IPSCO announces net income for quarter ended March 31.REGINA Regina (rĭjī`nə), city (1991 pop. 179,178), provincial capital, S Sask., Canada, on Wascana Creek. The city is the distribution and service center for one of the world's largest wheat-growing areas. , Saskatchewan--(BUSINESS WIRE)--April 18, 1995--IPSCO Inc. Tuesday Tuesday: see week. announced that its net income for the quarter ended March 31 was $23.1 million on sales of $198.4 million, 78-percent above the $13.0 million earned in the first quarter of 1994 and 10-percent higher than the $20.9 million earned in the previous quarter. Earnings per share for the quarter were $.85, compared with $.48 in the corresponding period last year, and $.77 for the fourth quarter of 1994. Sales revenue, at $198.4 million, was 3-percent higher than the same quarter in 1994, but some 13-percent lower than the fourth quarter of 1994. Tonnage TONNAGE, mar. law. The capacity of a ship or vessel. 2. The act of congress of March 2, 1799, s. 64, 1 Story's L. U. S. 630, directs that to ascertain the tonnage of any ship or vessel, the surveyor, &c. shipped fell 10 percent from the year- earlier figure and was 12-percent below the previous quarter. The drop in sales and shipments does not reflect a drop in demand but rather the lack of competitively priced steel available to supplement IPSCO's own production that is at record levels. Steel mill products tonnage shipments were virtually identical to the first quarter of 1994, but up some 16 percent from the fourth quarter. Fabricated-product tonnages were, in total, very similar to the year earlier and the fourth quarter of 1994. Within the group there were pronounced swings with cut-to-length shipments increasing by almost 15 percent and nonenergy tubular tubular /tu·bu·lar/ (too´bu-lar) 1. shaped like a tube. 2. of or pertaining to a tubule. tubular 1. pertaining to renal tubules. 2. pertaining to fallopian tube. shipments falling. Standard-pipe shipments in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of dropped, while in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. standard pipe production largely displaced displaced see displacement. oil country tubular goods at the company's Camanche, Iowa Camanche is a city in Clinton County, Iowa, United States on the Mississippi River. The population was 4,215 at the 2000 census. History Camanche was founded by 12 families who migrated from New Hampshire in 1818. , mill. Shipments of hollow hollow 1. a depression. 2. contains a cavity. hollow back backbone has a downward curvature in the center. hollow horn a mythical disease of cattle in primitive communities; treated by removal of the horns. structurals in both countries fell below both the year-earlier and fourth-quarter levels. Tonnage sales of energy-tubular products were off in total by 26 and 36 percent, respectively, as compared with the first and fourth quarter of 1994. The quarter was almost devoid de·void adj. Completely lacking; destitute or empty: a novel devoid of wit and inventiveness. [Middle English, past participle of devoiden, of large-diameter pipe shipments, while shipments of 16- to 24-inch diameter diameter - The diameter of a graph is the maximum value of the minimum distance between any two nodes. line pipe were weak, reflecting a low level of gas pipe line construction activity. Oil country tubular goods and small-diameter line pipe fell drastically dras·tic adj. 1. Severe or radical in nature; extreme: the drastic measure of amputating the entire leg; drastic social change brought about by the French Revolution. 2. in the United States as IPSCO used a pricing policy to discourage low-profit items. Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. sales fell marginally mar·gin·al adj. 1. Of, relating to, located at, or constituting a margin, a border, or an edge: the marginal strip of beach; a marginal issue that had no bearing on the election results. 2. as a result of weather-related curtailment Curtailment The act of contracting or reducing operations of a company in the hope of bringing it financial or operational stability. This management technique is often used when a company has grown too fast and is unable to effectively manage its operations. of drilling and liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of existing surplus by end-users and distributors. Steel-making facilities continued at an extremely high level of operation. The Regina Steelworks saw 95-percent utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be , and the Western Steel Calgary Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial facility ran at 80 percent. IPSCO's pipe