Inscape Corporation
TSX : INQ

Inscape Corporation

June 26, 2008 16:30 ET

Inscape Corporation Announces Fourth Quarter and Annual Results

HOLLAND LANDING, ONTARIO--(Marketwire - June 26, 2008) - 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, 2008:



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

Three Months Ended April 30,
2008 2007 Change
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Sales $ 24,565 $ 24,838 -1.1%
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Gross margin 7,448 6,749 10.4%
Selling, general & administrative expenses 5,604 5,666 -1.1%
Interest income (262) (155)
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Income before taxes 2,106 1,238
Income taxes 594 456
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Net income $ 1,512 $ 782
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Basic and diluted earnings per share $ 0.10 $ 0.05

Weighted average number of shares (in thousands)
for basic EPS calculation 15,097 15,097
for diluted EPS calculation 15,110 15,136


Years Ended April 30,
2008 2007 Change
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Sales $ 94,510 $ 92,313 2.4%
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Gross margin 28,664 24,419 17.4%
Selling, general & administrative expenses 22,893 22,734 0.7%
Interest income (1,018) (638)
Restructuring (recovery) costs (after-tax) - (91)
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Income before taxes 6,789 2,414
Income taxes 2,041 645
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Net income $ 4,748 $ 1,769
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Basic and diluted earnings per share $ 0.31 $ 0.12

Weighted average number of shares (in thousands)
for basic EPS calculation 15,097 15,097
for diluted EPS calculation 15,114 15,098


Commentary and Outlook

"2008 was a year of continued improvement for Inscape with growth in sales, margins and profitability including a strong fourth quarter improvement in earnings" commented Peter Brunelle, President and CEO. "The current environment remains challenging due to pressure from commodity prices which impact our material costs and due to the continued strength of the Canadian dollar. Despite these challenges, we remain committed to pursuing the development of our distribution channel, to continuous operational improvement and to new product introductions, which we believe position us for long-term success. Fortunately, our strong balance sheet and cash position provide us with the ability to invest in these strategically important areas, in spite of near-term hurdles. The many new products we recently introduced at NeoCon, the industries' major tradeshow, evidenced our commitment to making such investments", said Mr. Brunelle. "In closing I want to thank and congratulate our employees, sales partners and dealers for their contributions to a very good year."

Based on current order levels, Inscape anticipates that its revenues for the first quarter of fiscal 2009 will be lower than the fourth quarter of fiscal 2008.

Operating Performance

Sales of $24.6 million for the fourth quarter of fiscal 2008 were 1.1% lower than the sales of $24.8 million for the same quarter of fiscal 2007. During this period, the U.S. dollar exchange rate declined by about 8%. The quarterly sales in local currency were actually 6.1% higher than the same quarter of fiscal 2007. For the fiscal years ended April 30, sales increased 2.4% from $92.3 million in fiscal 2007 to $94.5 million in fiscal 2008, despite the U.S. dollar exchange rate erosion of 4.2% . On a source currency basis, annual sales increased 6.3% . Gross margin as a percentage of sales in the fourth quarter improved from 27.2% in fiscal 2007 to 30.3% in fiscal 2008. On an annual basis, gross margin improved from 26.5% to 30.3% of sales as a result of significant improvements in production and logistic costs that exceeded the negative impact of foreign currency related to the appreciation of the Canadian dollar relative to the US dollar.

Fourth quarter selling, general and administrative expenses ("SG&A") of 22.8% as a percentage of sales were consistent with the prior year. The annual SG&A expenses improved from 24.6% in fiscal 2007 to 24.2% in fiscal 2008. Higher variable selling expenses relating to growth in sales were offset by reductions in various operating and administrative expenses and increased absorption of fixed expenses.

As a result of the substantial improvements in gross margin and reductions in SG&A expenses, fourth quarter earnings per share doubled from 5 cents to 10 cents, while full year earnings per share increased from 12 cents to 31 cents. Cash on hand and liquid short-term investments grew from last year's $21.3 million to $27.7 million at the end of fiscal 2008.

Conference Call

Inscape will host a conference call at 8:30 a.m. on Friday, June 27, 2008, to discuss the Company's annual results and to provide additional outlook on the next quarter. To participate, please call 1-800-732-6870. A replay of the conference call will also be available from Friday, June 27, 2008 after 10:30 a.m. until midnight on Friday, July 4, 2008. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21386012).

