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Share Name | Share Symbol | Market | Type |
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Orecap Invest Corp | TSXV:OCI | TSX Venture | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.065 | 0.06 | 0.065 | 0 | 01:00:00 |
Peter Brunelle, President and Chief Executive Officer of Inscape (TSX:INQ), a leading designer, manufacturer and distributor of office furniture solutions, announces the following financial results for the first quarter ended July 31, 2007: Inscape Corporation Summary of Consolidated Financial Results (Unuadited) (in thousands except EPS) Quarters Ended July 31, 2007 2006 Change -------------------------------------------------------------------------- Sales $ 24,100 $ 20,478 17.7% ----------------------------------------------------------------- Gross margin 7,245 5,442 33.1% Selling, general & administrative expenses 5,982 5,356 11.7% Interest income (271) (176) Income before taxes 1,534 262 Income taxes (recovery) 504 (60) ----------------------------------------------------------------- Net income $ 1,030 $ 322 ----------------------------------------------------------------- ----------------------------------------------------------------- Basic and diluted earnings per share $ 0.07 $ 0.02 Commentary and Outlook "I am pleased by the ongoing improvement in our financial results, especially in light of the challenges posed by the appreciating Canadian dollar relative to the US currency" said Peter Brunelle, CEO of Inscape Corporation. "All key operating metrics, from sales to earnings showed a marked improvement over the prior year. We are especially encouraged by the improvement in gross margin at 30.1% . This noteworthy result is reflective of numerous continuous improvement activities that have been underway for the last two years combined with material cost and yield savings and a beneficial sales mix impact. Based on current order levels, we expect that sales for the second quarter of fiscal 2008 will be in line with the second quarter of fiscal 2007" said Mr. Brunelle. Operating Performance Sales for the first quarter of fiscal 2008 were 17.7% higher than the same quarter of fiscal 2007. The increase was driven by increased general demand for our products and increased project business. On a comparable exchange rate basis, the quarterly sales were 19% higher than the same period of last year. Gross margin as a percentage of sales for the first quarter of fiscal 2008 was 30.1% compared to 26.6% for the same quarter of fiscal 2007. The 3.5 percentage point improvement was attributable to leverage from much higher sales volume, improved logistics management and benefit of reduced material cost and consumption. The level of improvement was offset to some extent by continued weakening of the U.S. dollar exchange rate from 90.1 cents at the beginning of the quarter to 93.7 cents at the end of the quarter. SG&A expenses for the first quarter of fiscal 2008 were $0.6 million higher than the same quarter of fiscal 2007 due to higher variable selling expenses and an accrual for preliminary capital tax assessments. As a percentage of sales, SG&A expenses decreased from 26.2% for the first quarter of fiscal 2007 to 24.8% for the first quarter of fiscal 2008. The Company adopted the new CICA Accounting Standards on "Financial Instruments". Financial assets and liabilities of the Company, including cash, cash equivalents, short-term investments, foreign exchange derivatives and accounts payable, were recorded in the Balance Sheets at their fair values as at the end of the quarter. Accordingly, the Company also recorded in the quarter an unrealized gain of $0.5 million (after-tax) in relation to its U.S. dollar exchange forward contracts and options. As a result, the quarter ended with a net income of $1 million from operations and the $0.5 million unrealized gain, giving a comprehensive net income of $1.5 million. The Company maintained a strong financial position with cash and short-term investments of $21 million and no debt. Conference Call INSCAPE will host a conference call at 8:30 a.m. on Wednesday, September 12, 2007 to discuss the Company's quarterly results and to provide additional outlook on the next quarter. To participate, please call 1-800-926-5230. A replay of the conference call will also be available from Wednesday, September 12, 2007 after 10:30 a.m. until midnight on Wednesday, September 19, 2007. To access the rebroadcast, please dial 1-800-558-5253 (Reservation Number 21347033). 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 US.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 Corporation is a leading designer, manufacturer and distributor of high quality office furniture headquartered in Holland Landing, Ontario, Canada. The Company offers innovative product solutions that seamlessly integrate to create highly flexible office interiors, including moveable walls, systems and storage products. Company operations are based across two manufacturing facilities totalling approximately 485,000 square feet. Visit INSCAPE at www.inscapesolutions.com. INSCAPE CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited)(in thousands) --------------------------------------------------------------------------- --------------------------------------------------------------------------- July 31, April 30, 2007 2007 --------------------------------------------------------------------------- ASSETS CURRENT Cash and cash equivalents $ 11,824 $ 4,551 Short-term investments 9,187 16,759 Accounts receivable 12,715 11,656 Inventory 4,935 4,250 Derivatives asset (Note 2) 1,838 - Prepaid