Inscape Corporation

TSX : INQ


Inscape Corporation

December 12, 2013 17:11 ET

Inscape Announces Second Quarter Results

HOLLAND LANDING, ONTARIO--(Marketwired - Dec. 12, 2013) - Inscape (TSX:INQ) today announced its second quarter financial results ended October 31, 2013.

The second quarter of fiscal year 2014 had a net loss of $0.3 million or 2 cents per share, compared to a breakeven result in the same quarter of last year. The quarterly results included $0.4 million decrease in the fair value of outstanding currency hedge contracts, which may not reflect the actual financial results of those contracts when they are settled in the future. The quarter would have a breakeven result with the exclusion of the fair value adjustments. The first six months of fiscal year 2014 had a net loss of $1.6 million or 11 cents per share, which included a decrease of $1.1 million in the fair value of outstanding hedge contracts. The same period of last year had a net income of $0.1 million or 1 cent per share. The current year's financial results with the exclusion of the currency hedge contract's fair value adjustments would be a net loss of $0.9 million, compared to last year's adjusted net income of $0.4 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.

"We had some impressive sales with high profile clients during this period, and benefited from sales that were 11.8% higher and operating costs that were 6.5% lower than the first quarter. However, some large projects with higher discounts negatively impacted profitability," said Rod Turgeon, President & CEO. "We are very encouraged by the market response to our Inscape Bench, which has crystalized our application approach. We continue to have a solid foundation in place: excellent products, a strong balance sheet, and an established strategy."

Sales of $19.3 million in the second quarter of fiscal 2014 increased 6.1% from $18.2 million in the same quarter of last year due to higher volumes in both the furniture and the walls segments. For the first half of the current fiscal year, sales of $36.6 million were 6.8% lower than the same period of last year. While the walls business showed a strong year-over-year growth during the first six months of this fiscal year, the year-to-date furniture sales were adversely impacted by low volume during the first quarter of the year.

Gross margin percentage of the second quarter of fiscal year 2014 was 25.5%, a decrease of 3.2 percentage points from 28.7% of the same quarter of the previous year. The reduced gross margin percentage was mainly due to lower net prices, partially offset by favorable overhead absorption and production costs. Year-to-date gross margin percentage was 24.9%, compared to 27% for the same period of last year. The decrease in gross margin percentage was caused by lower net prices, unfavourable overhead absorption, partially offset by decrease in production costs.

Selling, general and administrative expenses ("SG&A") in the second quarter of fiscal year 2014 were 26.2% of sales, compared to 27.9% in the same quarter of last year. SG&A in terms of dollars spent was at the same level as last year at $5.1 million. Although the current quarter's sales were higher than the same quarter of last year, variable selling expenses were $0.2 million less than the previous year because certain large projects were subject to lower commission rates. The lower variable selling expenses were offset by a minor increase in overhead expenses in the current quarter. Year-to-date SG&A was 28.7% of sales, compared to 26.7% for the same period of last year. The total dollar amount of SG&A at $10.5 million was comparable to the amount incurred in last year. Variable selling expense was $0.3 million less than last year due to lower sales volume and commission rate for certain projects. The savings were offset by $0.2 million unrealized decrease in the fair value of interest-rate-sensitive short- term investments and a small increase in other overhead expenses.

At the end of the second quarter of fiscal year 2014, the Company was debt-free with cash and cash equivalents at $6.4 million and liquid short-term investments at $13.3 million.

In addition, Chairman of the Board Madan Bhayana announces that Rod Turgeon is stepping down from his position on the board, effective December 31, 2013 and appoints Brian Mirsky to the board. Mr. Mirsky is an experienced Consumer Packaged Goods executive and CEO of FreshChange Foods Group, a company that invests in food companies across North America. Mr. Mirsky holds an MBA in Marketing from the Schulich School of Management in Toronto and an undergraduate degree in Economics from the University of Toronto.

Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months Ended October 31,
2013 2012 Change
Sales $ 19,323 $ 18,210 6.1 %
Gross profit 4,922 5,229 -5.9 %
Selling, general & administrative expenses 5,072 5,088 -0.3 %
Unrealized (gain) loss on foreign exchange (99 ) 18
Decrease in fair value of derivatives 370 228
Investment income (91 ) (71 )
Loss before taxes (330 ) (34 )
Income taxes (74 ) (94 )
Net (loss ) income $ (256 ) $ 60
Basic earnings per share $ (0.02 ) $ -
Weighted average number of shares (in thousands)
for basic EPS calculation 14,373 14,376
for diluted EPS calculation 14,381 14,471
Six Months Ended October 31,
2013 2012 Change
Sales $ 36,611 $ 39,277 -6.8 %
Gross profit 9,134 10,618 -14.0 %
Selling, general & administrative expenses 10,499 10,473 0.2 %
Unrealized gain on foreign exchange (88 ) (24 )
Decrease in fair value of derivatives 1,120 405
Investment income (190 ) (191 )
Loss before taxes (2,207 ) (45 )
Income taxes (568 ) (161 )
Net (loss) income $ (1,639 ) $ 116
Basic and diluted earnings per share $ (0.11 ) $ 0.01
Weighted average number of shares (in thousands)
for basic EPS calculation 14,373 14,377
for diluted EPS calculation 14,381 14,434

Financial Statements

http://media3.marketwire.com/docs/917575.pdf.

Second Quarter Call Details

Inscape will host a conference call at 8:30 a.m. on Friday, December 13, 2013 to discuss the Company's quarterly results. To participate, please call 1-800-743-4304. A replay of the conference call will also be available from Friday, December 13, 2013 after 10:30 a.m. until midnight on December 20, 2013. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21688314).

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.

Contact Information

  • Inscape Corporation
    Rod Turgeon
    President and Chief Executive Officer
    905 836 7676
    905 836 5037 (FAX)
    www.inscapesolutions.com