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 | |||
