Goodfellow Reports its Restated Results for the Second Quarter Ended May 31, 2016

DELSON, QUEBEC--(Marketwired - Nov. 29, 2016) - Goodfellow Inc. (TSX:GDL) announced today the completion of its review of accounts undertaken in connection with the discovery of certain discrepancies which led to the announcement on October 13, 2016 of the delay in the filing of its interim financial report, interim management discussion and analysis and interim certificates for the quarter ended August 31, 2016. As a result, the Company restated the consolidated statement of financial position as of May 31, 2016, the Consolidated Statement of Comprehensive Income, Cash Flows and Statement of Change in Shareholders' Equity and Comprehensive Income for the three and six-month periods ended May 31, 2016. The restated interim consolidated financial statements at May 31, 2016 includes adjustments mainly in the inventory valuation following an extensive review process of its new Enterprise Resource Planning (ERP), controls and procedures. The net impact on the statement of financial position was a reduction of $1.1 million in assets, a reduction of $0.2 million in currents liabilities and a reduction of $0.9 million in Shareholders' Equity. The net impact of the adjustments was a reduction of net income from $3.4 million to $2.5 million for the three months ended May 31, 2016. Net income for the six months ended May 31, 2016 decreased from $2.5 million to $1.6 million.

"We are disappointed that inaccuracies impacted our Q2 results. All measures are taken to assure the ongoing accuracy of our reported results. We are assisted by a team from Deloitte to complete this process quickly" said Denis Fraser, President and Chief Executive Officer. "Our results nevertheless, were less than expected. The combination of increased cost related to the implementation of the ERP system and softer margins impacted our profitability."

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 six months ended May 31, 2016 and 2015

(in thousands of dollars, except per share amounts)

		For the three months ended		For the six months ended
		May 31 2016 Restated	May 31 2015	May 31 2016 Restated	May 31 2015
		$	$	$	$
Sales		166,623	153,975	275,282	252,072
Expenses
	Cost of goods sold	138,729	125,653	226,708	203,341
	Selling, administrative and general expenses	23,810	23,034	45,113	43,412
	Net financial costs	824	713	1,459	1,247
		163,363	149,400	273,280	248,000
Earnings before income taxes		3,260	4,575	2,002	4,072
Income taxes		787	1,327	435	1,181
Net earnings		2,473	3,248	1,567	2,891
Net earnings per share - Basic and diluted		0.29	0.38	0.18	0.34

GOODFELLOW INC.

Consolidated Statement of Financial Position (Unaudited)

(in thousands of dollars)

		As at May 31 2016 Restated	As at November 30 2015	As at May 31 2015
		$	$	$
Assets
Current Assets
	Cash	1,396	965	494
	Trade and other receivables	122,316	65,670	98,708
	Income taxes receivable	721	-	-
	Inventories	138,901	97,665	107,384
	Prepaid expenses	4,842	4,156	2,852
Total Current Assets		268,176	168,456	209,438
Non-Current Assets
	Property, plant and equipment	39,343	36,146	36,626
	Intangible assets	3,614	2,667	-
	Defined benefit plan asset	4,991	4,812	1,832
	Investment in a joint venture	3,444	-	-
Total Non-Current Assets		51,392	43,625	38,458
Total Assets		319,568	212,081	247,896
Liabilities
Current liabilities
	Bank indebtedness	102,107	46,781	66,227
	Trade and other payables	82,367	29,762	52,876
	Income taxes payable	-	1,595	679
	Provision	1,111	1,112	941
	Current portion of long-term debt	183	113	50
Total Current Liabilities		185,768	79,363	120,773
Non-Current Liabilities
	Provision	503	477	499
	Long-term debt	188	-	37
	Deferred income taxes	4,718	4,141	2,535
	Defined benefit plan obligation	-	-	1,675
Total Non-Current Liabilities		5,409	4,618	4,746
Total Liabilities		191,177	83,981	125,519
Shareholders' equity
	Share capital	9,152	9,152	9,152
	Retained earnings	119,239	118,948	113,225
		128,391	128,100	122,377
Total Liabilities and Shareholders' Equity		319,568	212,081	247,896

GOODFELLOW INC.

Consolidated Statement of Cash Flows (Unaudited)

For the three months and six months ended May 31, 2016 and 2015

(in thousands of dollars)

			For the three months ended				For the six months ended
			May 31 2016 Restated		May 31 2015		May 31 2016 Restated		May 31 2015
			$		$		$		$
Operating Activities
	Net Earnings		2,473		3,248		1,567		2,891
	Adjustments for :
		Depreciation	938		746		1,736		1,477
		Accretion expense on provision	13		3		26		(11	)
		Income taxes	787		1,327		435		1,181
		(Gain) Loss on disposal of property, plant and equipment	-		(21	)	-		16
		Interest expense	529		463		963		807
		Funding in (excess) deficit of pension plan expense	(54	)	56		(179	)	113
		Share of the profits of the joint venture	(444	)	-		(444	)	-
			4,242		5,822		4,104		6,474
	Changes in non-cash working capital items		(11,211	)	4,134		(46,725	)	(25,771	)
	Interest paid		(508	)	(401	)	(1,164	)	(765	)
	Income taxes paid		(2,505	)	(284	)	(3,058	)	(1,499	)
			(14,224	)	3,449		(50,947	)	(28,035	)
Net Cash Flows from Operating Activities			(9,982	)	9,271		(46,843	)	(21,561	)
Financing Activities
	Net increase (decrease) in bank loans		2,500		(6,000	)	15,500		(1,500	)
	Increase in banker's acceptances		2,500		2,000		30,500		22,000
	Increase in long-term debt		560		-		1,050		-
	Reimbursement of long-term debt		(56	)	(847	)	(792	)	(833	)
	Dividends paid		(1,276	)	-		(1,276	)	-
			4,228		(4,847	)	44,982		19,667
Investing Activities
	Acquisition of property, plant and equipment		(568	)	(611	)	(934	)	(1,117	)
	Increase in intangible assets		(622	)	-		(1,305	)	-
	Proceeds on disposal of property, plant and equipment		-		3		-		17
	Business acquisitions, net of cash acquired		(587	)	-		(4,795	)	-
			(1,777	)	(608	)	(7,034	)	(1,100	)
Net cash (outflow) inflow			(7,531	)	3,816		(8,895	)	(2,994	)
Cash position, beginning of period			(3,180	)	(10,549	)	(1,816	)	(3,739	)
Cash position, end of period			(10,711	)	(6,733	)	(10,711	)	(6,733	)
Cash position is comprised of :
	Cash and cash equivalents		1,396		494		1,396		494
	Bank overdraft		(12,107	)	(7,227	)	(12,107	)	(7,227	)
			(10,711	)	(6,733	)	(10,711	)	(6,733	)

GOODFELLOW INC.

Consolidated Statement of Change in Shareholders' Equity (Unaudited)

For the six months ended May 31, 2016 and 2015

(in thousands of dollars)

		Share Capital	Retained Earnings Restated		Total Restated
		$	$		$
Balance as at November 30, 2014		9,152	110,334		119,486
	Net earnings	-	2,891		2,891
Total comprehensive income		-	2,891		2,891
Balance as at May 31, 2015		9,152	113,225		122,377
Balance as at November 30, 2015		9,152	118,948		128,100
	Net earnings	-	1,567		1,567
Total comprehensive income		-	1,567		1,567
Transactions with owners of the Company
	Dividends	-	(1,276	)	(1,276	)
Balance as at May 31, 2016		9,152	119,239		128,391