Inscape (TSX: INQ), a leading designer and manufacturer of
furnishings and movable wall systems for the workplace, today
announced its results of operations for the fourth quarter and full
year ended April 30, 2021.
“Fiscal Year 2021 results reflect a full
year of operations impacted by the COVID-19 pandemic and, as such,
any comparison to prior fiscal years is of little value. Instead,
it’s important to highlight that Inscape has utilized this past
fiscal year to position for the eventual recovery from the pandemic
and implement the changes necessary to be a successful and growing
enterprise. During the fiscal year, management successfully: (1)
moved our NY state Walls plant to a new, lower cost premises; (2)
eliminated surplus equipment and added a state-of-the-art laser
turret press to our Holland Landing plant to improve our core
manufacturing capabilities; (3) prepared for a different
competitive landscape by re-assessing our competitive strengths and
developed an execution plan to support both our Inscape brand and
our Office Specialty brand for the new realities of the market; (4)
reinvigorated new product plans to ensure relevant offerings are
launched into the market during Fiscal Year 2022 and thereafter;
and, (5) developed a framework to implement some of the necessary
changes to the businesses core operating model and identified the
other changes needed to occur in the early portion of the coming
fiscal year to properly position the business for long term growth
in sales and profitability. While we are pleased with the
accomplishments to date, this work is not yet complete. Management
continues to focus on realignment of costs while investing in both
the right talent and technology to drive topline growth and
profitability once the economic recovery becomes evident,” said
Eric Ehgoetz, CEO.
Total sales for the fourth quarter of fiscal
2021 were $8.1 million, compared to $14.4 million for the same
period of fiscal 2020. The decline in the quarter, similar to other
previous quarters in the fiscal, was primarily due to COVID-19
impacts in some major markets. In addition, during the fourth
quarter the Walls plant was moved from Falconer, New York to
Jamestown New York, resulting in a shut down for close to a month
which impacted sales and shipments. Net income for the fourth
quarter of fiscal 2021 was $0.5 million or positive $0.03 per
diluted share, compared to net loss of $5.1 million or negative
$0.36 per diluted share for fiscal 2020. Non-GAAP EBITDA for the
fourth quarter was negative $1.3 million, compared to negative $4.0
million, for fiscal 2020.
Full year 2021 total sales were $38.2 million,
compared to $75.8 million for fiscal 2020. The twelve month period
ended with a net loss of $0.9 million or negative $0.06 per diluted
share, compared to a net loss of $5.4 million or negative $0.38 per
diluted share for fiscal 2020. Non-GAAP EBITDA for 2021 was
positive $0.5 million, compared to negative $1.6 million for fiscal
2020.
Fourth Quarter Financial Highlights
(All comparisons are relative to the three month period ended
April 30, 2020 unless otherwise stated):
- Retirement benefit obligation
decrease of $6.3 million related to favourable returns on the fair
value of plan assets and actuarial gains
- Revolving credit facility loan with
FrontWell Capital Partners Inc. of $15.0 million was closed and the
Company drew $8.0 million as of April 30, 2021
- Tranche 2 of the US forgivable
government loan was received in amount of $1.8 million (US $1.4
million)
- Asset held for sale of $5.2 million
disclosure related to the planned Holland Landing property sale and
leaseback
- Deferred tax assets of $2.6 million
related to tax loss carry-forwards recognized due to sufficient
positive evidence that they will be realized against expected
profits in the foreseeable future
- SG&A expenses of $5.9 million,
a decrease of $0.7 million versus $6.6 million
- EBITDA of ($1.3) million, compared
to EBITDA of ($4.0) million
- Gross profit margin of 7.6%, with
gross profit down by $3.3 million, versus gross profit margin of
