INQ INSCAPE Corporation

HOLLAND LANDING, ONTARIO--(Marketwired - Mar 6, 2014) - 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.

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.

Inscape CorporationJim StelterDirector & Chief Executive Officer905 836 7676905 836 5037www.inscapesolutions.com

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