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STRONGCO ANNOUNCES
THIRD QUARTER RESULTS
TORONTO, ONTARIO - Wednesday, October 21, 1998, 2:45 PM EDT
Strongco Inc. today announced its results for the third
quarter of 1998. Revenues were higher than last year, but net
income was lower because of increased financing costs and a
higher tax rate. Strongco's quarterly results are as follows:
1998 1997
Q3 Q2 Q1 Q4 Q3 Q2 Q1
----- ----- ----- ----- ----- ----- -----
Revenue $141.1 $162.9 $117.0 $140.3 $122.5 $125.5 $89.9
Pre-tax Income 4.2 7.6 2.0 4.9 4.6 5.3 1.2
Net Income 2.3 4.4 1.2 3.4 3.6 4.1 0.9
Earnings
Per Share $0.23 $0.48 $0.14 $0.41 $0.42 $0.47 $0.11
Consolidated revenue for the three months to the end of
September, at $141.1 million, was up 15% over the same
period last year. The gross profit margin, reflecting Strongco's
focus on the higher margin aspects of its business, rose 3
percentage points to 21.9% from 18.9% last year. Operating
income increased to 6.2% of revenue from 5.3% last year, but
higher financing costs caused a decline in pre-tax income to $4.2
million from $4.6 million. Net income for the quarter was $2.3
million compared to $3.6 million last year, due primarily to an
increase in the tax rate to 43.0% from 23.1% last year. The rate
increased because tax loss carryforwards from prior years have
now been fully utilized.
"Strongco was not immune to the turmoil which swept the economy
during the quarter," said Larry Pirnak, Chairman. "Falling
equity and currency markets around the world and a general sense
of uncertainty all contributed to reduced customer demand which
led to lower than anticipated earnings."
Strongco did not complete any acquisitions during the third
quarter and none is expected to close during the fourth. The
five acquisitions which Strongco did complete earlier this year
are all operating at or above expected levels and each has
contributed positively to the company's earnings this year.
For further information, contact:
Randy Henderson
Senior Vice President & CFO
905-565-3802
STRONGCO INC.
Condensed Consolidated Balance Sheets
As at September 30
(unaudited - in thousands of dollars)
1998 1997
-------- --------
Accounts Receivable 83,372 61,212
Inventories 255,408 165,860
Other Current Assets 9,360 7,523
-------- --------
348,140 234,595
Capital Assets 33,726 25,352
Rental Equipment 45,793 6,506
Goodwill and Other 18,189 8,131
-------- --------
445,848 274,584
======== ========
Bank Indebtedness 69,303 36,574
Equipment Notes Payable 161,881 97,373
Accounts Payable and Accruals 56,708 54,929
Other 20,876 6,803
-------- --------
308,768 195,679
Long-Term Debt 51,250 19,678
Deferred Income Taxes 2,121 -
Shareholders' Equity 83,709 59,227
-------- --------
445,848 274,584
======== ========
STRONGCO INC.
Consolidated Statements of Income
For the Three and Nine Months Ended September 30
(unaudited - in thousands of dollars)
-- Three Months -- -- Nine Months --
Ended September 30 Ended September 30
1998 1997 1998 1997
------- ------- ------- -------
Revenue 141,084 122,512 420,940 337,982
------- ------- ------- -------
Gross Margin 30,958 23,124 84,757 63,687
Administrative,
Distribution and
Selling Expenses 22,206 16,612 59,967 47,340
Interest Expense 4,542 1,870 10,974 5,217
------- ------- ------- -------
26,748 18,482 70,941 52,557
------- ------- ------- -------
Pre-Tax Income 4,210 4,642 13,816 11,130
Income and Other Taxes 1,900 1,072 5,941 2,604
------- ------- ------- -------
Net Income 2,310 3,570 7,875 8,526
======= ======= ======= =======
Per Share $0.23 $0.42 $0.85 $1.00
======= ======= ======= =======
Note: Income tax loss carryforwards were utilized in 1997 and,
to a lesser extent, in 1998 to reduce income taxes otherwise
payable.
STRONGCO INC.
Consolidated Statements of Changes in Financial Position
For the Three and Nine Months Ended September 30
(Unaudited - in thousands of dollars)
--Three Months-- --Nine Months--
Ended September 30 Ended September 30
1998 1997 1998 1997
------- ------- ------- -------
OPERATING ACTIVITIES
Net Income 2,310 3,570 7,875 8,526
Non-Cash Items
Depreciation and
Amortization 2,534 959 5,760 2,750
Other (1,133) (213) (980) 381
Net Changes in Non-Cash
Working Capital Balances (13,640) (5,247) (27,578) (14,118)
------- ------- ------- -------
Cash Provided by (Used in)
Operations (9,929) (931) (14,923) (2,461)
------- ------- ------- -------
INVESTING ACTIVITIES
Business Acquisitions &
Divestitures, net (222) (4,583) (27,964) (7,685)
Rental Equipment & Capital
Assets, net 150 (4,048) (13,493) (4,683)
Cumulative Translation Gain 456 13 379 48
------- ------- ------- ------
Cash Provided (Used in)
Investing Activities 384 (8,618) (41,078) (12,320)
------- ------- ------- ------
FINANCING ACTIVITIES
Long-Term Debt, net 1,140 7,160 12,008 10,723
Share Capital
Transactions, net (1,384) 20 12,182 435
------- ------- ------- -----
Cash Provided by (Used in)
Financing Activities (244) 7,180 24,190 11,158
------- ------- ------- -----
DIVIDENDS - - - -
------- ------- ------- -----
Net Decrease (Increase) in
Bank Indebtedness (9,789) (2,369) (31,811) (3,623)
Bank Indebtedness -
beginning of period (59,514) (34,205) (37,492) (32,951)
------- ------- ------- -----
Bank indebtedness -
end of period (69,303) (36,574) (69,303) (36,574)
======== ======== ======== ========
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