mills in Canada generally operated at levels below both the year earlier and the previous quarter. In contrast, the company's U.S. electric resistance weld mills saw utilization steady at 31 percent when compared with the previous quarter, but down from 47 percent a year earlier. Capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. for the quarter was $74.6 million, all but $6.1 million devoted to IPSCO's U.S. mini-mill project, which is on schedule for commissioning in the second quarter of 1996. The overall demand for steel mill products in Canada and the United States The United States and Canada share a unique legal relationship. U.S. law looks northward with a mixture of optimism and cooperation, viewing Canada as an integral part of U.S. economic and environmental policy. has clearly peaked, but the company said that this need not be the harbinger har·bin·ger n. One that indicates or foreshadows what is to come; a forerunner. tr.v. har·bin·gered, har·bin·ger·ing, har·bin·gers To signal the approach of; presage. of precipitous drops in either shipment volumes or prices for the domestic producers. In 1994, about 20 percent of demand in Canada and the United Sates was captured by imports, which did not replace domestic sales as the domestic producers were operating at effectively full capacity. Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Japan now seem to be in the early stages of economic recoveries,
requiring more steel in their domestic markets and leaving less for
export; while Southeast Southeast or south east is the ordinal direction halfway between south and east. It the opposite of northwest.Southeast or South East can refer to: While these factors mean that less steel is available to be imported to the U.S. and Canada, the factors are also contributing to higher world steel prices. This set of circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or has led many observers to suggest that demand decreases will be offset by comparable decreases in imports, which would indicate that U.S. and Canadian flat-rolled-steel producers could post excellent years. On the other hand, skeptics point to signs of sporadic sporadic /spo·rad·ic/ (spo-rad´ic) occurring singly; widely scattered; not epidemic or endemic. spo·rad·ic or spo·rad·i·cal adj. 1. Occurring at irregular intervals. 2. discounting by large producers as an indication that supply and demand are not in balance. IPSCO believes that it will still be several months before a clear pattern emerges. Following the end of the quarter, labor negotiations at IPSCO's subsidiary, Western Steel Ltd. in Calgary, broke down, resulting in the employees voting to strike and the company locking out the employees to facilitate an orderly orderly /or·der·ly/ (or´der-le) an attendant in a hospital who works under the direction of a nurse. or·der·ly n. An attendant in a hospital. shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down . There will be no material impact to the consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: profits of IPSCO, as raw material freed up by the cessation cessation Vox populi The stopping of a thing. See Smoking cessation. of manufacturing at Calgary will displace dis·place tr.v. dis·placed, dis·plac·ing, dis·plac·es 1. To move or shift from the usual place or position, especially to force to leave a homeland: higher-cost scrap imports used in the Regina Steelworks with the savings basically equalling the lost profits. -0-
INTERIM REPORT TO SHAREHOLDERS
FOR THE FIRST QUARTER ENDED MARCH 31, 1995
To the Shareholders: After tax profit of $23.1 million was 78-percent above the 1994 first quarter figure of $13.0 million and 10-percent higher than the $20.9 million recorded for the previous quarter. Sales revenue at $198.4 million was 3-percent higher than the same quarter a year earlier, but some 13-percent lower than the fourth quarter of 1994. Tonnage shipped fell 10 percent from the year earlier figure and was 12-percent below the previous quarter. However, sales and shipments were not the result of a drop in demand but were kept down by the lack of competitively priced steel to supplement IPSCO's own production, which continued at record levels. In 1994, IPSCO had been able to purchase an average of 62,000 tons of steel per quarter and convert that material to further fabricated goods at break-even or somewhat better profit margins. The rising cost of offshore hot-rolled coil, driven by shortages elsewhere in the world, and also pushed up by unfavorable currency fluctuation, sharply restricted IPSCO's ability in the first quarter of 1995 to make profitable use of available imports. In