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Inscape announces 1st quarter results

Friday 13 September 2013

Inscape today announced its first quarter financial results ended July 31, 2013. The first quarter of fiscal year 2014 had a net loss of $1.4 million or 10 cents per share, compared with a breakeven result in the same quarter of last year.
Sales of $17.3 million in the first quarter of fiscal 2014 were 17.9% lower than the sales of $21.1 million in the same quarter of last year. The decrease was the net result of lower furniture sales, which were offset by an increase in the movable walls business and slight improvements in realized selling prices and U.S. exchange rate.
"We are disappointed with results this quarter but are focused on a longer term view of our products and business. Although we have been impacted by turnover in our dealer network, we are making significant strides in our efforts to improve support for our dealers and partners," said Rod Turgeon, President & CEO. "This year's 125th anniversary of Office Specialty marks a special milestone in our company's history. We are energized by the positive response to this division's rebranding and our renewed focus on the creative role storage can play in designing work environments. We are also excited about the recent launch of Inscape Bench, which significantly broadens our solutions for open office environments."
Gross margin percentage of the first quarter of fiscal year 2014 was 24.4%, a decrease of 1.2 percentage points from 25.6% of the same quarter of the previous year. The lower gross margin percentage was caused by unfavorable overhead absorption associated with lower volume, which was offset by more favorable realized selling prices, U.S. exchange rate and production costs.
Selling, general and administrative expenses ("SG&A") in the first quarter of fiscal year 2014 were 31.4% of sales, compared to 25.6% of sales in the same quarter of last year. SG&A in terms of dollars spent was at the same level as last year at $5.4 million. Variable selling expenses were $0.15 million lower than last year due to lower sales volume, whereas non-variable SG&A was $0.19 million higher than last year mainly due to a decrease in the mark-to-market fair values of short-term investments and increased investments in the development of sales partners.
The current quarter's loss of $1.4 million included a small amount of unrealized exchange loss and a net decrease of $0.75 million in the fair values of derivatives relating to U.S. hedge agreements, compared with a decrease of $0.18 million in the same quarter of last year. The net decrease in the derivatives' fair values mainly consisted of reversals of unrealized gains of some previously outstanding hedge agreements, which were settled in the current quarter; and a decline in the mark-to-market values of unsettled hedge agreements. With the exclusion of the derivatives and unrealized exchange loss, net loss of the current quarter would be $0.8 million instead of $1.4 million, whereas results of the same quarter of last year would be a net income of $0.1 million instead of breakeven.

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