Strongco Announces Third Quarter 2018 Results

MISSISSAUGA, ON, Oct. 31, 2018

TSX Symbol: SQP

MISSISSAUGA, ON, Oct. 31, 2018 /CNW/ - Strongco Corporation (TSX: SQP) today reported financial results for the third quarter ended September 30, 2018.

Financial Summary
($ thousands except per share amounts)

Period Ended September 30	Three Months		Nine Months ARIVA.DE Börsen-Geflüster Kurse STRONGCO CORPORATION -   0,00%
	2018	2017	2018	2017
Revenues	98,984	87,860	309,993	278,504
Gross Profit	18,134	16,616	55,268	50,103
Operating Income Before Restructuring Costs	3,206	1,804	8,919	3,863
EBITDA*	8,033	6,590	22,116	14,902
Restructuring Costs	3,443	-	3,443	678
Interest Expense	2,201	1,561	6,102	4,517
Pretax Income (Loss)	(2,438)	243	(626)	(1,332)
Net Income (Loss)	(2,438)	243	(626)	(1,332)
Basic and Diluted Income (Loss) Per Share	(0.18)	0.02	(0.05)	(0.10)
Equipment Inventory			164,995	157,758
Equipment Notes Payable			145,546	132,416

"Sales improvements, together with market share gains, particularly in Ontario, resulted in increased year-over-year revenues. Higher revenues coupled with higher margins and lower expenses had a favourable impact on operating income," said Robert Beutel, Executive Chairman of Strongco. "With the exception of the restructuring charges related to the termination of our Fort McMurray lease, previously reported, earnings improved substantially for the period. Our organization has a heightened focus on inventory and cost controls, which we continue to manage diligently to best align with market demand. Despite continuing macro uncertainties, we are optimistic that these positive results are indicative of more stable profitability for Strongco over the long term."

Highlights (Third Quarter 2018 and Third Quarter 2017)

Lease Termination

• Effective July 1, Strongco terminated the lease of its Fort McMurray branch at 205 McAlpine Crescent, and entered into a new lease agreement to sublet a smaller facility at 310 MacKenzie Boulevard as its new location, resulting in restructuring costs of approximately $3.4 million.
• The estimated net savings, after lease termination costs, are expected to exceed $5.6 million over the remaining 11 years of the terminated lease. After the initial cash payments on closing, management anticipates the impact on the Company's cash flow from this transaction to be relatively neutral for the next 22 months, after which the cash flow impact will be positive.

Income Statement

• Revenues of $99.0 million for the quarter, compared to $87.9 million in 2017, the result of:
• Equipment sales up $9.2 million, or 19%. Sales of cranes up $5.5 million, or 94%, with strong increases in the Central and Eastern regions of the country; construction equipment sales up $3.7 million, due to stronger sales in Ontario.
• Rental revenues up slightly over last year with increases in Ontario.
• Product support revenues up 5% with increases in Ontario and Quebec.
• Gross profit of $18.1 million (18.3% of revenues), up from $16.6 million (18.9% of revenues).
• Operating income of $3.2 million, before lease termination costs, compared to $1.8 million, from higher revenues and margins.
• EBITDA of $8.0 million, up from $6.6 million.
• Interest expense of $2.2 million, up from $1.6 million, due primarily to increased equipment inventories and the associated interest-bearing debt.
• Pre-tax earnings, before lease termination costs, of $1.0 million, up from pre-tax earnings of $0.2 million.
• Net loss, after lease termination costs, of $2.4 million, or ($0.18) per share, compared to net income of $0.2 million, or $0.02 per share, in last year's third quarter.

Balance Sheet

• Equipment inventory of $165.0 million, up from $153.3 million at December 31, 2017 and $157.8 million at September 30, 2017. The increase is to support projected sales and increased rental activity.
• Equipment notes payable of $145.5 million, compared to $131.0 million at December 31, 2017 and $132.4 million at September 30, 2017.

Third Quarter Results Materials
The complete third quarter 2018 MD&A and Unaudited Interim Condensed Consolidated Financial Statements are available on our website at www.strongco.com/en/investor-relations/financial-reports/.

Conference Call Details
Strongco will hold a conference call on Thursday, November 1 at 10:00am ET to discuss third quarter results. Analysts and investors can participate by dialing 1-800-319-4610 or +1-604- 638-5340 outside of Canada and the U.S. Following management's introductory remarks, a question and answer session will take place for analysts and institutional investors.

An archived recording will be available to listeners following the call until midnight on December 1, 2018. To access it, dial 1-855-669-9658 or +1-604-674-8052 outside of Canada and the U.S., and enter passcode 2674#.

About Strongco Corporation
Strongco Corporation is a major multiline mobile equipment dealer with operations across Canada. Strongco sells, rents and services equipment used in diverse sectors such as construction, infrastructure, mining, oil and gas, utilities, municipalities, waste management and forestry. The Company has approximately 500 employees serving customers from 26 branches in Canada. Strongco represents leading equipment manufacturers with globally recognized brands, including Volvo Construction Equipment, Case Construction, Manitowoc Crane, including National and Grove, Terex Cedarapids, Terex Trucks, Fassi, Sennebogen, Konecranes and SDLG. Strongco is listed on the Toronto Stock Exchange under the symbol SQP.

Forward-Looking Statements
This news release contains forward-looking statements that involve assumptions and estimates that may not be realized and other risks and uncertainties. These statements relate to future events or future performance and reflect management's current expectations and assumptions which are based on information currently available to the Company's management. The forward-looking statements include but are not limited to: (i) the ability of the Company to meet contractual obligations through cash flow generated from operations, (ii) the expectation that customer support revenues will grow following the warranty period on new machine sales, and (iii) the outlook for 2018. There is significant risk that forward-looking statements will not prove to be accurate. These statements are based on a number of assumptions, including, but not limited to, continued demand for Strongco's products and services. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. The inclusion of this information should not be regarded as a representation of the Company or any other person that the anticipated results will be achieved and investors are cautioned not to place undue reliance on such information. These forward-looking statements are made as of the date of this press release, or as otherwise stated and the Company does not assume any obligation to update or revise them to reflect new events or circumstances.

Additional information, including the Company's Annual Information Form, may be found on SEDAR at www.sedar.com.

Footnotes
* "EBITDA" refers to earnings before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, amortization of rental fleet and lease termination costs. EBITDA is presented as a measure used by many investors to compare issuers on the basis of ability to generate cash flow from operations. EBITDA is not a measure of financial performance or earnings recognized under International Financial Reporting Standards ("IFRS") and therefore has no standardized meaning prescribed by IFRS and may not be comparable to similar terms and measures presented by other similar issuers. The Company's management believes that EBITDA is an important supplemental measure in evaluating the Company's performance and in determining whether to invest in shares. Readers of this information are cautioned that EBITDA should not be construed as an alternative to net income or loss determined in accordance with IFRS as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as a measure of the Company's liquidity and cash flows.

SOURCE Strongco Corporation