Ennis, Inc. Reports Results For The Three And Six Months Ended August 31, 2016 And Declares Quarterly Dividend

Ennis, Inc. (the "Company"), (NYSE: EBF), today reported financial results for the three and six months ended August 31, 2016. Highlights include:
  • Gross profit margin on continuing operations increased slightly from 29.5% to 29.6% on a sequential quarter basis.
  • Diluted earnings per share from continuing operations remained constant at $0.26 on a sequential quarter basis, but declined from $0.37 for the comparative quarter last year and declined from $0.72 to $0.52 for the comparable six month period.
  • Adjusted diluted earnings per share from continuing operations (a non-GAAP financial measure) was $0.35 for the quarter and $0.64 for the six month period, compared to $0.37 and $0.72 for the comparative periods last year.

Financial Overview

The Company's net sales from continuing operations for the quarter ended August 31, 2016 were $91.2 million compared to $100.5 million for the same quarter last year, a decrease of 9.3%. Gross profit margin ("margin") for continuing operations was $27.0 million for the quarter, or 29.6%, as compared to 29.5% for the sequential quarter and 31.2% for the same quarter last year. Diluted earnings per share from continuing operations for the quarter were $0.26, compared to $0.37 for the same quarter last year. During the quarter our operational results continued to be impacted by the relocation costs of our Folder Express operation and a $2.3 million charge for higher than normal medical expenses incurred during the quarter. Without the impact of these items, on a non-GAAP basis, our adjusted net earnings from continuing operations would have been $9.0 million and our adjusted earnings per share from continuing operations would have been $0.35 per diluted share.

The Company's net sales from continuing operations for the six month period were $181.7 million compared to $197.2 million for the same period last year, a decrease of 7.9%. Margin for continuing operations was $53.7 million, or 29.6%, as compared to $61.3 million, or 31.1% for the six month period ended August 31, 2016 and August 31, 2015, respectively. Diluted earnings per share from continuing operations for the six month period were $0.52, compared to $0.72 for the same period last year. Earnings from discontinued operations during the six month period were $0.10, compared to $0.07 for the same period last year. The combined results for continued and discontinued operations were $0.62 per diluted share for the period compared to $0.79 for the same period last year. The net loss arising from the sale of the Company's apparel operations during the six month period, net of tax, was $26.0 million, or ($1.01) per share, which included the write-off of the balance of foreign currency translation adjustments of $16.0 million, or $10.3 million, net of taxes. As a result, the Company realized a net loss of ($10.1) million, or ($0.39) per diluted share compared to net earnings of $20.2 million, or $0.79 per diluted share for the six months ended August 31, 2016 and August 31, 2015, respectively. Without the impact of the Folder Express relocation and the higher than normal medical expenses, on a non-GAAP basis, our adjusted net earnings from continuing operations would have been $16.6 million and our adjusted earnings per share from continuing operations would have been $0.64 per diluted share.

Non-GAAP Reconciliations

The Company believes the non-GAAP financial measure of EBITDA (EBITDA is calculated as net earnings from continuing operations 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 yields metrics which are 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 second quarter, the Company generated EBITDA from continuing operations of $14.2 million compared to $18.4 million for the comparable quarter last year. For the six month period ended August 31, 2016, the Company generated $27.9 million of EBITDA from continuing operations compared to $35.2 million for the comparable period last year.

The following table reconciles EBITDA from continuing operations, a non-GAAP financial measure, to the most comparable GAAP measure, net earnings from continuing operations (dollars in thousands).
         
Reconciliation of Non-GAAP to GAAP measure ( dollars in thousands):
       
Three months ended Six months ended
August 31, August 31,
2016 2015 2016 2015
 
Net earnings from continuing operations $ 6,784 $ 9,611 $ 13,467 $ 18,374
Income tax expense 3,981 5,644 7,906 10,791
Interest expense 231 3 233 6
Depreciation and amortization   3,181     3,117     6,323     6,055  
EBITDA from continuing operations (non-GAAP) $ 14,177   $ 18,375   $ 27,929   $ 35,226  
 
% of sales 15.5 % 18.3 % 15.4 % 17.9 %
 

The above table does not include the impact of the additional medical reserve charge or the impact of our Folder Express relocation. Without these items during the quarter and six month period, our adjusted EBITDA would have been $17.6 million, or 19.3% for the quarter and $32.9 million, or 18.1%, for the six month period.

The following table reconciles the reported numbers to the adjusted numbers for the quarter and period after the elimination of the impact associated with the additional medical reserve charge and the impact of the Folder Express relocation.

