Inscape Corporation
TSX : INQ

Inscape Corporation

June 25, 2009 18:59 ET

Inscape Corporation Announces Fourth Quarter and Annual Results

HOLLAND LANDING, ONTARIO--(Marketwire - June 25, 2009) - Peter Brunelle, President and Chief Executive Officer of Inscape (TSX:INQ), a leading designer, manufacturer and marketer of office systems, storage and architectural wall solutions for commercial office environments, announced the following financial results for the quarter and year ended April 30, 2009:



Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)

Three Months Ended April 30,
2009 2008 Change
----------------------------------------------------------------------------

Sales $ 19,901 $ 24,565 -19.0%
---------------------------------------------------------------------
Gross margin 3,841 7,435 -48.3%
Selling, general & administrative
expenses 5,432 5,570 -2.5%
Unrealized foreign exchange loss 25 21
Interest income (176) (262)
-------------------------------------------------------------------
Income (loss) before taxes (1,440) 2,106
Income taxes expense (recovery) (406) 594
-------------------------------------------------------------------
Net income (loss) $ (1,034) $ 1,512
-------------------------------------------------------------------
-------------------------------------------------------------------

Basic and diluted income (loss)
per share $ (0.07) $ 0.10

Weighted average number of shares
(in thousands)
for basic EPS calculation 15,097 15,097
for diluted EPS calculation 15,097 15,110


Twelve Months Ended April 30,
2009 2008 Change
----------------------------------------------------------------------------

Sales $ 82,940 $ 94,510 -12.2%
---------------------------------------------------------------------
Gross margin 18,631 28,885 -35.5%
Selling, general & administrative
expenses 22,903 22,749 0.7%
Unrealized foreign exchange (gain)
loss (1,283) 365
Interest income (805) (1,018)
-------------------------------------------------------------------
Income (Loss) before taxes (2,184) 6,789
Income taxes expense (recovery) (844) 2,041
--------------------------------------------------------------------
Net income (loss) $ (1,340) $ 4,748
--------------------------------------------------------------------
--------------------------------------------------------------------

Basic and diluted income (loss)
per share $ (0.09) $ 0.31

Weighted average number of shares
(in thousands)
for basic EPS calculation 15,097 15,097
for diluted EPS calculation 15,100 15,114


Commentary and Outlook

"Lower sales volume and lower net realized pricing related to higher discounting contributed significantly to a disappointing loss in the quarter" commented Peter Brunelle, President and CEO. "Gross margins were also negatively affected by severance costs and a significant proportion of high material content product sales in the quarter. On an annual basis, the Company's overall sales decline of roughly 12% was in line with the decline in industry demand for the comparable period. Industry demand estimates for calendar 2009 indicate an even more dramatic decline. The Company has chosen to take advantage of its cash position to address this challenging sales environment by continuing to make purposeful investments in terms of aggressively launching and promoting new products, establishing an important product licensing relationship and expanding sales and marketing initiatives. In the third and fourth quarter of fiscal 2009, the Company undertook further cost rationalization efforts to reduce fixed costs entering into the new fiscal year commencing May 1, 2009. Declining commodity prices and higher hedged exchange rates will help offset what is expected to be continuing margin pressure related to lower sales and lower realized net pricing." said Mr. Brunelle. "Despite the expectations for continued industry demand contraction, we feel confident in our ability to deploy our financial and human resources to improve our market position and our operational effectiveness."

Based on current order levels, Inscape anticipates that its revenues for the first quarter of fiscal 2010 will be lower than the fourth quarter of fiscal 2009 and the first quarter of fiscal 2009.

Operating Performance

The fourth quarter of fiscal 2009 recorded a loss of 7 cents per share compared with a net income of 10 cents per share in the same quarter of last year. The twelve month period ended April 30, 2009 had a loss of 9 cents per share compared with a gain of 31 cents per share in last fiscal year. The negative swing in the year-over-year operating performance was mainly due to a substantial decline in sales faced by the industry and reduced gross margins.

Sales in the fourth quarter of fiscal 2009 were down 19% to $19.9 million compared with the same time last year, when the sales were $24.6 million. For the fiscal year ended April 30, 2009, sales of $82.9 million were 12.2% lower than last year's $94.5 million. The results reflect significant reductions in office furniture demand and downward pressure on selling prices. Gross margin as a percentage of sales in the fourth quarter was 19.3% compared with last year's 30.3%. The unusually low margin was due to selling price pressure, unfavourable overhead absorption, severance costs and sales of higher material content products. On an annual basis, gross margin decreased from last year's 30.6% to 22.5%. In addition to lower sales volumes, margins were eroded by higher raw materials costs for most of the year and by lower realized exchange rates versus fiscal 2008.

Selling, general and administrative expenses ("SG&A") in the fourth quarter were 27.3% of sales compared with 22.7% in the same quarter of last year. The annual SG&A expenses were 27.6% of sales compared with last year's 24.1%. Dollar expenditures for the full year were essentially equal to expenditures in 2008. Lower variable selling expenses were offset by higher fixed sales and marketing expenditures.

