Inscape Corporation
TSX : INQ

Inscape Corporation

March 10, 2016 17:12 ET

Inscape Announces Third Quarter Results

- Quarterly Sales Increased by 36% Year Over Year

- 4 West Elm Workspace With Inscape Showrooms Open This Month

HOLLAND LANDING, ONTARIO--(Marketwired - March 10, 2016) - Inscape (TSX:INQ) today reported sales of $22.9 million for the third quarter of fiscal 2016, a 36% increase from $16.9 million in the third quarter of fiscal 2015.

Year-to-date sales of $59.4 million were 4.5% higher than the same period of last year ($56.8 million).

"We are pleased with the improved momentum resulting from the execution of our strategy outlined over 18 months ago," said Jim Stelter, CEO. "We are seeing growth in quoting and project activity bolstered by committed distribution. Sales benefitted from new additions to Inscape's distribution network. The West Elm Workspace with Inscape reseller network has also been further solidified with our first 4 showrooms opening in March in Tampa, Seattle, New York and Los Angeles -- 12 more showrooms are slated to open before June of this year."

"Revenue growth and margin improvement remain our priority over the long term," added Stelter. "We are vigorously reviewing our internal processes and making changes that will enhance both margins and the ability to fulfil the needs of our distributors and clients. We are far from our goal but our path is clearly chartered and our team is united in our efforts."

Gross profit as a percentage of sales for the third quarter of fiscal year 2016 was 27.6%, compared to 20.6% of the same quarter of the previous year. This increase was due to favourable overhead absorption with higher sales volume, lower variable and fixed cost of sales, which was offset by unfavourable realized selling prices. Year-to-date gross margin percentage was 24.6%, compared to 24.0% for the same period of last year.

Selling, general and administrative expenses (SG&A) in the third quarter of fiscal year 2016 were 29.5% of sales, compared to 34.1% in the same quarter of last year. In terms of dollars, SG&A had an increase of $1.0 million. This $1.0 million increase includes a one-time charge of $0.4 million for the wind-up one of the Company's defined benefit pension plans and $0.6 million for increased investment in sales initiatives and new products. Year-to-date SG&A was 32.5% of sales, compared to 28.2% for the same period of last year (or an increase of $3.3 million). The higher SG&A amount was mainly attributable to increased investments in sales initiatives, West Elm Workspace with Inscape start-up costs, new products and higher health care expenses.

The third quarter of fiscal year 2016 ended with a net loss of $2.2 million or 15 cents per share, compared with a net loss of $9.4 million or 65 cents per share in the same quarter of last year. The current quarter's results included an unrealized derivative loss of $2.2 million due to an increase in derivative liabilities relating to the fair value of outstanding U.S. currency hedge contracts; the same quarter of last year had an unrealized derivative loss of $7.0 million and a long-lived asset impairment loss of $1.7 million.

On a year-to-date basis, the nine-month period had a net loss of $6.6 million or 46 cents per share, compared to a net loss of $9.7 million, or 67 cents per share a year ago. The current year-to-date period included a derivative loss of $2.9 million and unrealized exchange gain of $0.9 million due to the revaluation of FX hedges and exchange, respectively.

With the exclusion of the currency adjustments and certain one-time items, the current quarter had an adjusted income of $0.3 million compared to last year's adjusted loss of $1.9 million before taxes; the nine-month period would have an adjusted pre-tax loss of $3.7 million, compared to last year's adjusted pre-tax 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.

At the end of the third quarter of fiscal year 2016, the company was debt-free with cash and cash equivalents of $4.2 million and short-term investments of $4.5 million.

Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months Ended January 31,
2016 2015 Change
Sales $ 22,948 $ 16,855 36.1%
Gross profit 6,333 3,476 82.2%
Selling, general & administrative expenses 6,763 5,750 17.6%
Impairment loss - 1,695
Unrealized gai on foreign exchange (489 ) (751 )
Increase in fair value of derivative liabilities 2,240 6,954
Investment income (24 ) (71 )
Loss before taxes (2,157 ) (10,101 )
Income taxes - (705 )
Net loss $ (2,157 ) $ (9,396 )
Basic earnings per share $ (0.15 ) $ (0.65 )
Weighted average number of shares (in thousands)
for basic EPS calculation 14,381 14,377
for diluted EPS calculation 14,628 14,555
Nine Months Ended January 31,
2016 2015 Change
Sales $ 59,366 $ 56,783 4.5%
Gross profit 14,595 13,613 7.2%
Selling, general & administrative expenses 19,306 15,991 20.7%
Impairment loss - 1,695
Unrealized gain on foreign exchange (845 ) (974 )
Increase in fair value of derivative liabilities 2,869 7,486
Investment income (108 ) (242 )
Loss before taxes (6,627 ) (10,343 )
Income taxes - (663 )
Net loss $ (6,627 ) $ (9,680 )
Basic earnings per share $ (0.46 ) $ (0.67 )
Weighted average number of shares (in thousands)
for basic EPS calculation 14,381 14,374
for diluted EPS calculation 14,666 14,439

Financial Statements

http://media3.marketwire.com/docs/1046430FS.pdf

Third Quarter Call Details

Inscape will host a conference call at 8:30 AM EST on Friday, March 11, 2016 to discuss the company's quarterly results. To participate, please call 1-800-669-4993 five minutes before the start time. A replay of the conference call will also be available from March 11, 2016 after 10:30 AM EST until 10:30 AM EST on March 18, 2016. To access the rebroadcast, please dial 1-800-633-8284 (Reservation Number 21805914).

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 over 125 years. With an emphasis on quality, innovation, technical design and unparalleled delivery and service, Inscape has been consistently awarded for its design.

Inscape collaborates with leading European partners and manufactures their designs in North American facilities. Our 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.

Contact Information