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A business consultancy, based in London, England, John Sacks' JSA Consultancy Services provides expert, in-depth, information advice and guidance as to how to exploit successfully the office furniture and interiors markets in Europe, North America, Australasia and Japan.

Inscape announces 2nd quarter $300,000 loss.

Friday 13 December 2013

Inscape today announced its 2nd quarter financial results ended October 31, 2013. The quarter had a net loss of $0.3 million compared to a breakeven result in the same quarter of last year. The quarterly results included $0.4 million decrease in the fair value of outstanding currency hedge contracts, which may not reflect the actual financial results of those contracts when they are settled in the future. The quarter would have had a breakeven result without the fair value adjustments. The first six months of fiscal year 2014 had a net loss of $1.6 million or 11 cents per share, which included a decrease of $1.1 million in the fair value of outstanding hedge contracts. The same period of last year had a net income of $0.1 million or 1 cent per share. The current year's financial results with the exclusion of the currency hedge contract's fair value adjustments would be a net loss of $0.9 million, compared to last year's adjusted net income of $0.4 million.
"We had some impressive sales with high profile clients during this period, and benefited from sales that were 11.8% higher and operating costs that were 6.5% lower than the first quarter. However, some large projects with higher discounts negatively impacted profitability," said Rod Turgeon, President & CEO. "We are very encouraged by the market response to our Inscape Bench, which has crystalized our application approach. We continue to have a solid foundation in place: excellent products, a strong balance sheet, and an established strategy."
Sales of $19.3 million in the second quarter of fiscal 2014 increased 6.1% from $18.2 million in the same quarter of last year due to higher volumes in both the furniture and the walls segments. For the first half of the current fiscal year, sales of $36.6 million were 6.8% lower than the same period of last year. While the walls business showed a strong year-over-year growth during the first six months of this fiscal year, the year-to-date furniture sales were adversely impacted by low volume during the first quarter of the year.
Gross margin percentage of the second quarter of fiscal year 2014 was 25.5%, a decrease of 3.2 percentage points from 28.7% of the same quarter of the previous year. The reduced gross margin percentage was mainly due to lower net prices, partially offset by favorable overhead absorption and production costs. Year-to-date gross margin percentage was 24.9%, compared to 27% for the same period of last year. The decrease in gross margin percentage was caused by lower net prices, unfavourable overhead absorption, partially offset by decrease in production costs.
Selling, general and administrative expenses ("SG&A") in the second quarter of fiscal year 2014 were 26.2% of sales, compared to 27.9% in the same quarter of last year. SG&A in terms of dollars spent was at the same level as last year at $5.1 million. Although the current quarter's sales were higher than the same quarter of last year, variable selling expenses were $0.2 million less than the previous year because certain large projects were subject to lower commission rates. The lower variable selling expenses were offset by a minor increase in overhead expenses in the current quarter. Year-to-date SG&A was 28.7% of sales, compared to 26.7% for the same period of last year. The total dollar amount of SG&A at $10.5 million was comparable to the amount incurred in last year. Variable selling expense was $0.3 million less than last year due to lower sales volume and commission rate for certain projects. The savings were offset by $0.2 million unrealized decrease in the fair value of interest-rate-sensitive short- term investments and a small increase in other overhead expenses.
At the end of the second quarter of fiscal year 2014, the Company was debt-free with cash and cash equivalents at $6.4 million and liquid short-term investments at $13.3 million.
In addition, Chairman of the Board Madan Bhayana announces that Rod Turgeon is stepping down from his position on the board, effective December 31, 2013 and appoints Brian Mirsky to the board. Mr. Mirsky is an experienced Consumer Packaged Goods executive and CEO of FreshChange Foods Group, a company that invests in food companies across North America. Mr. Mirsky holds an MBA in Marketing from the Schulich School of Management in Toronto and an undergraduate degree in Economics from the University of Toronto.

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