Inscape Announces Third Quarter Results
06 März 2014 - 10:01PM
Marketwired Canada
Inscape (TSX:INQ) today announced its third quarter financial results ended
January 31, 2014. The third quarter of fiscal year 2014 had a net loss of $4.0
million or 28 cents per share, compared to a breakeven result in the same
quarter of last year. The quarterly results included a $0.3 million asset
impairment loss on the write down of a product license fee based on the
company's assessment of demand for the product. The quarter also included a $3.5
million pre-tax decrease in the fair values of U.S. currency hedge contracts due
to the widened spread between the U.S. spot exchange rate and the hedged rates
of the contracts at the end of the reporting period. The drop in the fair values
may not reflect the actual financial results of settling those contracts on
their maturity dates in the future. The spike in the U.S. spot rate resulted in
a $0.5 million unrealized exchange gain from the translation of U.S. dollar
denominated net assets. With the exclusion of the hedge contract fair value
adjustments and unrealized exchange gain, the quarter would have a net loss of
$1.9 million compared to last year's adjusted net income of $0.2 million. The
negative change in the operating results was primarily due to a decrease in
sales volume.
On a year-to-date basis, the nine-month period had a net loss of $5.6 million or
39 cents per share. The year-to-date period included the above-mentioned asset
impairment loss and a decrease of $4.6 million in the fair values of U.S.
currency hedge contracts and a $0.5 million unrealized U.S exchange gain. 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 hedge contracts
fair value adjustments and unrealized exchange gain would be a net loss of $2.7
million, compared to last year's adjusted net income of $0.5 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.
"While I am disappointed with this quarter's results, I am very excited about
the addition of Jim Stelter as CEO of Inscape. During his 37 years in the
furniture industry, Jim has gained a broad understanding of the market and what
it takes to be successful. His priority is a thorough review of the business,
our team and our place in the market. With Jim's track record of success, I am
confident in his ability to lead the transformation of the company," said Madan
Bhayana, Chair of the Board.
"In my first six weeks, I've been impressed with the team that is in place, the
product platform and the desire to win. We have a solid foundation, including
great products, a strong balance sheet and commitment to quality and on-time
delivery," said Jim Stelter, CEO. "Our immediate focus is on more efficient
utilization of our resources and building brand recognition. While we are
immediately pursuing project activity, including engaging the design community
and dealers, we will take our time in creating an innovative strategy for the
future. I want to be clear that this will not be a short-term solution. It will
take some time to feel the full impact of our efforts."
Sales of $14.4 million in the third quarter of fiscal 2014 were 26.6% lower than
last year's $19.6 million due to a slowdown in projects during the quarter.
Year-to-date sales of $51.0 million were 13.4% lower than the same period of
last year's $58.9 million, primarily due to a decline in the volume of the
office system segment.
Gross margin percentage of the third quarter of fiscal year 2014 was 16.7%, a
decrease of 12 percentage points from 28.7% of the same quarter of the previous
year as a result of reduced sales volume. Year-to-date gross margin percentage
was 22.9%, compared to 27.6% for the same period of last year. The decrease in
gross margin percentage was caused by lower net prices and unfavorable overhead
absorption, partially abated by lower production costs.
Selling, general and administrative expenses ("SG&A") in the third quarter of
fiscal year 2014, including the asset impairment loss of $0.3 million, were
34.6% of sales, compared to 28.3% in the same quarter of last year. SG&A in
terms of dollars spent was $0.6 million or 10.5% lower, consisting of $0.2
million variable selling expenses and $0.4 million overheads. Year-to-date SG&A
was 30.3% of sales, compared to 27.2% for the same period of last year. The
total dollar amount of SG&A at $15.5 million was $0.6 million less than last
year's $16 million, consisting of $0.5 million variable selling expenses and
$0.1 million overhead expenses.
At the end of the third quarter of fiscal year 2014, the company was debt-free
with cash and cash equivalents totaling $21 million.
Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months Ended
January 31,
2014 2013 Change
----------------------------------------------------------------------------
Sales $ 14,373 $ 19,585 -26.6%
-----------------------------------------------------------------
Gross profit 2,405 5,620 -57.2%
Selling, general & administrative
expenses 4,968 5,550 -10.5%
Unrealized (gain) loss on foreign
exchange (452) 22
Decrease in fair value of derivatives 3,482 85
Investment income (96) (103)
-----------------------------------------------------------------
(Loss) Income before taxes (5,497) 66
Income taxes (1,495) (2)
-----------------------------------------------------------------
Net (loss) income $ (4,002) $ 68
-----------------------------------------------------------------
-----------------------------------------------------------------
Basic earnings per share $ (0.28) $ -
Weighted average number of shares (in
thousands)
for basic EPS calculation 14,373 14,373
for diluted EPS calculation 14,390 14,375
Nine Months Ended
January 31,
2014 2013 Change
----------------------------------------------------------------------------
Sales $ 50,984 $ 58,862 -13.4%
-----------------------------------------------------------------
Gross profit 11,539 16,238 -28.9%
Selling, general & administrative
expenses 15,467 16,023 -3.5%
Unrealized gain on foreign exchange (540) (2)
Decrease in fair value of derivatives 4,602 490
Investment income (286) (294)
-----------------------------------------------------------------
(Loss) Income before taxes (7,704) 21
Income taxes (2,063) (163)
-----------------------------------------------------------------
Net (loss) income $ (5,641) $ 184
-----------------------------------------------------------------
-----------------------------------------------------------------
Basic and diluted earnings per share $ (0.39) $ 0.01
Weighted average number of shares (in
thousands)
for basic EPS calculation 14,373 14,376
for diluted EPS calculation 14,380 14,432
Financial Statements
http://media3.marketwire.com/docs/931901FS.pdf
Third Quarter Call Details
Inscape will host a conference call at 8:30 a.m. on Friday, March 7, 2014 to
discuss the company's quarterly results. To participate, please call
1-800-754-1366. A replay of the conference call will also be available from
March 7, 2014 after 10:30 a.m. until midnight on March 14, 2014. To access the
rebroadcast, please dial 1-800-558-5253 (Reservation Number 21707543).
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
Inscape Corporation
Jim Stelter
Director & Chief Executive Officer
905 836 7676
905 836 5037 (FAX)
www.inscapesolutions.com
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