Inscape Corporation
TSX : INQ

Inscape Corporation

September 10, 2015 16:30 ET

Inscape Announces First Quarter Results

Sales Increased by 20% Over Previous Quarter

HOLLAND LANDING, ONTARIO--(Marketwired - Sept. 10, 2015) - Inscape (TSX:INQ) today announced its first quarter financial results ended July 31, 2015.

The first quarter's sales of $15.3 million was $2.6 million or 20.8% higher than the sales of $12.6 million of the preceding quarter ended on April 30, 2015. Operating results (gross profit net of selling, general and administrative expenses) also improved from a loss of $5.2 million in the preceding quarter to a loss of $3.1 million in the current quarter. The quarter-over-quarter improvement in financial results was attributable to higher sales, higher gross profit and lower SGA expenses.

"While we have seen improvement in sales this quarter, our challenges underscore the importance of effectively and rapidly implementing our current initiatives. Multiple efforts to improve future performance are underway, and we are pleased with our progress," said Jim Stelter, CEO, Inscape. "We are on schedule with our distribution strategy, with more committed dealers than expected. Our success at NeoCon, including the Best of NeoCon Awards won for West Elm Workspace with Inscape products, also reflects our progress as an organization."

The first quarter of fiscal year 2016 ended with a net loss of $5.0 million or 35 cents per share, compared with a net income of $0.8 million, or 5 cents per share a year ago. Sales in the first quarter of fiscal year 2016 was $3.8 million or 19.8% lower than the same quarter of the previous year due to decline in the number of large projects mainly in the furniture business. The current quarter's results included an unrealized derivative loss of $2.4 million relating to a decrease in the fair value of outstanding U.S. currency hedge contracts, whereas the same quarter of last year had an unrealized derivative gain of $1.0 million.

Net income or loss with the exclusion of these unrealized items is a non-GAAP measure, which does not have any standardized meaning prescribed by GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers.

Gross profit as a percentage of sales decreased 5.9 percentage points from last year's 26.8% to the current year's 20.9%. The decrease in gross profit percentage was due to lower sales volume that resulted in unfavourable overhead absorption and reduced production efficiency.

SG&A for the first quarter was 41.2% of sales versus 26.6% of last year or an increase of $1.2 million. The higher SG&A amount spent was mainly attributable to approximately $0.8 million startup costs for the West Elm Workspace with Inscape business and increased investment in fixed selling expenses.

At the end of the first quarter of fiscal year 2016, the company was debt-free with cash and cash equivalents totaling $11.2 million.

Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months Ended July 31,
2015 2014 Change
Sales $ 15,274 $ 19,040 -19.8 %
Gross profit 3,196 5,097 -37.3 %
Selling, general & administrative expenses 6,288 5,067 24.1 %
Unrealized gain on foreign exchange (384 ) (74 )
Increase (decrease) in fair value of derivative liabilities 2,385 (1,014 )
Investment income (50 ) (89 )
(Loss) income before taxes (5,043 ) 1,207
Income taxes 0 428
Net (loss) income $ (5,043 ) $ 779
Basic earnings per share $ (0.35 ) $ 0.05
Weighted average number of shares (in thousands)
for basic EPS calculation 14,381 14,373
for diluted EPS calculation 14,751 14,409

Financial Statements

http://media3.marketwire.com/docs/inq0910cfs.pdf

First Quarter Call Details

Inscape will host a conference call at 8:30 AM EST on Friday, September 11, 2015 to discuss the company's quarterly results. To participate, please call 1-800-785-8944 five minutes before the start time. A replay of the conference call will also be available from September 11, 2015 after 10:30 AM EST until 11:59 PM EST on September 18, 2015. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21773905).

Forward-looking Statements

Certain of the above statements are forward-looking statements that involve risks and uncertainties. Actual results 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. 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 makes smart workspaces. For over a century, we have collaborated with our clients to provide customized solutions based on their individual needs. Our meticulously engineered system, storage and wall products provide unparalleled flexibility to create unique applications at a lower cost of ownership. Easy reconfiguration and seamless integration with other products means our smart applications will work today and tomorrow. And they look fabulous.

For more information, visit www.inscapesolutions.com.

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