Mr. Rod Turgeon, 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, announces the following financial results for
the second quarter ended October 31, 2011:
Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months Ended
October 31,
2011 2010 Change
----------------------------------------------------------------- --------
Sales $ 21,867 $ 25,612 -14.6%
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Gross margin 5,669 7,910 -28.3%
Selling, general & administrative
expenses 5,951 5,606 6.2%
Unrealized gain on foreign exchange (483) (32)
Unrealized loss (gain) on derivatives 735 (146)
Interest income (157) (67)
-----------------------------------------------------------------
(Loss) income before taxes (377) 2,549
Income tax (recovery) expense (133) 871
-----------------------------------------------------------------
Net (loss) income $ (244) $ 1,678
-----------------------------------------------------------------
-----------------------------------------------------------------
Basic and diluted earnings per share $ (0.02) $ 0.11
Weighted average number of shares (in
thousands)
for basic EPS calculation 14,320 14,654
for diluted EPS calculation 14,443 14,741
Six Months Ended
October 31,
2011 2010 Change
----------------------------------------------------------------- --------
Sales $ 41,192 $ 43,678 -5.7%
-----------------------------------------------------------------
Gross margin 8,730 13,432 -35.0%
Selling, general & administrative
expenses 11,636 10,403 11.9%
Unrealized (gain) loss on foreign
exchange (399) 33
Unrealized loss (gain) on derivatives 611 (298)
Interest income (273) (204)
-----------------------------------------------------------------
(Loss) Income before taxes (2,845) 3,498
Income tax (recovery) expense (911) 1,175
-----------------------------------------------------------------
Net (loss) income $ (1,934) $ 2,323
-----------------------------------------------------------------
-----------------------------------------------------------------
Basic and diluted earnings per share $ (0.13) $ 0.16
Weighted average number of shares (in
thousands)
for basic EPS calculation 14,535 14,849
for diluted EPS calculation 14,664 14,862
Commentary
"Our second quarter results reflected improvement over the first
quarter in revenue, margin and profitability; however the results
were below our expectations and behind last year's second quarter
which was the strongest revenue quarter of fiscal 2011 and also
benefited from better currency translation rates.
Achieving our desired levels of performance requires us to
successfully implement our market position strategies. The Company
is committed to maximizing the return on our investments in recent
product launches, sales staff increases, showrooms build-outs and
marketing initiatives.
I am excited by several recent developments at Inscape. Our
sales team has had a number of recent project wins including one of
the largest single project awards in our history. Our new Inscape
System was the product of choice for two high profile US based
firms setting up operations in Canada. One of our key objectives is
to establish successful distribution. We are encouraged to see that
one of our Inscape dealers has achieved unprecedented sales levels
after only 4 years in operations.
I am proud to be a new member of the Inscape family and look
forward to working with my colleagues and our selling partners to
deliver the optimum solutions to our customers." said Rod Turgeon,
President and CEO.
Operating Performance
The second quarter of fiscal 2012 ended with a net loss of $0.2
million or 2 cents per share, compared with a net income of $1.7
million or 11 cents per share in the same quarter of last year. On
a year-to-date basis, the six-month period ended October 31, 2011
had a net loss of $1.9 million or 13 cents per share, compared to a
net income of $2.3 million or 16 cents per share
a-year-earlier.
Sales in the second quarter of fiscal 2012 were $21.9 million, a
decrease of 14.6% from the sales of $25.6 million in the same
quarter of last year. The strong sales in the second quarter of
last year were attributable to a substantial increase in project
volume. In addition, last year's reported sales included a currency
hedge gain of $1.7 million, compared to the current quarter's hedge
gain of $0.66 million. On a normalized currency basis, the current
quarter's sales were about 8.7% lower than the same quarter of last
year.
The year-to-date sales of $41.2 million were 5.7% below the
$43.7 million reported in last year, which included a currency
hedge gain of $3.3 million versus $0.8 million in the current year.
On a constant dollar basis that removes the impact of hedge gains
and the U.S. exchange rate changes, the current year-to-date sales
were about 4% higher than last year.
Gross margin as a percentage of sales in the second quarter of
fiscal year 2012 fell 5 percentage points from last year's 30.9% to
the current quarter's 25.9%, primarily due to much lower currency
hedge gain and overhead absorption, offset by better net realized
prices.
On a year-to-date basis, the gross margin as a percentage of
sales dropped 9.6 percentage points from the prior year's 30.8% to
the current year's 21.2%. About 6.6 percentage points of the fall
in gross margin resulted from the lower U.S. exchange rate and
currency hedge gain. The margin was further eroded by a less
favourable sales mix.
Selling, general and administrative expenses ("SG&A") in the
second quarter of fiscal year 2012 were $6.0 million or 27.2% of
sales, compared to $5.6 million or 21.9% of sales in the same
quarter of last year. Included in the current quarter's SG&A
was a charge of $0.26 million on the settlement of certain pension
obligations with the purchase of an annuity.
Year-to-date SG&A of $11.6 million were $28.2% of sales,
compared to $10.4 million or 23.8% of sales. This increase of $1.2
million is primarily related to continued investments required to
develop a broader and deeper go to market strategy which is
essential to driving the revenue growth needed for us to achieve
sustainable profitability in a par dollar currency environment.
Financial Statements
To view the financial statements, please visit the following
link: http://media3.marketwire.com/docs/inq_fnc.pdf
Conference Call
Inscape will host a conference call at 8:30 a.m. on Thursday,
December 8, 2011 to discuss the Company's quarterly results. To
participate, please call 1-800-695-1940. A replay of the conference
call will also be available from Thursday, December 8, 2011 after
10:30 a.m. until midnight on December 15, 2011. To access the
rebroadcast, please dial 1-800-558-5253 (Reservation Number
21544280).
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 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
438,000 square feet and serves customers through a network of
authorized dealers. For more information, please visit
www.inscapesolutions.com.
Contacts: Inscape Corporation Kent Smallwood CA Chief Financial
Officer 905-836-7676 905-836-5037 (FAX)www.inscapesolutions.com
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