HOLLAND LANDING, ON -- Mr. Madan Bhayana, 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 first quarter ended July 31, 2010:
Commentary and Outlook
âWe are pleased by the gross margin and profitability results in our first quarter of fiscal 2011. This is our third consecutive profitable quarter despite historically low sales volumes experienced by the office furniture industry in general and by our Company as well. Our commitment is to continue our efforts to improve our market position and thereby increase our sales volumes. During the first quarter we have taken a number of steps in ensuring that we demonstrate our unique capabilities to designers and customers with additional sales resources in most of our target markets. At NeoCon, the primary industry trade show, we received very positive reception to the preview of ADDWALL, a scalable, functional and attractive all in one moveable wall solution. Customers and designers continued to express their interest in our ability to create visually appealing and flexible product applications using our integrated suite of products.
In August the Company purchased all intellectual property and trademarks owned by Acme Architectural Walls, a manufacturer and designer of demountable office partitions. Acme has been a leader in the New York City market for demountable office partitions for over 50 years, specializing in critical design sensitive solutions desired by architects and designers of numerous Fortune 500 clients. The acquisition of Acmeâs intellectual property and product portfolio by Inscape and the addition of local representation is a good fit for Inscape as we continue to invest in growing our architectural walls business.
Our outlook for the 2nd quarter of fiscal 2011 is positive based on large project volume from existing and new customers. We see strong indications that we are positioning our solutions more effectively which has led to a number of project awards. As historically been the case, our quarterly sales results may fluctuate based on timing of projects; however, we are confident that we are progressing towards growing sales and profitability.
We expect that sales for the second quarter of fiscal 2011 will be higher than the first quarter of fiscal 2011 and the second quarter of fiscal 2010.â said Madan Bhayana, CEO.
The first quarter of fiscal year 2011 ended on July 31, 2010 had a net income of $0.6 million, a substantial improvement from the net loss of $1.0 million in the same quarter of last fiscal year. Although the total sales of $17.7 million in the current quarter was only 1.7% higher than the $17.4 million earned in the same quarter of fiscal year 2010, the year-over-year increase of $1.6 million in the operating results was driven by the significant growth in gross profit and reduced negative impact from currency translation. The gross profit was up 23.6% from last yearâs $4.4 million to the current quarterâs $5.4 million, while total operating expenses, including interest income, unrealized gains and losses on derivatives and currency translation, decreased 16.1% from last yearâs $5.4 million to the current quarterâs $4.6 million. With the exclusion of the unrealized gains and losses on derivatives and currency translation from both periods, the current quarter would have a net income of $0.5 million while the same quarter of last year would have a net loss of $0.4 million.
On July 9, 2010, the Company repurchased 441,317 Class B subordinated voting Shares from an ex-officer of the Company at $1.88 per share before expenses. The shares were returned to treasury for cancellation on July 21, 2010. Basic and diluted earnings per share (âEPSâ) for the current quarter were 4 cents per share based on the weighted average number of shares outstanding during the period, which was 15,044,051 shares for the basic EPS and 15,044,975 for the diluted EPS. Basic EPS for the first quarter of fiscal year 2009 was a loss of 6 cents per share, based on 15,096,817 shares outstanding.
At the end of the current quarter, total cash, cash equivalents and short-term investments was at $18.8 million, compares to $19.7 million at the end of last fiscal year ended on April 30, 2010. During the three-month period, cash generated from operations was offset by increase in working capital and capital expenditures. The net decrease of $0.9 million in total cash, cash equivalents and short-term investments represents the cost and related expenses incurred in the Class B share buyback.
Sales in the first quarter of fiscal 2011 were $17.7 million, an increase of 1.7% from the sales of $17.4 million in the same quarter of last year. Compared to last year, the current quarterâs sales reflected the gains from favourable US currency hedges and a 3.8% increase due to higher volumes, which were offset by lower realized selling prices. The Company expects that the US currency hedge gains and selling price pressure will continue to affect our reported sales for the rest of this fiscal year.
Gross margin as a percentage of sales in the first quarter of fiscal year 2011 was 30.7%, compared to last yearâs 25.2%. The growth in the current quarterâs gross margin was driven by the US currency hedge gains that increased sales results, favourable overhead absorption due to higher volumes, lower manufacturing overheads, and improvements in variable production costs. The gains were partially eroded by lower realized selling prices. Selling, general and administrative expenses (âSG&Aâ) in the first quarter of fiscal year 2010 were 27.4% of sales, compared to 28.4% in the same quarter of last year. During the first quarter, the Company increased investments in various sales, marketing and promotion initiatives. Higher expenditures in these areas were offset by reduced administrative overheads and the benefit of the favourable exchange rate at which the U.S. dollar denominated expenditures were translated.
Inscape Corporation is a leading designer, manufacturer and marketer of office systems, storage and architectural wall solutions for commercial office environments. Headquartered in Holland Landing, Ontario, the company 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.
Source: Inscape Corp.
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