IPSCO Inc. Announces Third Quarter Results
16 October 2000
IPSCO Inc. Announces Third Quarter Results
LISLE, Ill.--Oct. 16, 2000--IPSCO Inc.** Note that IPSCO results are reported in US$
IPSCO Inc. announced today that its third quarter net income was $12.3 million, down 19 percent from the second quarter of this year and down 40 percent from the third quarter of 1999.
After deducting preferred share dividends and interest on subordinated notes, net income available to common shareholders was $9.4 million and the basic earnings per common share were $0.23 for the quarter compared to $0.47 in the third quarter of 1999.
"The drop in profit from the year earlier period was principally due to a less favorable product mix, price erosion as the result of an influx of unfairly priced imports, and higher legal and research and development costs," said Roger Phillips, the company's President and Chief Executive Officer. Shipments at 524,300 tons surpassed those of the previous year's third quarter by seven percent.
Sales revenue at $223.0 million was up five percent over the third quarter of last year. Nine month sales were $717.3 million, an increase of 24 percent over the first nine months of 1999. Phillips said that this trend of higher sales should continue with the anticipated commissioning of the Mobile Steelworks early next year.
Steel mill products shipments at 231,200 tons were 25 percent ahead of the third quarter figure for 1999 while further fabricated products at 293,100 tons were down four percent.
Phillips added that the Montpelier Steelworks production was somewhat below an annualized one million ton rate due to a tougher than normal product mix involving higher priced, but more slowly produced, high strength pipe skelp and because of an unscheduled four day shutdown. At the Regina Steelworks a planned eight day outage was taken to undergo general maintenance.
Capital spending of $95.5 million continued to be concentrated on the Mobile Steelworks which remains scheduled for a first quarter 2001 startup.
"The precipitous fall of North American steel prices will have its impact on IPSCO for a full accounting period for the first time in the fourth quarter of 2000. Coupled with the price depression there may be weakness in distributor demand which could mean lower sales of steel mill products by IPSCO. Demand for steel mill products by most original equipment manufacturers does appear to be holding up. Oil country tubular goods shipments are expected to remain strong in the United States and finally reach levels in Canada more appropriate to the ongoing high natural gas and oil prices. Selling, research, and administration expenses are expected to fall as development work on high grade pipe steels will be basically completed. While IPSCO expects to remain profitable for the quarter, market volatility makes accurate forecasting impossible.
"Looking into 2001 a recovery in steel mill products pricing is expected with continuing strength for drilling related tubulars and some increase in demand for larger diameter line pipe. The timing of any price strengthening remains unclear, however, and will substantially depend on actions taken by the U.S. government and any independent trade actions that may be initiated by industry sources," Phillips concluded.
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 For the
Three Months Ended Nine Months Ended
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30 Sept. 30 Sept. 30 June 30 Sept. 30 Sept.
2000 1999 2000 2000 1999
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Coil and Plate
Tons Produced
(thousands) 442.1 450.8 482.6 1,419.4 1,238.9
Finished Tons
Shipped
(thousands) 524.3 490.0 559.0 1,673.7 1,317.8
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Revenue
Sales $ 223,000 $ 212,706 $ 236,619 $ 717,345 $ 577,753
Interest income
(expense) (1,379) 1,438 101 (37) 4,543
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221,621 214,144 236,720 717,308 582,296
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Expenses
Cost of sales,
exclusive of
the following
items 177,629 163,771 188,691 574,377 446,159
Selling,
research and
administration 16,973 11,557 15,087 46,458 31,746
Interest on
long-term debt 485 4,550 2,230 6,852 14,582
Amortization of
capital assets 9,252 7,757 9,396 27,439 21,337
Foreign exchange
loss (gain) (302) (396) 560 163 (206)
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204,037 187,239 215,964 655,289 513,618
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Income Before
Income Taxes 17,584 26,905 20,756 62,019 68,678
Income Taxes 5,276 6,492 5,500 17,116 15,877
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Net Income 12,308 20,413 15,256 44,903 52,801
Dividends on
Preferred Shares 1,485 1,468 1,483 4,490 4,412
Interest on
Subordinated
Notes 1,428 - 1,442 3,448 -
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Net Income
Available to
Common
Shareholders $ 9,395 $ 18,945 $ 12,331 $ 36,965 $ 48,389
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Summary of Net
Income Available
to Common Shareholders
Steel business $13,402 $ 22,474 $ 17,233 $ 50,025 $ 60,379
Net interest
expense (1,305) (2,361) (1,565) (4,991) (7,731)
Foreign exchange
gain (loss) 211 300 (412) (131) 153
Dividends on
