Inscape (TSX:INQ) today announced its third quarter financial
results ended January 31, 2018.
Sales in the third quarter
of fiscal year 2018 were $25.9 million, 11.9% higher than the same
quarter of the previous year.
“We are pleased with our performance this quarter,” said
Brian Mirsky, CEO. “Despite unfavorable foreign
exchange compared to the prior year, and increased investments in
marketing, sales and product development, our net income was
positive and our cash balance remains strong. We are continuing to
invest to drive Inscape’s organic sales growth and improve
manufacturing efficiencies.”
Financial Results
| Inscape
Corporation |
| Summary of Interim
Consolidated Financial Results |
| (Unaudited) (in
thousands except EPS) |
| |
|
|
|
|
|
|
| |
Three Months January 31 |
|
|
|
|
Fiscal 2018 |
|
Fiscal 2017 |
|
Change |
|
| |
|
|
|
|
|
|
|
Sales |
$ |
25,906 |
|
|
$ |
23,161 |
|
|
11.9 |
% |
|
| Gross profit |
|
7,009 |
|
|
|
7,018 |
|
|
-0.1 |
% |
|
| Selling, general &
administrative expenses |
|
7,266 |
|
|
|
6,814 |
|
|
6.6 |
% |
|
| Unrealized (gain) loss
on foreign exchange |
|
312 |
|
|
|
211 |
|
|
|
|
| Unrealized (gain) loss
on derivatives |
|
(1,858 |
) |
|
|
(1,790 |
) |
|
|
|
|
Investment income |
|
(11 |
) |
|
|
(63 |
) |
|
|
|
| Income (loss) before
taxes |
|
1,300 |
|
|
|
1,846 |
|
|
|
|
| Income taxes |
|
- |
|
|
|
- |
|
|
|
|
|
Net income (loss) |
$ |
1,300 |
|
|
$ |
1,846 |
|
|
|
|
| |
|
|
|
|
|
|
| Basic and diluted
income (loss) per share |
$ |
0.09 |
|
|
$ |
0.13 |
|
|
|
|
| |
|
|
|
|
|
|
| Weighted average number
of shares (in thousands) |
|
|
|
|
|
|
| for basic EPS
calculation |
|
14,381 |
|
|
|
14,381 |
|
|
|
|
| for diluted EPS
calculation |
|
14,406 |
|
|
|
14,570 |
|
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
Nine Months Ended January 31 |
|
|
|
Fiscal 2018 |
|
Fiscal 2017 |
|
Change |
|
| |
|
|
|
|
|
|
|
Sales |
$ |
72,422 |
|
|
$ |
74,272 |
|
|
-2.5 |
% |
|
| Gross profit |
|
20,267 |
|
|
|
22,985 |
|
|
-11.8 |
% |
|
| Selling, general &
administrative expenses |
|
22,249 |
|
|
|
20,340 |
|
|
9.4 |
% |
|
| Unrealized (gain) loss
on foreign exchange |
|
650 |
|
|
|
(150 |
) |
|
|
|
| Unrealized (gain) loss
on derivatives |
|
(4,375 |
) |
|
|
986 |
|
|
|
|
|
Investment income |
|
(53 |
) |
|
|
(106 |
) |
|
|
|
| Income (loss) before
taxes |
|
1,796 |
|
|
|
1,915 |
|
|
|
|
| Income taxes |
|
- |
|
|
|
- |
|
|
|
|
|
Net income (loss) |
$ |
1,796 |
|
|
$ |
1,915 |
|
|
|
|
| |
|
|
|
|
|
|
| Basic and diluted
income (loss) per share |
$ |
0.12 |
|
|
$ |
0.13 |
|
|
|
|
| |
|
|
|
|
|
|
| Weighted average number
of shares (in thousands) |
|
|
|
|
|
|
| for basic EPS
calculation |
|
14,381 |
|
|
|
14,381 |
|
|
|
|
| for diluted EPS
calculation |
|
14,434 |
|
|
|
14,531 |
|
|
|
|
The third quarter of fiscal year 2018 ended with a net income of
$1.3 million or 9 cents per share, compared with a net income of
$1.8 million or 13 cents per share in the same quarter of last
year. Net income of both quarters included certain unrealized,
non-cash expenses and one-time items that have significant impact
on the net income per GAAP. With the exclusion of these items, the
third quarter of fiscal 2018 had an adjusted net income of $0.1
million, compared with adjusted net income of $2.5 million in the
same quarter of last year. The adjusted net income of $0.1 million
in the quarter is inclusive of a $1.5 million incremental
investment in sales, marketing and product development.
On a year-to-date basis, the nine month period had a net income
of $1.8 million, compared to a net income of $1.9 million a year
ago. The current year-to-date period included certain unrealized
and non-cash expense and severance obligations, which were
considered as unusual operating expenses. With the exclusion of
these unusual items, the year-to-date third quarter had an adjusted
net loss of $1.4 million compared to adjusted net income of $4.9
million in the prior period. The adjusted year-to-date net loss of
$1.4 million is inclusive of $4 million incremental investment in
sales, marketing and product development.