26.8%
- Inventory write-downs of $0.2
million during the quarter
Full Year 2021 Financial Highlights
(All comparisons are relative to the full year ended ended April
30, 2020 unless otherwise stated):
- SG&A expenses of $20.5 million,
a decrease of $5.8 million versus $26.4 million due to less selling
expenses resulting from lower sales volume and management actions
to reduce costs
- Government assistance from
subsidies (including the forgivable loan) of $5.3 million
- Cash on hand of $3.7 million as at
April 30, 2021 and $2.8 million in restricted cash put forth as
collateral security for certain derivative financial
instruments
- EBITDA of $0.5 million, compared to
EBITDA of ($1.6) million
- Gross profit margin of 18.2%, with
gross profit down by $13.9 million, versus gross profit margin of
27.4%
- Inventory write-downs of $1.5
million for the twelve month period
- Gross profit margin of 22.1%,
excluding inventory write-downs of $1.5 million
- EBITDA of $2.0 million, excluding
inventory write-down of $1.5 million
Inscape
CorporationSummary of Interim Condensed
Consolidated Financial Results (in thousands
except EPS)
| |
Three Months Ended April 30, |
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
Sales |
$ |
8,051 |
|
|
$ |
14,443 |
|
|
Gross profit |
|
614 |
|
|
|
3,877 |
|
|
Selling, general & administrative expenses(i) |
|
5,520 |
|
|
|
6,165 |
|
| Unrealized (gain) loss on
derivatives |
|
(581 |
) |
|
|
3,032 |
|
| Unrealized (gain) loss on
foreign exchange |
|
(488 |
) |
|
|
224 |
|
| Loss (gain) on disposal of
PP&E and intangibles |
|
23 |
|
|
|
(188 |
) |
| Other income – government
grant |
|
(1,916 |
) |
|
|
(517 |
) |
| Stock-based
compensation(i) |
|
(110 |
) |
|
|
(102 |
) |
| Severance obligation(i) |
|
522 |
|
|
|
500 |
|
|
Net loss before taxes |
$ |
(2,356 |
) |
|
$ |
(5,237 |
) |
|
Income tax recovery |
|
(2,855 |
) |
|
|
(41 |
) |
| Net
income (loss) |
$ |
499 |
|
|
$ |
(5,196 |
) |
| |
|
|
|
|
| Basic and diluted income
(loss) per share |
$ |
0.03 |
|
|
$ |
(0.36 |
) |
| Weighted average number of
shares (in thousands): |
|
|
|
|
|
for basic EPS calculation |
|
14,381 |
|
|
|
14,381 |
|
|
for diluted EPS calculation |
|
14,381 |
|
|
|
14,381 |
|
|
|
|
|
|
|
|
|
|
| |
Years Ended April 30, |
|
|
|
|
2021 |
|
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
Sales |
$ |
38,203 |
|
|
$ |
75,818 |
|
|
Gross profit |
|
6,934 |
|
|
|
20,791 |
|
|
Selling, general & administrative expenses(i) |
|
19,886 |
|
|
|
25,954 |
|
| Unrealized (gain) loss on
derivatives |
|
(3,997 |
) |
|
|
1,994 |
|
| Unrealized (gain) loss on
foreign exchange |
|
(377 |
) |
|
|
289 |
|
| Loss (gain) on disposal of
PP&E and intangibles |
|
(209 |
) |
|
|
(1,957 |
) |
| Other income – government
grant |
|
(5,308 |
) |
|
|
(517 |
) |
| Stock-based
compensation(i) |
|
90 |
|
|
|
(379 |
) |
| Severance obligation(i) |
|
566 |
|
|
|
798 |
|
|
Loss before taxes |
$ |
(3,717 |
) |
|
$ |
(5,391 |
) |
|
Income tax (recovery) expense |
|
(2,826 |
) |
|
|
15 |
|
| Net
loss |
$ |
(891 |
) |
|
$ |
(5,406 |
) |
| |
|
|
|
|
| Basic and diluted loss per
share |
$ |
(0.06 |
) |
|
$ |
(0.38 |
) |
| Weighted average number of
shares (in thousands): |
|
|
|
|
|
for basic EPS calculation |
|
14,381 |
|
|
|
14,381 |
|
|
for diluted EPS calculation |
|
14,381 |
|
|
|
14,381 |
|
|
|
|
|
|
|
|
|
|
(i) Stock-based compensation and severance obligations were
displayed separately from selling, general and administrative
(SG&A) expenses for the purpose of these tables.
Sales in the fourth quarter and fiscal 2021 were
44.3% and 49.6% lower than the same periods of the previous year
primarily related to the economic impact of COVID-19 pandemic,
which resulted in both shipment delays and customer order pushouts
in some of our major markets. In addition, during the fourth
quarter the Walls plant sales were lower due to the plant
relocation.
Adjusted net loss and adjusted EBITDA are
non-GAAP measures, which do not have any standardized meaning
prescribed by GAAP and are therefore unlikely to be comparable to
similar measures presented by other issuers.
