Inscape Announces Second Quarter Results

Inscape (TSX:INQ) today announced its second quarter financial results ended
October 31, 2013.


The second quarter of fiscal year 2014 had a net loss of $0.3 million or 2 cents
per share, 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 a breakeven result with the exclusion of 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.


Net income or loss with the exclusion of these unrealized items 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.


"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.




                            Inscape Corporation                             
                 Summary of Consolidated Financial Results                  
                   (Unaudited) (in thousands except EPS)                    
                                                                            
                                Three Months Ended October 31,              
                                         2013             2012       Change 
----------------------------------------------------------------------------
                                                                            
Sales                          $       19,323   $       18,210          6.1%
---------------------------------------------------------------             
Gross profit                            4,922            5,229         -5.9%
Selling, general &                                                          
 administrative expenses                5,072            5,088         -0.3%
Unrealized (gain) loss on                                                   
 foreign exchange                         (99)              18              
Decrease in fair value of                                                   
 derivatives                              370              228              
Investment income                         (91)             (71)             
---------------------------------------------------------------             
Loss before taxes                        (330)             (34)             
Income taxes                              (74)             (94)             
---------------------------------------------------------------             
Net (loss ) income             $         (256)  $           60              
---------------------------------------------------------------             
---------------------------------------------------------------             
                                                                            
Basic earnings per share       $        (0.02)  $            -              
                                                                            
Weighted average number of                                                  
 shares (in thousands)                                                      
for basic EPS calculation              14,373           14,376              
for diluted EPS calculation            14,381           14,471              
                                                                            
                                  Six Months Ended October 31,              
                                         2013             2012       Change 
----------------------------------------------------------------------------
                                                                            
Sales                          $       36,611   $       39,277         -6.8%
---------------------------------------------------------------             
Gross profit                            9,134           10,618        -14.0%
Selling, general &                                                          
 administrative expenses               10,499           10,473          0.2%
Unrealized gain on foreign                                                  
 exchange                                 (88)             (24)             
Decrease in fair value of                                                   
 derivatives                            1,120              405              
Investment income                        (190)            (191)             
---------------------------------------------------------------             
Loss before taxes                      (2,207)             (45)             
Income taxes                             (568)            (161)             
---------------------------------------------------------------             
Net (loss) income              $       (1,639)  $          116              
---------------------------------------------------------------             
---------------------------------------------------------------             
                                                                            
Basic and diluted earnings                                                  
 per share                     $        (0.11)  $         0.01              
                                                                            
Weighted average number of                                                  
 shares (in thousands)                                                      
for basic EPS calculation              14,373           14,377              
for diluted EPS calculation            14,381           14,434              



Financial Statements

http://media3.marketwire.com/docs/917575.pdf.

Second Quarter Call Details

Inscape will host a conference call at 8:30 a.m. on Friday, December 13, 2013 to
discuss the Company's quarterly results. To participate, please call
1-800-743-4304. A replay of the conference call will also be available from
Friday, December 13, 2013 after 10:30 a.m. until midnight on December 20, 2013.
To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number
21688314).


Forward-looking Statements

Certain 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 INSCAPE

Inscape makes smart workspaces. For over a century, we have collaborated with
our clients to provide customized solutions based on their individual needs. Our
meticulously engineered system, storage and wall products provide unparalleled
flexibility to create unique applications at a lower cost of ownership. Easy
reconfiguration and seamless integration with other products means our smart
applications will work today and tomorrow. And they look fabulous.


For more information, visit www.inscapesolutions.com. 

FOR FURTHER INFORMATION PLEASE CONTACT: 
Inscape Corporation
Rod Turgeon
President and Chief Executive Officer
905 836 7676
905 836 5037 (FAX)
www.inscapesolutions.com