Goodfellow Inc.
TSX : GDL

Goodfellow Inc.

June 27, 2008 17:38 ET

Goodfellow Reports its Results for Q3-2008

DELSON, QUEBEC--(Marketwire - June 27, 2008) - Goodfellow Inc. (TSX:GDL) announced today its financial results for the third quarter ended May 31, 2008. Consolidated sales for the third quarter of fiscal 2008 decreased 8.5% to $131.5 million compared to $143.7 million a year ago. Net income decreased to $1.7 million or $0.20 per share compared to $2.5 million or $0.30 per share for the same period last year. The third quarter results reflect the impact of the rapid fuel price increase, the economic crisis in the US, the housing start slowdown in Canada and the lower demand for panel products. The foreign currency conversion effect on our US denominated sales resulted in a reduction of some $2.2 million in sales compared to last year. General expenses, selling and administrative costs for the third quarter ended May 31 2008 decreased closing at $20.0 million compared to $20.8 million for the same period last year. The decrease reflects a reduction in variable operating costs linked with the sales decrease, staffing and selling expense reduction measures and reduction in administrative costs due to the conversion of our hourly pension plan from Defined Benefit to Defined Contribution.

For the first nine months of fiscal 2008, consolidated sales decreased 7% to $348.8 million compared to $369.4 million for the same period a year ago. The overall conversion effect on our US denominated sales represents some $7.4 million in sales reduction. For the nine months ended May 31, 2008, net income decreased to $3.6 million or $0.42 per share from $8.6 million or $1.00 per share for the same period last year. Net income for the current fiscal year includes a non recurring item which represents a special charge of $156,000 net after tax or $0.02 per share, representing the impact of the conversion of our hourly employees pension plan from Defined Benefit to Defined Contribution as of May 1, 2008. Last year's results includes two non recurring items: First, the final net settlement after tax of $3.5 million or $0.41 per share, related to the Softwood Lumber Agreement and secondly, a special charge of $420,000 net after tax or $0.05 per share, representing the impact of the conversion of our salaried and senior-salaried employees pension plan from Defined Benefit to Defined Contribution as of June 1, 2007. Without these non recurring items, comparable net income for the nine months ended May 31, 2008 was $3.7 million or $0.44 per share compared to $5.5 million or $0.64 per share for the same period a year ago.

"We are disappointed with these results but they reflect the deteriorating economic situation in most sectors" said Richard Goodfellow, President and Chief Executive Officer. "We are endeavouring to adjust our cost base quickly to the new realities."

Goodfellow Inc. is one of eastern Canada's largest independent re-manufacturers and distributors of lumber and hardwood flooring products. Goodfellow shares trade on the Toronto Stock Exchange under the symbol GDL.



CONSOLIDATED STATEMENTS OF INCOME
Nine Months Three Months
(in thousands of dollars, except Ended May 31 Ended May 31
earnings per share)
(unaudited) 2008 2007 2008 2007
$ $ $ $
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Sales 348,760 369,411 131,506 143,684
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Expenses
Cost of goods sold, selling,
administrative and general expenses 339,972 352,652 127,746 138,351
Depreciation and amortization 1,690 1,655 569 627
Financial 1,657 2,043 609 817
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343,319 356,350 128,925 139,795
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Income before income taxes 5,441 13,061 2,581 3,889
Income taxes 1,823 4,506 865 1,342
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Net income 3,618 8,555 1,716 2,547
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Earnings per share (note 2) 0,42 1,00 0,20 0,30
Earnings per share diluted 0,42 1,00 0,20 0,30



CONSOLIDATED BALANCE SHEETS As at As at As at
(in thousand of dollars) May 31, 2008 May 31, 2007 August 31, 2007
(unaudited) (unaudited) (audited)
$ $ $
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Assets
Current assets
Cash 734 1,459 1,139
Accounts receivable 78,667 79,796 82,849
Income taxes 2,362 312 -
Inventories 65,776 75,464 52,284
Prepaid expenses 4,905 6,847 4,834
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152,445 163,878 141,106

Fixed assets 26,097 26,842 26,607
Future charges related to
pension plan 3,537 2,858 3,054
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182,080 193,578 170,767
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Liabilities
Current liabilities
Bank indebtedness 46,412 60,936 36,691
Accounts payable and accrued
liabilities 32,670 31,878 31,351
Income Taxes - - 192
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79,082 92,813 68,234

Deferred income taxes 1,678 1,807 1,678

Shareholders' equity
Capital stock 9,234 9,238 9,238
Retained earnings 92,389 89,884 91,801
Foreign currency translation
adjustments (303) (165) (184)
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101,320 98,957 100,855
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182,080 193,578 170,767
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CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(in thousands of dollars)
(unaudited)
Nine months
Ended May 31
2008 2007
$ $
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Balance at beginning 91,801 84,746
Net income for the period 3,618 8,555
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95,419 93,301

Redemption of share 25 -
Dividends 3,005 3,417
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Balance at end 92,389 89,884
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CONSOLIDATED CASH FLOWS
(in thousands of dollars)
(unaudited) Nine Months Ended Three Months Ended
May 31 May 31
2008 2007 2008 2007
$ $ $ $
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Operating activities
Net income 3,618 8,555 1,716 2,547
Items not affecting cash
Amortization 1,690 1,655 569 627
Excess of expense over
pension plan funding
(pension plan funding over
expense) (484) 298 (14) 522
Gain on disposal of assets (1) - (1) -
Future income taxes - - - -
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4,823 10,508 2,271 3,696

Changes in non-cash operating
working capital balances
Decrease (increase)
in accounts receivable 4,182 (4,362) (21,297) (19,109)
Decrease (increase) in
inventories (13,493) (24,468) 8,933 2,050
Decrease (increase) in
prepaid expenses (72) (1,657) 920 (883)
Increase (decrease) in
accounts payable 1,319 4,042 8,819 (991)
Increase (decrease) in
income taxes (2,554) (1,655) (12) (252)
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(5,794) (17,592) (366) (15,490)
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Financing activities
Dividends (3,005) (3,417) - -
Purchase of common shares (25) - (25) -
Issuance of common shares - 242 - 242
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(3,030) (3,175) (25) 242

Investing activities
Acquisition of fixed assets (1,301) (3,793) (257) (1,848)
Disposal of fixed assets 120 - 120 -
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(1,181) (3,793) (137) (1,848)
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Foreign currency translation
adjustment (119) (58) - (150)
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Net cash inflow (outflow) (10,125) (24,618) (529) (17,246)
Cash and cash equivalents,
beginning of period (35,553) (34,859) (45,149) (42,231)
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Cash and cash equivalents,
end of period (45,678) (59,477) (45,678) (59,477)
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of dollars, except
earnings per share) Nine months Three months
(unaudited) Ended May 31 Ended May 31
2008 2007 2008 2007
$ $ $ $
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Net income 3,618 8,555 1,716 2,547
Other comprehensive income
Cumulative translation
adjustment (note 8) - - - -
Net investments in self-
sustaining foreign operations (119) (58) - (150)
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Total Other comprehensive income (119) (58) - (150)
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Total comprehensive income 3,499 8,497 1,716 2,397
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