       

Three months ended

Six months ended

August 31, 2016
August 31, 2016
(in thousands, except per share amounts)
 
Net income from continuing operations $ 6,784 $ 13,467
 
Impact of additional medical charge 2,250 2,250
Impact of Folder Express relocation   1,220   2,737
Total of noted adjustments 3,470 4,987
Income taxes on adjustments   1,284   1,845
Adjustments, net of taxes   2,186   3,142
 
Adjusted net earnings from continuing operations (non- GAAP) $ 8,970 $ 16,609
 
Adjusted diluted earnings per share (non-GAAP) $ 0.35 $ 0.64
       
 
Three months ended Six months ended
August 31, 2016 August 31, 2016
(in thousands, except per share amounts)
 
EBITDA from continuing operations (non-GAAP) $ 14,177 $ 27,929
 
Total of noted adjustments 3,470 4,987
   
Adjusted EBITDA from continuing operations (non-GAAP) $ 17,647   $ 32,916  
 
% of sales   19.3 %   18.1 %
 

Keith Walters, Chairman, Chief Executive Officer and President, commented by stating, "The financial performance for the quarter was an improvement over the sequential quarter's results. The quarter actually would have exceeded, on a percentage basis, our prior year's print results, if you excluded the $2.3 million adjustment we made to our medical reserve and the impact of the relocation of our Folder Express operations of $1.2 million ($2.7 million for the six month period). While our results continued to be impacted by the relocation of our Folder Express operations, it appears this operation is well on its way to becoming once again a contributor to our earnings and not a drag, which is quite a turnaround, and ahead of our previously announced plan. Medical claims are running higher than our historical trends, resulting in an additional $2.3 million charge during the quarter. Although we are evaluating various alternatives to impact the cost curve, we most likely would not see the impact of the implementation of any alternative plan we may choose until the start of the next fiscal year. With respect to our cash position, during the quarter we paid our previously announced special one-time dividend of $1.50 per share, which was declared in connection with the sale of our apparel division, and we repurchased approximately 104,000 shares of our common stock at an average purchase price of $17.22 per share. While the Alstyle sale has been completed, we continue to incur some costs associated with this discontinued business due to our support obligations pursuant to a transition services agreement with the buyer. We believe our support obligations should be concluding over the next several months. Overall, the business climate remains challenging, as we face predatory pricing, among other factors. However, we continue to believe we are well positioned to not only provide our customers quality products, but products that are competitively priced."

In Other News

The Company announced today that the Board of Directors has declared a quarterly cash dividend of 17 1/2 cents a share on its common stock. The dividend is payable November 7, 2016 to shareholders of record on October 14, 2016.

About Ennis

Since 1909, Ennis, Inc. has primarily engaged in the production and sale of business forms 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 USA to serve the Company's national network of distributors. Ennis 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, tags and labels and other custom products. For more information, visit www.ennis.com.

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 competitive environment, the Company's ability to adapt and expand its services in such an environment and 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, 2016. 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.
Unaudited Condensed Consolidated Financial Information
(In thousands, except share and per share amounts)
                   
Three months ended Six months ended

Condensed Consolidated Operating Results
August 31, August 31,
2016 2015 2016 2015
Revenues $ 91,246 $ 100,455 $ 181,656 $ 197,224
Cost of goods sold   64,208   69,092   127,924     135,897  
Gross profit margin 27,038 31,363 53,732 61,327
Operating expenses   16,053   16,108   32,130     32,159  
Operating income 10,985 15,255 21,602 29,168
Other expense   220   -   229     3  
Earnings from continuing operations before income taxes 10,765 15,255 21,373 29,165
Income tax expense   3,981   5,644   7,906     10,791  
Earnings from continuing operations 6,784 9,611 13,467 18,374
Income from discontinued operations, net of tax - 1,435 2,481 1,843
Loss on sale of discontinued operations, net of tax   -   -   (26,042 )   -  
Net earnings (loss) $ 6,784 $ 11,046 $ (10,094 ) $ 20,217  
 

Weighted average common shares outstanding
Basic   25,893,218   25,662,828   25,847,051     25,636,203  
Diluted   25,910,375   25,693,256   25,868,799     25,657,519  
 

Earnings (loss) per share - basic and diluted
Earnings per share on continuing operations $ 0.26 $ 0.37 $ 0.52 $ 0.72
Earnings per share on discontinued operations   -   0.06   0.10     0.07  
0.26 0.43 0.62 0.79
Loss per share on sale of discontinued operations   -   -   (1.01 )   -  
Net earnings (loss) $ 0.26 $ 0.43 $ (0.39 ) $ 0.79  
 
 
August 31, February 29,

Condensed Consolidated Balance Sheet Information
2016 2016
Assets
Current assets
Cash $ 85,225 $ 7,957
Accounts receivable, net 37,017 36,546
Inventories, net 28,227 27,619
Other 10,098 6,359
Current assets of discontinued operations   -     100,494  
  160,567     178,975  
Property, plant & equipment 48,436 50,791
Other 115,276 117,075
Long-term assets of discontinued operations   -     46,337  
$ 324,279   $ 393,178  
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 11,362 $ 13,738
Accrued expenses 15,278 14,167
Current liabilities from discontinued operations   -     12,495  
  26,640     40,400  
Long-term debt 30,000 40,000
Other non-current liabilities   15,519     14,232  
Total liabilities   72,159     94,632  
 
Shareholders' equity   252,120     298,546  
$ 324,279   $ 393,178  
 
Six months ended
August 31,

Condensed Consolidated Cash Flow Information
2016 2015
Cash provided by operating activities $ 29,078 $ 60,187
Cash provided by (used in) investing activities 105,253 (2,824 )
Cash used in financing activities (57,063 ) (52,512 )
Effect of exchange rates on cash   -     (1,834 )
Change in cash 77,268 3,017
Cash at beginning of period   7,957     13,357  
Cash at end of period $ 85,225   $ 16,374  

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