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8-K - 8-K - ENNIS, INC.d793127d8k.htm

Exhibit 99.1

 

LOGO

FOR IMMEDIATE RELEASE

ENNIS, INC. REPORTS RESULTS

FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 2014 AND

DECLARES QUARTERLY DIVIDEND

Midlothian, September 22, 2014 — Ennis, Inc. (the “Company”), (NYSE: EBF), today reported financial results for the three and six months ended August 31, 2014. Highlights for the quarter are:

 

    Consolidated net sales increased 7.5% over the previous quarter and 12.2% over the previous year’s comparable quarter.

 

    Diluted earnings per share increased 25.8% over the previous quarter and 2.6% over the previous year’s comparable quarter.

Financial Overview

The Company’s consolidated net sales for the second quarter ended August 31, 2014 increased to $151.8 million compared to $135.3 million for the same quarter last year, an improvement of 12.2%. Print sales increased 23.9% from $79.0 million to $97.9 million, while apparel sales declined 4.1% from $56.3 million to $54.0 million. Although apparel sales improved on a volume basis by 1.0% for the quarter, a 5.1% decrease in average selling price during the period resulted in a decrease in revenues. Apparel sales continue to be impacted by the weak domestic retail environment, which is impacting both volume and pricing. Consolidated gross profit margin (“margin”) for the second quarter increased $1.5 million, or 4.1%, from $36.7 million to $38.2 million. For the three month period, print margin increased from 30.0% to 31.1%, while apparel margin decreased from 23.1% to 14.3%, primarily due to pricing pressures in the marketplace. As a result, net earnings increased from $9.8 million, or 7.2% of net sales, for the second quarter ended August 31, 2013 to $10.0 million, or 6.6% of net sales, for the second quarter ended August 31, 2014. Diluted earnings per share increased 2.6% from $0.38 for the 2013 quarter to $0.39 for the 2014 quarter.

The Company’s consolidated net sales for the six month period increased from $273.8 million to $293.0 million, or 7.0%. Print sales were $186.3 million, compared to $160.4 million for the same period last year, an increase of $25.9 million, or 16.1%. Apparel sales were $106.8 million, compared to $113.4 million for the same period last year, a decrease of $6.6 million or 5.8%. Apparel revenue’s volume declined by 0.8% and price declined by 5.0% for the comparable period. Consolidated margin increased on a dollar basis from $72.5 million to $73.6 million and decreased on a percentage basis from 26.5% to 25.1% for the six months ended August 31, 2013 and 2014, respectively. Print margin increased from 29.9% to 30.8%, as a result of the elimination of duplicative costs associated with the integration of acquisitions. Apparel margin decreased from 21.7% to 15.1% due to lower selling prices and higher input costs. As a result, consolidated net earnings decreased slightly from $18.3 million, or 6.7% of net sales, for the six months ended August 31, 2013 to $18.0 million, or 6.2% of net sales, for the six months ended August 31, 2014. Diluted earnings per share decreased 1.4% from $0.70 to $0.69 for the six months ended August 31, 2013 and 2014, respectively.


Non-GAAP Reconciliations

The Company believes the non-GAAP financial measure of 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 second quarter, the Company generated $20.5 million in EBITDA compared to $19.0 million for the comparable quarter last year. For the six month period ended August 31, 2014, the Company generated $37.8 million of EBITDA compared to $35.9 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     Six months ended  
     August 31,     August 31,  
     2014     2013     2014     2013  

Net earnings

   $ 10,016      $ 9,801      $ 18,048      $ 18,307   

Income taxes

     5,883        5,754        10,600        10,751   

Interest expense

     525        216        1,027        467   

Depreciation/amortization

     4,096        3,198        8,132        6,417   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA (non-GAAP)

   $ 20,520      $ 18,969      $ 37,807      $ 35,942   
  

 

 

   

 

 

   

 

 

   

 

 

 

