Inscape Announces Fiscal Year 2019 Second Quarter Results
December 13 2018 - 5:01PM
Inscape (TSX: INQ), a leading designer and manufacturer of
furnishings for the workplace, today announced its second quarter
financial results ended October 31, 2018. Sales in the second
quarter of fiscal year 2019 were $21.9 million, an increase of 6%
compared to the same quarter of the prior year on a comparable
basis when excluding prior year sales from an exited unprofitable
business. Including sales from the exited business unit, sales were
down 6% compared to the same quarter of the prior year.
Second Quarter Highlights:
- Sales of the base business (excluding sales from an
unprofitable business) increased by 6% for the second quarter of
fiscal 2019 compared to the prior year
- Second half of fiscal 2019 bookings have increased by 12%
compared to the prior year
- Gross margin for the second quarter improved to 30%, 4 points
higher compared to the first quarter of fiscal 2019 driven by
favourable product mix and increase in capacity utilization
- SG&A as a % of sales increased to 39.5% driven by one time
investments in marketing initiatives and the impact of exiting
unprofitable business totalling $1.3 million which are not expected
to recur. Excluding these investments, second quarter SG&A
would have been 33.6% of sales
- Cost saving initiatives of $1.5 million on an annualized basis
have been completed thereby lowering manufacturing fixed costs.
These are not yet fully reflected in the current quarter
results.
“We are encouraged with the second quarter organic sales
growth and margin expansion compared to the previous year. Our
financial performance reflects our focussed approach to creating
value via growth in our differentiated products and reducing our
manufacturing costs,” said Brian Mirsky, CEO.
|
|
Inscape Corporation Summary of
Consolidated Financial Results (Unaudited) (in
thousands except EPS) |
|
|
|
|
Three Months Ended October 31 |
|
|
Fiscal 2019 |
Fiscal 2018 |
|
|
|
|
|
|
|
Sales |
$ |
21,850 |
$ |
23,209 |
|
Gross Profit |
|
6,560 |
|
6,065 |
|
Selling, general &
administrative expenses |
|
8,650 |
|
7,179 |
|
Unrealized (gain) loss
on foreign exchange |
|
(327) |
|
(119 |
) |
Unrealized loss on
derivatives |
|
668 |
|
1,586 |
|
Gain on sale of
property, plant and equipment |
|
- |
|
- |
|
Gain on sale of
intangible |
|
- |
|
- |
|
Investment income |
|
(10) |
|
(19 |
) |
(Loss) income before
taxes |
$ |
(2,421) |
$ |
(2,562 |
) |
Income
tax (recovery) |
|
- |
|
- |
|
Net
(loss) income |
$ |
(2,421) |
$ |
(2,562 |
) |
Basic and diluted
(loss) income per share |
$ |
(0.17) |
$ |
(0.18 |
) |
Weighted average number
of shares (in thousands) |
|
|
|
for basic EPS
calculation |
|
14,381 |
|
14,381 |
|
for diluted EPS
calculation |
|
14,388 |
|
14,435 |
|
|
Six Months Ended October 31 |
|
|
Fiscal 2019 |
Fiscal 2018 |
|
|
|
|
|
|
|
Sales |
$ |
43,076 |
$ |
46,516 |
|
Gross Profit |
|
12,052 |
|
13,258 |
|
Selling, general &
administrative expenses |
|
16,669 |
|
14,983 |
|
Unrealized (gain) loss
on foreign exchange |
|
(11) |
|
338 |
|
Unrealized loss (gain)
on derivatives |
|
1,336 |
|
(2,517 |
) |
Gain on sale of
property, plant and equipment |
|
(32) |
|
- |
|
Gain on sale of
intangible |
|
(263) |
|
- |
|
Investment income |
|
(21) |
|
(42 |
) |
(Loss) income before
taxes |
$ |
(5,626) |
$ |
496 |
|
Income
tax (recovery) |
|
- |
|
- |
|
Net
(loss) income |
$ |
(5,626) |
$ |
496 |
|
Basic and diluted
(loss) income per share |
$ |
(0.39) |
$ |
0.03 |
|
Weighted average number
of shares (in thousands) |
|
|
|
for basic EPS
calculation |
|
14,381 |
|
14,381 |
|
for diluted EPS
calculation |
|
14,393 |
|
14,440 |
|
The second quarter of fiscal year 2019 ended with a loss of $2.4
million or 17 cents per share, compared with a net loss of $2.6
million or 18 cents per share in the same quarter of last year. Net
income (loss) 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
second quarter of fiscal 2019 had an adjusted net loss of $2.1
million, compared with adjusted net loss of $0.7 million in the
same quarter of last year due to unfavourable product mix and
increased investments in sales and marketing initiatives
The six month period of fiscal year 2019 ended with a net loss
of $5.6 million or 39 cents per share, compared with a net income
of $0.5 million or 3 cents per share for the same period of last
year. Net income (loss) of both periods included certain
unrealized, non-cash expenses and one-time items that have
significant impact on the net income (loss) per GAAP. With the
exclusion of these items, the six month period of fiscal year 2019
had an adjusted net loss of $4.6 million, compared with adjusted
net loss of $1.1 million in the same period of the previous year.
