Ennis, Inc. Reports Results for the Three and Six Months Ended August 31, 2013

Apparel Segment Continues Strong Positive Movement

Business Wire

MIDLOTHIAN, Texas--(BUSINESS WIRE)--

Ennis, Inc. (the “Company"), (EBF), today reported financial results for the three and six months ended August 31, 2013. Highlights for the quarter include:

  • Consolidated gross profit margin increased 260 basis points for the quarter and 440 basis points for the period.
    • Apparel gross profit margin increased 870 basis points for the quarter and 1,110 basis points for the period.
  • Diluted EPS increased 31.0% to $0.38 per share for the quarter and 59.1% to $0.70 per share for the period.

Financial Overview

The Company’s consolidated net sales for the quarter were $135.3 million compared to $138.3 million for the same quarter last year. Print sales were down 8.2% on a comparable quarter basis, from $86.1 million to $79.0 million. Apparel sales increased 7.6% (volume up 12.7% and selling price per unit down 4.9%) for the comparable quarter, from $52.3 million to $56.3 million. Consolidated gross profit margin ("margin") for the quarter increased 260 basis points from 24.5%, for the same quarter last year, to 27.1%. For a quarter comparison basis, print margin remained relatively stable at 30.0% plus, while apparel margin increased from 14.4% to 23.1%. Apparel margin continued to increase on both a comparable and sequential quarter basis, due to lower input costs and higher production levels. As a result, net earnings increased from $7.6 million, or 5.5% of net sales, for the quarter ended August 31, 2012 to $9.8 million, or 7.2% of net sales, for the quarter ended August 31, 2013. Diluted earnings per share increased 31.0% from $0.29 for the 2012 quarter to $0.38 for the 2013 quarter.

For the six month period, net sales decreased from $280.9 million to $273.8 million, or 2.5%. Print sales for the six month period were $160.4 million, compared to $173.4 million for the same period last year, a decrease of $13.0 million, or 7.5%. Apparel sales for the six month period were $113.4 million, compared to $107.5 million for the same period last year, or an increase of $5.9 million or 5.5% (volume up 11.6% and price down 6.1%). The consolidated margin increased from 22.1% to 26.5% for the six months ended August 31, 2012 and 2013, respectively. Print margin increased during the period from 29.3% to 29.9%, as a result of the elimination of duplicative costs associated with the integration of acquisitions. Apparel margin increased 1,110 basis points from 10.6% to 21.7% during the period, due to lower input costs and increased production levels. Net earnings increased from $11.5 million, or 4.1% of net sales, for the six months ended August 31, 2012 to $18.3 million, or 6.7% of net sales, for the six months ended August 31, 2013. Diluted earnings per share increased 59.1% from $0.44 to $0.70 for the six months ended August 31, 2012 and 2013, respectively.

During the quarter, the Company generated $19.0 million in EBITDA (a non-GAAP financial measure calculated as net earnings before interest, taxes, depreciation, and amortization) compared to $15.7 million for the comparable quarter last year. For the six month period ended August 31, 2013, the Company generated $35.9 million of EBITDA compared to $25.7 million for the comparable period last year.

The following table reconciles EBITDA, a non-GAAP financial measure, to the most comparable GAAP measure, net earnings (dollars in thousands):

Non-GAAP to GAAP Reconciliation
               

Three months ended

Six months ended
August 31, August 31,
  2013     2012     2013     2012  
 
Net earnings $ 9,801 $ 7,592 $ 18,307 $ 11,471
Income taxes 5,754 4,364 10,751 6,593
Interest expense 216 402 467 871
Depreciation/amortization   3,198     3,342     6,417     6,783  
EBITDA (non-GAAP) $ 18,969   $ 15,700   $ 35,942   $ 25,718  
 
% of sales 14.0 % 11.3 % 13.1 % 9.2 %
 

The Company believes the non-GAAP financial measure of EBITDA provides important supplemental information to both management and investors regarding financial and business trends used in assessing its results of operations. The Company believes adding back the specified items to net earnings provides a more meaningful comparison to the corresponding reported periods and internal budgets and forecasts, provides management with a more relevant measurement of operating performance and is more useful in assessing management performance. In addition, EBITDA is a component of the financial covenants and an interest rate metric in the Company’s credit facility.

Keith Walters, Chairman, Chief Executive Officer and President, commented by stating, “Overall we are pleased with our results for the quarter. Our apparel results continued to improve on both a sequential and comparative basis, as lower input costs of manufacturing and raw materials are favorably impacting their operational results. We realized a 270 basis point sequential margin improvement last quarter and a 280 basis point sequential margin improvement this quarter in our apparel margins. We would expect our apparel margin to continue to improve as our operational efficiencies improve as production levels increase. While the overall apparel market continues to be challenging, both from a pricing and volume perspective, we are seeing some pricing stability in the marketplace. Our print margin continues to remain healthy improving 30 basis points sequentially and 60 basis points for the period, as we continue to integrate acquisitions. We feel positive about the quarter and the remainder of the year.”

