TSE Symbol:  SQP                                         For Immediate Release

Strongco Releases Second Quarter Results

Mississauga, Ontario;  July 28, 2000 – Strongco Inc. today released its operating results for the second quarter of 2000. 

The second quarter began on a weak note but improved significantly as the quarter progressed.  Consolidated revenue declined to $136.7 million from $159.7 million during last year’s second quarter as a result of several external factors, including cool, wet weather in Central and Eastern Canada and the U.S. mid-Atlantic region and a protracted strike by concrete truck drivers in the Greater Toronto Area which delayed several major construction projects.  In spite of the lower revenue, gross margins improved to $28.9 million (21.2%) for the quarter, up from $28.8 million (18.0%) last year and operating expenses declined to $23.0 million from $23.2 million.  As a result, earnings before interest and taxes improved to $5.9 million, up from $5.6 million last year.  This represents the second consecutive year over year improvement in quarterly operating earnings.  Higher interest rates resulted in an increase in interest expense to $5.3 million from $4.85 million last year, thereby reducing Strongco’s second quarter pre-tax earnings to $.6 million from $.75 million last year.  Income taxes and the Large Corporation Tax – which is based on the size of a company’s balance sheet, not its level of income - reduced Strongco’s net income to a nominal amount for the quarter.

For the six months to June 30, 2000, Strongco’s consolidated revenue totaled $270.7 million, down from $286.3 million for the first half of 1999.  Gross margins remained virtually the same at $56.9 million (21.0%) compared to $57.0 million (19.9%) last year, while operating expenses declined to $45.9 million from $46.7 million.  Consequently, in spite of the lower revenues, Strongco’s earnings before interest and taxes for the first half of this year improved to $11.0 million from $10.3 million last year.  Interest expenses increased to $10.1 million for the half from $9.5 million last year.  Pre-tax income, at $.9 million, is up this year over last.  Earnings per share, at $0.01 for the half, are down slightly from $0.03 last year due to higher accruals for Large Corporations Tax and income taxes.

Larry Pirnak, Chairman and CEO of Strongco, commented, “We expect that much of the activity that was missed early on in the quarter will spill over into the third.  We were pleased that the gross margins increased and that our operating expenses fell, resulting in our second consecutive year over year improvement in quarterly EBIT.”  Mr. Pirnak carried on to say, “Our business improved steadily over the quarter and we believe that the advances we are seeing will continue over the latter half of the year.  We also recognize the need to reduce balance sheet leverage and various initiatives are in process to accomplish this objective.”

Strongco's quarterly financial results are summarized below (in $millions, except per share amounts - see attached for details):

Income Statement

 


STRONGCO INC.
 Condensed Consolidated Balance Sheets
As at June 30, 2000

($000's)

Note1: Bank indebtedness includes $37,618 reclassified from equipment notes payable pursuant to renegotiation of U.S. banking arrangements in the second quarter of 2000.

Note2: Effective January 1, 2000, Strongco changed its method of accounting for income taxes to comply with the requirements of the Canadian Institute of Chartered Accountants.  The cumulative effect of this change was to decrease opening retained earnings at January 1, 2000 by approximately $3.6 million and increase deferred taxes by the same amount.

Unaudited

STRONGCO INC.
Consolidated Statements of Income
For the Three and Six Months Ended June 30, 2000

($000's)

Unaudited

STRONGCO INC.
Consolidated Statements of Cash Flows

For the Three and Six Months Ended June 30, 2000

($000's)

 Unaudited