Goodfellow Reports its Results for the Second Quarter Ended May 31, 2017

DELSON, QUEBEC--(Marketwired - Jul 4, 2017) - Goodfellow Inc. (GDL.TO) announced today its financial results for the second quarter ended May 31^st, 2017. For the three months ended May 31^st, 2017, the Company reported a net loss of $(0.5) M or $(0.07) per share. Consolidated sales for the three months ended May 31^st, 2017 were $139.6 M. For the month of May 2017, the Company reported a net profit of $0.845 M or $0.10 per share. Consolidated sales for the month of May 2017 were $52.1 M. EBITDA for the month of May 2017 was $1.940 M and EBITDA for Q2 was $1.312 M. For the six months ended May 31, 2017, the Company reported a net loss of $(5.9) M or $(0.70) per share. Consolidated sales for the six months ended May 31^st, 2017 were $253.1 M.

A SPECIAL STATEMENT

Q2 results

Initiatives that began in the second half of Q1 started to show positive benefits in Q2. The Costs of Goods Sold was reset in order to incorporate all freight charges and give management the necessary information to challenge Goodfellow's gross margin expectation upwards. The headcount reduction continued in the first half of Q2 to right size overhead primarily in Delson. Obsolete inventory sales action remained a priority concern through March and April. The aggressive nature of our obsolete inventory sell off, combined with heavy restrictions on inbound inventory, led to substantial losses in March and April. By May 1^st the company had right sized its inventory to a reasonable level giving it the ability to replenish prime goods and move forward. Crucial margin levels are being restored to historic norms, despite the compromised pressure treated wood margin, and the cost cutting measures have taken hold. The salesforce showed great resilience in regaining market share and re-establishing customer loyalty. May's results demonstrate the company is closer to normalcy. Yet, much work is to be done. There is greater clarity within the company of where our future success lies.

Update TLGI JV

The dissolution of the pressure treated joint venture took place as expected by May 31^st in common accord. The corporate guarantee of $6.5 M related to the BN line has been released and Goodfellow is secured in regaining its initial $3.0 M investment.

Outlook

The company is continuing in its focused strategy to steadily increase margin levels and address all elements of obsolete inventory. Product lines are being reviewed to attribute precious inventory dollars properly and set a positive course leading to our annual warehouse sale August 15^th in Delson and August 17^th in Campbellville.

Goodfellow Inc. is a distributor of lumber products, building materials, 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 and six months ended May 31, 2017
(in thousands of dollars, except per share amounts)
		For the three months Ended May 31		For the six months Ended May 31
		$		$
Sales		139,641		253,131
Expenses
	Cost of goods sold	119,585		218,688
	Selling, administrative and general expenses	19,701		40,719
	Net financial costs	1,072		2,024
		140,358		261,431
Loss before income taxes		(717	)	(8,300	)
Income taxes		(176	)	(2,358	)
Net loss		(541	)	(5,942	)
Loss per share - Basic and diluted		(0.07	)	(0.70	)

GOODFELLOW INC.
Consolidated Statement of Financial Position
(Unaudited)
(in thousands of dollars)
		As at	As at
		May 31 2017	November 30 2016
		$	$
Assets
Current Assets
	Cash	1,841	703
	Trade and other receivables	86,625	64,255
	Income taxes receivable	9,564	6,598
	Inventories	101,074	115,391
	Prepaid expenses	4,490	4,863
Total Current Assets		203,594	191,810
Non-Current Assets
	Property, plant and equipment	37,512	38,693
	Intangible assets	5,263	5,428
	Defined benefit plan asset	2,233	2,234
	Investment in a joint venture	3,524	3,403
Total Non-Current Assets		48,532	49,758
Total Assets		252,126	241,568
Liabilities
Current liabilities
	Bank indebtedness	86,586	94,113
	Trade and other payables	54,784	30,721
	Provision	929	963
	Current portion of long-term debt	125	136
Total Current Liabilities		142,424	125,933
Non-Current Liabilities
	Provision	500	475
	Long-term debt	64	126
	Deferred income taxes	3,296	3,296
	Defined benefit plan obligation	1,091	1,045
Total Non-Current Liabilities		4,951	4,942
Total Liabilities		147,375	130,875
Shareholders' equity
	Share capital	9,152	9,152
	Retained earnings	95,599	101,541
		104,751	110,693
Total Liabilities and Shareholders' Equity		252,126	241,568

GOODFELLOW INC.
Consolidated Statement of Cash Flows (Unaudited)
For the three and six months ended May 31, 2017
(in thousands of dollars)
			For the three months Ended May 31		For the six months Ended May 31
			$		$
Operating Activities
	Net loss		(541	)	(5,942	)
	Adjustments for :
		Depreciation	957		1,906
		Accretion expense on provision	13		25
		Decrease in provision	(3	)	(33	)
		Income taxes	(176	)	(2,358	)
		Loss on disposal of property, plant and equipment	1		13
		Interest expense	782		1,474
		Funding in deficit of pension plan expense	31		47
		Share of the profits of the joint venture	82		(121	)
			1,146		(4,989	)
	Changes in non-cash working capital items		534		16,401
	Interest paid		(807	)	(1,492	)
	Income taxes paid		(52	)	(608	)
			(325	)	14,301
Net Cash Flows from Operating Activities			821		9,312
Financing Activities
	Net increase in bank loans		11,000		-
	Net decrease in banker's acceptances		(8,000	)	(8,000	)
	Reimbursement of long-term debt		(30	)	(73	)
			2,970		(8,073	)
Investing Activities
	Acquisition of property, plant and equipment		(191	)	(401	)
	Increase in intangible assets		(133	)	(222	)
	Proceeds on disposal of property, plant and equipment		23		49
			(301	)	(574	)
Net cash inflow			3,490		665
Cash position, beginning of period			(4,735	)	(1,910	)
Cash position, end of period			(1,245	)	(1,245	)
Cash position is comprised of :
	Cash and cash equivalents		1,841		1,841
	Bank overdraft		(3,086	)	(3,086	)
			(1,245	)	(1,245	)

GOODFELLOW INC.
Consolidated Statements of Change in Shareholders' Equity (Unaudited)
For the six months ended May 31, 2017
(in thousands of dollars)
		Share	Retained
		Capital	Earnings		Total
		$	$		$
Balance as at November 30, 2016 (Audited)		9,152	101,541		110,693
	Net loss	-	(5,942	)	(5,942	)
Total comprehensive loss		-	(5,942	)	(5,942	)
Balance as at May 31, 2017		9,152	95,599		104,751