consequence, IPSCO reduced its use of purchased material to 49,000 tons. The steel available from its own production, plus the reduced level of purchases, was sold in products and markets which yielded the maximum profitability. In the sales commentary that follows, sales decreases or increases do not necessarily reflect changes in demand but rather IPSCO's adjusting its sales to maximize earnings. The tonnage of steel mill products shipments was virtually identical to the first quarter of 1994 but up some 16 percent from the fourth quarter. Flat rolled tonnage was down marginally from a year earlier but up almost 20 percent from the fourth quarter, while bar shipment levels were roughly 10-percent higher than both earlier periods. Fabricated product tonnages were, in total, very similar to the year earlier and the fourth quarter of 1994. Within this group there were pronounced swings, however, with cut-to-length shipments higher in both Canada and the United States by almost 15 percent from the first and fourth quarters of 1994, while non-energy tubular goods fell in comparison. Compared with a year earlier, standard pipe shipments in Canada dropped as IPSCO products were generally not competitive in Eastern Canadian markets. In contrast, U.S. shipments were higher as standard pipe production largely displaced oil country tubular goods manufacturing at the Camanche, Iowa, pipe mill. Fourth-quarter shipments were somewhat high as customers accumulated inventory in anticipation of a first-of-the-year price increase. Shipments of hollow structurals in both countries fell below both the year-earlier and fourth-quarter levels. Energy tubular products tonnage was off in total by 26 and 36 percent, respectively, as compared to the first and fourth quarter of 1994. The quarter was almost devoid of large-diameter pipe shipments, while shipments of 16 to 24-inch diameter line pipe were weak, reflecting a low level of gas pipeline construction activity. Oil country tubular goods and small-diameter line pipe fell drastically in the U.S. as IPSCO used pricing policy to discourage low-profit items. Canadian sales fell, but only marginally from the previous year and the previous quarter, attributed to a somewhat early weather- related curtailment in winter drilling activity and surplus stocks of small-diameter line pipe being liquidated by distributors and end users. The average unit selling price remained flat between the first quarter of 1995 and the previous quarter, due entirely to product mix. Individual categories generally were up between $10 and $40 per ton, but the percentage of higher-priced products fell to some extent. Compared to a year earlier, prices were up an average of $85 per ton. Average scrap costs were higher than the fourth quarter of 1994, but a combination of reduced purchases of hot rolled steel for further processing and continuing good conversion costs within IPSCO more than offset both this rise in scrap and the lower sales volumes. Steel-making facilities continued at an extremely high level of operation. The Regina Steelworks saw 95-percent utilization and the Western Steel Calgary facility ran at 80 percent. IPSCO's pipe mills in Canada generally operated at levels below both the year earlier experience and the previous quarter. The Canadian electric resistance weld mills saw 44-percent utilization, down from 65 percent in the first quarter of 1994 and from 58 percent in the fourth quarter. Spiral mill utilization was 8 percent, compared to zero a year earlier and 65 percent in the fourth quarter. In contrast, the company's U.S. electric resistance weld mills saw utilization steady at 31 percent when compared to the previous quarter, but down from 47 percent a year earlier. Capital spending at $74.6 million was dominated by expenditures on the company's new U.S. steel mill, which amounted to some $68.5 million. The mill is on schedule for commissioning in the second quarter of 1996. Spending on the company's existing facilities made up the balance, the level being about that of the first quarter of 1994. Financial Net income for the quarter was $23.1 million, 78-percent higher than the $13.0 million earned in the same quarter last year, and 10-percent higher than the $20.9 million earned in the fourth quarter of 1994. The $23.1 million for the quarter is made up of $21.8 million from operations, and $1.3 million in net interest income. In the same quarter last year, net income of $13.0 million consisted of $8.8 million from operations, $1.4 million in net interest income and $2.8 million in exchange gains. In the fourth quarter of 1994, the $20.9 million was made up of $20.7 million from operations, $.4 million in net interest income and a loss of $.2 million in foreign exchange. Earnings per share on 27.1 million shares outstanding were $.85 for the quarter. This compares to $.48 on the corresponding period last year, and to $.77 for the fourth quarter of 1994. The annualized rate of return on common shareholders equity this quarter was 14 percent. This compares to 9 percent and 13 percent, respectively, for the first and fourth quarters last year. Working capital provided by operations in the quarter was $25.3 million. Investment in non-cash operating working capital was increased by $21.4 million (mainly a reduction in operating accounts payable and taxes payable). In addition, long-term securities were reduced by $61.9 million. Dividends paid in the quarter were $3.2 million. Expenditures on capital assets totalled $74.6 million and the cash effect of translation of foreign investment was $.2 million. As a result, cash decreased by $12.2 million to end the quarter at $68.9 million. At quarter-end, long-term debt was 33 percent of total capitalization, current assets were 1.8 times current liabilities and $328.7 million was invested in high-quality long-term securities that will be liquidated to fund the construction of the U.S. steel mill and retire the $45 million debentures that mature on 1 October 1995. Outlook Demand for steel in Canada and the U.S. has clearly peaked. There is now no doubt that high-interest-rate policies have dampened car sales and residential construction, both major steel-consuming industries, but this need not be the harbinger of precipitous drops in either shipment volumes or prices for the domestic producers. In 1994, something like 20 percent of demand was captured by imports, imports which incidentally did not replace domestic sales as the domestic producers were operating at effectively full capacity. While the North American cycle is losing strength, Europe and Japan seem to be in the early stages of their own economic recoveries, requiring more steel in their domestic markets and leaving less for export. Southeast Asian markets, net importers of steel, are booming. And while all these factors mean less steel available to be imported to the U.S. and Canada, they are also contributing to higher world steel prices. Due to weakness in both the U.S. and Canadian dollars, the already higher foreign steel prices become even higher in dollar terms. This set of circumstances has led many observers to suggest that demand decreases will be offset by comparable decreases in imports. Should this utopian scenario, or something approaching it, occur, U.S. and Canadian flat rolled steel producers will post excellent years. On the other hand, skeptics point to signs of sporadic discounting by large producers as an indication that supply/demand is not in balance. Certainly many users stocked up in 1994 in anticipation of 1995 price increases, announced as much as six months in advance. IPSCO believes that it will still be several months before a clear pattern emerges. IPSCO's second quarter is historically its least-profitable due to weather-related shifts in product mix, but this seasonal drop in profits is expected to be buffered somewhat by continuing strength in flat rolled markets and an increase in medium- and large-diameter pipe shipments over the first quarter. The last half of the year will depend largely on what new equilibrium develops between domestic and imported supply. IPSCO will continue to manage its business for optimal profit, and any weakness will be softened by lower scrap prices which inevitably occur, and by adjusting purchases of steel. Following the end of the quarter, labour negotiations at IPSCO's Western Steel subsidiary in Calgary broke down, resulting in a strike vote being taken and approved by employees. To facilitate an orderly shutdown, Western Steel locked out the employees on 9 April and production of the plant's reinforcing bar product ceased. In contention is the company's proposal to achieve a long-term labor contract which will ensure profitable productivity levels. There will be no material impact to the consolidated profits of IPSCO, as raw material freed up by the cessation of manufacturing at Calgary will displace higher cost scrap imports used in the Regina Steelworks with the savings basically equalling the lost profits. The Calgary operation has an annual capacity of 165,000 tons of reinforcing bar and is not integrated with IPSCO's major flatrolled business. Roger Phillips President and Chief Executive Officer April 17, 1995
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IPSCO INC.
