Goodfellow Reports its Results for the Third Quarter Ended August 31, 2016

DELSON, QUEBEC--(Marketwired - Nov. 29, 2016) - Goodfellow Inc. (TSE:GDL) announced today its financial results for the third quarter ended August 31, 2016. For the three months ended August 31, 2016, the Company reported a net loss of $(2.5) million or $(0.29) per share compared to net income of $3.7 million or $0.44 per share a year ago. Consolidated sales for the three months ended August 31, 2016 were $159.1 million compared to $151.7 million last year. For the nine months ended August 31, 2016, the Company reported a net loss of $(0.9) million or $(0.11) per share compared to $6.6 million or $0.78 per share a year ago. Consolidated sales for the nine months ended August 31, 2016 were $434.4 million compared to $403.8 million last year. Sales in Canada during the first nine months of fiscal 2016 increased 11% compared to the same period a year ago mainly due to a strong performance in Ontario and strong sales of pressure treated wood. Sales in the United States for the first nine months ended August 31, 2016 decreased 6% on a Canadian dollar basis compared to the same period last year due to lower demand of flooring products and lower industrial projects deliveries. On a US dollar basis, US denominated sales decreased 13% compared to last year. Finally, Export sales decreased 13% during the first nine months of fiscal 2016 compared to the same period a year ago mainly due to decreasing demand of hardwood products in Asia and lower sales in the United Kingdom impacted by uncertainties following the Brexit vote. On the operating side, Selling, Administrative and General Expenses for the nine months ended August 31, 2016 increased 3.6% compared to the corresponding period last year due to non-recurring expenses with added resources relating to our new ERP implementation, procedures performed by external auditors, increased variables costs due to the added volumes and finally the acquisition of Quality Hardwoods Ltd. on December 31, 2015. As a result, direct, selling, and administrative expenses increased to $69.1 million ($66.7 million last year).

The delay in producing the third quarter results was motivated by the discovery of certain discrepancies mostly related to the recording of inventory value and its impact on the cost of goods sold. The services of our auditor, KPMG LLP, was retained to perform selected procedures over the nine month period ended August 31, 2016. Management review was instrumental in establishing confidence in our results. "Material weakness identified for the recording of inventory value is being addressed." said Denis Fraser, President and Chief Executive Officer. "Sales at 159 million dollars although 4.87% higher than last year were below expectation. Margin realised in 2 of our predominant product categories were disappointing. Increase in raw material cost was not recovered".

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.

GOODFELLOW INC.

Consolidated Statement of Comprehensive Income (Unaudited)

For the three months and nine months ended August 31, 2016 and 2015

(in thousands of dollars, except per share amounts)

		For the three months ended			For the nine months ended
		August 31 2016		August 31 2015	August 31 2016		August 31 2015
		$		$	$		$
Sales		159,143		151,749	434,425		403,821
Expenses
	Cost of goods sold	137,561		122,450	364,269		325,791
	Selling, administrative and general expenses	24,034		23,333	69,147		66,745
	Net financial costs	1,014		711	2,473		1,958
		162,609		146,494	435,889		394,494
(Loss) Earnings before income taxes		(3,466	)	5,255	(1,464	)	9,327
Income taxes		(975	)	1,524	(540	)	2,705
Net (Loss) earnings		(2,491	)	3,731	(924	)	6,622
Net (Loss) earnings per share - Basic and diluted		(0.29	)	0.44	(0.11	)	0.78

GOODFELLOW INC.

Consolidated Statement of Financial Position (Unaudited)

(in thousands of dollars)

		As at	As at	As at
		August 31 2016	November 30 2015	August 31 2015
		$	$	$
Assets
Current Assets
	Cash	1,327	965	1,280
	Trade and other receivables	84,930	65,670	74,215
	Income taxes receivable	2,455	-	-
	Inventories	129,789	97,665	108,286
	Prepaid expenses	5,831	4,156	8,176
Total Current Assets		224,332	168,456	191,957
Non-Current Assets
	Property, plant and equipment	39,867	36,146	37,362
	Intangible assets	3,589	2,667	-
	Defined benefit plan asset	4,983	4,812	1,824
	Investment in a joint venture	3,468	-	-
Total Non-Current Assets		51,907	43,625	39,186
Total Assets		276,239	212,081	231,143
Liabilities
Current liabilities
	Bank indebtedness	107,969	46,781	59,440
	Trade and other payables	37,004	29,762	39,225
	Income taxes payable	-	1,595	1,863
	Provision	1,093	1,112	938
	Current portion of long-term debt	157	113	50
Total Current Liabilities		146,223	79,363	101,516
Non-Current Liabilities
	Provision	516	477	512
	Long-term debt	158	-	25
	Deferred income taxes	4,718	4,141	2,535
	Defined benefit plan obligation	-	-	1,723
Total Non-Current Liabilities		5,392	4,618	4,795
Total Liabilities		151,615	83,981	106,311
Shareholders' equity
	Share capital	9,152	9,152	9,152
	Retained earnings	115,472	118,948	115,680
		124,624	128,100	124,832
Total Liabilities and Shareholders' Equity		276,239	212,081	231,143