About Ennis

Ennis, Inc. (www.ennis.com) is primarily engaged in the production and sale of business forms, apparel and other business products. The Company is one of the largest private-label printed business product suppliers in the United States. Headquartered in Midlothian, Texas, the Company has production and distribution facilities strategically located throughout the United States of America, Mexico and Canada, to serve the Company’s national network of distributors. The Company, together with its subsidiaries, operates in two business segments: print and apparel. The print segment manufactures and sells business forms, other printed business products, printed and electronic media, presentation products, flex-o-graphic printing, advertising specialties and Post-it® Notes, internal bank forms, plastic cards, secure and negotiable documents, envelopes and other custom products. The apparel segment manufactures T-Shirts and distributes T-Shirts and other active-wear apparel through nine distribution centers located throughout North America.

Safe Harbor Under The Private Securities Litigation Reform Act of 1995

Certain statements contained in this press release that are not historical facts are forward-looking statements that involve a number of known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. The words “anticipate,” “preliminary,” “expect,” “believe,” “intend” and similar expressions identify forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for such forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. These statements are subject to numerous uncertainties, which include, but are not limited to, the Company’s ability to effectively manage its business functions while growing its business in a rapidly changing environment, the Company’s ability to adapt and expand its services in such an environment, the variability in the prices of paper and other raw materials. Other important information regarding factors that may affect the Company’s future performance is included in the public reports that the Company files with the Securities and Exchange Commission, including but not limited to, its Annual Report on Form 10-K for the fiscal year ending February 28, 2013, and its subsequent quarterly reports on Form 10-Q for its 2014 fiscal year. The Company does not undertake, and hereby disclaims, any duty or obligation to update or otherwise revise any forward-looking statements to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events, although its situation and circumstances may change in the future. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The inclusion of any statement in this release does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material.

 
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Condensed Financial Information
(In thousands, except share and per share amounts)
                 
Three months ended Six months ended

Condensed Operating Results

August 31, August 31,
2013 2012   2013     2012  
Revenues $ 135,288 $ 138,344 $ 273,754 $ 280,872
Cost of goods sold   98,629   104,395   201,300     218,674  
Gross profit margin 36,659 33,949 72,454 62,198
Operating expenses   20,835   21,326   43,033     43,348  
Operating income 15,824 12,623 29,421 18,850
Other expense   269   667   363     786  
Earnings before income taxes 15,555 11,956 29,058 18,064
Income tax expense   5,754   4,364   10,751     6,593  
Net earnings $ 9,801 $ 7,592 $ 18,307   $ 11,471  
 

Weighted average common shares outstanding

Basic   26,102,129   25,992,505   26,078,188     25,984,188  
Diluted   26,128,655   26,011,143   26,098,420     26,003,583  
 

Earnings per share

Basic $ 0.38 $ 0.29 $ 0.70   $ 0.44  
Diluted $ 0.38 $ 0.29 $ 0.70   $ 0.44  
 
August 31, February 28,

Condensed Balance Sheet Information

  2013     2013  

Assets

Current assets
Cash $ 17,681 $ 6,232
Accounts receivable, net 59,080 60,071
Inventories, net 100,576 109,698
Other   13,945     17,415  
  191,282     193,416  
Property, plant & equipment 87,784 91,913
Other   208,213     209,963  
$ 487,279   $ 495,292  

Liabilities and Shareholders' Equity

Current liabilities
Accounts payable $ 22,495 $ 22,256
Accrued expenses   20,962     20,783  
  43,457     43,039  
Long-term debt 35,000 57,500
Other non-current liabilities   33,985     33,537  
Total liabilities   112,442     134,076  
 
Shareholders’ equity   374,837     361,216  
$ 487,279   $ 495,292  
 
Six months ended
August 31,

Condensed Cash Flow Information

  2013     2012  
Cash provided by operating activities $ 40,104 $ 29,360
Cash provided by (used in) investing activities (1,204 ) 2,889
Cash used in financing activities (27,043 ) (29,111 )
Effect of exchange rates on cash   (408 )   (343 )
Change in cash 11,449 2,795
Cash at beginning of period   6,232     10,410  
Cash at end of period $ 17,681   $ 13,205  

Contact:
Ennis, Inc.
Mr. Keith S. Walters, 972-775-9801
Chairman, Chief Executive Officer and President
or
Mr. Richard L. Travis, Jr., 972-775-9801
CFO, Treasurer and Principal Financial and Accounting Officer
or
Mr. Michael D. Magill, 972-775-9801
Executive Vice President and Secretary
or
Fax: 972-775-9820
www.ennis.com
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