Adjusted net 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 following is a reconciliation of net income and loss
calculated in accordance with GAAP to the non-GAAP measure:
| |
Three Months Ended January 31 |
| (in
thousands) |
Fiscal 2018 |
|
Fiscal 2017 |
| NET INCOME (LOSS) |
$ |
1,300 |
|
|
$ |
1,846 |
|
| adjust non-operating or
unusual items |
|
|
|
|
Unrealized (gain) loss on derivatives |
|
(1,858 |
) |
|
|
(1,790 |
) |
|
Unrealized (gain) loss on foreign exchange |
|
312 |
|
|
|
211 |
|
|
(Increase) Decrease in fair value of short-term investments |
|
- |
|
|
|
(69 |
) |
| Stock
based compensation |
|
(26 |
) |
|
|
2,063 |
|
| Severance
obligation |
|
347 |
|
|
|
227 |
|
|
ADJUSTED NET (LOSS) INCOME |
$ |
75 |
|
|
$ |
2,488 |
|
|
|
|
|
|
| |
|
|
|
| |
Nine Months Ended January 31 |
| (in
thousands) |
Fiscal 2018 |
|
Fiscal 2017 |
| NET INCOME (LOSS) |
$ |
1,796 |
|
|
$ |
1,915 |
|
| adjust non-operating or
unusual items |
|
|
|
|
Unrealized (gain) loss on derivatives |
|
(4,375 |
) |
|
|
986 |
|
|
Unrealized (gain) loss on foreign exchange |
|
650 |
|
|
|
(150 |
) |
|
(Increase) Decrease in fair value of short-term investments |
|
- |
|
|
|
(118 |
) |
| Stock
based compensation |
|
(293 |
) |
|
|
2,063 |
|
| Severance
obligation |
|
787 |
|
|
|
233 |
|
|
ADJUSTED NET (LOSS) INCOME |
$ |
(1,435 |
) |
|
$ |
4,929 |
|
Sales in the third quarter of fiscal year 2018 were $2.7 million
or 11.9% higher than the same quarter of the previous year.
Excluding the impact foreign exchange, third quarter sales were 21%
higher than the prior year quarter due to gains realized in both
the furniture and walls segments.
Year-to-date sales declined by $1.9 million or -2.5% compared to
the prior year. YTD sales are 1% higher than the prior year
if we normalize foreign exchange. The previous year benefitted from
two large non-recurring projects totaling $5 million which implies
the run rate sales have improved.
Gross profit as a percentage of sales for the third quarter of
fiscal year 2018 was 27.1%, a decline from 30.3% from the same
quarter of the previous year. Unfavorable foreign exchange and
lower product mix negatively impacted gross profit.
Year-to-date gross profit percentage was 28.0% compared to last
year’s 30.9% due to the same factors as described in the
quarter.
Selling, general and administrative expenses (“SG&A”) in the
third quarter of fiscal year 2018 were 28.0% of sales, compared to
29.4% in the same quarter of last year. The increase in SGA by $0.5
million compared to the prior year was mainly due to severance
costs and investment in marketing, sales coverage and supply chain
initiatives.
Year-to-date SG&A was 30.7% of sales,
compared to 27.4% for the same period of last year. The dollar
amount increased by $1.9 million due to severance costs and
investments in marketing, sales coverage and supply chain
initiatives.
At the previous fiscal year ended April 30, 2017, the Company
recorded a valuation allowance of $6.4 million to derecognize the
future income tax benefit of loss carryforwards as deferred tax
assets. The off-balance sheet valuation allowance was utilized to
reduce the Company’s income tax expense of the current period.
At the end of the quarter, the company was debt-free and had
cash, cash equivalents and short-term investments totaling $9.3
million and an unused credit facility.
Board of Directors UpdateAfter
5 decades with the company, Madan Bhayana has
decided to retire as Chair and Director effective March 6, 2018. “I
have enjoyed my time working with the company and am grateful for
the help and support from the board over the years. I wish the
board and the company all the best for the future,” said Madan.
Bart Bull will assume the role of Chair of the
Inscape board effective March 7, 2018. Bart has over 25 years of
experience with Inscape, including roles in management, as an
investor and as a board member. “On behalf of the board, I would
like to thank Mo for the vision, dedication and energy that he has
brought to Inscape for over five decades,” said Bart. “We wish him
all the best in his retirement.”
Tania Bortolotto joined the Inscape Board of
Directors effective March 6, 2018. Tania is an architect and
interior designer, and founder and president of Bortolotto Design,
recently named on Blog TO’s list of top 15 Architects in Toronto. A
design advocate, Tania lends her time to numerous design panels,
juries and speaking engagements. Tania’s passion for architecture
is grounded in its ability to uplift the human experience through
design. Tania has recently become a WELL AP and is an active WELL
Faculty member.
Third Quarter Call
DetailsInscape will host a conference call at 8:30 AM EST
on Wednesday, March 7, 2018 to discuss the company’s quarterly
results. To participate, please call 1-800-705-7067 (Reservation
Number 21881450) five minutes before the start time. A replay of
the conference call will also be available from March 7, 2018 after
10:30 AM EST until 11:59 PM EST on March 14, 2018. To access the
rebroadcast, please dial 1-800-558-5253 (Reservation Number
21881450).
Forward-looking
StatementsCertain 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 InscapeInscape is a
design enabler. We have been saying yes since 1888 with a versatile
portfolio of systems, storage, and walls products that are
adaptable, and always built to last. With a wide dealer network,
showrooms in both Canada and the U.S., and full service and support
for all of our clients, our philosophy is to always do what we can
to say Yes. For more information, visit
www.inscapesolutions.com.
Contact:Aziz Hirji, CPA,
CAChief Financial Officer InscapeT 905 836 7676 x 3351
ahirji@inscapesolutions.com
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