Ennis, Inc. Reports Results For The Year And Quarter Ended February 28, 2014 And Sets Record Date For Annual Shareholder Meeting

Ennis, Inc. (the “Company"), (NYSE: EBF), today reported financial results for the quarter and fiscal year ended February 28, 2014. Highlights for the year include:
  • Consolidated sales increased 1.7%
    • Print sales increased $5.2 million
    • Apparel sales increased $3.7 million
  • Consolidated gross profit margin increased 320 basis points
    • Print gross profit margin increased 50 basis points
    • Apparel gross profit margin increased 790 basis points
  • Non-GAAP diluted EPS increased 42.1% to $1.35 per share, before impairment charge of $0.85 per share resulting in GAAP diluted EPS of $0.50 per share.

Financial Overview

The Company’s consolidated net sales for the quarter were $132.1 million compared to $123.6 million for the same quarter last year. Print sales increased 12.7% on a comparable quarter basis, from $79.8 million to $89.9 million. Apparel sales decreased 3.6% for the comparable quarter, from $43.9 million to $42.3 million. Consolidated gross profit margin ("margin") during the quarter remained level at 25.4% in comparison to last year’s quarter. On a quarter comparison basis, print margin decreased 120 basis points, from 29.6% to 28.4%, while apparel margin increased 140 basis points, from 17.6% to 19.0%. Apparel margin continued to improve due to lower input costs and higher production levels. Net earnings (loss) for the quarter decreased from $7.1 million, or 5.7% of net sales, for the quarter ended February 28, 2013 to ($14.5) million for the quarter ended February 28, 2014, due to a goodwill and trademark impairment charge of $24.2 million relating to the apparel division. Diluted earnings (loss) per share decreased from $0.27 for the quarter ended February 28, 2013 to ($0.55) for the quarter ended February 28, 2014. Excluding the impairment charge, non-GAAP earnings for the quarter would have been approximately $7.7 million, or approximately $0.30 per share.

For the fiscal year, consolidated net sales increased from $533.5 million for the year ended February 28, 2013 to $542.4 million for the year ended February 28, 2014, or an increase of 1.7%. Print sales for the year increased $5.2 million or 1.6%, from $334.7 million to $339.9 million, while apparel sales for the year increased $3.7 million or 1.9%, from $198.8 million to $202.5 million. Consolidated margin increased from 23.3% to 26.5% for the fiscal years ended 2013 and 2014, respectively. For the fiscal year by segment, print margin increased from 29.2% to 29.7%, and apparel margin increased from 13.2% to 21.1% due to lower input costs and increased production levels. Net earnings for the period decreased from $24.7 million, or 4.6% of net sales for the fiscal year ended February 28, 2013, to $13.2 million, or 2.4% of net sales for the fiscal year ended February 28, 2014, due to the goodwill and trademark impairment charge of $24.2 million in the fourth quarter. Diluted earnings per share decreased from $0.95 to $0.50 for each year, respectively. Excluding the impairment charge, non-GAAP net earnings for the year would have been approximately $35.3 million, or approximately $1.35 per diluted share.

Non-GAAP Reconciliations

The Company believes the non-GAAP financial measures of net earnings and diluted earnings per share on a proforma basis, excluding impairment, and EBITDA (EBITDA is calculated as net earnings before interest, taxes, depreciation, amortization, and impairment charge) provide 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.

Proforma Net Earnings and Earnings per Share ( dollars in thousands, except per share):

The following table reconciles proforma net earnings and proforma diluted earnings per share, non-GAAP financial measures, to the most comparable GAAP measures, net earnings and diluted earnings per share, to show the impact of impairment on reported earnings.
           
For the quarter ended February 28, 2014 For the year ended February 28, 2014
As         Proforma As         Proforma
Reported Impairment Results Reported Impairment Results
 
Earnings (loss) before
income taxes $ (12,105 ) $ (24,226 ) $ 12,121 $ 31,792 $ (24,226 ) $ 56,018
 
Income tax expense (benefit) 2,362 (2,066 ) 4,428 18,603 (2,066 ) 20,669
           
Net earnings (loss) $ (14,467 ) $ (22,160 ) $ 7,693 $ 13,189 $ (22,160 ) $ 35,349
 
Diluted earnings (loss) per share $ (0.55 ) $ (0.85 ) $ 0.30 $ 0.50 $ (0.85 ) $ 1.35
 

During the fourth quarter, the Company generated $16.6 million in EBITDA compared to $14.6 million for the comparable quarter last year. For the fiscal year ended February 28, 2014, the Company generated $71.5 million of EBITDA compared to $53.5 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 Year ended
February 28, February 28,
2014     2013 2014     2013
 
