HOLLAND LANDING, ONTARIO--(Marketwired - March 12, 2015) - Inscape (TSX:INQ) today announced its third quarter financial results ended January 31, 2015.
Sales of the third quarter had an overall increase of 17.3% from the same quarter of last year. While the furniture segment had a strong growth from last year, sales of the Walls division were lower than the same quarter of the previous year. Despite the overall growth in sales, the current quarter's financial result was adversely affected by several sizable unrealized and non-cash expenses (these will be outlined below). The third quarter had a net loss of $9.4 million or 65 cents per share, compared with a net loss of $4.0 million or 28 cents per share in the same quarter of last year. On a year-to-date basis, the nine-month period had a net loss of $9.7 million or 67 cents per share, compared to a net loss of $5.6 million, or 39 cents per share a year ago.
Excluding the above-mentioned unrealized charges and non-cash expenses, the current quarter would have an adjusted loss of $1.9 million before taxes, compared with $2.9 million for the same quarter of last year. Year-to-date adjusted loss is $0.9 million compared with $3.5 million for the same period of last year. The adjusted income or loss 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.
The most significant unrealized and non-cash charge resulted from the decrease in the fair value of outstanding U.S. currency hedge contracts totaling $7.0 million due to the upswing in the U.S. spot exchange rate. The quarter was charged with a $1.7 million impairment loss when the Company conducted a review of the recoverable amount of the Walls division's capital assets and estimated that the book value of the assets should be lowered by that amount. The quarter's result was also negatively affected by a $0.3 million increase in the fair value of share-based compensation and $0.1 million from the mark-to-market valuation of the Company's short term investments. On the other hand, the increase in the U.S. exchange rate resulted in a $0.8 million unrealized exchange gain from the translation of the Company's U.S. dollar denominated net assets.
The following is a reconciliation of loss calculated in accordance with GAAP to the non-GAAP measure:
| (in 000's) |
Three Months Ended |
|
Nine Months Ended
January 31, |
|
| |
2015 |
|
2014 |
|
2015 |
|
2014 |
|
| LOSS BEFORE TAXES |
(10,101 |
) |
(5,497 |
) |
(10,343 |
) |
(7,704 |
) |
| NON-OPERATING AND/OR UNUSUAL ITEMS |
|
|
|
|
|
|
|
|
| |
Decrease in fair value of derivatives |
6,954 |
|
3,482 |
|
7,486 |
|
4,602 |
|
| |
Impairment loss |
1,695 |
|
- |
|
1,695 |
|
- |
|
| |
Stock based compensation |
299 |
|
(430 |
) |
554 |
|
(44 |
) |
| |
Fair value of short-term investments |
106 |
|
(10 |
) |
94 |
|
170 |
|
| |
Unrealized gain on foreign exchange |
(751 |
) |
(452 |
) |
(974 |
) |
(540 |
) |
| |
Unusual installation expense/loss |
(54 |
) |
- |
|
630 |
|
- |
|
| |
8,249 |
|
2,590 |
|
9,485 |
|
4,188 |
|
| ADJUSTED LOSS BEFORE TAXES |
(1,852 |
) |
(2,907 |
) |
(858 |
) |
(3,516 |
) |
Sales in the third quarter of fiscal 2015 were 17.3% higher than the same quarter of last year resulting from increased volume in the furniture segment, improved realized pricing and higher U.S. currency partially offset by a decline in the Walls division. Year-to-date sales of $56.8 million were 11.4% more than the same period of last year's $51.0 million, attributable to higher volumes, mainly in the furniture segment, improved realized pricing and higher U.S. exchange rate.
Gross margin percentage of the third quarter of fiscal year 2015 was 20.6%, an increase of 3.9 percentage points from 16.7% of the same quarter of the previous year. Increase in the current quarter's gross margin percentage was due to higher realized pricing, gain in the U.S. currency exchange rate and favourable overhead absorption from higher volume. The gains were partly reduced by increase in production costs resulting from year over year changing sales product mix. Year-to-date gross margin percentage was 24.0%, compared to 22.6% for the same period of last year. The current year's gross margin percentage benefitted from improvements in realized pricing, U.S. exchange rate and favourable overhead absorption. However, these gains were largely absorbed by higher production costs throughout the year and a $0.6 million installation loss for a project that was disclosed in the second quarter's management discussion.
Selling, general and administrative expenses ("SG&A") in the third quarter of fiscal year 2015 were 34.1% of sales, compared to 34.6% in the same quarter of last year or $0.8 million higher than the same quarter of last year. Last year's SG&A included $0.3 million write-off of a product license fee. About $0.4 million of the increase was variable selling expense due to higher sales volume and last year's relatively lower commission rate for specific large projects. The increase in the current quarter's fixed SG&A mainly consisted of a spike in the fair value of share-based compensation as the Company's share price was up at the end of the quarter, a decrease in the fair value of interest rate sensitive short-term investments when the prime rate was reduced in January, and pre-operating costs incurred in the launch of new ventures.
