GBO Inc. on the Right Track

STE-MARIE DE BEAUCE, QC, June 22 /CNW Telbec/ - (Note: All amounts are in Canadian dollars.) For the fiscal year ended February 28, 2010 GBO INC. ("GBO" or "the Company"; ticker symbol GBO / TSX Venture Exchange), manufacturer of the "Bonneville" windows and doors, achieved annual sales of $29.8 million, compared with $54.4 million the previous year. This decline is primarily attributable to the second quarter disposal of two divisions, as sales of the Bonneville division's continuing operations ("Bonneville"), namely the Ste-Marie de Beauce plant which is exclusively focused on the manufacture and marketing of wood windows, doors and accessories, decreased by 18% only in light of the current economic context. Bonneville's Canadian sales amounted to $22.6 million compared with $42.7 million the previous year. The Ontario market remained particularly affected by the economic downturn, given its exposure to the weakened automotive industry. The Company's U.S. sales, which continued to be affected by challenging economic conditions, attained $7.2 million compared with $11.7 million the previous year this despite the fact that Bonneville maintained and even expanded its customer base in its targeted territories in the United States over the past year.

GBO recorded operating earnings before amortization, interest and income taxes (or EBITDA) of $1.2 million during the year ended February 28, 2010, down from $0.3 million a year earlier. Besides the disposal of two divisions, the decline in EBITDA is primarily attributable to the impact of the economic slowdown on Bonneville's sales in Ontario and the United States. It should be noted that Bonneville continued to carry out its continuous optimization efforts to further lower its breakeven point and better align its cost structure with the seasonal fluctuations in its industry, notably through improved flexibility of its labour force and the broadened sales force in the U.S. Excluding the unusual item, the Company posted a pre-tax net loss of $3.2 million and net earnings of $0.7 million or $0.02 per share (basic and diluted) for fiscal 2010, compared with a net loss of $1.4 million or ($0.04) per share (basic and diluted) for fiscal 2009.

As at February 28, 2010, GBO's working capital posted a gain of $7.2 million and a current ratio of 2.8:1, compared with a $0.1 million deficiency and a 0.99:1 ratio a year earlier which is primarily due to the sale of two divisions during the year.

    
    Fourth-Quarter Financial Results
    --------------------------------
    

For the three-month period ended February 28, 2010, sales totalled $2.8 million compared to $6.3 million in the previous year. Canadian sales were $1.5 million compared with $4.4 million last year. Exports to the United States were $1.3 million compared with $1.9 million during the same period last year. However, despite a sales decrease of 56%, GBO recorded negative EBITDA of $0.7 million in the fourth quarter of 2010, compared with negative EBITDA of $2.1 million in the same period of 2009. The quarterly net loss amounted to $1.4 million or $0.04 per share (basic and diluted) (including unusual items), compared with a net loss of $2.4 million or $0.07 per share (basic and diluted) in the same quarter of the previous year, which confirms that GBO is on the right track with its cost reductions.

    
    Outlook
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Management is cautious as to GBO's outlook for fiscal 2011 given the current economic context although it believes that the Company benefits from certain advantages to continue to weather the uncertainty in the marketplace. Such advantages include its solid balance sheet, its lower breakeven point as a result of the initiatives taken in recent years and a more flexible cost structure, partly as a result of the changes introduced in labor management during the past fiscal year with the support of the union, in order to better align operating expenses to our seasonal sales cycle.

GBO expects the Quebec and Ontario markets will continue its turnaround. For its part these markets continue to perform well, although its relative strength is giving rise to fiercer competition. GBO is well positioned to face this competition, given its leadership, its higher end positioning and the quality of the solutions it offers, which combine a broad selection of top performing, innovative and high quality products, excellent customer service and one of the best warranty programs in the industry. Its solid financial health also represents an advantage within the market.

