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 third quarter ended January 31, 2012:
Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months Ended January 31,
2012 2011 Change
------------------------------------------------------------------ --------
Sales $ 20,203 $ 23,872 -15.4%
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Gross margin 5,728 7,003 -18.2%
Selling, general &
administrative expenses 5,155 5,984 -13.9%
Unrealized (gain) loss on
foreign exchange (30) 12
Unrealized gain on derivatives (210) (375)
Investment income (113) (150)
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Income before taxes 926 1,532
Income tax expense 260 446
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Net income $ 666 $ 1,086
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Basic and diluted earnings per
share $ 0.05 $ 0.07
Weighted average number of
shares (in thousands)
for basic EPS calculation 14,389 14,635
for diluted EPS calculation 14,486 14,779
Nine Months Ended January 31,
2012 2011 Change
------------------------------------------------------------------ --------
Sales $ 61,395 $ 67,550 -9.1%
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Gross margin 14,458 20,435 -29.2%
Selling, general &
administrative expenses 16,791 16,387 2.5%
Unrealized (gain) loss on
foreign exchange (429) 45
Unrealized loss (gain) on
derivatives 401 (673)
Investment income (386) (354)
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(Loss) Income before taxes (1,919) 5,030
Income tax (recovery) expense (651) 1,621
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Net (loss) income $ (1,268) $ 3,409
------------------------------------------------------------------
------------------------------------------------------------------
Basic and diluted earnings per
share $ (0.09) $ 0.23
Weighted average number of
shares (in thousands)
for basic EPS calculation 14,486 14,778
for diluted EPS calculation 14,605 14,831
Commentary
"In the third quarter, revenues were down 9% in constant
currency. Last year's sales benefited from a very large, highly
successful project in our architectural division. Despite an
increased number of projects in the quarter, we were unable to
completely offset the impact of that project's completion.
We delivered operational profitability and generated cash in
this quarter. Our employees continue to make improvements to our
business, which is imperative as we operate in a less favourable
foreign currency environment.
Our recently launched corporate branding has been well received
by our partners and clients. Our innovative approach combined with
even greater focus on client applications resonates with the
A&D community which values our ability to integrate and tailor
solutions that use best-in-class products. Inscape is well
positioned to make the most of this growing market opportunity. We
are on schedule with the execution of our strategy and are
encouraged with progress made this quarter," said Rod Turgeon,
President and CEO.
Operating Performance
The third quarter of fiscal 2012 ended with a net income of $0.7
million or 5 cents per share, compared with a net income of $1.1
million or 7 cents per share in the same quarter of last year. The
drop of $0.4 million in the quarterly result was mainly
attributable to the decrease in US currency hedge gain from $2.2
million in the third quarter of last year to $0.3 million in the
current quarter. The adverse impact of the hedge gain was offset by
$0.8 million decrease in the quarter's SG&A relating to reduced
fair value of share-based compensation and lower accruals for
short-term incentives.
On a year-to-date basis, the nine-month period ended on January
31, 2012 had a net loss of $1.3 million or 9 cents per share,
compared to a net income of $3.4 million or 23 cents per share
a-year-earlier. The decline in the financial results was mainly
attributable to a significant decrease in US currency hedge gain
and reduced gross margin of the year's sales mix. Last year's
results included a pre-tax currency hedge gain of $5.4 million
versus $1.2 million in the current year. In addition, last year
benefited from a net unrealized derivative and exchange gain of
$0.6 million.
Sales in the third quarter of fiscal 2012 were $20.2 million, a
decline of 15.4% from the sales of $23.9 million in the same
quarter of last year. Last year's third quarter reported sales
included a currency hedge gain of $2.2 million, compared to the
current quarter's hedge gain of $0.3 million. On a normalized
currency basis, the current quarter's sales were about 9% lower
than the same quarter of last year.
The year-to-date sales of $61.4 million were 9.1% below the
$67.6 million reported in last year, which included a currency
hedge gain of $5.4 million versus $1.2 million in the current year.
On a constant dollar basis that removes the impact of hedge gains
and the U.S. spot exchange rate differences, the current
year-to-date sales were about 0.6% less than last year.
Gross margin as a percentage of sales in the third quarter of
fiscal year 2012 fell 0.9 percentage points from last year's 29.3%
to the current quarter's 28.4%, primarily due to much lower US
currency hedge gains and overhead absorption, offset by better net
realized prices. Last year's third quarter gross margin was reduced
by 2.2 percentage points due to an accrual of $0.5 million for a
workers' compensation assessment.
On a year-to-date basis, the gross margin as a percentage of
sales dropped 6.8 percentage points from the prior year's 30.3% to
the current year's 23.5%. Last year's gross margin included a US
currency hedge gain of $5.4 million, compared to the current year's
$1.2 million. About 6.2 percentage points of the drop in the 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
third quarter of fiscal year 2012 were $5.2 million or 25.5% of
sales, compared to $6.0 million or 25.1% of sales in the same
quarter of last year. The dollar amount of SG&A was $0.8
million lower than last year. The decrease mainly consists of lower
variable selling expense, reduced fair value of share-based
compensation and lower accruals for short-term incentives.
Year-to-date SG&A of $16.8 million were $27.3% of sales,
compared to $16.4 million or 24.3% of sales. The total expense was
up by $0.4 million. The increase mainly consists of higher
investments in our selling capacity and marketing resources. The
increases were offset by lower expenses in the fair value of
share-based compensation and accruals for short-term
incentives.
At the end of the third quarter of fiscal year 2012, the Company
was debt-free with cash and cash equivalents at $9.0 million and
liquid short-term investments at $11.9 million.
Financial Statements
To view the financial statements, please visit the following
link: http://media3.marketwire.com/docs/INQfsQ3.pdf
Conference Call
Inscape will host a conference call at 8:30 a.m. on Thursday,
March 9, 2012 to discuss the Company's quarterly results. To
participate, please call 1-800-694-6219. A replay of the conference
call will also be available from March 9, 2012 after 10:30 a.m.
until midnight on March 16, 2012. To access the rebroadcast, please
dial 1-800-558-5253 (Reservation Number 21577461).
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 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
Inscape makes smart workspaces - thoughtfully designed spaces
that perform beyond expectations. 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, 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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