IPSCO Announces First Quarter Results
19 April 1999
IPSCO Announces First Quarter Results
REGINA, Saskatchewan--April 19, 1999-- IPSCO(TSE:IPS.)PLEASE NOTE THAT IPSCO FINANCIAL RESULTS ARE NOW BEING REPORTED IN US$
IPSCO Inc. today announced that its first quarter net income was $16.3 million US, up six percent from the fourth quarter of 1998 but down 29 percent from the first quarter a year ago. After deducting preferred share dividends, net income available to common shareholders was $14.8 million US, up one percent from the fourth quarter of 1998 but down 35 percent from the first quarter a year ago. After provision for preferred share dividends the earnings per common share were $0.36 as compared to $0.36 and $0.56 in the fourth and first quarters of 1998.
IPSCO said that the impact of dumped steel imports to the United States, which had affected both volume and prices achieved for hot rolled coil and plate in the fourth quarter, continued to dampen its results. While import volumes had lessened somewhat, translating into larger sales tonnages, the unit prices of these products were lower in the first quarter. But because of successful trade cases in the United States IPSCO said it was reasonable to assume continuing improvements in both hot rolled coil and plate tonnages and realized prices as the year progressed.
IPSCO said it would have achieved better results in the first quarter but that an unexpected 12-day maintenance shutdown at its U.S. steelworks, curtailed power supply at its Canadian steelworks, and an earlier than usual spring slowdown in Canadian drilling activity combined to restrain profitability.
Sales revenue at $180 million was up 12 percent from the fourth quarter of 1998 and three percent lower than in the first quarter of 1998.
Steel mill product shipments at 144,400 tons and further fabricated products at 262,100 tons were both substantially ahead of the fourth quarter of 1998, surpassing it by 39 and 12 percent respectively.
The Regina Steelworks saw 93 percent capacity utilization. The Montpelier Steelworks was estimated at 35 percent overall caused in part by the previously mentioned 12-day maintenance outage and continuing weak market conditions.
On an accrual basis capital spending of $36.3 million during the quarter included $18.9 million on the new mini-mill in Mobile, Alabama with the remaining $17.4 million being spent on expansion and improvement projects at other IPSCO locations. Mainly this constituted the construction of the small diameter pipe mill in Blytheville, Arkansas and the construction of the coil processing facility in Houston, Texas.
IPSCO continues to have a mood of cautious optimism with regard to the remainder of 1999. The recent successes at the preliminary stages of trade cases plus the need by distributors to order replacement steel as their destocking programs get nearer to the end bode well for both volume and price increases for steel mill products as the year proceeds. IPSCO's Blytheville and Toronto facilities, to be followed by a third quarter startup of the Houston coil processing facility, are expected to contribute incremental profit as the year goes on. Recent increases in world oil prices cannot but help to bolster the weak drilling activity in both Canada and the United States. Because of seasonal factors affecting the sales of oil country tubular goods IPSCO Inc. usually experiences a softening in profitability in its second quarter as compared to the first quarter. In 1999 this phenomenon will be mitigated to some degree by the factors discussed above although it will probably be present to some extent. The last half of the year should produce improvements as the impact of the previously enumerated factors continues to mount.
This news release contains forward looking information with respect to IPSCO's operations and beliefs. Actual results may differ from these forward looking statements due to numerous factors, including those discussed in IPSCO's 1998 Annual Report for its fiscal year ended December 31, 1998.
Statements Presented in United States Dollars
CONSOLIDATED STATEMENTS OF INCOME
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(thousands of United States Dollars except for share,
per share, ton and per ton data)
For the Three Months Ended
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31 March 31 March 31 Dec.