Unfavourable product mix, costs incurred to improve manufacturing
efficiencies and incremental investments in sales and marketing
initiatives contributed to the year to date loss.
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 (loss)
calculated in accordance with GAAP to the non-GAAP measure:
|
|
Three Months Ended October 31 |
(in thousands) |
|
Fiscal 2019 |
|
|
Fiscal 2018 |
Net (loss) income before taxes |
$ |
(2,421 |
) |
|
$ |
(2,562 |
) |
adjust non-operating or unusual items: |
|
|
|
|
|
Unrealized loss (gain) on derivatives |
|
668 |
|
|
|
1,586 |
|
Unrealized (gain) loss on foreign exchange |
|
(327 |
) |
|
|
(119 |
) |
Gain on sale of property, plant and equipment |
|
- |
|
|
|
- |
|
Gain on sale of intangible |
|
- |
|
|
|
- |
|
Stock based compensation |
|
(18 |
) |
|
|
103 |
|
Severance obligation |
|
- |
|
|
|
258 |
|
Adjusted net (loss) income before taxes |
$ |
(2,098 |
) |
|
$ |
(734 |
) |
|
|
Six Months Ended October 31 |
(in thousands) |
|
Fiscal 2019 |
|
|
Fiscal 2018 |
Net (loss) income before taxes |
$ |
(5,626 |
) |
|
$ |
496 |
|
adjust non-operating or unusual items: |
|
|
|
|
|
Unrealized loss (gain) on derivatives |
|
1,336 |
|
|
|
(2,517 |
) |
Unrealized loss on foreign exchange |
|
(11 |
) |
|
|
338 |
|
Gain on sale of property, plant and equipment |
|
(32 |
) |
|
|
- |
|
Gain on sale of intangible |
|
(263 |
) |
|
|
- |
|
Stock based compensation |
|
17 |
|
|
|
(164 |
) |
Severance obligation |
|
- |
|
|
|
698 |
|
Adjusted net (loss) income before taxes |
$ |
(4,579 |
) |
|
$ |
(1,149 |
) |
Gross profit as a percentage of sales for the
second quarter of fiscal year 2019 at 30.0% was 3.9 points higher
than the same quarter of the last year’s gross profit of
26.1%. Favourable product mix and exit of
an unprofitable business unit improved margins.
For the six month period of fiscal year 2019
gross profit as a percentage of sales of 27.9% or 0.6 points lower
than the same period of the previous year. Unfavourable product mix
and costs to improve supply chain efficiencies incurred during the
first quarter of fiscal 2019 contributed to the decline.
Selling, general and administrative expenses
(“SG&A”) in the second quarter of fiscal year 2019 were 39.6%
of sales, compared to 30.9% in the same quarter of last year. The
dollar amount increased by $1.5 million compared to the same
quarter of last year due to incremental investments in marketing,
sales coverage and supply chain initiatives.
SG&A for the six month period of fiscal year
2019 were 38.7% of sales, compared to 32.2% in the same period of
the previous year. The current six month period SG&A of $16.7
million was $1.7 million higher than the six month period of last
year, mainly due to incremental investments in marketing, sales
coverage and supply chain initiatives.
At the end of the quarter, the company was debt-free and had
cash, cash equivalents and short-term investments totaling $4.7
million and an unused credit facility. Cash decline during the
quarter was due to higher working capital investment necessary to
fulfill the Company’s increased bookings during the quarter.
Financial StatementsFinancial
statements are available from our website as of this press
release.
Second Quarter Call
DetailsInscape will host a conference call at 8:30 AM EST
on Friday, December 14, 2018 to discuss the company’s quarterly
results. To participate, please call 1-888-221-6261 five minutes
before the start time. A replay of the conference call will also be
available from December 14, 2018 after 10:30 AM EST until 11:59 PM
EST on January 13, 2019. To access the rebroadcast, please dial
1-800-558-5253 (Reservation Number 21894371).
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 InscapeSince 1888,
Inscape has been designing products and services that are focused
on the future, so businesses can adapt and evolve without
investing in their workspaces all over again. Our versatile
portfolio includes systems furniture, storage, and walls – all of
which are adaptable and built to last. Inscape’s wide dealer
network, showrooms in the United States and Canada, along with full
service and support for all of our clients, enables us to stand out
from the crowd. We make it simple. We make it smart. We make our
clients wonder why they didn’t choose us sooner.
For more information, visit www.inscapesolutions.com.
Contact
Aziz Hirji, CPA, CAChief Financial Officer
Inscape Corporation
T 905 836 7676 x 3351
ahirji@inscapesolutions.com
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