185
Non-Cash Items
Depreciation and Amortization 1,806 1,192
Other (176) 182
Net Change in Non-Cash
Working Capital Balances (23,598) (20,091)
----------------------------
Cash Provided by (Used in)
Operations (22,069) (17,532)
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INVESTING ACTIVITIES
Business Acquisitions &
Divestitures, net (116) (20,056)
Rental Equipment & Capital
Assets, net 1,365 (1,447)
Other Assets (177) (39)
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Cash Provided by (Used in)
Investing Activities 1,072 (21,542)
----------------------------
FINANCING ACTIVITIES
Long-Term Debt, net (2,505) 8,423
Share Capital Transactions, net (176) 13,484
----------------------------
Cash Provided by (Used in)
Financing Activities (2,681) 21,907
----------------------------
DIVIDENDS - -
---------------------------
Net Decrease (Increase) in
Bank Indebtedness (23,678) (17,167)
Bank Indebtedness -
beginning of period (49,385) (37,492)
----------------------------
Bank Indebtedness - end of period (73,063) (54,659)
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