1999 1998 1998
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Coil and Plate Tons Produced
(thousands) 366.8 362.9 301.8
Finished Tons Shipped (thousands) 406.5 471.4 338.0
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Revenue
Sales $180,006 $184,966 $160,490
Interest income 1,633 1,256 1,409
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181,639 186,222 161,899
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Expenses
Cost of sales, exclusive of the
following items 139,822 141,102 124,357
Selling, research and
administration 9,623 7,072 10,326
Interest on long-term debt 5,325 1,521 5,354
Amortization of capital assets 5,831 3,759 5,340
Foreign exchange loss 58 172 22
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160,659 153,626 145,399
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Income Before Income Taxes 20,980 32,596 16,500
Income Taxes 4,720 9,683 1,124
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Net Income 16,260 22,913 15,376
Accrued Dividends on Preferred
Shares 1,464 - 748
Net Income Available to Common
Shareholders $ 14,796 $ 22,913 $ 14,628
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Summary of Net Income Available
to Common Shareholders
Steel business $ 19,166 $ 23,220 $ 19,073
Net interest expense (2,861) (186) (3,676)
Foreign exchange loss (45) (121) (21)
Accrued dividends on preferred
shares (1,464) - (748)
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$ 14,796 $ 22,913 $ 14,628
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Earnings Per Common Share - Basic $ 0.36 $ 0.56 $ 0.36
- Fully Diluted $ 0.34 $ 0.54 $ 0.32
Number of Common Shares
Outstanding (thousands) 40,709 40,694 40,703
Annualized Return on Common
Shareholders' Equity (percent) 9 15 9
Operating Profit Per Ton (x) $ 61 $ 88 $ 60
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(x) First quarter 1998 excludes shipments during start-up of the
Montpelier Steelworks.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(thousands of United States Dollars)
For the Three Months Ended
31 March
--------------------------
1999 1998
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Cash Derived From (Applied To)
Operating Activities
Working capital provided by
operations $ 18,279 $ 23,809
Change in non-cash operating
working capital 7,560 (26,852)
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25,839 (3,043)
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Financing Activities
Common share dividends (3,359) (3,317)
Common shares issued pursuant to
share option plan 68 54
Preferred share dividends (1,407) -
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(4,698) (3,263)
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Investing Activities
Expenditures for capital assets (35,271) (26,258)
Investment (1,995) (1,971)
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(37,266) (28,229)
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Effect of exchange rate changes on
cash and cash equivalents 1,630 (894)
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Decrease in Cash and Cash Equivalents (14,495) (35,429)
Cash and Cash Equivalents at Beginning
of Period 133,271 105,554
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Cash and Cash Equivalents at End
of Period $ 118,776 $ 70,125
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Statements Presented in United States Dollars
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
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(thousands of United States Dollars)
31 March
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1999 1998
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Current Assets
Cash and cash equivalents $ 118,776 $ 70,125
Accounts receivable 127,967 98,473
Inventories 145,147 176,606
Other 2,278 2,213
Income taxes allocated to future years 44,594 16,066
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438,762 363,483
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Current Liabilities
Accounts payable and accrued charges 125,367 135,893
Current portion of long-term debt 1,100 1,016
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126,467 136,909
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Working Capital 312,295 226,574
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Non-Current Assets
Capital and other 827,231 684,295
Income taxes allocated to future years 26,177 19,742
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853,408 704,037
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Total Investment 1,165,703 930,611
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Long-Term Debt 287,689 270,706
Deferred Pension Liability - 3,839
Income Taxes Allocated to Future Years 67,407 25,514
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355,096 300,059
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Shareholders' Equity $ 810,607 $ 630,552
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Derived from
Preferred Shares $ 98,576 $ -
Common Shares 254,574 254,399
Retained Earnings 408,488 358,538
Cumulative Translation Adjustment 48,969 17,615
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$ 810,607 $ 630,552
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Percentage of Long-Term Debt to Total
Capitalization (percent) 26 30
Ratio of Current Assets to Current
Liabilities 3.5 : 1 2.7 : 1
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NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS -------------------------------------------------------------- --------------------------------------------------------------
1. The consolidated interim financial statements are unaudited and are based on accounting principles and practices consistent with those used in the preparation of the annual financial statements except as explained in note 2.
2. Historically, the company's consolidated financial statements have been presented in Canadian dollars. Effective 01 January 1999, the company began reporting its financial results in United States dollars. The decision to change the currency of its financial statements was made to reflect the company's growing American presence. The comparative consolidated financial statements and notes thereto have been restated in U.S. dollars, in accordance with accounting principles generally accepted in Canada, using the 01 January 1999 exchange rate of CDN $1.5333 per U.S. $1.00. The functional currency of the company and each of its subsidiaries operations are unchanged.
3. During the fourth quarter of 1998, the company adopted the new recommendations of The Canadian Institute of Chartered Accountants with respect to accounting for income taxes retroactive to 01 January 1998. The comparative consolidated financial statements have been restated. The cumulative effect of adopting the liability method of tax allocation effective 01 January 1998 was a one time increase in income taxes allocated to future years and retained earnings of $4,254.