TSX Symbol:  SQP                                                      For Immediate Release

 

Strongco Returns to Profitability in the Second Quarter

Mississauga, Ont.:   Strongco Inc. today released financial results for the second quarter of the year which reflected the positive impact of the strategic and operating initiatives implemented by the Company over the last several quarters.

Strongco earned $2.3 million during the second quarter compared to a loss of $1.5 million from continuing operations in last year’s second quarter.  Per share earnings for the quarter were $0.24 compared to a per share loss of $0.16 for the same period last year.  The turnaround in results this year was a function of higher gross profit margins combined with lower operating and interest expenses.  Revenues were largely unchanged.  Earnings in the Company’s Equipment Distribution segment, which represents more than 90% of consolidated revenue, rose to $5.1 million during the quarter on the strength of higher revenues, firmer gross profit margins and reduced operating and interest expenses.  This segment earned $1.6 million during last year’s second quarter.  Strongco’s two other business segments - Equipment Rentals and Engineered Systems –  reduced their losses for the quarter to $1.0 million and $0.3 million respectively from $1.1 million and $1.0 million in last year’s second quarter. 

For the first half of the year, Strongco has earned $1.7 million - $0.18 per share – compared to a loss from continuing operations of $3.6 million - $0.39 per share – last year.  As was true of the second quarter, the current year’s improvement has resulted from higher gross margins combined with lower operating and interest expenses. 

Mr. Larry Pirnak, Chairman, commented: “We were extremely encouraged by Strongco’s second quarter results, particularly in the core Equipment Distribution segment where we have been focusing on improving working capital efficiencies and increasing the higher margin customer support activities.  We were also pleased with the continued reduction in the Company’s levels of debt and the consequent reduction in interest expense.  We anticipate continued year-over-year improvements in earnings during the second half of this year.” 

Strongco also announced that Randy Henderson will be resigning as President and Director of the Company, effective August 31, 2003.  Mr. Pirnak commented: “Over the last two years, Strongco has executed a number of important strategic and operating initiatives designed to increase the profitability of the company.  Randy has been an important part of this process.  Given that these initiatives are now paying off, Randy has decided that the time is right for him to pursue other career opportunities.  We wish him well in his future endeavours.” 

Strongco will host a conference call at 3:00 PM on Tuesday, July 29, 2003 to further discuss its second quarter and year-to-date results and prospects.  Replays of the call will be available until August 12, 2003.  Conference call details can be obtained from the Company by calling 905-565-3875. 

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:

 

Randy Henderson
President
Ph:  905-565-3802

e-mail: rhenderson@strongco.com
 
 
STRONGCO INC.

Consolidated Balance Sheets
($000's)
 

June 30

   June 30   December 31
 

2003

  

2002

  

2002
Accounts Receivable 38,576   33,885   36,162
Inventories 113,641   150,994   122,218
Prepaid Expenses and Deposits 3,708   3,402   2,592
Income and Other Taxes Receivable 302   588   381
Current Assets: Discontinued Operations - note
   -
  
31,409
  
-
  156,227   220,278   161,353
Rental Equipment 20,967   32,289   25,790
Capital Assets 22,863   24,201   23,438
Goodwill
   -
  
12,025
  
-
 
200,057
  
288,793
  
210,581
Bank Indebtedness 28,160   49,521   28,285
Accounts Payable and Accruals 37,651   41,030   39,172
Equipment Notes Payable 76,467   93,238   79,633
Current Portion of Long-Term Debt 7,450   12,596   10,952
Current Liabilities: Discontinued Operations - note
   -
  
7,980
  
-
  149,728   204,365   158,042
Long-Term Debt 3,826   19,294   7,719
Future Income Taxes 72   632   121
Shareholders' Equity
46,431
  
64,502
  
44,699
 
200,057
  
288,793
  
210,581
           
Note:  The following businesses were sold in 2002 and have been accounted for as discontinued operations in the financial statements:
- the Northern Ontario/Quebec Supplies business, effective August 30, 2002
- the Alberta and B.C. Supplies businesses, effective August 31, 2002

- Unaudited -

 

 

 

 

 
 
STRONGCO INC.
Consolidated Statements of Income (Loss)
($000's)
    Three Months Ended
   ---  June 30  ---		     Six Months Ended
    ---  June 30  ---
   
2003
  
2002
  
2003
  
2002
Revenue  
93,135
  
92,275
  
165,338
  
164,890
Gross Margin   15,892   12,606   29,257   24,284
Administrative, Distribution and Selling Expenses  
12,555
  
13,013
  
25,030
  
26,300
Income/(Loss) before Interest and Taxes   3,337   (407)   4,227   (2,016)
Interest Expense  
1,247
  
1,586
  
2,550
  
3,301
Income/(Loss) before Income and Other Taxes  

2,090

  

(1,993)

  

1,677

   (5,317)
Income & Other Taxes (Recovery)  
(167)
  
(519)
  
(55)
  
(1,672)
Net Income/(Loss) from Continuing Operations   2,257   (1,474)   1,732   (3,645)
Net Income from Discontinued Operations  
-  
 
278
  
-  
 
528
Net Income/(Loss) for the Period  
2,257
  
(1,196)
  
1,732
  
(3,117)
Per Share (basic and fully diluted)                
- Continuing Operations   $0.24   ($0.16)   $0.18   ($0.39)
- Total  
$0.24
  
($0.13)
  
$0.18
  
($0.33)

- Unaudited -
 

 

STRONGCO INC.
Consolidated Statements of Cash Flows
($000's)
   

Three Months Ended
--  June 30 ---

  

Six Months Ended
---  June 30  ---
   
2003
  
2002
  
2003
  
2002
OPERATING ACTIVITIES                
Net Income/(Loss) from Continuing Operations   2,257   (1,474)   1,732   (3,645)
Add/(Deduct) Items not Involving
a Current Outlay/(Inflow) of Cash:		                
  Amortization of Rental Equipment   1,159   1,583   2,369   3,232
  Amortization of Capital Assets   305   359   601   734
  Gain on Disposals of Capital
  Assets and Rental Equipment		   (117)   (128)   (214)   (245)
Future Income Taxes/(Recovery)  
(69)
  
(254)
  
(49)
  
(1,162)
    3,535   86   4,439   (1,086)
Net Change, Non-Cash Working
  Capital Balances from Operations		  
(827)
  
1,793
  
606
  
8,053
Cash Provided by Operating Activities  
2,708
  
1,879
  
5,045
  
6,967
INVESTING ACTIVITIES                
Purchase of Rental Equipment   (39)   (175)   (107)   (247)
Purchase of Capital Assets   (44)   (76)   (75)   (93)
Proceeds from Disposals of Capital Assets and
  Rental Equipment		  
1,427
  
1,976
  
2,824
  
3,162
Cash Provided by Investing Activities  
1,344
  
1,725
  
2,642
  
2,822
FINANCING ACTIVITIES                
Increase/(Decrease) in Bank Indebtedness   137   (537)   (125)   (2,625)
Repayment of Long-Term Debt   (1,898)   (2,136)   (3,461)   (2,802)
Decrease in Rental Equipment Financing  
(2,291)
  
(1,624)
  
4,101
  
6,793
Cash Used In Financing Activities  
(4,052)
  
(4,297)
  
7,687
  
12,220
                 
Cash from Discontinued Operations   -     693   -     2,431
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   1,237   1,626   2,581   3,407
Income Taxes Paid (recovered)   (108)   (125)   (110)   215