SERVICE SECTOR / CE Franklin Ltd. Announces Third Quarter Results
CE FRANKLIN LTD.
TSE SYMBOL: CFT
AMEX SYMBOL: CFK
OCTOBER 15, 1998
CE Franklin Ltd. Announces Third Quarter Results (Results
Are In Canadian Dollars)
CALGARY, ALBERTA--CE FRANKLIN LTD. (TSE.CFT, AMEX.CFK) today
reported results for the third quarter ended September 30, 1998.
Sales were $65.1 million, a decrease of $49.8 million from $114.9
million or 43 percent from the record level achieved in the
comparable period in 1997. The decrease is due mainly to the
impact of a weaker oil price on drilling activity in Western
Canada and a reduction in spending on maintenance of existing
wells. Drilling activity, as measured by the number of wells
drilled, decreased by approximately 55 percent in the third
quarter of 1998 from the comparable period in 1997.
Gross profit for the quarter declined less than sales from $15.3
million to $9.3 million or 39 percent from the third quarter of
1997. Gross profit as a percentage of sales increased from 13.3
percent to 14.3 percent due to a shift in product mix.
The number of employees in the company declined by 12 percent
during the third quarter of 1998 as a result of layoffs.
There was no net income per share for the third quarter of 1998,
before severance and related downsizing expenses, as compared to
$0.20 from the third quarter in 1997 and $0.11 in 1996. The
reduction resulted from the combination of reduced sales and an
investment in internal growth initiatives; including expansion
into new markets which are expected to contribute to earnings in
1999 and future years.
Sales for the first nine months of 1998 were $246.2 million, a
decrease of $43.9 million or 15 percent from $290.1 million in the
first nine months of 1997. Net income for the first nine months
decreased by $4.9 million from $7.6 million to $2.7 million and
earnings per share fully diluted were $0.15, a decrease of $0.29
from $0.44 from 1997.
"The company is adapting well to this abrupt change in the market
conditions and we expect to return to profitability in the fourth
quarter assuming drilling activity reaches at least 50 percent of
the 1997 level," commented John Gilbank, Chairman and Chief
Executive Officer. "Our earnings should continue to improve in
1999 if activity remains near the 1998 level, which is what most
oil services analysts are now forecasting," he added.
The company is also reporting that it has conducted a complete
review of its computer information systems and technology to
identify the systems and technology that could be affected by the
year 2000 issue. Since early 1997, the company has been engaged in
the process of replacing its fully integrated distribution and
financial software. In addition, the new software, which is
expected to be in place by April 1999, has been contractually
guaranteed by the supplier to be year 2000 compliant. In addition
to the new software the Chief Financial Officer, Jean Parker, is
leading a task force to document, evaluate, assess, plan, and test
any internal or external year 2000 issues. At this point the
company is uncertain whether the Y2K readiness of our customers,
suppliers, service providers and third parties will have a
material effect on the financial results of CE Franklin. The
company will have tested and set up contingency plans, if
required, before the second quarter 1999. The costs associated
with addressing CE Franklin's year 2000 issues have not been
material historically and the company does not expect these costs
to have a material effect on the financial results of the company
in 1998 and 1999.
CE Franklin is Canada's largest distributor of supplies to the oil
and gas drilling and production industry. In addition to its
complete range of production equipment, including artificial lift
technology, the company sells pipe, valves, fittings and
maintenance supplies and provides complete customer inventory
procurement and management services through its 44 locations
across Canada. The company also manufactures and packages
specialized products for the energy industry and provides supply
packages for projects in the hydrocarbon processing industry
through its Piping Resources Division. For more information visit
our Web Site at cefranklin.com. CE Franklin's common
stock trades on The Toronto Stock Exchange under the symbol CFT
and on the American Stock Exchange under the symbol CFK.
This news release includes forward looking statements within the
meaning of section 27A of the United States Securities Act of 1933
and Section 21E of the United States Securities Exchange Act of
1934. Although the Company believes that its expectations are
based on reasonable assumptions, it can give no assurance that
expected results will be achieved. Important factors that could
cause actual results to differ materially from those in the
forward looking statements herein include economic conditions,
seasonality of drilling activity, commodity prices for oil and
gas, currency fluctuations and government regulations, and other
risks and uncertainties as described in the Company's 1997 Annual
Report on Form 20-F as filed with the United States Securities and
Exchange Commission.
/T/
CE FRANKLIN LTD.
SUMMARY OF FINANCIAL DATA
(All amounts shown in Canadian Dollars)
Three months Three months Nine months Nine months
ended ended ended ended
September September September September
30, 30, 30, 30,
1998 1997 1998 1997
----------- ------------ ----------- -----------
Selected Income Statement Data:
Sales $65,091,453 $114,864,233 $246,216,619 $290,122,796
Gross Profit 9,302,339 15,295,812 35,997,315 38,010,632
Selling, General &
Administrative
Expenses 7,703,369 8,148,179 26,407,273 22,086,360
Severance & Related
Expenses 520,000 - 520,000 -
Total SG&A 8,223,369 8,148,179 26,927,273 22,086,360
EBITDA 1,078,970 7,147,633 9,070,042 15,924,272
Net Income (330,885) 3,445,481 2,669,436 7,560,436
Net Income Per Share
- Basic (0.02) 0.21 0.16 0.47
- Fully Diluted (0.02) 0.20 0.15 0.44
Weighted Average
Number of Shares
Outstanding 16,505,291 16,084,037 16,491,114 15,988,297
Selected Balance Sheet Data:
Working Capital 73,846,101 66,584,436
Total Assets 128,769,146 148,844,754
Long Term Debt 51,100,404 45,209,811
Total Liabilities 77,024,869 104,919,611
Shareholders'
Equity 51,744,277 43,925,143
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