Strongco lost $1.2 million, or $0.13 per share, for the three months ended June 30, 2002. Losses for the same period last year were $2.5 million, or $0.26 per share. Losses for the first half of the year were $3.1 million, or $0.33 per share, compared to $5.6 million, or $0.60 per share last year (continuing operations only). Last year’s first half results included non-recurring pre-tax charges of $3.9 million (approximately $2.2 million, or $0.23 per share, after tax) comprised of $2.0 million in the second quarter related to the company’s disassociation from a former equipment supplier and $1.9 million arising from the first quarter closure of three branches in the Atlantic division.

Improvements in Strongco’s Equipment Distribution operations during the quarter were largely offset by ongoing weakness in its Equipment Rentals and Engineered Systems businesses. Second quarter revenues increased to $107.3 million this year from $103.7 million last year. The improvement came entirely from Strongco’s Equipment Distribution segment, particularly the western division, where last year’s second quarter addition of the Volvo construction equipment line has had a significant impact on the division’s revenues and earnings, and Quebec, where activity levels have improved recently. Gross margin pressures continued during the quarter, but lower administration, distribution, selling and interest expenses more than offset the gross margin declines. Continued stringent balance sheet management enabled Strongco to generate $2.6 million of cash from operations during the quarter plus an additional $1.7 million from investing activities, all of which was applied toward debt reduction. On a year-over-year basis, Strongco has reduced its investment in inventories and rental fleet assets by $10.3 million and $11.3 million respectively and funded debt has been reduced by $24.5 million, or 12.3%.

For the first half of 2002, Strongco’s revenues have increased to $195.3 million from $190.3 million last year, gross margins have declined to $33.2 million (17.0%) from $39.8 million (20.9%) last year, and administrative, distribution, selling and interest expenses – in total – have been reduced by $11.6 million ($7.7 million before the non-recurring charges noted above). Cash from operations and investing activities totaling $12.2 million has been applied against interest-bearing debt.

Mr. Larry Pirnak, Chairman, commented: "Although Strongco’s second quarter results were far from acceptable, we were encouraged by the progress made within various aspects of our operations. Specifically, sales of key product lines are up over last year, operating and interest expenses are down and our relationships with principal product suppliers such as Volvo, Tigercat and Grove, are strong. Our core equipment distribution operations, excluding rentals, were profitable during the quarter. However, ongoing weakness within the equipment rental industry throughout North America continued to depress fleet utilization and rental rates, resulting in operating losses which more than offset the gains made in our core business. The Engineered Systems business also incurred losses during the quarter." Mr. Pirnak went on to say, "We intend to continue with our stated strategy of reducing the equipment rental fleet with its associated depreciation and interest charges to the point at which the size of the fleet more closely corresponds to market demand. We have also recently negotiated and executed a non-binding letter of intent to sell the Engineered Systems business. We expect this transaction to close early in the fourth quarter."

Regarding this transaction and the imminent completion of the previously-announced sale of Strongco’s B.C. Supplies and Alberta Supplies divisions, Mr. Pirnak commented: "The sale of these divisions will benefit Strongco in two ways. First, it will enable us to focus more of our attention on Strongco’s core Equipment Distribution business across the country. Second, it will strengthen the company’s balance sheet and advance our objective of reducing Strongco’s debt."

Strongco will host a conference call at 3:00 P.M. on August 27 to further discuss its second quarter and year-to-date operating results and prospects. Call-in details can be obtained from the company by phoning 905-565-3811.

Strongco is one of Canada’s largest full-line equipment sales, rental and service companies. Its shares are listed on the Toronto Stock Exchange and its website can be accessed at www.strongco.com.

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