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8-K - FORM 8-K - ENNIS, INC.d198278d8k.htm

LOGO

FOR IMMEDIATE RELEASE

ENNIS, INC. REPORTS RESULTS

FOR THE FIRST QUARTER ENDED MAY 31, 2016

Midlothian, TX. June 27, 2016 — Ennis, Inc. (the “Company”), (NYSE: EBF), today reported financial results for the first quarter ended May 31, 2016. Highlights include:

 

    The Company completed the sale of the Apparel Segment to Gildan for $110.0 million.
    Print sequential gross profit margin increased from 27.7% to 29.5% on a sequential quarter basis.
    Diluted earnings per share from operations (continued and discontinued) remained constant at $0.36.
    Diluted earnings per share from continuing operations decreased from $0.34 to $0.26.

Financial Overview

As previously announced, the Company completed the sale of its apparel business to Gildan Activewear on May 25, 2016. Based on closing date working capital, which is subject to audit, the all cash purchase price for the apparel business was $110.0 million. The results of the apparel segment have been accounted for as discontinued operations for the quarter ended May 31, 2016, and comparable prior year results have been restated to reflect this accounting.

The Company’s net sales from continuing operations for the quarter ended May 31, 2016 were $90.4 million compared to $96.8 million for the same quarter last year, a decrease of 6.6%. Gross profit margin (“margin”) for continuing operations was $26.7 million for the quarter, or 29.5%, as compared to 27.7% for the sequential quarter and 31.0% for the same quarter last year. Diluted earnings per share from continuing operations for the quarter were $0.26, compared to $0.34 for the same quarter last year. Earnings from discontinued operations during the quarter were $0.10, compared to $0.02 for the same quarter last year. The combined results for continued and discontinued operations were $0.36 per diluted share for both the quarter and the comparable quarter last year. The net loss arising from the sale of the Company’s apparel operations during the quarter, net of tax, was $26.0 million, or ($1.01) per share, which included the write-off of the Company’s balance of foreign currency translation adjustments recorded in accumulated other comprehensive income of $16.0 million, or $10.3 million, net of taxes. As a result, for the quarter the Company realized a net loss of ($16.9) million, or ($0.65) per diluted share compared to net earnings of $9.2 million, or $0.36 per diluted share for the same quarter last year.

Non-GAAP Reconciliations

The Company believes the non-GAAP financial measure of adjusted EBITDA (adjusted 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, adjusted 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 adjusted EBITDA from continuing operations of $13.8 million compared to $16.9 million for the comparable quarter last year.

The following table reconciles adjusted EBITDA from continuing operations, a non-GAAP financial measure, to the most comparable GAAP measure, net earnings from continuing operations (dollars in thousands).

 

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     Three months ended  
     May 31,  
     2016      2015  

Net earnings from continuing operations

   $ 6,683       $ 8,763   

Income tax expense

     3,925         5,147   

Interest expense

     2         3   

Depreciation and amortization

     3,142         2,938   
  

 

 

    

 

 

 

Adjusted EBITDA from continuing operations (non-GAAP)

   $ 13,752       $ 16,851   
  

 

 

    

 

 

 

% of sales

     15.2%         17.4%   

Keith Walters, Chairman, Chief Executive Officer and President, commented by stating, “We are pleased that we were able to close the sale of the apparel business within the first quarter. The completion of this transaction will allow us to focus on our core print business, including pursuing acquisitions that fit our corporate strategy. As previously announced, in connection with the sale the Company declared a one-time cash dividend of $1.50 per share to shareholders of record on July 11, 2016, which is payable on August 8, 2016.

The print performance for the quarter, while improving over the sequential quarter’s results, did not meet the expectations we have for this business. Operational results for the quarter were impacted by the unavoidable relocation of our Folder Express operations from Omaha, Nebraska to Columbus, Kansas, which was implemented last quarter. The start-up training process for the labor force has impacted efficiencies, and we estimate the loss of efficiencies associated with the move impacted our financial performance by approximately $1.6 million for the quarter. While we have seen improvements in this operation, we continue to expect this move will impact our financial performance in the short term. However, we continue to be pleased with the integration of recent acquisitions and the margins of print operations as a whole. I would also like to remind our shareholders that our annual shareholders’ meeting is scheduled for July 21, 2016. I hope to see you there.”

