Inscape Thursday announced its results of operations for the fourth quarter and full year ended April 30, 2021.
Total sales for the fourth quarter of fiscal 2021 were $8.1 million, compared to $14.4 million for the same period of fiscal 2020. The decline in the quarter, similar to other previous quarters in the fiscal, was primarily due to COVID-19 impacts in some major markets. In addition, during the fourth quarter the Walls plant was moved from Falconer, New York to Jamestown New York, resulting in a shut down for close to a month which impacted sales and shipments. Net income for the fourth quarter of fiscal 2021 was $0.5 million or positive $0.03 per diluted share, compared to net loss of $5.1 million or negative $0.36 per diluted share for fiscal 2020. Non-GAAP EBITDA for the fourth quarter was negative $1.3 million, compared to negative $4.0 million, for fiscal 2020.
Full year 2021 total sales were $38.2 million, compared to $75.8 million for fiscal 2020. The twelve month period ended with a net loss of $0.9 million or negative $0.06 per diluted share, compared to a net loss of $5.4 million or negative $0.38 per diluted share for fiscal 2020. Non-GAAP EBITDA for 2021 was positive $0.5 million, compared to negative $1.6 million for fiscal 2020.
Fourth Quarter Financial Highlights
(All comparisons are relative to the three month period ended April 30, 2020 unless otherwise stated):
Retirement benefit obligation decrease of $6.3 million related to favourable returns on the fair value of plan assets and actuarial gains
Revolving credit facility loan with FrontWell Capital Partners Inc. of $15.0 million was closed and the Company drew $8.0 million as of April 30, 2021
Tranche 2 of the US forgivable government loan was received in amount of $1.8 million (US $1.4 million)
Asset held for sale of $5.2 million disclosure related to the planned Holland Landing property sale and leaseback
Deferred tax assets of $2.6 million related to tax loss carry-forwards recognized due to sufficient positive evidence that they will be realized against expected profits in the foreseeable future
SG&A expenses of $5.9 million, a decrease of $0.7 million versus $6.6 million
EBITDA of ($1.3) million, compared to EBITDA of ($4.0) million
Gross profit margin of 7.6%, with gross profit down by $3.3 million, versus gross profit margin of 26.8%
Inventory write-downs of $0.2 million during the quarter
Full Year 2021 Financial Highlights
(All comparisons are relative to the full year ended ended April 30, 2020 unless otherwise stated):
SG&A expenses of $20.5 million, a decrease of $5.8 million versus $26.4 million due to less selling expenses resulting from lower sales volume and management actions to reduce costs
Government assistance from subsidies (including the forgivable loan) of $5.3 million
Cash on hand of $3.7 million as at April 30, 2021 and $2.8 million in restricted cash put forth as collateral security for certain derivative financial instruments
EBITDA of $0.5 million, compared to EBITDA of ($1.6) million
Gross profit margin of 18.2%, with gross profit down by $13.9 million, versus gross profit margin of 27.4%
Inventory write-downs of $1.5 million for the twelve month period
Gross profit margin of 22.1%, excluding inventory write-downs of $1.5 million
EBITDA of $2.0 million, excluding inventory write-down of $1.5 million
Sales in the fourth quarter and fiscal 2021 were 44.3% and 49.6% lower than the same periods of the previous year primarily related to the economic impact of COVID-19 pandemic, which resulted in both shipment delays and customer order pushouts in some of our major markets. In addition, during the fourth quarter the Walls plant sales were lower due to the plant relocation.
Gross profit margin for the fourth quarter and fiscal 2021 decreased by 19.2 and 9.2 percentage points, respectively, over the same periods last year as a result of the lower sales volume due to the economic impact of the COVID-19 pandemic. In addition, for the fourth quarter and fiscal year 2021, inventory totaling $0.2 million and $1.5 million, respectively, relating to discontinued product lines and obsolescence were written off. The Company continues to identify initiatives to achieve cost efficiencies and improved margins as sales levels return to normal. However, gross profit margins without the effects of the excess inventory write-offs would have been 9.7% for the fourth quarter and 22.1% for the twelve months period ending April 30, 2021.
SG&A for the fourth quarter and fiscal 2021 were 73.6% and 53.8% of sales, compared to 45.5% and 34.8% for the same periods of last year. Despite the higher ratio percentages, the $0.6 million and $5.8 million actual decrease in SG&A expenses resulted from workforce reductions, decrease in marketing initiatives and lower selling, travel and entertainment expenses, partially offset by the non-recurring severance expense of $0.5 million. Collectively, these actions are largely the results of measures adopted by management to manage expenses during COVID-19. In the current fiscal, lower sales volumes impacted the overall higher SG&A to sales ratio.
At the end of the quarter, the Company had cash totaling $3.7 million, restricted cash of $2.8 million set as collateral security for certain derivative financial instruments, $8 million drawn on the new credit facility with FrontWell Capital Partners Inc. and an unused authorized balance of over $6.0 million available.
Additional comments on the results:
“Fiscal Year 2021 results reflect a full year of operations impacted by the COVID-19 pandemic and, as such, any comparison to prior fiscal years is of little value. Instead, it’s important to highlight that Inscape has utilized this past fiscal year to position for the eventual recovery from the pandemic and implement the changes necessary to be a successful and growing enterprise. During the fiscal year, management successfully: (1) moved our NY state Walls plant to a new, lower cost premises; (2) eliminated surplus equipment and added a state-of-the-art laser turret press to our Holland Landing plant to improve our core manufacturing capabilities; (3) prepared for a different competitive landscape by re-assessing our competitive strengths and developed an execution plan to support both our Inscape brand and our Office Specialty brand for the new realities of the market; (4) reinvigorated new product plans to ensure relevant offerings are launched into the market during Fiscal Year 2022 and thereafter; and, (5) developed a framework to implement some of the necessary changes to the businesses core operating model and identified the other changes needed to occur in the early portion of the coming fiscal year to properly position the business for long term growth in sales and profitability. While we are pleased with the accomplishments to date, this work is not yet complete. Management continues to focus on realignment of costs while investing in both the right talent and technology to drive topline growth and profitability once the economic recovery becomes evident,” said Eric Ehgoetz, CEO.