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, except per-share data)
For the Three Months Ended
March 31, March 31, Dec. 31,
1995 1994 1994
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Tons Shipped 297.5 329.9 338.2
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Revenue
Sales $ 198,404 $ 193,143 $ 227,169
Interest income 5,895 3,813 6,099
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$ 204,299 $ 196,956 $ 233,268
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Expenses
Cost of sales, exclusive
of the following items $ 153,085 $ 165,664 $ 184,365
Selling, research and
administration 9,403 9,183 10,081
Interest on long-term debt 3,947 1,630 5,489
Amortization of capital assets 4,428 4,172 4,271
Foreign exchange loss (gain) (28) (4,580) 337
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$ 170,835 $ 176,069 $ 204,543
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Income Before Income Taxes $ 33,464 $ 20,887 $ 28,725
Income Taxes 10,345 7,876 7,800
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Net Income $ 23,119 $ 13,011 $ 20,925
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Summary of Net Income
Operations $ 21,754 $ 8,798 $ 20,726
Net interest income 1,346 1,360 444
Foreign exchange gain (loss) 19 2,853 (245)
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$ 23,119 $ 13,011 $ 20,925
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Earnings Per Share $ 0.85 $ 0.48 $ 0.77
Number of Shares Outstanding 27,082 27,059 27,081
Annualized Return on Common
Shareholders' Equity 14% 9% 13%
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CONSOLIDATED STATEMENT OF CHANGES IN CASH POSITION
(Thousands of dollars) For the Three Months
Ended March 31,
1995 1994
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Cash Derived From (Applied To)
Operating Activities
Working capital provided by
operations $ 25,296 $ 22,470
Change in non-cash operating working
capital (21,382) (10,264)
----------------------
$ 3,914 $ 12,206
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Financing Activities
Shares issued pursuant to share
option plan $ 26 $ 52
Dividends (3,250) (3,247)
----------------------
$ (3,224) $ (3,195)
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Investing Activities
Expenditures for capital assets $ (74,579) $ (15,923)
Reduction in long-term securities 61,924 -
Cash effect of translation of foreign
subsidiaries (233) 5,364
----------------------
$ (12,888) $ (10,559)
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Decrease in Cash $ (12,198) $ (1,548)
Cash Position at Beginning of Period 81,098 244,441
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Cash Position at End of Period $ 68,900 $ 242,893
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
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(Thousands of dollars) At March 31,
1995 1994
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Current Assets
Cash and cash equivalents $ 68,900 $ 242,893
Accounts receivable 100,914 117,566
Inventories 150,071 154,328
Other 2,063 1,323
Income taxes allocated to future years 14,717 9,836
----------------------
$ 336,665 $ 525,946
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Current Liabilities
Accounts payable and accrued charges $ 174,835 $ 95,122
Income and other taxes payable 9,175 -
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$ 184,010 $ 95,122
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Working Capital $ 152,655 $ 430,824
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Non-Current Assets
Long-term securities $ 328,721 $ -
Capital and Other 591,830 308,484
$ 920,551 $ 308,484
Total Investment $ 1,073,206 $ 739,308
Long-Term Debt $ 340,358 $ 60,216
Deferred Pension Credit 5,158 7,612
Deferred Gain on Sale-Leaseback 12,273 13,278
Income Taxes Allocated to Future Years 35,245 39,886
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$ 393,034 $ 120,992
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Shareholders' Equity $ 680,172 $ 618,316
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Derived from
Capital Stock $ 389,105 $ 388,763
Retained Earnings 274,945 220,118
Cumulative Translation Adjustment 16,122 9,435
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$ 680,172 $ 618,316
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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. Earnings per share are based on the weighted average number of
shares outstanding during the period. Fully diluted earnings per
share, which assume the exercise of options described in note 6 of
the annual financial statements, do not differ significantly from
the reported basic earnings per share.
3. Included in accounts payable and accrued charges are amounts
relating to the construction of the company's new U.S. steel mill.
These amounts total $73,732 and $10,527, respectively, as of March
31, 1995 and March 31, 1994.
4. Certain comparative figures have been reclassified to conform to
the current year's financial statement presentation.
CONTACT: IPSCO Inc., Regina Anne Anne, British princess Anne (Anne Elizabeth Alice Louise), 1950–, British princess, only daughter of Queen Elizabeth II and Prince Philip, duke of Edinburgh. She was educated at Benenden School. Parker, 306/924-7390 |
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