As the U.S. dollar exchange rate increased from parity at the beginning of the fiscal year to $1.19 at the end of the year, translation of the Company's U.S. dollar denominated monetary net assets resulted in an unrealized exchange gain of $1.3 million. This unrealized exchange gain may be reversed as unrealized exchange loss in fiscal year 2010 if the recent downward trend of the U.S. dollar exchange rate continues.

At the end of the year, the Company remained debt free and held cash, cash equivalents and highly liquid short term investments of $25.1million.

Conference Call

Inscape will host a conference call at 8:30 a.m. on Friday, June 26, 2009, to discuss the Company's annual results and to provide additional outlook on the next quarter. To participate, please call 1-800-891-6979. A replay of the conference call will also be available from Friday, June 26, 2009 after 10:30 a.m. until midnight on Friday, July 3, 2009. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21428855).

Forward-Looking Statements

Certain of the above statements are forward-looking statements that involve risks and uncertainties. Actual results, particularly those achieved during the next fiscal year, could differ materially as a result of many factors including, but not limited to, further changes in market conditions and changes or delays in anticipated product demand during the next fiscal year. In addition, future results may also differ materially as a result of many factors, including: fluctuations in the Company's operating results due to product demand arising from competitive and general economic and business conditions in North America; length of sales cycles; significant fluctuations in international exchange rates, particularly the U.S dollar exchange rate; restrictions in access to the U.S. market; changes in the Company's markets, including technology changes and competitive new product introductions; pricing pressures; dependence on key personnel; and other factors set forth in the Company's Ontario Securities Commission reports and filings.

About Inscape

Inscape Corporation is a leading designer, manufacturer and marketer of office systems, storage and architectural wall solutions for commercial office environments. Headquartered in Holland Landing, Ontario, the company has offices and production facilities in Canada and the United States totalling approximately 485,000 square feet and serves customers through a growing network of authorized dealers. For more information, please visit www.inscapesolutions.com.



INSCAPE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)(in thousands)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
April 30 April 30
2009 2008
----------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents $ 13,857 $ 6,126
Short-term investments 11,270 21,618
Accounts receivable 11,047 12,732
Inventory 4,932 5,340
Derivative assets - 688
Income taxes receivable 634 -
Prepaid expenses 845 822
----------------------------------------------------------------------------
42,585 47,326
CAPITAL ASSETS 24,900 25,847
INTANGIBLE ASSETS 602 49
DERIVATIVE ASSETS 1,247 -
DEFERRED PENSION ASSETS 1,948 1,637
FUTURE INCOME TAX ASSETS 2,610 2,156
----------------------------------------------------------------------------
$ 73,892 $ 77,015
----------------------------------------------------------------------------

LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 10,611 $ 13,075
Derivative liabilities 1,725 -
Income taxes payable - 960
----------------------------------------------------------------------------
12,336 14,035
OTHER LONG-TERM OBLIGATIONS 528 622
FUTURE INCOME TAX LIABILITIES 3,351 3,115
----------------------------------------------------------------------------
16,215 17,772
----------------------------------------------------------------------------

SHAREHOLDERS' EQUITY
SHARE CAPITAL 57,059 57,059
CONTRIBUTED SURPLUS 84 84
ACCUMULATED OTHER COMPREHENSIVE INCOME 23 310
RETAINED EARNINGS 511 1,790
----------------------------------------------------------------------------
57,677 59,243
----------------------------------------------------------------------------
$ 73,892 $ 77,015
----------------------------------------------------------------------------



INSCAPE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)(in thousands, except per share amounts)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Twelve Months
Ended April 30, Ended April 30,
2009 2008 2009 2008
----------------------------------------------------------------------------

SALES $ 19,901 $ 24,565 $ 82,940 $ 94,510
COST OF GOODS SOLD 16,060 17,130 64,309 65,625
----------------------------------------------------------------------------
GROSS MARGIN 3,841 7,435 18,631 28,885

EXPENSES
Selling, general
and administrative 5,432 5,570 22,903 22,749
Unrealized foreign
exchange (gain) loss 25 21 (1,283) 365
Interest income (176) (262) (805) (1,018)
----------------------------------------------------------------------------
5,281 5,329 20,815 22,096
----------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES (1,440) 2,106 (2,184) 6,789
INCOME TAX EXPENSE (RECOVERY) (406) 594 (844) 2,041
----------------------------------------------------------------------------
NET INCOME (LOSS) $ (1,034) $ 1,512 $ (1,340) $ 4,748
----------------------------------------------------------------------------
BASIC AND DILUTED INCOME
(LOSS) PER SHARE $ (0.07) $ 0.10 $ (0.09) $ 0.31
----------------------------------------------------------------------------



INSCAPE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)(in thousands)
----------------------------------------------------------------------------
Three Months Twelve Months
Ended April 30, Ended April 30,
2009 2008 2009 2008
----------------------------------------------------------------------------
NET INCOME (LOSS) $ (1,034) $ 1,512 $ (1,340) $ 4,748
----------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
(LOSS), NET OF TAXES
Unrealized gains (losses)
on derivatives designated
as cash flow hedges, (three-
month net of taxes of $1,454,
2008 - $153, twelve-month net
of taxes of $11, 2008 - $154) 3,221 (306) 23 310

