Inscape Corporation Announces Third Quarter Results

Business Wire, March 10, 2005

HOLLAND LANDING, Ontario -- Peter Brunelle, President and Chief Executive Officer of Inscape (TSX:INQ.SV), a leading designer, manufacturer and distributor of office furniture solutions, announced the following financial results for the quarter ended January 31, 2005:

INSCAPE
                       Summary of Financial Results
               (millions, except EPS and number of shares)

                         3-Months Ended    3-Months Ended
                       January 31, 2005  January 31, 2004
                       (Q3, Fiscal 2005) (Q3, Fiscal 2004)    Change
                      -----------------------------------------------
                                             (As restated)

Revenue                          $ 30.4            $ 27.5      10.2%
Gross Margin                        8.7               8.4       2.6%
Selling, General &
 Administrative expenses            7.6               7.5       1.7%
Net Income, prior to
 restructuring costs and
 revaluation of future
 income taxes                       0.9               0.9
Restructuring costs (after-tax)    -8.8                 -
Revaluation of future
 income taxes                         -              -0.7(b)
Net income                         -7.9               0.2
Earnings Per Share (EPS)         $-0.52(a)         $ 0.02

Weighted average
 number of shares                15,097            15,097
(in thousands)

                        9-Months Ended     9-Months Ended
                      January 31, 2005   January 31, 2004     Change
                      -----------------------------------------------

Revenue                         $ 76.4             $ 91.4     -16.4%
Gross Margin                      19.4               30.5     -36.5%
Selling, General &
 Administrative expenses          22.5               24.8     - 9.2%
Net Income, prior to
 restructuring costs and
 revaluation of future
 income taxes                     -1.7                4.5    -219.1%
Restructuring costs (after-tax)   -8.8(a)            -1.5
Revaluation of future
 income taxes                        -               -0.7(b)
Net Income                       -10.5                2.3
Earnings Per Share (EPS)       $ -0.70(a)          $ 0.15(c)

Weighted average number
 of shares                      15,097             15,097
(in thousands)

(a) Reflects the impact of restructuring costs of $0.58 per share
   (pre-tax restructuring costs were $9.9 million).

(b) During the quarter, future income taxes were revalued to reflect
    the new Ontario income tax rates. This resulted in an expense of
    $0.7 million and had an impact of $0.05 per share.
(c) Reflects the impact of restructuring costs of $0.10 per share
   (pre-tax restructuring costs were $2.2 million) and revaluation
    of future income taxes of $0.05 per share.

Commentary and Outlook

"I am pleased with the improvement in Inscape's financial results during the third quarter", said Peter Brunelle, CEO of Inscape Corporation. "We have taken and continue to take the necessary steps to restructure the business to reflect current market realities. While we recognize that there is always more to do, we have a sound business and I am excited about our future." With respect to the near term outlook, the Business and Institutional Furniture Manufacturer's Association ("BIFMA") anticipates that shipments in the first calendar quarter of 2005 will be 12.5% lower than the fourth quarter of 2004 and 5.4% higher than the same quarter of 2004. Based on current order input levels, Inscape anticipates that fourth quarter revenues may be lower than the fourth quarter of fiscal 2004. Earnings in the fourth quarter of fiscal 2005 will also be adversely impacted by the effect of the stronger Canadian dollar and restructuring costs related to the New York showroom.

Restructuring initiative

As announced in December 2004, Inscape decided to discontinue its seating product line. Third quarter earnings include a one-time pre-tax charge of approximately $1.8 million with respect to this decision. This charge relates to the write-down of manufacturing assets and inventory related to this product line.Seating has always been a minor part of Inscape's business and therefore this discontinuance will have minimal impact on the Company's consolidated earnings on a go forward basis.

During December 2004, Inscape also announced its decision to pursue a new business model in New York that is expected to generate additional sales in this market for Inscape. This decision also allows the Company to vacate its existing showroom in New York. The Company anticipates vacating the showroom by April 30, 2005. During the third quarter, Inscape recorded pre-tax costs of $0.3 million, with respect to the accelerated depreciation of leasehold improvements at this showroom. During the fourth quarter of fiscal 2005, the Company will record an additional $0.4 million of accelerated depreciation. The Company will also record pre-tax costs of $1.3 million in connection with vacating this showroom as current rental rates for this location are lower than Inscape's lease rate. This cost will be recognized in the period the Company ceases using the showroom, which is anticipated to be during the fourth quarter of fiscal 2005. Assuming that the Company is able to sub-lease this space, it will reduce pre-tax expenses by approximately U.S. $0.4 million annually.