expenses 1,053 742 Income taxes receivable 174 106 --------------------------------------------------------------------------- 41,726 38,064 CAPITAL ASSETS 27,037 27,542 OTHER ASSETS 1,522 1,519 FUTURE INCOME TAX ASSET 3,644 4,535 --------------------------------------------------------------------------- $ 73,929 $ 71,660 --------------------------------------------------------------------------- --------------------------------------------------------------------------- LIABILITIES CURRENT Accounts payable and accrued liabilities $ 12,374 $ 12,356 Income taxes payable - 95 --------------------------------------------------------------------------- 12,374 12,451 OTHER LONG-TERM OBLIGATIONS 769 955 FUTURE INCOME TAX LIABILITY 4,350 4,069 --------------------------------------------------------------------------- 17,493 17,475 --------------------------------------------------------------------------- SHAREHOLDERS' EQUITY SHARE CAPITAL 57,059 57,059 CONTRIBUTED SURPLUS 84 84 ACCUMULATED OTHER COMPREHENSIVE INCOME (Note 2) 1,221 - DEFICIT (1,928) (2,958) --------------------------------------------------------------------------- 56,436 54,185 --------------------------------------------------------------------------- $ 73,929 $ 71,660 --------------------------------------------------------------------------- --------------------------------------------------------------------------- INSCAPE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited)(in thousands , except per share amounts) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Three Months Ended July 31, 2007 2006 --------------------------------------------------------------------------- SALES $ 24,100 $ 20,478 COST OF GOODS SOLD 16,855 15,036 --------------------------------------------------------------------------- GROSS MARGIN 7,245 5,442 EXPENSES Selling, general and administrative 5,982 5,356 Interest income (271) (176) --------------------------------------------------------------------------- 5,711 5,180 --------------------------------------------------------------------------- INCOME BEFORE TAXES 1,534 262 INCOME TAXES (RECOVERY) (Note 7) 504 (60) --------------------------------------------------------------------------- NET INCOME $ 1,030 $ 322 --------------------------------------------------------------------------- BASIC AND DILUTED INCOME PER SHARE (Note 3) $ 0.07 $ 0.02 --------------------------------------------------------------------------- --------------------------------------------------------------------------- INSCAPE CORPORATION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three Months Ended July 31, 2007 (Unaudited)(in thousands) -------------------------------------------------------------- NET INCOME $ 1,030 OTHER COMPREHENSIVE INCOME, NET OF TAXES Realized gain on derivatives designated as cash flow hedges classified to income (net of taxes of $36) (71) Unrealized gain on derivatives designated as cash flow hedges (net of taxes of $261) 516 -------------------------------------------------------------- 445 -------------------------------------------------------------- COMPREHENSIVE INCOME, NET OF TAXES $ 1,475 -------------------------------------------------------------- -------------------------------------------------------------- INSCAPE CORPORATION CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Three Months Ended July 31, 2007 (Unaudited)(in thousands) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Accumu- lated Share Contributed Other Total Total Capital Surplus Compreh- Deficit AOCI and Shareholder's ensive Deficit Equity Income ("AOCI") --------------------------------------------------------------------------- --------------------------------------------------------------------------- BALANCE - April 30, 2007 $ 57,059 $ 84 $ - $ (2,958) $(2,958) $ 54,185 Opening balance adjustment for unrealized gain on cash flow hedges (net of taxes $392) 776 776 776 --------------------------------------------------------------------------- BALANCE - May 1, 2007 57,059 84 776 (2,958) (2,182) 54,961 Net Income 1,030 1,030 1,030 Realized gain on derivatives designated as cash flow hedges classified to income (net of taxes of $36) (71) (71) (71) Unrealized gain on derivatives designated as cash flow hedges (net of taxes of $261) 516 516 516 --------------------------------------------------------------------------- BALANCE - July 31, 2007 $ 57,059 $ 84 $ 1,221 $ (1,928) $ (707) $ 56,436 --------------------------------------------------------------------------- --------------------------------------------------------------------------- INSCAPE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Three Months Ended July 31, 2007 2006 --------------------------------------------------------------------------- NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING ACTIVITIES: OPERATING Net income $ 1,030 $ 322 Items not affecting cash: Amortization 1,210 1,139 Future income taxes (359) (515) Deferred expenses and other expenses (98) 50 Stock based compensation (108) (9) Loss (gain) on sale of capital assets - (7) --------------------------------------------------------------------------- 1,675 980 Changes in non-cash operating working capital items (1,313) (536) --------------------------------------------------------------------------- 362 444 --------------------------------------------------------------------------- INVESTING Short-term investments net redemption 7,572 2,310 Additions to capital assets (705) (856) Proceeds from sale of capital assets 44 53 --------------------------------------------------------------------------- 6,911 1,507 --------------------------------------------------------------------------- NET CASH INFLOW 7,273 1,951 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,551 1,472 --------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,824 $ 3,423 --------------------------------------------------------------------------- --------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS CONSIST OF: Cash $ 3,911 $ 3,179 Cash equivalents 7,913 244 --------------------------------------------------------------------------- $ 11,824 $ 3,423 --------------------------------------------------------------------------- --------------------------------------------------------------------------- SUPPLEMENTAL INFORMATION Income taxes paid $ 541 $ 198 Inscape Corporation Notes to the Interim Consolidated Financial Statements For periods ended July 31 Unaudited (in thousands except share and per share amounts) 1. BASIS OF PRESENTATION These unaudited interim consolidated financial statements (the "interim consolidated financial statements") have been prepared in accordance with Canadian generally accepted accounting principles. These interim financial statements do not include all of the disclosure requirements for annual consolidated financial statements, and accordingly, these statements should be read in conjunction with the consolidated financial statements for the year ended April 30, 2007 including the notes thereto. These interim consolidated financial statements contain all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the periods reported. 2. ACCOUNTING POLICIES These interim consolidated financial statements follow the same accounting policies as were used for the consolidated financial statements for the year ended April 30, 2007, except for the new accounting policies as noted below. On May 1, 2007 the Corporation adopted the following Canadian Institute of Chartered Accountants ("CICA") new accounting standards on recognition, measurement and presentation of financial instruments: (a) Section 1530 "Comprehensive Income" - "comprehensive income" is the change in equity of the Corporation during a period from transactions and other events from non-owner sources, which include net income from operations and other comprehensive income ("OCI"). Examples of items included in OCI are changes in fair value of available-for-sale financial assets and effective portion of changes in fair value of cash flow hedging instruments. OCI net of taxes is disclosed in the "Consolidated Statements of Comprehensive Income" for the three-month period ended July 31, 2007. (b) Section 3251 "Equity" - this standard describes the presentation of equity and changes in equity during an accounting period with respect to comprehensive income. As a result of the implementation of the standard, the "Consolidated Statements of Retained Earnings (Deficit)" has been reformatted and replaced by the "Consolidated Statements of Changes in Shareholders' Equity" to disclose separately the changes in the components of shareholders' equity. "Accumulated other comprehensive income" (the portion of comprehensive income not already included in net income) is presented as a separate line in shareholders' equity on the consolidated balance sheet. (c) Section 3855 "Financial Instruments, Recognition and Measurement" - a financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. This standard requires all financial instruments be classified according to their characteristics or management's intent or choice, with the corresponding measurement and the recognition of associated gains and losses implications as summarized below: --------------------------------------------------------------------------- Measurement subsequent Financial to initial Instrument Class recognition (1) Gains and Losses --------------------------------------------------------------------------- Recognized in net Held for trading Fair value income in the current period ---------------------------------------------------------- Recognized in net income in the period Held to maturity Amortized cost that the asset is derecognized or impaired Financial assets ---------------------------------------------------------- Recognized in net income in the period Loans and that the asset receivables Amortized cost is derecognized or impaired ---------------------------------------------------------- Recognized in OCI Available for sale Fair value until realized through disposal or impaired --------------------------------------------------------------------------- Recognized in net Held for trading Fair value income in the current period Financial ---------------------------------------------------------- liabilities Recognized in net income in the period Other liabilities Amortized cost that the liability is derecognized --------------------------------------------------------------------------- (1) All financial instruments, including derivatives designated in qualifying hedging relationships and any embedded derivatives, are initially measured at fair value. Upon adoption of this new accounting standard, the Corporation's financial assets and liabilities are classified as follows: --------------------------------------------------------------------------- Cash and cash equivalents and short-term investments Held for trading --------------------------------------------------------------------------- Accounts receivable Loans and receivables --------------------------------------------------------------------------- Accounts payable Other liabilities --------------------------------------------------------------------------- Other long-term obligations Other liabilities --------------------------------------------------------------------------- (d) Section 3861 "Financial instruments - Disclosure and Presentation" - this standard prescribes information that should be disclosed about financial instruments and non-financial derivatives. Under this standard, the accounting polices on financial instruments have been applied retroactively without restatement. Accordingly, the Corporation's comparative financial statements are not required to be restated. (e) Section 3865 "Hedges" - this standard establishes formal documentation, designation and effectiveness assessment as pre-requisites for application of hedge accounting. The Corporation enters into foreign exchange contracts to hedge its exposure to foreign currency risk on its accounts receivable from anticipated sales which are denominated in U.S. dollar. These contracts are designated as cash flow hedges with their fair values as at July 31, 2007 recorded as derivative assets on the consolidated balance sheet. The effective portion of the change in these fair values during the period is included in other comprehensive income ("OCI"). On the adoption of this standard, the Company had an unrealized gain on its cash flow hedges of $776 (net of taxes of $392) which was recorded as the opening accumulated OCI balance. During the three-month period ended July 31, 2007, realized gain of $71 (net of taxes of $36) was reclassified from accumulated OCI to net income. Unrealized gain of $516 (net of taxes of $261) was recorded to OCI of the period. The balance of accumulated OCI of $1,221 as at July 31, 2007 is expected to be fully reclassified to net income within the next 12 months, when the U.S. dollar denominated accounts receivable being hedged are recognized on the balance sheet. 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended July 31, Numerator 2007 2006 --------------------------------------------------------------------------- Net income for the quarter for basic and diluted earnings per share $ 1,030 $ 322 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Denominator 2007 2006 --------------------------------------------------------------------------- Weighted average number of shares outstanding for basic earnings per share 15,096,817 15,096,817 Weighted average number of shares outstanding for diluted earnings per share 15,120,316 15,096,817 --------------------------------------------------------------------------- --------------------------------------------------------------------------- Stock options for 524,500 shares were not included in the computation of diluted earnings per share for the three months ended July 31, 2007 (2006 - 727,000 shares) as they were anti-dilutive for the period. 4. SEGMENT INFORMATION The Company operates under one reporting segment, which is the design, manufacture and distribution of office systems and furniture. Three Months Ended July 31, 2007 2006 -------------------------------------------------------------------- Sales from United States $ 20,516 $ 17,585 Canada 3,337 2,513 Other 247 380 ------------------------------------------------------------------- $ 24,100 $ 20,478 -------------------------------------------------------------------- -------------------------------------------------------------------- July 31, April 30, 2007 2007 ------------------------------------------------------------------- Capital Assets Canada $ 25,564 $ 26,256 United States 1,473 1,286 ------------------------------------------------------------------- $ 27,037 $ 27,542 ------------------------------------------------------------------- ------------------------------------------------------------------- 5. PENSION EXPENSE Total pension expense relating to the various defined benefit plans for the three-month period ended July 31, 2007 is $82 (2006 - $148). 6. RESTRUCTURING COSTS AND ASSET IMPAIRMENT The table below shows changes in the liabilities incurred in the third and fourth quarters of fiscal 2005 relating to the discontinuance of manufacturing operations at its Scarborough, Ontario metal filing and seating facilities and the closing of New York showroom: Three Months Ended July 31, 2007 --------------------------------------------------------------------- Opening Ending balance Changes Payments Liability --------------------------------------------------------------------- Employee termination expenses $ - - - $ - Lease restructuring 699 (20) 55 624 --------------------------------------------------------------------- $ 699 (20) 55 $ 624 --------------------------------------------------------------------- --------------------------------------------------------------------- Three Months Ended July 31, 2006 --------------------------------------------------------------------- Opening Ending balance Changes Payments Liability --------------------------------------------------------------------- Employee termination expenses $ 39 - 21 $ 18 Lease restructuring 1,042 (26) 41 975 --------------------------------------------------------------------- $ 1,081 (26) 62 $ 993 --------------------------------------------------------------------- --------------------------------------------------------------------- The lease restructuring provision is expected to be completed in the first quarter of fiscal year 2011. 7. INCOME TAXES Income taxes for the three-month period ended July 31, 2007 include a net recovery of $107 relating to re-measurement of future income tax assets and future income tax liabilities as a result of Federal corporate income tax rate reductions which were enacted in June 2007 (2006 - $177).
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