Reclassification of gains on
derivatives designated as
cash flow hedges to income,
twelve-month net of taxes
of $154, 2008 - $392) - - (310) (776)
----------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
(LOSS), NET OF TAXES 3,221 (306) (287) (466)
----------------------------------------------------------------------------
COMPREHENSIVE INCOME
(LOSS), NET OF TAXES $ 2,187 $ 1,206 $ (1,627) $ 4,282
----------------------------------------------------------------------------



INSCAPE CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended April 30
(Unaudited)(in thousands)
Year Ended April 30, 2009
----------------------------------------------------------------------------
Share Contri- Accu- Retained Total Total
Capital buted mulated Earnings AOCI and Share-
Surplus Other Retained holders'
Compre- Earnings Equity
hensive
Income
(Loss)
("AOCI")
----------------------------------------------------------------------------

BALANCE - May
1, 2008 $ 57,059 $ 84 $ 310 $ 1,790 $ 2,100 $ 59,243
Transitional
adjustment
on adoption
of new
accounting
policies
on inventories
(net of taxes
of $34) 61 61 61
----------------------------------------------------------------------------
BALANCE - May
1, 2008,
as restated 57,059 84 310 1,851 2,161 59,304
Net Loss - - - (1,340) (1,340) (1,340)
Other Comprehensive
Loss - - (287) - (287) (287)
----------------------------------------------------------------------------
BALANCE - April
30, 2009 $ 57,059 $ 84 $ 23 $ 511 $ 534 $ 57,677
----------------------------------------------------------------------------



Year Ended April 30, 2008
----------------------------------------------------------------------------
Share Contri- Accu- (Deficit) Total Total
Capital buted mulated Retained AOCI and Share-
Surplus Other Earnings (Deficit) holders'
Compre- Retained Equity
hensive Earnings
Income
("AOCI")
----------------------------------------------------------------------------
BALANCE - May
1, 2007 $ 57,059 $ 84 $ - $ (2,958) $(2,958) $54,185
Opening balance
adjustment for
unrealized gain on
cash flow hedges
(net of taxes of $392) - - 776 - 776 776
----------------------------------------------------------------------------
BALANCE - May
1, 2007 as restated 57,059 84 776 (2,958) (2,182) 54,961
Net Income - - - 4,748 4,748 4,748
Other
Comprehensive Loss (466) (466) (466)
----------------------------------------------------------------------------
BALANCE - April
30, 2008 $ 57,059 $ 84 $ 310 $ 1,790 $ 2,100 $59,243
----------------------------------------------------------------------------



INSCAPE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)(in thousands)
----------------------------------------------------------------------------
Three Months Twelve Months
Ended April 30, Ended April 30,
2009 2008 2009 2008
----------------------------------------------------------------------------
NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES:

OPERATING ACTIVITIES
Net income (loss) $ (1,034) $ 1,512 $ (1,340) $ 4,748
Items not affecting cash:
Amortization 1,179 1,253 4,363 4,834
Pension expense 147 37 480 209
Employer's contributions
to pension funds (246) (240) (727) (579)
Unrealized gain on short-term
investments held for trading (111) (8) (71) (38)
Future income taxes 163 1,751 (275) 1,367
Derivative assets
and liabilities (253) 193 736 (224)
Deferred expenses and
other expenses (77) (33) (162) (186)
Stock based compensation 17 2 (52) (61)
Unrealized foreign exchange
(gain) loss 25 21 (1,283) 365
(Gain) loss on sale of
capital assets (68) - (108) 1
----------------------------------------------------------------------------
(258) 4,488 1,561 10,436
Changes in non-cash operating
working capital items 4,768 (1,608) (1,195) (988)
----------------------------------------------------------------------------
Cash generated from
operating activities 4,510 2,880 366 9,448
----------------------------------------------------------------------------

INVESTING ACTIVITIES
Short-term investments held
for trading (73) (84) 10,419 (4,821)
Additions to capital assets
and intangible assets (987) (495) (3,605) (3,191)
Proceeds from sale of
capital assets 46 44 157 179
----------------------------------------------------------------------------
Cash generated from (used for)
investing activities (1,014) (535) 6,971 (7,833)
----------------------------------------------------------------------------
Unrealized foreign exchange
gain (loss) on cash and
cash equivalents (78) (610) 394 (40)
----------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 3,418 1,735 7,731 1,575
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 10,439 4,391 6,126 4,551
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END
OF YEAR $ 13,857 $ 6,126 $ 13,857 $ 6,126
----------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS
CONSIST OF:
Cash $ 3,926 $ 3,978 $ 3,926 $ 3,978
Cash equivalents 9,931 2,148 9,931 2,148
----------------------------------------------------------------------------
$ 13,857 $ 6,126 $ 13,857 $ 6,126
----------------------------------------------------------------------------
----------------------------------------------------------------------------

SUPPLEMENTAL INFORMATION
Income taxes paid (received) $ (2) $ (27) $ 570 $ 573

Contact Information