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.

 

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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.

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

 

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Ennis, Inc.

Condensed Consolidated Financial Information

(In thousands, except share and per share amounts)

 

    

Three months ended

May 31,

 
     2016     2015  

Condensed Consolidated Operating Results

    

Revenues

   $ 90,410      $ 96,769   

Cost of goods sold

     63,716        66,805   
  

 

 

   

 

 

 

Gross profit margin

     26,694        29,964   

Operating expenses

     16,077        16,051   
  

 

 

   

 

 

 

Operating income

     10,617        13,913   

Other expense

     9        3   
  

 

 

   

 

 

 

Earnings from continuing operations before income taxes

     10,608        13,910   

Income tax expense

     3,925        5,147   
  

 

 

   

 

 

 

Earnings from continuing operations

     6,683        8,763   

Income from discontinued operations, net of tax

     2,481        408   

Loss on sale of discontinued operations, net of tax

     (26,042     —     
  

 

 

   

 

 

 

Net earnings (loss)

   $ (16,878   $ 9,171   
  

 

 

   

 

 

 

Weighted average common shares outstanding

    

Basic

     25,783,770        25,586,596   
  

 

 

   

 

 

 

Diluted

     25,783,770        25,599,055   
  

 

 

   

 

 

 

Earnings (loss) per share — basic and diluted

    

Earnings per share on continuing operations

   $ 0.26      $ 0.34   

Earnings per share on discontinued operations

     0.10        0.02   
  

 

 

   

 

 

 
     0.36        0.36   

Loss per share on sale of discontinued operations

     (1.01     —     
  

 

 

   

 

 

 

Net earnings (loss)

   $ (0.65   $ 0.36   
  

 

 

   

 

 

 
     May 31,
2016
    February 29,
2016
 

Condensed Consolidated Balance Sheet Information

    
Assets   

Current assets

    

Cash

   $ 122,421      $ 7,957   

Accounts receivable, net

     35,979        36,546   

Inventories, net

     27,588        27,619   

Other

     13,474        6,359   

Current assets of discontinued operations

     —          100,494   
  

 

 

   

 

 

 
     199,462        178,975   
  

 

 

   

 

 

 

Property, plant & equipment

     49,957        50,791   

Other

     116,160        117,075   

Long-term assets of discontinued operations

     —          46,337   
  

 

 

   

 

 

 
   $ 365,579      $ 393,178   
  

 

 

   

 

 

 
Liabilities and Shareholders’ Equity   

Current liabilities

    

Accounts payable

   $ 12,425      $ 13,738   

Accrued expenses

     12,830        14,167   

Current liabilities from discontinued operations

     —          12,495   
  

 

 

   

 

 

 
     25,255        40,400   
  

 

 

   

 

 

 

Long-term debt

     35,000        40,000   

Other non-current liabilities

     14,885        14,232   
  

 

 

   

 

 

 

Total liabilities

     75,140        94,632   
  

 

 

   

 

 

 

Shareholders’ equity

     290,439        298,546   
  

 

 

   

 

 

 
   $ 365,579      $ 393,178   
  

 

 

   

 

 

 
    

Three months ended

May 31,

 
     2016     2015  

Condensed Consolidated Cash Flow Information

    

Cash provided by operating activities

   $ 15,047      $ 29,998   

Cash provided by (used in) investing activities

     106,037        (1,203

Cash used in financing activities

     (6,620     (25,496

Effect of exchange rates on cash

     —          (332
  

 

 

   

 

 

 

Change in cash

     114,464        2,967   

Cash at beginning of period

     7,957        13,357   
  

 

 

   

 

 

 

Cash at end of period

   $ 122,421      $ 16,324   
  

 

 

   

 

 

 

 

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