In the United States, GBO's management has been witnessing some positive signs in the market, and is of the opinion that the worst of the real estate crisis is behind us. In addition, although the recent rise in the Canadian dollar in relation to the US dollar can weaken Canadian exporters competitiveness when selling prices are a predominant factor, management believes this will continue to be alleviated by the fact that GBO has adopted its niche strategy to develop the Southeastern US market, where it banks on its selection of high-end wood products (all of which are certified in accordance with the highest North American Standards), and where it offers its customers the opportunity to differentiate themselves with distinctive products. Finally GBO expects the cost of its raw materials to be stable over the upcoming year.

    
    Profile
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Founded in 1946, GBO Inc. is an important Canadian window and door manufacturer. The Company designs, develops, manufactures, markets and distributes a selection of mid-range and high-end energy-efficient wood window arrangements, doors and accessories, sold primarily under the "Bonneville" and "Polar" brands. Recently, GBO launched a line of innovative fenestration products resistant to hurricanes and other impacts. The Company sells its windows and doors to the home improvement and construction markets in Quebec, Ontario, the Maritimes and the Eastern United States. GBO mainly serves independent building material distributors, distributors specializing in windows, doors and millwork, certain retailers, as well as construction and renovation contractors.

    
    Consolidated Earnings and Comprehensive Income
    Years ended February 28, 2010 and 2009
    (in thousands of dollars, except per share amounts)

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                                                          2010          2009
                                                  ------------- -------------
                                                             $             $
    Sales                                               29,782        54,412
    Cost of sales and operating expenses                30,962        54,072
                                                  ------------- -------------
    Operating income (loss) before the following
     items                                              (1,180)          340
                                                  - - - - - - - - - - - - - -

    Depreciation and write-down of fixed assets          1,593         1,562
    Amortization of intangible assets                      182           199
    Gain on disposal of fixed assets                        (6)           (5)
    Interest on long-term debt                              13             6
    Other net financial expenses                           189          (173)
                                                  ------------- -------------
                                                         1,971         1,589
                                                  ------------- -------------
    Loss before unusual item and income taxes           (3,151)       (1,249)
    Unusual item - gain on disposal of assets            4,591
                                                  ------------- -------------
    Earnings (loss) before income taxes                  1,440        (1,249)
                                                  - - - - - - - - - - - - - -

    Income taxes
      Current                                               74
      Future                                               698           187
                                                  ------------- -------------
                                                           772           187
                                                  ------------- -------------
    Net earnings (loss) and comprehensive income           668        (1,436)
                                                  ------------- -------------
                                                  ------------- -------------

    Net earnings (loss) per share
      Basic and diluted                                   0.02         (0.04)
                                                  ------------- -------------
                                                  ------------- -------------


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    Consolidated Deficit
    Years ended February 28, 2010 and 2009
    (in thousands of dollars)

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                                                          2010          2009
                                                  ------------- -------------
                                                             $             $
    Balance, beginning of year                         (24,978)      (23,542)
    Net earnings (loss)                                    668        (1,436)
                                                  ------------- -------------
    Balance, end of year                               (24,310)      (24,978)
                                                  ------------- -------------
                                                  ------------- -------------

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    Consolidated Cash Flows
    Years ended February 28, 2010 and 2009
    (in thousands of dollars)