% of sales

     13.5     14.0     12.9     13.1

Keith Walters, Chairman, Chief Executive Officer and President, commented by stating, “Overall we are pleased with the results for the second quarter. Our print margins improved as we continue to make operational improvements at our recent acquisitions. Our apparel margins and operating results continue to be impacted by a challenging domestic retail environment. The market appeared to improve both from a volume and pricing perspective during the quarter, with apparel sales on a linked quarter basis up 2.3%, volume up 1.1% and price up 1.2%. However, the overall domestic retail market continues to be rather lethargic. Given this rather subdued environment, we believe discounting continues to be prevalent in the marketplace as a strategy by big-box retailers to maintain market share. As such, the ability for manufacturers to raise prices to account for increases in input costs remains difficult, resulting in margins being compressed below historical levels. A potentially favorable impact is cotton futures which have recently started to decline. This may positively impact manufacturers’ margins, once their current finished goods have turned, if they won’t be forced into additional discounted pricing due to continuing market pressures. On the print front, we are pleased with the integration of our recent print acquisitions and the improved margins on the print group as a whole. Overall, while the retail market continues to be anemic, we will continue to stay vigilant to the task at hand.”

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 3, 2014 to shareholders of record on October 8, 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” 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, 2014, and its subsequent quarterly reports on Form 10-Q for its 2015 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.

For Further Information Contact:

Mr. Keith S. Walters, Chairman, Chief Executive Officer and President

Mr. Richard L. Travis, Jr., CFO, Treasurer and Principal Financial and Accounting Officer

Mr. Michael D. Magill, Executive Vice President and Secretary

Ennis, Inc.

2441 Presidential Parkway

Midlothian, Texas 76065

Phone: (972) 775-9801

Fax: (972) 775-9820

www.ennis.com


Condensed Financial Information

(In thousands, except share and per share amounts)

 

     Three months ended      Six months ended  
     August 31,      August 31,  
     2014      2013      2014      2013  

Condensed Operating Results

           

Revenues

   $ 151,841       $ 135,288       $ 293,027       $ 273,754   

Cost of goods sold

     113,653         98,629         219,451         201,300   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross profit margin

     38,188         36,659         73,576         72,454   

Operating expenses

     21,821         20,835         43,615         43,033   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     16,367         15,824         29,961         29,421   

Other expense

     468         269         1,313         363   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings before income taxes

     15,899         15,555         28,648         29,058   

Income tax expense

     5,883         5,754         10,600         10,751   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net earnings

   $ 10,016       $ 9,801       $ 18,048       $ 18,307   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common shares outstanding

           

Basic

     25,990,496         26,102,129         25,991,444         26,078,188   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

     26,002,701         26,128,655         26,004,549         26,098,420   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share

           

Basic

   $ 0.39       $ 0.38       $ 0.69       $ 0.70   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.39       $ 0.38       $ 0.69       $ 0.70   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     August 31,     February 28,  
     2014     2014  

Condensed Balance Sheet Information

    
Assets     

Current assets

    

Cash

   $ 13,782      $ 5,316   

Accounts receivable, net

     67,013        63,695   

Inventories, net

     125,830        130,095   

Other

     16,681        15,037   
  

 

 

   

 

 

 
     223,306        214,143   
  

 

 

   

 

 

 

Property, plant & equipment

     91,032        91,565   

Other

     231,683        230,639   
  

 

 

   

 

 

 
   $ 546,021      $ 536,347   
  

 

 

   

 

 

 
Liabilities and Shareholders’ Equity     

Current liabilities

    

Accounts payable

   $ 23,584      $ 22,062   

Accrued expenses

     20,393        19,815   
  

 

 

   

 

 

 
     43,977        41,877   
  

 

 

   

 

 

 

Long-term debt

     104,000        105,500   

Other non-current liabilities

     26,979        26,035   
  

 

 

   

 

 

 

Total liabilities

     174,956        173,412   
  

 

 

   

 

 

 

Shareholders’ equity

     371,065        362,935   
  

 

 

   

 

 

 
   $ 546,021      $ 536,347   
  

 

 

   

 

 

 
    

Six months ended

August 31,

 
     2014     2013  

Condensed Cash Flow Information

    

Cash provided by operating activities

   $ 32,338      $ 40,104   

Cash used in investing activities

     (11,414     (1,204

Cash used in financing activities

     (12,638     (27,043

Effect of exchange rates on cash

     180        (408
  

 

 

   

 

 

 

Change in cash

     8,466        11,449   

Cash at beginning of period

     5,316        6,232   
  

 

 

   

 

 

 

Cash at end of period

   $ 13,782      $ 17,681