GOODFELLOW INC.

Consolidated Statement of Cash Flows (Unaudited)

For the three months and nine months ended August 31, 2016 and 2015

(in thousands of dollars)

			For the three months ended				For the nine months ended
			August 31		August 31		August 31		August 31
			2016		2015		2016		2015
			$		$		$		$
Operating Activities
	Net (Loss) Earnings		(2,491	)	3,731		(924	)	6,622
	Adjustments for :
		Depreciation	1,055		758		2,791		2,235
		Accretion expense on provision	13		10		39		(1	)
		Income taxes	(975	)	1,524		(540	)	2,705
		Loss on disposal of property, plant and equipment	-		-		-		16
		Interest expense	682		424		1,645		1,231
		Funding in deficit (excess) of pension plan expense	8		57		(171	)	170
		Share of the profits of the joint venture	(24	)	-		(468	)	-
			(1,732	)	6,504		2,372		12,978
	Changes in non-cash working capital items		210		4,814		(46,515	)	(20,957	)
	Interest paid		(746	)	(623	)	(1,910	)	(1,388	)
	Income taxes paid		(759	)	(340	)	(3,817	)	(1,839	)
			(1,295	)	3,851		(52,242	)	(24,184	)
Net Cash Flows from Operating Activities			(3,027	)	10,355		(49,870	)	(11,206	)
Financing Activities
	Net (decrease) increase in bank loans		(12,000	)	7,000		3 500		5,500
	Increase (decrease) in banker's acceptances		27,000		(12,000	)	57,500		10,000
	Increase in long-term debt		-		-		1,050		-
	Reimbursement of long-term debt		(56	)	(12	)	(848	)	(845	)
	Dividends paid		(1,276	)	(1,276	)	(2,552	)	(1,276	)
			13,668		(6,288	)	58,650		13,379
Investing Activities
	Acquisition of property, plant and equipment		(1,027	)	(1,494	)	(1,961	)	(2,611	)
	Increase in intangible assets		(545	)	-		(1,850	)	-
	Proceeds on disposal of property, plant and equipment		-		-		-		17
	Business acquisitions, net of cash acquired		-		-		(4,795	)	-
			(1,572	)	(1,494	)	(8,606	)	(2,594	)
Net cash inflow (outflow)			9,069		2,573		174		(421	)
Cash position, beginning of period			(10,711	)	(6,733	)	(1,816	)	(3,739	)
Cash position, end of period			(1,642	)	(4,160	)	(1,642	)	(4,160	)
Cash position is comprised of :
	Cash and cash equivalents		1,327		1,280		1,327		1,280
	Bank overdraft		(2,969	)	(5,440	)	(2,969	)	(5,440	)
			(1,642	)	(4,160	)	(1,642	)	(4,160	)

GOODFELLOW INC.

Consolidated Statements of Change in Shareholders' Equity (Unaudited)

For the nine months ended August 31, 2016 and 2015

(in thousands of dollars)

		Share	Retained
		Capital	Earnings		Total
		$	$		$
Balance as at November 30, 2014		9,152	110,334		119,486
	Net earnings	-	6,622		6,622
Total comprehensive income		-	6,622		6,622
Transactions with owners of the Company
	Dividends	-	(1,276	)	(1,276	)
Balance as at August 31, 2015		9,152	115,680		124,832
Balance as at November 30, 2015		9,152	118,948		128,100
	Net loss	-	(924	)	(924	)
Total comprehensive loss		-	(924	)	(924	)
Transactions with owners of the Company
	Dividends	-	(2,552	)	(2,552	)
Balance as at August 31, 2016		9,152	115,472		124,624