Ennis, Inc. Reports Results for the Three and Nine Months Ended November 30, 2012

MIDLOTHIAN, Texas--()--Ennis, Inc. (the “Company"), (NYSE: EBF), today reported financial results for the three and nine months ended November 30, 2012.

Financial Overview

Our consolidated net sales were $129.0 million for the third quarter ended November 30, 2012 compared to $121.8 million for the third quarter ended November 30, 2011, or an increase of 5.9%. Print sales increased 17.8% for the quarter, from $69.2 million to $81.5 million. Apparel sales for the quarter declined by 9.9% (down 6.9% on units and down 3.0% on price) from $52.6 million to $47.4 million. Our consolidated gross profit margin ("margin") decreased from 24.8% to 23.7% for the quarters ended November 30, 2011 and November 30, 2012, respectively. Our print segment margin increased from 27.8% to 28.7%, while our apparel segment margin, which continues to be impacted by higher cotton costs residing in finished goods, decreased from 20.8% to 15.2% for the quarter. As a result, our net earnings decreased from $6.9 million, or 5.7% of net sales, for the quarter ended November 30, 2011 to $6.2 million, or 4.8% of net sales, for the quarter ended November 30, 2012. Diluted earnings per share decreased from $0.27 to $0.24 for the quarters ended November 30, 2011 and November 30, 2012, respectively.

For the nine month period, net sales increased from $395.5 million to $409.9 million, or 3.6%. Print sales for the nine month period were $254.9 million, compared to $205.5 million for the same period last year, an increase of $49.4 million, or 24.0%. Apparel sales for the nine month period were $155.0 million, compared to $189.9 million for the same period last year, or a decrease of 18.4% (down 12.7% on units and down 5.7% on price). Overall our margin decreased from 26.3% to 22.6% for the nine months ended November 30, 2011 and 2012, respectively. Our print margin increased during the period from 28.4% to 29.1%, while our apparel margin decreased from 24.0% to 12.0%, again due to higher cost of cotton in finished goods. Net earnings for the period decreased from $28.0 million, or 7.1% of net sales, to $17.6 million, or 4.3% of net sales, for the nine months ended November 30, 2011 and 2012, respectively. Diluted earnings per share decreased from $1.08 to $0.68 for the nine months ended November 30, 2011 and 2012, respectively.

During the third quarter, the Company generated $13.2 million in EBITDA (a non-GAAP financial measure calculated as net earnings before interest, taxes, depreciation, and amortization) compared to $14.5 million for the comparable quarter last year. For the nine month period ended November 30, 2012, the Company generated $38.9 million of EBITDA compared to $55.3 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):

    Three months ended     Nine months ended
November 30, November 30,
2012   2011 2012   2011
 
Net earnings $ 6,170 $ 6,892 $ 17,641 $ 28,028
Income taxes 3,330 4,118 9,923 16,111
Interest expense 335 405 1,206 1,887
Depreciation/amortization   3,330   3,035   10,113   9,295
EBITDA (non-GAAP) $ 13,165 $ 14,450 $ 38,883 $ 55,321
 

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 financial covenants and an interest rate metric in the Company’s credit facility.

Keith Walters, Chairman, Chief Executive Officer and President, commented by stating, “Our apparel results for the quarter continued to be impacted by the higher residual cost of cotton remaining in our finished goods inventory. As we have previously stated, we attempted to match the sale side price with the cost side in selling through this high cost inventory rather than reducing our selling price significantly below our imbedded costs and thus allowing us to take a loss in one quarter, as some of our competitors. We continue to believe this was the right approach with the overall impact associated with this over-time approach being lower than if we had taken a loss in one quarter. However, at this point, most of the higher cost cotton has made its way through our finished goods inventory and the divergence between the current purchase cost of cotton and the average cost in our finished goods inventory has returned to a closer spread. We expect to see improvement in our apparel margins in the quarters to come, absent unforeseen economic disruption. Our print gross profit margin continues to remain healthy; however, legacy selling, general and administrative costs associated with our recent acquisitions remain as we integrate these locations into our ERP systems. We believe our system conversions are going well and will provide a solid basis for lowering the overall cost structures of these plants in the future. I continue to feel positive about fiscal year 2014, especially now that our apparel division has worked through their higher cotton costs. However, I am, as most, concerned with economic discussions currently occurring in Washington D.C. and how ultimate decisions may impact next year. There remain many economic uncertainties for many businesses that our government needs to provide clarity. How will their actions or inactions impact businesses, consumers and our economy in general over the short and long term is still to play out. Nevertheless, we will continue to stay vigilant to the task at hand.”

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 29, 2012, and its subsequent quarterly reports on Form 10-Q for its 2013 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.

 
 
Ennis, Inc.
Condensed Financial Information
(In thousands, except per share amounts)
 
      Three months ended       Nine months ended

Condensed Operating Results

November 30, November 30,
2012     2011 2012     2011
Revenues $ 128,996 $ 121,846 $ 409,868 $ 395,488
Cost of goods sold   98,385   91,663   317,059     291,510  
Gross profit margin 30,611 30,183 92,809 103,978
Operating expenses   20,594   19,086   63,942     58,265  
Operating income 10,017 11,097 28,867 45,713
Other expense   517   87   1,303     1,574  
Earnings before income taxes 9,500 11,010 27,564 44,139
Income tax expense   3,330   4,118   9,923     16,111  
Net earnings $ 6,170 $ 6,892 $ 17,641   $ 28,028  
 

Earnings per share

Basic $ 0.24 $ 0.27 $ 0.68   $ 1.08  
Diluted $ 0.24 $ 0.27 $ 0.68   $ 1.08  
 
November 30, February 29,

Condensed Balance Sheet Information

  2012     2012  
Assets
Current assets
Cash $ 9,234 $ 10,410
Accounts receivable, net 57,996 58,790
Inventories, net 109,481 132,572
Other   16,850     17,438  
  193,561     219,210  
Property, plant & equipment 93,147 99,516
Other   210,799     213,236  
$ 497,507   $ 531,962  
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 20,873 $ 27,924
Accrued expenses   19,212     22,317  
  40,085     50,241  
Long-term debt 60,000 90,000
Other non-current liabilities   32,972     31,846  
Total liabilities   133,057     172,087  
 
Shareholders’ equity   364,450     359,875  
$ 497,507   $ 531,962  
 
Nine months ended
November 30,

Condensed Cash Flow Information

  2012     2011  
Cash provided by operating activities $ 40,635 $ 26,964
Cash provided by (used in) investing activities 2,030 (11,061 )
Cash used in financing activities (43,678 ) (11,895 )
Effect of exchange rates on cash   (163 )   448  
Change in cash (1,176 ) 4,456
Cash at beginning of period   10,410     12,305  
Cash at end of period $ 9,234   $ 16,761  

Contacts

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

Sharing

Contacts

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