Ennis Reports Improved Print Margins During First Quarter
MIDLOTHIAN, TX—June 23, 2014—Ennis Inc. reported financial results for the first quarter ended May 31, 2014.
The company’s consolidated net sales for the quarter were $141.2 million, an increase of $2.7 million or 1.9 percent, from $138.5 million for the same quarter last year. At the segment level, print sales were up $7.0 million, or 8.6 percent, while apparel sales declined $4.2 million or 7.4 percent in comparison to the same quarter last year. Consolidated gross profit margin (“margin”) decreased from 25.9 percent for the same quarter last year to 25.1 percent for this year’s quarter. At the segment level, print margin increased 80 basis points, from 29.7 percent to 30.5 percent, due to improved operational efficiencies, while apparel margin decreased 430 basis points, from 20.3 percent to 16.0 percent, due to lower selling prices and slightly higher input costs. As a result, net earnings decreased slightly from $8.5 million, or 6.1 percent of net sales, for the previous year’s quarter to $8.0 million, or 5.7 percent of net sales, for this year’s quarter. Diluted earnings per share decreased from $0.33 for the 2013 quarter to $0.31 for the 2014 quarter.
The company believes the non-GAAP financial measure EBITDA (EBITDA is calculated as net earnings before interest, taxes, depreciation, and amortization) 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. While management believes this non-GAAP financial measure is useful in evaluating Ennis, this information should be considered as supplemental in nature and not as a substitute for, or superior to, the related financial information prepared in accordance with GAAP.
During the quarter, the company generated $17.3 million in EBITDA compared to $17.0 million for the comparable quarter 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 May 31,
|EBITDA (non-GAAP)|| $17,287
“Overall we are pleased with our results for the quarter," remarked Keith Walters, chairman, CEO and president. "Our print margins improved during the quarter as we continued to make operational improvements at our recent acquisitions." The apparel market continues to be very challenging, he noted. The unusually cold winter seemed to have further stressed the retail market. "While the market had some improvement as the quarter progressed, pricing continued to be extremely competitive, especially given the recent increases in raw material and other input costs."
"Based on the previous quarter, we planned for some of the market dynamics experienced; but what was not anticipated was the extent of the negative retail environment, which impacted our ability to achieve projected contributions from our apparel operations," Walters shared. "However, we did see some improvement in the retail market as our quarter progressed. Whether this will continue is unknown." In addition, he said, whether the discounted pricing prevalent in the marketplace will continue throughout the year is also unknown. "We believe we are well positioned to make positive strides forward during the remainder of the year. On the print front, we continue to be pleased with the progression of our most recent print acquisitions and look forward to the integration and contribution of our recent acquisition of Sovereign Business Forms and related entities," he said. "Overall, while the market continues to be challenging on the apparel side, we remain optimistic about the remainder of the fiscal year.”
About Ennis Inc.
Ennis Inc. 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.
Source: Ennis Inc.