Net earnings (loss) $ (14,467 ) $ 7,074 $ 13,189 $ 24,715
Income taxes 2,362 3,980 18,603 13,903
Interest expense 459 322 1,268 1,528
Depreciation/amortization 4,026 3,271 14,219 13,384
Impairment of goodwill and trademarks   24,226     -     24,226     -  
EBITDA (non-GAAP) $ 16,606   $ 14,647   $ 71,505   $ 53,530  
 
% of sales 12.6 % 11.8 % 13.2 % 10.0 %
 

Keith Walters, Chairman, Chief Executive Officer and President, commented, “Overall our results before taking into account the impairment charge continue to show improvement over comparable periods. Our EBITDA was 12.6% for the quarter compared to 11.8% for the same quarter last year and 13.2% for the year compared to 10.0% for last year. Our apparel results continued to improve during the quarter, even though the impact of lower raw material costs over comparable quarters has all but dissipated. While we continue to make cost-side improvements, the apparel market continues to be extremely challenging, both from a volume and pricing perspective. Apparel volumes, during the quarter, continued to be softer than expected, especially on the East Coast and Mid-West. We attribute this weakness to the extreme weather conditions experienced across the country this winter. Due to this market softness, pricing pressures continued to be prevalent in the marketplace. Whether discounted pricing, which we believe is driven by a desire to maintain production volumes, coupled with overall softness in the marketplace, will continue into the next fiscal year is unknown. With respect to the print segment, our sales during the quarter were softer than expected. Combined with the impact of our recent acquisitions, these resulted in our print margin being down slightly during the quarter. Even so, our print margin continued to fall within its historical parameters. While the market continues to be challenging, we remain optimistic about the upcoming fiscal year on many fronts. We look forward to the impact of our acquisitions on next years’ operational results. Potential acquisition opportunities remain strong. Our apparel manufacturing facility continues to show improvement and we expect it to increase the contribution to our operating results as production levels continue to increase. While the apparel market continues to be challenging, it has recently shown signs of improving, so while there are still many unknowns about the upcoming year, we continue to be optimistic and will remain opportunistic.”

Other News: The Company announced today the Board of Directors has set the record date and meeting date for the Annual Shareholder Meeting. The Annual Meeting of Shareholders will be held on July 24, 2014, with a record date of May 27, 2014.

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,” “look forward to” 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.
`                
Condensed Financial Information
(In thousands, except share and per share amounts)
 
Three months ended Year ended

Condensed Operating Results
February 28, February 28,
2014 2013 2014 2013
Revenues $ 132,138 $ 123,638 $ 542,442 $ 533,506
Cost of goods sold   98,558     92,295   398,649     409,354  
Gross profit margin 33,580 31,343 143,793 124,152
Impairment of goodwill and trademarks 24,226 - 24,226 -
Operating expenses   21,045     19,817   86,403     83,759  
Operating income (loss) (11,691 ) 11,526 33,164 40,393
Other expense   414     472   1,372     1,775  
Earnings (loss) before income taxes (12,105 ) 11,054 31,792 38,618
Income tax expense   2,362     3,980   18,603     13,903  
Net earnings (loss) $ (14,467 ) $ 7,074 $ 13,189   $ 24,715  
 

Weighted average common shares outstanding
Basic   26,122,869     26,045,894   26,125,348     26,035,571  
Diluted   26,139,652     26,064,064   26,146,325     26,053,452  
 

Earnings (loss) per share
Basic $ (0.55 ) $ 0.27 $ 0.50   $ 0.95  
Diluted $ (0.55 ) $ 0.27 $ 0.50   $ 0.95  
 
February 28, February 28,

Condensed Balance Sheet Information
  2014     2013  
Assets
Current assets
Cash $ 5,316 $ 6,232
Accounts receivable, net 63,695 60,071
Inventories, net 130,095 109,698
Other   15,037     17,415  
  214,143     193,416  
Property, plant & equipment 91,565 91,913
Other   230,639     209,963  
$ 536,347   $ 495,292  
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 22,062 $ 22,256
Accrued expenses   19,815     20,783  
  41,877     43,039  
Long-term debt 105,500 57,500
Other non-current liabilities   26,035     33,537  
Total liabilities   173,412     134,076  
 
Shareholders’ equity   362,935     361,216  
$ 536,347   $ 495,292  
 
Year ended
February 28,

Condensed Cash Flow Information
  2014     2013  
Cash provided by operating activities $ 32,755 $ 49,957
Cash provided by (used in) investing activities (65,511 ) 1,195
Cash provided by (used in) financing activities 32,508 (55,215 )
Effect of exchange rates on cash   (668 )   (115 )
Change in cash (916 ) (4,178 )
Cash at beginning of period   6,232     10,410  
Cash at end of period $ 5,316   $ 6,232  

Copyright Business Wire 2010

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