The following is a reconciliation of net loss
calculated in accordance with GAAP to adjusted net (loss) income
before taxes, the non-GAAP measure:
|
|
Three Months Ended April 30 |
Years Ended April 30 |
|
(in thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Net loss before taxes |
$ |
(2,356 |
) |
$ |
(5,237 |
) |
$ |
(3,717 |
) |
$ |
(5,391 |
) |
|
Adjust non-operating or unusual items: |
|
|
|
|
|
Unrealized (gain) loss on derivatives |
|
(581 |
) |
|
3,032 |
|
|
(3,997 |
) |
|
1,994 |
|
|
Unrealized (gain) loss on foreign exchange |
|
(488 |
) |
|
224 |
|
|
(377 |
) |
|
289 |
|
|
Loss (gain) on disposal of PP&E and intangibles |
|
23 |
|
|
(188 |
) |
|
(209 |
) |
|
(1,957 |
) |
|
Other income – government grant |
|
(1,916 |
) |
|
(517 |
) |
|
(5,308 |
) |
|
(517 |
) |
|
Stock based compensation |
|
(110 |
) |
|
(102 |
) |
|
90 |
|
|
(379 |
) |
|
Severance obligation |
|
522 |
|
|
500 |
|
|
566 |
|
|
798 |
|
|
Adjusted net loss before taxes |
$ |
(4,906 |
) |
$ |
(2,288 |
) |
$ |
(12,952 |
) |
$ |
(5,163 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of net loss
before taxes calculated in accordance with GAAP to EBITDA and
adjusted EBITDA, the non-GAAP measures:
|
|
Three Months Ended April 30 |
Years Ended April 30 |
|
(in thousands) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Net loss before taxes |
$ |
(2,356 |
) |
$ |
(5,237 |
) |
$ |
(3,717 |
) |
$ |
(5,391 |
) |
|
Interest |
|
149 |
|
|
191 |
|
|
303 |
|
|
184 |
|
|
Depreciation |
|
496 |
|
|
602 |
|
|
1,972 |
|
|
2,158 |
|
|
Amortization |
|
385 |
|
|
457 |
|
|
1,963 |
|
|
1,440 |
|
|
EBITDA |
$ |
(1,326 |
) |
$ |
(3,987 |
) |
$ |
521 |
|
$ |
(1,609 |
) |
|
Adjust non-operating or unusual items: |
|
|
|
|
|
Unrealized (gain) loss on derivatives |
$ |
(581 |
) |
$ |
3,032 |
|
$ |
(3,997 |
) |
$ |
1,994 |
|
|
Unrealized (gain) loss on foreign exchange |
|
(488 |
) |
|
224 |
|
|
(377 |
) |
|
289 |
|
|
Loss (gain) on disposal of PP&E and intangibles |
|
23 |
|
|
(188 |
) |
|
(209 |
) |
|
(1,957 |
) |
|
Other income – government grant |
|
(1,916 |
) |
|
(517 |
) |
|
(5,308 |
) |
|
(517 |
) |
|
Stock based compensation |
|
(110 |
) |
|
(102 |
) |
|
90 |
|
|
(379 |
) |
|
Severance obligation |
|
522 |
|
|
500 |
|
|
566 |
|
|
798 |
|
|
Adjusted EBITDA |
$ |
(3,876 |
) |
$ |
(1,038 |
) |
$ |
(8,714 |
) |
$ |
(1,381 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit margin for the fourth quarter and
fiscal 2021 decreased by 19.2 and 9.2 percentage points,
respectively, over the same periods last year as a result of the
lower sales volume due to the economic impact of the COVID-19
pandemic. In addition, for the fourth quarter and fiscal year 2021,
inventory totaling $0.2 million and $1.5 million, respectively,
relating to discontinued product lines and obsolescence were
written off. The Company continues to identify initiatives to
achieve cost efficiencies and improved margins as sales levels
return to normal. However, gross profit margins without the effects
of the excess inventory write-offs would have been 9.7% for the
fourth quarter and 22.1% for the twelve months period ending April
30, 2021.
SG&A for the fourth quarter and fiscal 2021
were 73.6% and 53.8% of sales, compared to 45.5% and 34.8% for the
same periods of last year. Despite the higher ratio percentages,
the $0.6 million and $5.8 million actual decrease in SG&A
expenses resulted from workforce reductions, decrease in marketing
initiatives and lower selling, travel and entertainment expenses,
partially offset by the non-recurring severance expense of $0.5
million. Collectively, these actions are largely the results of
measures adopted by management to manage expenses during COVID-19.
In the current fiscal, lower sales volumes impacted the overall
higher SG&A to sales ratio.
At the end of the quarter, the Company had cash
totaling $3.7 million, restricted cash of $2.8 million set as
collateral security for certain derivative financial instruments,
$8 million drawn on the new credit facility with FrontWell Capital
Partners Inc. and an unused authorized balance of over $6.0 million
available.
Financial Statements
Financial statements are available from our
website as of this press release.
Fourth Quarter Call Details
Inscape will host a conference call at 8:30 AM
EST on Friday, July 16, 2021 to discuss the Company’s quarterly
results. To participate, please call 1-800-891-8357 (Reservation
Number 21995014) about 10 - 15 minutes before the start time. A
replay of the conference call will also be available from July 16,
2021 after 10:30 AM EST until 11:59 PM EST on August 15, 2021. To
access the rebroadcast, please dial 1-800-558-5253 (Reservation
Number 21995014).
Going forward, in accordance with National
Instrument 51-110, interim financial statements will continue to be
filed on or before the 45 days after the end of the interim period
and 90 days for the year end period, however investor calls will be
discontinued. Investors are encouraged to reach out to Inscape if
they have questions about the financial results moving
forward.
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
Since 1888, Inscape has been designing products
and services that are focused on the future, so businesses can
adapt and evolve without investing in their workspaces all
over again. Our versatile portfolio includes systems furniture,
storage, and walls – all of which are adaptable and built to
last. Inscape’s wide dealer network, showrooms in the United
States and Canada, along with full service and support for all of
our clients, enables us to stand out from the crowd. We make it
simple. We make it smart. We make our clients wonder why they
didn’t choose us sooner.
For more information, visit www.myinscape.com
Contact
Jon Szczur, CPA, CMAChief Financial Officer
Inscape Corporation
T 905 952 4102
jszczur@myinscape.com
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