Inscape Corporation
TSX : INQ

Inscape Corporation

December 11, 2014 16:55 ET

Inscape Announces Second Quarter Results

Year-to-date sales growth of 9% exceeds industry average--announcement of strategic partnership with West Elm

HOLLAND LANDING, ONTARIO--(Marketwired - Dec. 11, 2014) - Inscape (TSX:INQ) today announced its second quarter financial results ended October 31, 2014. The second quarter of fiscal year 2015 had a net loss of $1.1 million or 7 cents per share, compared to a net loss of $0.3 million or 2 cents per share in the same quarter of last year.

The quarterly results included a $1.5 million pre-tax decrease in the fair values of U.S. currency hedge contracts due to the spread between the higher U.S. spot exchange rate and the hedged rates of the contracts at the end of the reporting period. With the exclusion of the unrealized currency hedge contract fair value adjustment and exchange gain, the quarter would have a net loss of $0.06 million compared to last year's similarly adjusted net loss of $0.08 million.

Sales in the second quarter of fiscal 2015 were 8.1% higher than the same quarter of last year due to improved realized pricing and a stronger U.S. currency. Year-to-date sales of $39.9 million were 9.1% higher than the same period of last year's $36.6 million, attributable to improved realized pricing, higher U.S. exchange rate, and moderate growth in volumes.

"Our continued sales growth is testament to our strong product offering and our 'back to basics' approach to dealer relationships and sales. Improvements in furniture gross margins and operating results demonstrate the ability of this company to generate strong results," said Jim Stelter, Chief Executive Officer. "We are excited about the recent announcement of our exclusive partnership with West Elm, a member of Williams-Sonoma Inc., to launch West Elm Workspace Exclusively with Inscape."

On a year-to-date basis, the six-month period had a net loss of $0.3 million or 2 cents per share, compared to a net loss of $1.6 million, or 11 cents per share a year ago. The year-to-date period included a decrease of $0.5 million in the fair values of U.S. currency hedge contracts and a $0.2 million unrealized U.S exchange gain. With the exclusion of the currency hedge contract fair value adjustment and unrealized exchange gain, the six-month period would have a net loss of $0.1 million, compared to last year's adjusted net loss of $0.9 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 margin percentage of the second quarter of fiscal year 2015 was 24.1%, a decrease of 1.4 percentage points from 25.5% of the same quarter of the previous year. The current quarter's gross margin percentage was adversely impacted by unfavorable product mix and extra costs incurred for a project that had scheduling delays and incurred incremental installation costs of approximately $0.7 million, or 3.4% of sales. Gross profit margin without the cost overruns would be 27.5%, compared to last year's 25.5%. Year-to-date gross margin percentage was 25.4%, compared to 24.9% for the same period of last year. The benefits of improved realized pricing and U.S. exchange were reduced by unfavorable product mix and the installation costs of approximately $0.7 million.

Selling, general and administrative expenses ("SG&A") in the second quarter of fiscal year 2015 were 24.8% of sales, compared to 26.2% in the same quarter of last year. SG&A in terms of dollars spent was $0.1 million or 2% higher than last year. Increase in variable selling expenses was offset by lower overheads. Year-to-date SG&A was 25.6% of sales, compared to 28.7% for the same period of last year. The total dollar amount of SG&A at $10.2 million was $0.3 million or 2.5% less than last year's $10.5 million. The lower SGA was a net result of reduced overheads and higher variable selling expenses.

At the end of the second quarter of fiscal year 2015, the company was debt-free with cash and cash equivalents totaling $17.0 million.

Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months Ended October 31,
2014 2013 Change
Sales $ 20,888 $ 19,323 8.1 %
Gross profit 5,040 4,922 2.4 %
Selling, general & administrative expenses 5,174 5,072 2.0 %
Unrealized gain on foreign exchange (149 ) (99 )
Decrease in fair value of derivatives 1,546 370
Investment income (82 ) (91 )
Loss before taxes (1,449 ) (330 )
Income taxes (386 ) (74 )
Net loss $ (1,063 ) $ (256 )
Basic earnings per share $ (0.07 ) $ (0.02 )
Diluted earning per share $ (0.02 ) $ (0.02 )
Weighted average number of shares (in thousands)
for basic EPS calculation 14,373 14,373
for diluted EPS calculation 14,388 14,381
Six Months Ended October 31,
2014 2013 Change
Sales $ 39,928 $ 36,611 9.1 %
Gross profit 10,137 9,134 11.0 %
Selling, general & administrative expenses 10,241 10,499 -2.5 %
Unrealized gain on foreign exchange (223 ) (88 )
Decrease in fair value of derivatives 532 1,120
Investment income (171 ) (190 )
Loss before taxes (242 ) (2,207 )
Income taxes 42 (568 )
Net loss $ (284 ) $ (1,639 )
Basic and diluted earnings per share $ (0.02 ) $ (0.11 )
Weighted average number of shares (in thousands)
for basic EPS calculation 14,373 14,373
for diluted EPS calculation 14,782 14,381

Financial Statements

http://media3.marketwire.com/docs/inq1211cfs.pdf

Second Quarter Call Details

Inscape will host a conference call at 8:30 a.m. on Friday, December 12, 2014 to discuss the company's quarterly results. To participate, please call 1-800-901-4804. A replay of the conference call will also be available from December 12, 2014 after 10:30 a.m. until midnight on December 19, 2014. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21743541).

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, an award-winning designer and manufacturer of office furniture, has been initiating change in workspace design for the past 125 years. With an emphasis on quality, innovation, technical design and unparalleled delivery and service, Inscape has been consistently awarded for its design, including 4 Gold and 1 Silver Best of NeoCon Awards at NeoCon 2014, North America's largest design exposition and conference for commercial interiors. Inscape collaborates with leading European partners and manufactures their designs in North American facilities. Their systems, storage, seating and wall solutions delight users, foster agility and empower technology in the workplace. Flexible and designed for sustainability, Inscape products enable easy customization and readily adapt to keep pace with changing needs in the workplace. For more information, visit www.inscapesolutions.com.

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