Strongco Announces Fourth Quarter and Full Year 2016 Results

—Further progress in inventory management and cost controls;
improvements to cost structure and balance sheet—

MISSISSAUGA, ON, March 23, 2017 /CNW/ - Strongco Corporation (TSX: SQP) today reported financial results for the fourth quarter and year ended December 31, 2016.

Financial Summary
Note: All figures are from continuing operations only and exclude results of operations divested during the year.

($ millions except percentages and per share amounts)

Period Ended December 31

3 Months

12 Months


2016

2015

2016

2015

Revenues

81.2

101.4

361.3

385.0

Operating Loss Before Restructuring Costs and Intangible Impairment

(4.4)

(6.5)

(7.7)

(4.8)

Restructuring Costs

0.4

-

3.6

-

Intangible Impairment

-

-

16.5

-

Pretax Loss

(6.2)

(7.4)

(33.6)

(12.2)

Net Loss from Continuing Operations

(6.1)

(5.5)

(38.3)

(8.9)

Basic and Diluted Loss Per Share from Continuing Operations

(0.46)

(0.41)

(2.90)

(0.68)

EBITDA

(0.2)

(0.4)

5.8

16.2

Equipment Inventory – Continuing Operations



129.2

181.3

Equipment Notes Payable – Continuing Operations



101.2

156.7

 

"2016 was a challenging year for Strongco, but saw meaningful progress in our efforts to streamline and stabilize the business. As weak markets persist, we now have a much younger and more focused inventory, a more sustainable cost structure and a stronger balance sheet," said Robert Beutel, Executive Chairman of Strongco. "Management believes the actions taken set the stage for greater profitability going forward, regardless of market conditions. We remain confident that financial stability, along with exceptional customer service and a greater focus on core world-class suppliers, will enhance our position, positively impact cash flow and deliver greater value over the long term."

Activities During the Fourth Quarter and the Year

  • Restructuring Actions in 2016
    • Strongco completed the sale of its U.S. subsidiary, Chadwick-BaRoss Inc., for gross proceeds of US$12.4 million, resulting in a small gain on sale of $0.5 million before tax. A portion of the proceeds is being held in escrow for a period of 18 months to satisfy any claims under the standard reps and warranties. Net cash, after the escrow amount and repayment of intercompany debt, was $8.8 million.
    • Restructuring cost provisions of $3.6 million for severance and other termination costs of certain employees terminated during the year, in response to ongoing weak economic conditions. Headcount in Canada declined from 591 to 532 during the year and a further 25 positions were eliminated subsequent to year-end in the first two months of 2017.
    • Non-cash impairment charge of $16.5 million recorded against intangible asset related to SAP computer system.
    • Non-cash provision of $4.7 million recorded against deferred tax assets.

  • Operating Results
    • Revenues of $81.2 million, down from $101.4 million as sales of several large cranes to a project in Quebec in the fourth quarter of 2015 were not repeated in 2016. For the 12 months, revenues of $361.3 million, down from $385.0 million.
    • Gross profit of $11.9 million (14.7% of sales) in the fourth quarter, compared to $13.6 million (13.4% of sales) last year. For the 12 months, gross profit of $57.0 million (15.8% of sales), compared to $65.2 million (16.9% of sales).
    • Operating loss, before restructuring costs, of $4.4 million in the quarter, compared to an operating loss of $6.5 million last year. For the 12 months, operating loss, before restructuring costs, of $7.7 million, compared to an operating loss of $4.8 million.
    • EBITDA loss of $0.2 million, compared to EBITDA loss of $0.4 million in Q4 2015. For the 12 months, EBITDA of $5.8 million, compared to $16.2 million. .
    • Pretax loss, before restructuring costs, of $5.8 million in the quarter, improved from an operating loss of $7.4 million last year. For the 12 months, pretax loss, before impairment of intangible asset and restructuring costs, of $13.5 million, compared to pretax loss of $12.2 million.
    • Net loss from continuing operations of $6.1 million ($0.46 per share) in the quarter, compared to $5.5 million ($0.41 per share) in Q4 2016. For the 12 months, net loss from continuing operations of $38.3 million ($2.90 per share), compared to net loss from continuing operations of $8.9 million ($0.68 per share).

  • Balance Sheet Improvement
    • Equipment inventory of continuing operations of $129.2 million, down from $146.3 million at September 30, 2016 and $181.3 million at December 31, 2015.
    • Equipment notes payable of continuing operations of $101.2 million, down from $127.8 million at September 30, 2016 and $156.7 million at December 31, 2015.
    • New bank credit facility executed in fourth quarter following the sale of Chadwick-BaRoss. Company was in compliance with all covenants at December 31, 2016 and continues to operate within the limits of the new bank agreement.

Fourth Quarter and Year-End Results Materials
The complete fourth quarter and year-end 2016 MD&A and Audited 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 Friday, March 24 at 10:00am ET to discuss fourth quarter and year-end results. Analysts and investors can participate by dialing 1-800-319-4610 or +1-604-638-5340 outside of Canada and the USA. 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 April 24, 2017. To access it, dial 1-855-669-9658 or +1-604-674-8052 outside of Canada and the U.S., and enter passcode 1079#.

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 515 employees serving customers from 27 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 2017. 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 from continuing operations before interest, income taxes, amortization of capital assets, amortization of equipment inventory on rent, and amortization of rental fleet, and impairment and amortization of intangible assets. 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 indicators of the Company's performance or to cash flows from operating, investing and financing activities as measures of the Company's liquidity and cash flows.

SOURCE Strongco Corporation

For further information: J. David Wood, Vice President and Chief Financial Officer, 905.670.5100, jdwood@strongco.com, strongco.com

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