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

DELSON, QUEBEC -- (Marketwired) -- 11/29/16 -- 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       For the nine months
                                             ended                     ended
----------------------------------------------------------------------------
                           August 31     August 31   August 31     August 31
                                2016          2015        2016          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   November 30     August 31
                                            2016          2015          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       For the nine months 
                                            ended                     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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