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                                                          2010          2009
                                                  ------------- -------------
    OPERATING ACTIVITIES                                     $             $
    Net earnings (loss)                                    668        (1,436)
    Non-cash items
      Unusual gain on disposal of assets                (4,591)
      Gain on disposal of fixed assets                      (6)           (5)
      Depreciation and write-down of fixed
       assets                                            1,593         1,562
      Amortization of intangible assets                    182           199
      Interest income on the note receivable              (165)         (208)
      Future income tax                                    698           187
      Stock-based compensation expense                      10            10
      Changes in working capital items                    (614)         (326)
                                                  ------------- -------------
    Cash flows from operating activities                (2,225)          (17)
                                                  - - - - - - - - - - - - - -
    INVESTING ACTIVITIES
    Disposal of assets in cash, net of expenses
     incurred                                           10,379
    Proceeds on note receivable                            522           562
    Proceed on other receivables                            22
    Fixed assets                                          (249)         (623)
    Disposal of fixed assets                                30             5
    Intangible assets                                     (176)         (139)
                                                  ------------- -------------
    Cash flows from investing activities                10,528          (195)
                                                  - - - - - - - - - - - - - -
    FINANCING ACTIVITIES
    Bank loan                                           (3,658)          554
    Repayment of long-term debt                            (99)          (79)
    Issue of common shares                                   1
                                                  ------------- -------------
    Cash flows from financing activities                (3,756)          475
                                                  ------------- -------------
    Net change in cash and cash equivalents              4,547           263
    Cash and cash equivalents, beginning of
     year                                                  550           287
                                                  ------------- -------------
    Cash and cash equivalents, end of year               5,097           550
                                                  ------------- -------------
                                                  ------------- -------------

    CASH AND CASH EQUIVALENTS
    Cash                                                    97           550
    Term deposit                                         5,000
                                                  ------------- -------------
                                                         5,097           550
                                                  ------------- -------------
                                                  ------------- -------------

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    Consolidated Balance Sheets
    February 28, 2010 and 2009
    (in thousands of dollars)

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                                                          2010          2009
                                                  ------------- -------------
    ASSETS                                                   $             $
    Current assets
      Cash                                                  97           550
      Term deposit, 0.1%, maturing on
       March 1, 2010                                     5,000
      Accounts receivable                                2,091         3,830
      Note receivable                                    1,000
      Income taxes receivable                               30           103
      Inventories                                        2,435         4,045
      Prepaid expenses and other                           288           517
      Current portion of note receivable                   200           356
                                                  ------------- -------------
                                                        11,142         9,401
    Note receivable                                      1,331         1,532
    Fixed assets                                         9,157        14,769
    Intangible assets                                      643           709
    Future income taxes                                  2,378         3,076
                                                  ------------- -------------
                                                        24,651        29,487
                                                  ------------- -------------
                                                  ------------- -------------
    LIABILITIES
    Current liabilities
      Bank loan                                                        3,658
      Accounts payable and accrued liabilities           3,825         5,806
      Instalments on long-term debt                         85            13
                                                  ------------- -------------
                                                         3,910         9,477
    Long-term debt                                          69            17
                                                  ------------- -------------
                                                         3,979         9,494
                                                  - - - - - - - - - - - - - -

    SHAREHOLDERS' EQUITY
    Capital stock                                       44,527        44,526
    Contributed surplus                                    455           445
    Deficit                                            (24,310)      (24,978)
                                                  ------------- -------------
                                                        20,672        19,993
                                                  ------------- -------------
                                                        24,651        29,487
                                                  ------------- -------------
                                                  ------------- -------------

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The statements set forth in this press release that describe GBO's objectives, projections, estimates, expectations or forecasts may constitute forward looking statements within the meaning of securities legislation. GBO would like to point out that, by their very nature, forward-looking statements involve a number of risks and uncertainties such that actual results or the measures it adopts could therefore differ materially from those indicated or underlying these forward-looking statements, or could have an impact on the degree of realization of a particular projection. There can be no assurance as to the materialization of the results, performance or achievements as expressed or implied by the forward-looking statements. Unless required to do so pursuant to applicable securities legislation, GBO's management assumes no obligation as to the updating or revision of the forward-looking statements as a result of new information, future events or other changes.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This press release contains forward-looking statements based on the Company's the current outlook regarding the future. Such information involves a number of risks, uncertainties and assumptions. Actual results and events could differ materially from those indicated or underlying the forward-looking statements.

%SEDAR: 00002757EF

SOURCE GBO INC.

For further information: For further information: Christopher M. Wood, Chairman of the Board and Chief Executive Officer, (418) 387-7723; Source: GBO Inc.

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