preferred
shares (1,485) (1,468) (1,483) (4,490) (4,412)
Interest on
subordinated
notes (1,428) - (1,442) (3,448) -
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$ 9,395 $ 18,945 $ 12,331 $ 36,965 $ 48,389
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Earnings Per
Common Share
- Basic $ 0.23 $ 0.47 $ 0.31 $ 0.91 $ 1.19
- Fully Diluted $ 0.19 $ 0.42 $ 0.28 $ 0.80 $ 1.09
Number of Common
Shares
Outstanding
(thousands) 40,813 40,751 40,813 40,813 40,751
Annualized Return
on Common
Shareholders'
Equity 5% 10% 6% 6% 9%
Operating Profit
Per Ton $ 37 $ 61 $ 41 $ 41 $ 60
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(thousands of United States Dollars)
For the Three Months For the Nine Months
Ended 30 September Ended 30 September
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2000 1999 2000 1999
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Cash Derived From
(Applied To)
Operating Activities
Working capital
provided by
operations $ 18,859 $ 24,038 $ 66,292 $ 63,476
Change in non-cash
operating working
capital 15,676 (25,496) (53,606) (15,528)
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34,535 (1,458) 12,686 47,948
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Financing Activities
Common share
dividends (3,437) (3,442) (10,387) (10,276)
Issue of
subordinated notes
(net of issue
costs) - - 89,824 -
Common shares issued
pursuant to share
option plan - 315 115 578
Preferred share
dividends (1,392) (1,380) (4,200) (4,197)
Subordinated notes
interest (2,962) - (3,161) -
Issue (repayment)
of long-term debt (1,100) (1,100) (11,100) (1,100)
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(8,891) (5,607) 61,091 (14,995)
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Investing Activities
Expenditures for
capital assets (87,132) (24,427) (273,744) (82,550)
Investment - - (2,075) (1,995)
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(87,132) (24,427) (275,819) (84,545)
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Effect of exchange
rate changes on cash
and cash equivalents (941) (463) (4,006) 6,769
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Decrease in Cash and
Cash Equivalents net
of Bank Indebtedness (62,429) (31,955) (206,048) (44,823)
Cash and Cash
Equivalents net of
Bank Indebtedness at
Beginning of Period (48,788) 120,403 94,831 133,271
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Cash and Cash
Equivalents net of
Bank Indebtedness at
End of Period $(111,217) $ 88,448 $(111,217) $ 88,448
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CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
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(thousands of United States Dollars)
30 Sept. 30 Sept. 31 Dec.
2000 1999 1999
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Current Assets
Cash and cash equivalents $ 38,783 $ 103,448 $ 103,931
Accounts receivable 151,685 137,832 120,346
Inventories 225,678 176,316 212,382
Other 1,803 1,805 2,758
Income taxes allocated
to future years 40,639 51,696 39,779
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458,588 471,097 479,196
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Current Liabilities
Bank indebtedness 150,000 15,000 9,100
Accounts payable
and accrued charges 163,179 145,122 159,314
Income and other taxes payable - 1,418 7,157
Current portion of
long-term debt 21,100 21,100 21,100
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334,279 182,640 196,671
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Working Capital 124,309 288,457 282,525
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Non-Current Assets
Capital and other 1,156,631 868,940 913,069
Income taxes allocated
to future years 127,274 46,680 80,694
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1,283,905 915,620 993,763
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Total Investment 1,408,214 1,204,077 1,276,288
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Long-Term Debt 283,640 268,340 297,501
Deferred Pension Liability 7,301 - -
Income Taxes Allocated to
Future Years 142,300 88,623 98,915
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433,241 356,963 396,416
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Shareholders' Equity $ 974,973 $ 847,114 $ 879,872
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Derived from
Preferred Shares $ 98,592 $ 98,585 $ 98,593
Common Shares 255,772 255,084 255,657
Subordinated Notes 102,125 - 10,198
Retained Earnings 469,029 435,164 451,548
Cumulative Translation
Adjustment 49,455 58,281 63,876
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$ 974,973 $ 847,114 $ 879,872
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Percentage of Long-Term Debt
to Total Capitalization 23% 24% 25%
Ratio of Current Assets
to Current Liabilities 1.4 : 1 2.6 : 1 2.4 : 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.
2. Effective 01 January 2000, the company adopted the new recommendation of the Canadian Institute of Chartered Accountants with respect to accounting for employee future benefits. The effect of adopting the new pronouncement was a one time increase to the deferred pension liability of $14,249. The increase in the deferred pension liability, net of income taxes of $5,272, has been charged to retained earnings.