Year-to-date SG&A was 28.2% of sales, compared to 30.3% of last year or $0.5 million higher, consisting of $1.0 million increase in variable selling expense, offset by $0.5 million lower fixed expenses. The higher variable selling expense was due to increased sales volume and last year's relatively lower commission rate for certain large projects. On the fixed expenses, the increases in the fair value of share-based compensation, mark-to-mark decline in the short-term investment and pre-operating costs were absorbed by reductions in other overheads throughout the year.
At the end of the third quarter of fiscal year 2015, the company was debt-free with cash and cash equivalents totaling $17.3 million.
| Inscape Corporation |
|
| Summary of Consolidated Financial Results |
|
| (Unaudited) (in thousands except EPS) |
|
| |
|
| |
|
Three Months Ended January 31, |
|
|
|
| |
|
2015 |
|
|
2014 |
|
Change |
|
| |
|
| Sales |
$ |
16,855 |
|
$ |
14,373 |
|
17.3 |
% |
| Gross profit |
|
3,476 |
|
|
2,405 |
|
44.5 |
% |
| Selling, general & administrative expenses |
|
5,750 |
|
|
4,968 |
|
15.7 |
% |
| Impairment loss |
|
1,695 |
|
|
- |
|
|
|
| Unrealized gain on foreign exchange |
|
(751 |
) |
|
(452 |
) |
|
|
| Decrease in fair value of derivatives |
|
6,954 |
|
|
3,482 |
|
|
|
| Investment income |
|
(71 |
) |
|
(96 |
) |
|
|
| Loss before taxes |
|
(10,101 |
) |
|
(5,497 |
) |
|
|
| Income taxes |
|
(705 |
) |
|
(1,495 |
) |
|
|
| Net loss |
$ |
(9,396 |
) |
$ |
(4,002 |
) |
|
|
| |
|
| Basic earnings per share |
$ |
(0.65 |
) |
$ |
(0.28 |
) |
|
|
| |
|
| Weighted average number of shares (in thousands) |
|
|
|
|
|
|
|
|
| for basic EPS calculation |
|
14,377 |
|
|
14,373 |
|
|
|
| for diluted EPS calculation |
|
14,555 |
|
|
14,390 |
|
|
|
| |
|
| |
|
Nine Months Ended January 31, |
|
|
|
| |
|
2015 |
|
|
2014 |
|
Change |
|
| |
|
| Sales |
$ |
56,783 |
|
$ |
50,984 |
|
11.4 |
% |
| Gross profit |
|
13,613 |
|
|
11,539 |
|
18.0 |
% |
| Selling, general & administrative expenses |
|
15,991 |
|
|
15,467 |
|
3.4 |
% |
| Impairment loss |
|
1,695 |
|
|
- |
|
|
|
| Unrealized gain on foreign exchange |
|
(974 |
) |
|
(540 |
) |
|
|
| Decrease in fair value of derivatives |
|
7,486 |
|
|
4,602 |
|
|
|
| Investment income |
|
(242 |
) |
|
(286 |
) |
|
|
| Loss before taxes |
|
(10,343 |
) |
|
(7,704 |
) |
|
|
| Income taxes |
|
(663 |
) |
|
(2,063 |
) |
|
|
| Net loss |
$ |
(9,680 |
) |
$ |
(5,641 |
) |
|
|
| |
|
| Basic earnings per share |
$ |
(0.67 |
) |
$ |
(0.39 |
) |
|
|
| |
|
| Weighted average number of shares (in thousands) |
|
|
|
|
|
|
|
|
| for basic EPS calculation |
|
14,374 |
|
|
14,373 |
|
|
|
| for diluted EPS calculation |
|
14,439 |
|
|
14,380 |
|
|
|
Financial Statements
http://media3.marketwire.com/docs/996660_financials.pdf
Third Quarter Call Details
Inscape will host a conference call at 8:30 a.m. on Friday, March 13, 2015 to discuss the company's quarterly results. To participate, please call 1-800-732-8470. A replay of the conference call will also be available from March 13, 2015 after 10:30 a.m. until midnight on March 20, 2015. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21761526).
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, an award-winning designer and manufacturer of office furniture, has been initiating change in workspace design for the past 125 years. With an emphasis on quality, innovation, technical design and unparalleled delivery and service, Inscape has been consistently awarded for its design, including 4 Gold and 1 Silver Best of NeoCon Awards at NeoCon 2014, North America's largest design exposition and conference for commercial interiors. Inscape collaborates with leading European partners and manufactures their designs in North American facilities. Their systems, storage, seating and wall solutions delight users, foster agility and empower technology in the workplace. Flexible and designed for sustainability, Inscape products enable easy customization and readily adapt to keep pace with changing needs in the workplace. For more information, visit www.inscapesolutions.com.