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
As at April 30
(Unaudited)(in thousands)
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2008 2007
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ASSETS
CURRENT
Cash and cash equivalents $ 6,126 $ 4,551
Short-term investments 21,618 16,759
Accounts receivable 12,732 11,656
Inventory 5,340 4,250
Derivative assets 688 -
Prepaid expenses 786 742
Income taxes receivable - 106
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47,290 38,064
CAPITAL ASSETS 25,896 27,542
OTHER ASSETS 1,673 1,519
FUTURE INCOME TAX ASSETS 2,156 4,148
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$ 77,015 $ 71,273
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LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 13,075 $ 12,356
Income taxes payable 960 95
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14,035 12,451
OTHER LONG-TERM OBLIGATIONS 622 955
FUTURE INCOME TAX LIABILITIES 3,115 3,682
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17,772 17,088
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SHAREHOLDERS' EQUITY
SHARE CAPITAL 57,059 57,059
CONTRIBUTED SURPLUS 84 84
ACCUMULATED OTHER COMPREHENSIVE INCOME 310 -
RETAINED EARNINGS (DEFICIT) 1,790 (2,958)
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59,243 54,185
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$ 77,015 $ 71,273
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INSCAPE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)(in thousands, except per share amounts)
---------------------------------------------------------------------------
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Three Months Ended Years Ended
April 30, April 30,

2008 2007 2008 2007
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SALES $ 24,565 $ 24,838 $ 94,510 $ 92,313
COST OF GOODS SOLD 17,117 18,089 65,846 67,894
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GROSS MARGIN 7,448 6,749 28,664 24,419

EXPENSES
Selling, general and
administrative 5,604 5,666 22,893 22,734
Restructuring (recovery) costs
and asset impairment - - - (151)
Interest income (262) (155) (1,018) (638)
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5,342 5,511 21,875 21,945
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INCOME BEFORE TAXES 2,106 1,238 6,789 2,474
INCOME TAXES 594 456 2,041 705
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NET INCOME $ 1,512 $ 782 $ 4,748 $ 1,769
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BASIC AND DILUTED INCOME PER
SHARE $ 0.10 $ 0.05 $ 0.31 $ 0.12
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INSCAPE CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)(in thousands)
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Three Months Ended Year Ended
April 30, 2008 April 30, 2008
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NET INCOME $ 1,512 $ 4,748
OTHER COMPREHENSIVE LOSS, NET OF TAXES
Unrealized gain on derivatives
designated as cash flow
hedges, net of taxes ($154) (306) 310
Realized gain on derivatives designated
as cash flow hedges classified to
income, net of taxes ($392) - (776)
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OTHER COMPREHENSIVE LOSS, NET OF TAXES (306) (466)
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COMPREHENSIVE INCOME, NET OF TAXES $ 1,206 $ 4,282
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended April 30,2008
(Unaudited)(in thousands)
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Accumu-
lated Total
Other AOCI
Compre- and Total
Contri- hensive (Deficit) (Deficit) Share-
Share buted Income Retained Retained holders'
Capital Surplus ("AOCI") Earnings Earnings Equity
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BALANCE - April
30, 2007 $ 57,059 $ 84 $ - $ (2,958) $ (2,958) $ 54,185

Transitional
adjustment on
adoption of
new accounting
policies - - 776 - 776 776
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BALANCE - May
1, 2007 57,059 84 776 (2,958) (2,182) 54,961

Net Income - - - 4,748 4,748 4,748

Other
Comprehensive
Loss - - (466) - (466) (466)

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BALANCE - April
30, 2008 $ 57,059 $ 84 $ 310 $ 1,790 $ 2,100 $ 59,243
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INSCAPE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)(in thousands)
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Three Months Ended Year Ended
April 30, April 30,
2008 2007 2008 2007
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NET INFLOW (OUTFLOW) OF CASH
RELATED TO THE FOLLOWING
ACTIVITIES:

OPERATING ACTIVITIES
Net income $ 1,512 $ 782 $ 4,748 $ 1,769
Items not affecting cash:
Amortization 1,253 1,239 4,834 4,772
Unrealized gain on short-term
investments (8) - (38) -
Future income taxes (23) (74) 1,367 (797)
Deferred expenses and other
expenses (238) (380) (497) (482)
Stock based compensation 2 164 (61) 221
Restructuring (recovery) costs
and asset impairment - - - (151)
Foreign exchange loss (gain) 105 (7) 182 (107)
Loss on sale of capital assets - 1 1 32
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2,603 1,725 10,536 5,257
Changes in non-cash operating
working capital items (228) (938) (946) 1,022
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Cash generated from operating
activities 2,375 787 9,590 6,279
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INVESTING ACTIVITIES
Short-term investments (84) (31) (4,821) (1,237)
Additions to capital assets (495) (259) (3,191) (2,332)
Proceeds from sale of capital
assets 44 46 179 262
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Cash used for investing
activities (535) (244) (7,833) (3,307)
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Foreign exchange (loss) gain on
cash and cash equivalents (105) 7 (182) 107
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NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,735 550 1,575 3,079
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 4,391 4,001 4,551 1,472
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CASH AND CASH EQUIVALENTS, END OF
YEAR $ 6,126 $ 4,551 $ 6,126 $ 4,551
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CASH AND CASH EQUIVALENTS
CONSIST OF:
Cash $ 3,978 $ 3,447 $ 3,978 $ 3,447
Cash equivalents 2,148 1,104 2,148 1,104
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$ 6,126 $ 4,551 $ 6,126 $ 4,551
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SUPPLEMENTAL INFORMATION
Income taxes paid (recovered) $ 33 $ 107 $ 606 $ (837)


Contact Information

  • Inscape Corporation
    Kent Smallwood CA
    Chief Financial Officer
    (905) 836-7676
    (905) 836-5037 (FAX)
    Website: www.inscapesolutions.com