Goodfellow Reports Its Results for the Fiscal Year Ended November 30, 2016

DELSON, QUEBEC–(Marketwired – Feb. 27, 2017) – Goodfellow Inc. (TSX:GDL) announced today its financial results for the twelve months ended 30 November 2016. The Company reported a net loss of $12.1 million or $1.42 per share for fiscal 2016 compared to a net profit of $8.6 million or $1.01 per share last year. For the three months ended 30 November 2016, the Company reported a net loss of $11.2 million or $1.31 per share compared to a net profit of $2.0 million or $0.23 per share a year ago. Consolidated sales during fiscal 2016 were $565.2 million compared to $539.0 million for the twelve months last year. Consolidated sales for the three months ended 30 November 2016 were $130.7 million compared to $135.2 million last year.

A SPECIAL STATEMENT

The major loss is a result of the very difficult implementation of an ERP system. Unfortunately, the system took some time to provide the hoped for quality of information available to management. Although the situation was perceived to have improved during the year, it was only in December/January 2017 that the disastrous effects were truly revealed.

On January 17th, 2017 a top management change was effected to myself and all energies and measures taken since have gone a long way to correcting the issues. The system transactionally is now working adequately in all locations and the downstream reporting has improved to a basic level. This situation during 2016 was combined with the complete upheaval of our pressure-treated business with the formation of the TLGI Joint-Venture with the Lebel Group. This structural change is now under review and specific changes will be required. Immediate measures taken post January 17th, 2017 are a complete physical review of inventories at all locations and an immediate freeze on any non-essential purchasing with the objective of reducing company-wide inventories 10 to 15%. A major sales initiative is now under way to achieve this objective.

In addition, a significant staff reduction has been initiated at all levels. All non-essential expenses are under immediate review. These initiatives have taken hold and prompt results are being seen. More cost cutting initiatives will be required in the coming months. All measures are being taken to ensure the company returns to its historic profitable operating situation by year-end 2017.

Richard Goodfellow, our President from 1988 until November 2014, has returned to work in Delson as a senior advisor to myself to assist in the re-structuring and the evaluation of the current situation. His presence has gone a long-way to re-establishing our staff’s confidence in the future of the company. Clear steps are being taken to re-establish profitability short term.

Historic difficult winter conditions continue in Q1 but most parts of the business have positive expectations for the coming spring. All measures taken should be well reflected by the end of Q2 at the end of May.

Patrick Goodfellow, President and CEO

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 Statements of Comprehensive Income

For the years ended November 30, 2016 and 2015
(in thousands of dollars, except per share amounts)

Years ended

November 30
2016

November 30
2015

$

$

Sales
565,173

538,975
Expenses

Cost of goods sold
483,885

435,960

Selling, administrative and general expenses
93,942

88,559

Net financial costs
3,640

2,582

581,467

527,101

(Loss) Earnings before income taxes
(16,294
)
11,874

Income taxes
(4,189
)
3,252

Net (loss) earnings
(12,105
)
8,622

Items that will not subsequently be reclassified to net earnings

Remeasurement of defined benefit plan obligation (asset), recovery of taxes of $1,070 (2015 – net of taxes of $1,099)

(2,750
)

2,969

Total comprehensive income
(14,855
)
11,591

Net (loss) earnings per share – Basic and diluted
(1.42
)
1.01

GOODFELLOW INC.

Consolidated Statements of Financial Position

(in thousands of dollars)

As at
As at

November 30
2016

November 30
2015

$
$
Assets

Current Assets

Cash
703
965

Trade and other receivables
64,255
65,670

Income taxes receivable
6,598

Inventories
115,391
97,665

Prepaid expenses
4,863
4,156
Total Current Assets
191,810
168,456

Non-Current Assets

Property, plant and equipment
38,693
36,146

Intangible assets
5,428
2,667

Defined benefit plan asset
2,234
4,812

Investment in a joint venture
3,403

Total Non-Current Assets
49,758
43,625
Total Assets
241,568
212,081

Liabilities

Current liabilities

Bank indebtedness
94,113
46,781

Trade and other payables
30,721
29,762

Income taxes payable

1,595

Provision
963
1,112

Current portion of long-term debt
136
113
Total Current Liabilities
125,933
79,363

Non-Current Liabilities

Provision
475
477

Long-term debt
126

Deferred income taxes
3,296
4,141

Defined benefit plan obligation
1,045

Total Non-Current Liabilities
4,942
4,618
Total Liabilities
130,875
83,981

Shareholders’ equity

Share capital
9,152
9,152

Retained earnings
101,541
118,948

110,693
128,100
Total Liabilities and Shareholders’ Equity
241,568
212,081

GOODFELLOW INC.

Consolidated Statements of Cash Flows

For the years ended November 30, 2016 and 2015

(in thousands of dollars)

Years ended

November 30
2016

November 30
2015

$

$

Operating Activities

Net (Loss) Earnings
(12,105
)
8,622

Adjustments for :

Depreciation
3,850

3,026

Accretion expense on provision
52

53

(Decrease) Increase in provision
(202
)
84

Income taxes
(4,189
)
3,252

Gain on disposal of property, plant and equipment

(26
)

Interest expense
2,392

1,555

Funding in excess of pension plan expense
(197
)
(474
)

Share of the profits of a joint venture
(403
)

(10,802
)
16,092

Changes in non-cash working capital items
(16,054
)
(7,859
)

Interest paid
(2,482
)
(1,659
)

Income taxes paid
(4,663
)
(2,146
)

(23,199
)
(11,664
)
Net Cash Flows from Operating Activities
(34,001
)
4,428

Financing Activities

Net increase in bank loans
2,000

5,500

Increase in banker’s acceptances
45,500

Increase in long-term debt
369

51

Reimbursement of long-term debt
(780
)
(858
)

Dividends paid
(2,552
)
(2,977
)

44,537

1,716

Investing Activities

Acquisition of property, plant and equipment
(2,970
)
(2,101
)

Increase in intangible assets
(2,865
)
(2,216
)

Proceeds on disposal of property, plant and equipment

96

Business acquisitions, net of cash acquired
(4,795
)

(10,630
)
(4,221
)

Net cash (outflow) inflow
(94
)
1,923

Cash position, beginning of year
(1,816
)
(3,739
)
Cash position, end of year
(1,910
)
(1,816
)

Cash position is comprised of :

Cash
703

965

Bank overdraft
(2,613
)
(2,781
)

(1,910
)
(1,816
)

GOODFELLOW INC.

Consolidated Statements of Change in Shareholders’ Equity

For the years ended November 30, 2016 and 2015

(in thousands of dollars)

Share
Capital

Retained
Earnings

Total

$
$

$

Balance as at November, 2014
9,152
110,334

119,486

Net earnings

8,622

8,622

Other comprehensive income

2,969

2,969

Total Comprehensive income

11,591

11,591

Transactions with owners of the Company

Dividends

(2,977
)
(2,977
)

Balance as at November 30, 2015
9,152
118,948

128,100

Net loss

(12,105
)
(12,105
)

Other comprehensive loss

(2,750
)
(2,750
)

Total Comprehensive loss

(14,855
)
(14,855
)

Transactions with owners of the Company

Dividends

(2,552
)
(2,552
)

Balance as at November 30, 2016
9,152
101,541

110,693