Mr. Rod Turgeon, President and Chief Executive Officer of Inscape
(TSX:INQ) -- a leading designer, manufacturer and marketer of
systems, storage and wall solutions for commercial office
environments -- announces the following financial results for the
fourth quarter and fiscal year ended April 30, 2012:
Inscape Corporation
Summary of Consolidated Financial Results
(Unaudited) (in thousands except EPS)
Three Months
Ended April 30,
2012 2011 Change
-------------------------------------------------------------------- -------
Sales $17,549 $19,855 -11.6%
--------------------------------------------------------------------
Gross margin 3,539 5,247 -32.6%
Selling, general & administrative expenses 5,042 5,526 -8.8%
Loss on disposals of property, plant and
equipment 261 -
Unrealized loss on foreign exchange 128 57
Unrealized gain on derivatives (547) (408)
Investment income (28) (171)
--------------------------------------------------------------------
(Loss) Income before taxes (1,317) 243
Income tax (recovery) expense (596) 77
--------------------------------------------------------------------
Net (loss) income $ (721) $ 166
--------------------------------------------------------------------
--------------------------------------------------------------------
Basic and diluted earnings per share $ (0.05) $ 0.01
Weighted average number of shares (in
thousands)
for basic EPS calculation 14,385 14,609
for diluted EPS calculation 14,420 14,798
Years Ended April
30,
2012 2011 Change
-------------------------------------------------------------------- -------
Sales $78,944 $87,405 -9.7%
--------------------------------------------------------------------
Gross margin 17,997 25,682 -29.9%
Selling, general & administrative expenses 21,670 21,913 -1.1%
Loss on disposals of property, plant and
equipment 424 -
Unrealized (gain) loss on foreign exchange (301) 102
Unrealized gain on derivatives (146) (1,081)
Investment income (414) (525)
--------------------------------------------------------------------
(Loss) Income before taxes (3,236) 5,273
Income tax (recovery) expense (1,247) 1,698
--------------------------------------------------------------------
Net (loss) income $(1,989) $ 3,575
--------------------------------------------------------------------
--------------------------------------------------------------------
Basic and diluted earnings per share $ (0.14) $ 0.24
Weighted average number of shares (in
thousands)
for basic EPS calculation 14,461 14,721
for diluted EPS calculation 14,537 14,791
COMMENTARY
"The Company had a disappointing final quarter. Sales revenue
declined by 5.4% in constant currency, yielding a full year annual
sales revenue decline of 1.8%. Furniture sales revenue grew for the
year, while wall division sales declined. To meet our targets, the
Company must increase revenue faster than the rate of industry
growth.
We have already introduced significant changes in our
go-to-market strategy. Our strategic intent over the next few years
is to establish a clear and compelling market position as the
leading provider of application based solutions to deliver smart
workspaces. Going into fiscal 2013, the Company is implementing
three business initiatives that will support our objectives of
revenue growth and improved profitability. These initiatives
are:
-- implement a two-pronged business approach which includes an Inscape
branded integrated application business and an Office Specialty branded
smart storage product business
-- execute a market coverage staffing approach to deploy a greater number
of targeted sales resources to high potential markets
-- undertake a targeted approach to creating and developing distribution
that matches the Company's application business and smart storage
product business
The effective deployment of these market focused strategies will
be complemented by ongoing improvements in business operations. The
combined positive impact of revenue growth and continual
improvement in business efficiencies will, we believe, deliver
profitability in a par dollar currency environment. We believe that
the Company is well positioned to capitalize on our strengths
moving forward." said Rod Turgeon, President and Chief Executive
Officer.
OPERATING PERFORMANCE
Fourth Quarter Results
The fourth quarter of fiscal year 2012 had a net loss of $0.7
million or 5 cents per share, compared to a net income of $0.2
million or 1 cent per share in the same quarter of last year.
Sales in the fourth quarter ended April 30, 2012 were 11.6% less
than the same quarter of last year. The current quarter's sales
included U.S. currency hedge gains of $0.3 million versus hedge
gains of $1.8 million in last year's fourth quarter. On a
normalized currency basis, the current quarter's sales were 5.4%
lower. The growth in the furniture division was offset by lower
sales recorded in the walls division.
Gross margin percentage in the fourth quarter was 20.2%,
compared with 26.4% of last year's fourth quarter. The drop of 6.2
percentage points consists mainly of 5.5 percentage points from the
lower U.S. currency hedge gains. The quarter's gross margin
percentage was also reduced by pressure on realized selling prices,
which was mitigated to some extent by improvements in manufacturing
costs during the quarter.
Selling, general and administrative expenses ("SG&A") in the
fourth quarter were 28.7% of sales, compared to 27.8% in the fourth
quarter of last year. In terms of dollar amounts, SG&A expense
during the current quarter was $0.5 million less than the same
quarter of last year, mainly consisting of lower accruals for
bonuses and other fixed overheads.
Investment income in the fourth quarter was net of the
amortization of premiums paid on several fixed income securities
that were redeemed on their maturities during the quarter.
The decrease of $0.9 million in the quarter's financial results
compared to the same quarter of last year was mainly attributable
to lower gross margin offset by lower SG&A and income tax
expense,
Annual Results
On an annual basis, fiscal year 2012 had a net loss of $2.0
million, or 14 cents per share, compared to a net income of $3.6
million or 24 cents per share in fiscal year 2011.
The sales of fiscal year 2012 were 9.7% lower than the same
period of last year. The decline in sales was attributable to
substantial decrease in U.S. currency hedge gains and fewer large
project sales for the moveable walls division.
The current year's sales included U.S. currency hedge gains of
$1.5 million, compared to hedge gains of $7.3 million in fiscal
year 2011. With the exclusion of the U.S. currency hedge gains and
the adverse impacts of lower average U.S. spot rate during fiscal
year 2012, the current year's sales on a normalized currency basis
were 1.8% less than fiscal year 2011. While the furniture divisions
of the business recorded an average growth of about 12%, the walls
division experienced significant decline in sales because of fewer
large projects sales during the year.
The gross margin as a percentage of sales of 22.8% was 6.6
percentage points lower than the 29.4% of last year of which
approximately 6 percentage points were attributable to the
significant reduction in the U.S. currency hedge gains. The balance
of the decline in gross margin percentage was evenly split among
unfavourable overhead absorption, lower realized selling prices and
manufacturing costs.
The SG&A expense was 27.4% of sales in fiscal 2012 versus
25.1% in fiscal 2011. The dollar amount spent was $0.2 million less
than last year. This slight reduction was a combination of
reduction in the accruals for performance-based bonuses, a drop in
the fair value of share-based compensation, offset by increased
fixed selling and showroom expenses. Variable selling expense was
at roughly the same level as last year despite the decrease in
overall sales because the base of commissionable sales was
comparable to fiscal year 2011.
Financial Statements
To view the Financial Statements and notes, please visit the
following link:
http://media3.marketwire.com/docs/F2012_Qt4_statements_and_notes.pdf.
CONFERENCE CALL
Inscape will host a conference call at 8:30 a.m. on Friday, June
29, 2012 to discuss the Company's quarterly and annual results. To
participate, please call 1-877-809-2333 A replay of the conference
call will also be available from Friday, June 29, 2012 after 10:30
a.m. until midnight on July 6, 2012. To access the rebroadcast,
please dial 1-800-558-5253 (Reservation Number 21593693)
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. 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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