Goodfellow Inc.
TSX : GDL

Goodfellow Inc.

November 29, 2016 22:41 ET

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

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