Ennis' Q1 Profits Fall, Revenue Up 5.3%
Wednesday, June 27, 2007
Press release from the issuing company
MIDLOTHIAN, Texas-- Ennis today reported financial results for the first quarter ended May 31, 2007.
* Revenues increased 5.3% over the same quarter last year, from approximately $145.1 million to approximately $152.8 million.
* Print Segment revenues increased by 10.4% over the same quarter last year, from $77.1 million to $85.1 million. Apparel revenues were flat for the quarter.
* Diluted EPS for the quarter was $.42 per shares compared to $.44 per shares for the same quarter last year, which principally resulted from our decision to increase our cut/sew capacity in our Mexican facilities.
For the quarter, net sales increased by approximately $7.7 million, or 5.3% from $145.1 million for the quarter ended May 31, 2006 to $152.8 million for the quarter ended May 31, 2007. Print group sales increased $8.0 million, or 10.4%, from $77.1 million to $85.1 million for the quarter ended May 31, 2006 and 2007, respectively. Apparel group sales, quarter over quarter, however remained relatively flat at $68.0 million and $67.7 million for the quarter ended May 31, 2006 and 2007, respectively. Management believes that the Apparel sales during the quarter were negatively impacted by their pre-quarter inventory position, which hindered their ability to capture certain opportunity sales during this period. Traditionally, the Apparel group rebuilds their inventory levels in the last half of the fiscal year for the upcoming summer buying season due to the normal falloff of demand during the winter season. However, during the second half of last fiscal year demand was at or above forecasted sales levels. As a result, production levels were only able to stay abreast of then current sales levels, which resulted in their inventory position not being as robust in the fourth quarter of fiscal year 2007 as it was during the same period last fiscal year. As a result, several initiatives were implemented during the current quarter to improve their inventory position and to meet their forecasted demand. Some of these initiatives in turn had a negative impact on their margin during the period (see discussion on Apparel margins following).
Overall our margins for the current period were $38.6 million, or 25.3% of sales, compared to $37.8 million, or 26.1% of sales for the same period last year. Due to improved operational efficiencies, our Print margins, as a percentage of sales, improved from 25.2% for the same quarter last year to 26.4% for the current quarter. Our Apparel margin, as a percentage of sales, decreased from 27.1% for the same quarter last year to 23.7% for the current quarter. During the quarter our Apparel margins were impacted slightly by increased yarn and cut/sew costs and reduced selling margins, due to changes in product mix. However, the main impact on our Apparel margin during the quarter related to our initiative to increase our cut/sew capacity in our Mexican facilities to meet our forecasted demand. We feel that the training costs associated with this program, which negatively impacted our Apparel margin during the period, was in excess of $1.0 million, or approximately $.03 per diluted share. Our earnings for the quarter were $10.8 million, or 7.1% of sales, compared to $11.3 million, or 7.8% of sales for the same quarter last year. Our diluted earnings per share for the quarter were $.42 per share, compared to $.44 per share for the same quarter last year. Without the estimated impact of our cut/sew training costs, our diluted earnings per share would have been $.45 per share for the current quarter.
The Company generated approximately $22.5 million in EBITDA (earnings before interest, taxes, depreciation and amortization) during the quarter, compared to $24.3 million for the comparable quarter last year.
Keith Walters, Chairman, President and CEO, commented by saying, "We are extremely pleased with our Print results for the quarter. We started an initiative over the previous quarters to improve our overall Print margins and are pleased to see the results of these initiatives this quarter. Our Apparel margins while lower than last year, due to the impact of our cut/sew production initiative, were in-line with our internal forecasts. We strongly feel that the increase in our cut/sew capacity is a critical step and one that must be undertaken to meet our forecasted sales projections and inventory demand levels. We are however, looking for ways to minimize the cost of this initiative going forward. Overall, given the market conditions and the cost of our Apparel initiative, we were pleased with our results for the quarter, which were in-line with our internal forecasts. In addition, we plan to continue to look for acquisitions in both Print and Apparel, which will be complimentary to our existing business model or strategic in nature."