Goodfellow Reports Its Results for the Second Quarter Ended February 28, 2011

DELSON, QUEBEC--(Marketwire - March 25, 2011) - Goodfellow Inc. (TSX:GDL) today reported its financial results for the second quarter ended February 28, 2011. Net loss from operations was $1.7 million or $0.20 per share compared to a net income of $1.9 million or $0.22 per share a year ago. Consolidated sales for the second quarter of fiscal 2011 were $94.9 million compared to $107.8 million for the same period a year ago. Cash flow from operations (excluding non-cash working capital) for the second quarter of fiscal 2011 decreased to $(1.3) million from $2.5 million last year. Sales in Canada decreased 14% compared to last year mainly due to the absence of the Home Renovation Tax Credit which was in full force during the second quarter of fiscal 2010. Consequently, flooring sales were affected in the retail industry which continued to slow down throughout the winter. Sales in the US increased 3% due to the slow recovery in the Northeast US retail lumber and panel market. Export sales increased 9% compared to last year due mainly to strong flooring sales in the UK and increasing sales to China and the Middle East. Selling, General and Administrative expenses for the second quarter of fiscal 2011 decreased slightly at $18.2 million compared to $18.4 million for the corresponding period a year ago. The decrease is due to the reduction in selling and administrative expenses due to reduced commissions linked with the sales decrease, lower bad debt provisions and lower collection fees. On the other hand, direct labour and energy costs increased due to the value-added production build-up through the winter. Finally, leases and rental costs rose due to fleet and logistics requirements linked with our commitment to improved customer service.

For the six months ended February 28, 2011, the Company reported net loss from operations of $0.7 million or $0.09 per share compared to a net income of $4.0 million or $0.46 per share a year ago. Consolidated sales were $204.2 million compared to $217.1 million for the same period a year ago. Cash flow from operations (excluding non-cash working capital) decreased to $0.2 million from $5.0 million for the same period last year.

"The above results reflect the fact that business conditions were very tough during the winter quarter. The harsh weather everywhere, the rapid rise in fuel costs, and the sharp slump in retail demand all contributed to these disappointing results" said Richard Goodfellow, President and Chief Executive Officer. "Historically, the second quarter has been difficult but this year presented even greater challenges. We remain however cautiously optimistic that the 3^rd and 4^th quarter will mark a return to our usual level of profitability".

Goodfellow Inc. is one of 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.

GOODFELLOW INC. Consolidated statements of earnings (in thousands of dollars, except per share amounts) (unaudited)
		Three Months ended February 28			Six Months ended February 28
		2011		2010	2011		2010
		$		$	$		$
Sales		94,853		107,832	204,231		217,078
Expenses
	Cost of goods sold, selling, administrative and general expenses	96,426		104,217	203,482		209,767
	Amortization	384		370	750		726
	Financial	296		261	667		492
	Foreign currency loss	194		159	392		306
		97,300		105,007	205,291		211,291
Earnings before income taxes		(2,447	)	2,825	(1,060	)	5,787
Income taxes		(759	)	891	(329	)	1,825
Net earnings		(1,688	)	1,934	(731	)	3,962
Earnings per share
	Basic and diluted	(0.20	)	0.22	(0.09	)	0.46

GOODFELLOW INC. Consolidated statements of retained earnings (in thousands of dollars) (unaudited)
	Six Months ended February 28
	2011		2010
	$		$
Balance, beginning of year	106,880		101,932
Net earnings	(731	)	3,962
	106,149		105,894
Dividends	(2,572	)	(2,572	)
Balance, end of year	103,577		103,322

Consolidated statements of comprehensive income (in thousands of dollars) (unaudited)
		Three Months ended February 28			Six Months ended February 28
		2011		2010	2011		2010
		$		$	$		$
Net Income		(1,688	)	1,934	(731	)	3,962
Other comprehensive income
	Foreign currency translation adjustment	-		-	-		-
Total other comprehensive income		-		-	-		-
Comprehensive income		(1,688	)	1,934	(731	)	3,962

GOODFELLOW INC. Consolidated balance sheets As at February 28, 2011 and 2010 (in thousands of dollars) (unaudited)
		2011	2010
		$	$
Assets
Current assets
	Cash	527	560
	Accounts receivable	54,477	61,805
	Income taxes recoverable	2,586	-
	Inventories	74,777	72,714
	Prepaid expenses	3,085	2,230
		135,452	137,309
Capital assets		31,044	30,558
Deferred pension asset		6,850	4,938
		173,346	172,805
Liabilities
Current liabilities
	Bank indebtedness	33,818	24,078
	Accounts payable and accrued liabilities	23,707	33,197
	Income taxes payable	-	311
		57,525	57,586
Future income taxes		3,022	2,674
		60,547	60,260
Shareholders' equity
	Capital stock	9,222	9,222
	Retained earnings	103,577	103,322
	Accumulated other comprehensive income	-	-
		112,799	112,545
		173,346	172,805

GOODFELLOW INC. Consolidate statements of cash flows (in thousands of dollars) (unaudited)
			Three Months ended February 28				Six Months ended February 28
			2011		2010		2011		2010
			$		$		$		$
Cash flows from operating activities
	Net earnings		(1,688	)	1,934		(731	)	3,962
	Adjustments for :
		Amortization	384		370		750		726
		Amortization included in cost of good sold	249		258		487		510
		Gain on disposal of capital assets	-		14		-		6
		Shortage of expense over pension plan funding	(197	)	(126	)	(329	)	(237	)
			(1,252	)	2,450		177		4,967
	Changes in non-cash working capital items		(7,741	)	(9,695	)	(2,568	)	(19,636	)
			(8,993	)	(7,245	)	(2,391	)	(14,669	)
Cash flows used by financing activities
	(Decrease) increase in bank loan		12,000		4,000		(1,000	)	9,000
	(Decrease) increase in banker's acceptances		(10,000	)	5,000		-		10,000
	Dividends		-		-		(2,572	)	(2,572	)
			2,000		9,000		(3,572	)	16,428
Cash flows used by investing activities
	Acquisition of capital assets		(802	)	(470	)	(1,744	)	(1,452	)
	Proceeds on disposal of capital assets		-		12		-		21
			(802	)	(458	)	(1,744	)	(1,432	)
Net cash (outflow) inflow			(7,795	)	1,297		(7,707	)	327
(Bank overdraft), beginning of year			(26,496	)	(5,817	)	(26,584	)	(4,847	)
Bank overdraft, end of year			(34,291	)	(4,520	)	(34,291	)	(4,520	)
Bank overdraft is comprised of :
	Cash		527		560		527		560
	Bank overdraft		(34,818	)	(5,080	)	(34,818	)	(5,080	)
			(34,291	)	(4,520	)	(34,291	)	(4,520	)