Ennis, Inc. (the “Company"), (NYSE: EBF), today reported financial results for the three and six months ended August 31, 2011.

Financial Overview

For the quarter, consolidated net sales decreased by $12.6 million, or 8.8%, from $143.0 million for the quarter ended August 31, 2010 to $130.4 million for the quarter ended August 31, 2011. Print sales for the quarter were stable at $69.2 million, compared to $69.1 million for the same quarter last year. Due to unexpected softness in the market, Apparel sales for the quarter ended August 31, 2011 were $61.2 million, compared to $73.9 million for the same quarter last year, or a decrease of 17.2%. Overall gross profit margins ("margins") decreased from 27.8% to 26.1% for the quarters ended August 31, 2010 and August 31, 2011, respectively. Print margins increased during the period from 28.2% to 28.6%, while Apparel margins due to higher input costs decreased from 27.4% to 23.4%. Net earnings for the quarter decreased from $12.1 million, or 8.5% of sales, for the quarter ended August 31, 2010 to $9.7 million, or 7.4% of sales, for the quarter ended August 31, 2011. Diluted EPS decreased from $0.47 per share to $0.37 per share for the quarters ended August 31, 2010 and August 31, 2011, respectively.

For the six month period, net sales decreased from $283.8 million for the six months ended August 31, 2010 to $273.6 million for the six months ended August 31, 2011, or 3.6%. Print sales for the period again remained relatively stable at $136.3 million, compared to $136.9 million for the same period last year. Apparel sales for the period were $137.3 million, compared to $146.8 million for the same period last year, or a decrease of 6.5%. Overall margins decreased from 28.9% to 27.0% for the six months ended August 31, 2010 and 2011, respectively. Print margins decreased slightly during the period from 29.2% to 28.7%, while Apparel margins decreased from 28.5% to 25.3%, again due to higher raw material costs. Net earnings for the period, decreased from $25.2 million, or 8.9% of sales, for the six months ended August 31, 2010 to $21.1 million, or 7.7% of sales, for the six months ended August 31, 2011. Diluted earnings decreased from $0.97 per share to $0.81 per share for the six months ended August 31, 2010 and 2011, respectively.

The Company, during the quarter, generated $19.0 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) compared to $22.2 million for the comparable quarter last year. For the six month period ended August 31, 2011, the Company generated $40.9 million of EBITDA during the period, compared to $46.0 million for the comparable period last year.

           
Three months ended Six months ended
August 31, August 31,
2011 2010 2011 2010
 
Earnings before income taxes $ 15,279 $ 19,100 $ 33,129 $ 39,636
Interest expense 664 321 1,482 758
Depreciation/amortization   3,061   2,793   6,260   5,569
EBITDA (non-GAAP) $ 19,004 $ 22,214 $ 40,871 $ 45,963
 

Keith Walters, Chairman, Chief Executive Officer and President, commented by saying, “Overall the operational results for the quarter were as expected. Print continued to deliver steady revenue levels and operational results, while margins in our Apparel division were compressed some, due to higher raw material costs. Our Apparel raw material cost, on a comparable basis, was up approximately 50%, with continued increases expected over the next six months as the impact of the higher priced cotton makes its way through inventory. What wasn’t expected was the softness in the market during the last quarter. Whether this is just a temporary situation or one we will have to manage for an extended period of time is unknown. As we indicated previously, manufacturers’ ability to navigate through this period of higher cotton costs was dependent upon many factors, one being the continued economic recovery. The current softness in the marketplace will make this an even more challenging task for all concerned. The new manufacturing facility in Agua Prieta, MX is fully operational and all production has now been transitioned from our Anaheim, CA facility to this facility. So while many challenges have been negotiated to date, many challenges and uncertainties continue to mark the short term landscape. However, as always, we will remain vigilant to the task at hand.”

About Ennis

Ennis, Inc. ( www.ennis.com) is primarily engaged in the production of 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: the Print Segment ("Print") and Apparel Segment ("Apparel"). The Print Segment is primarily engaged in the business of manufacturing and selling 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. The Company undertakes no obligation to revise any forward-looking statements or to update them to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events. Readers 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 Six months ended

Condensed Operating Results
August 31, August 31,
2011 2010 2011 2010
Revenues $ 130,384 $ 143,034 $ 273,642 $ 283,775
Cost of goods sold   96,290   103,326   199,847     201,887  
Gross profit margin 34,094 39,708 73,795 81,888
Operating expenses   18,322   20,276   39,179     41,523  
Operating income 15,772 19,432 34,616 40,365
Other expense   493   332   1,487     729  
Earnings before income taxes 15,279 19,100 33,129 39,636
Income tax expense   5,567   6,971   11,993     14,467  
Net earnings $ 9,712 $ 12,129 $ 21,136   $ 25,169  
 

Earnings per share
Basic $ 0.37 $ 0.47 $ 0.82   $ 0.97  
Diluted $ 0.37 $ 0.47 $ 0.81   $ 0.97  
 
August 31, February 28,

Condensed Balance Sheet Information
  2011     2011  
Assets
Current assets
Cash $ 14,307 $ 12,305
Accounts receivable, net 52,513 58,359
Inventories, net 120,789 100,363
Other   11,843     11,371  
  199,452     182,398  
Property, plant & equipment 92,285 93,661
Other   196,355     197,669  
$ 488,092   $ 473,728  
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 23,877 $ 18,868
Accrued expenses 22,679 27,644
Current portion of long-term debt   50,000     586  
  96,556     47,098  
Long-term debt - 50,000
Deferred credits   29,575     28,947  
Total liabilities   126,131     126,045  
 
Shareholders’ equity   361,961     347,683  
$ 488,092   $ 473,728  
 
Six months ended
August 31,

Condensed Cash Flow Information
  2011     2010  
Cash provided by operating activities $ 12,744 $ 27,507
Cash used in investing activities (3,965 ) (23,238 )
Cash used in financing activities (7,860 ) (8,024 )
Effect of exchange rates on cash   1,083     (315 )
Change in cash 2,002 (4,070 )
Cash at beginning of period   12,305     21,063  
Cash at end of period $ 14,307   $ 16,993  

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