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Ennis Net Sales Down 6%

Tuesday, April 24, 2012

Press release from the issuing company

Ennis, Inc. (the “Company"), today reported financial results for the quarter and year ended February 29, 2012.

Financial Overview
Our consolidated net sales for the quarter were $121.5 million, or down 7.5% from $131.4 million for the same quarter last year. Our print sales for the quarter were $72.4 million as compared to $66.2 million for the same quarter last year, an increase of $6.2 million, or 9.4%. Our apparel sales at $49.1 million for the quarter were down $16.1 million as compared to $65.2 million for the same quarter last year due to softness in the market and continued pricing pressures. Overall our gross profit margins ("margins") for the quarter were 21.8% as compared to 27.5% for the same quarter last year. On a segment basis, our print margins increased from 26.9% to 28.3%, while our apparel margins, due to continued higher input costs, primarily cotton, decreased from 28.0% to 12.2%. Our net earnings for the quarter, which were impacted by lower apparel sales and margins, were $3.3 million or $.13 per diluted share, as compared to $9.8 million or $.38 per diluted share for the same quarter last year.

For the year, our net sales decreased from $550.0 million for the fiscal year ended February 28, 2011 to $517.0 million for the fiscal year ended February 29, 2012, or a decrease of 6.0%. Our print sales for the year were at $278.0 million, compared to $272.7 million for last year, an increase of $5.3 million, or 1.9%. Our apparel sales for the year were $239.0 million, as compared to $277.3 million, or a decrease of 13.8%. Overall our margins decreased from 28.1% to 25.2% for the year ended February 28, 2011 and February 29, 2012, respectively. Our print margins increased slightly during the year from 28.3% to 28.4%, while our apparel margins decreased from 27.9% to 21.6%, again due to higher input costs and pricing pressures. Our net earnings decreased from $44.6 million, or 8.1% of sales for the year ended February 28, 2011, to $31.4 million or 6.1% of sales for the period ended February 29, 2012. Our diluted earnings decreased from $1.72 per share to $1.21 per share for the year ended February 28, 2011 and February 29, 2012, respectively.

The Company, during the quarter, generated $8.7 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) compared to $17.5 million for the comparable quarter last year. For the year ended February 29, 2012, the Company generated $64.0 million of EBITDA compared to $81.5 million for the comparable period last year.

Keith Walters, Chairman, Chief Executive Officer and President, commented by saying, “Our print operations continued to deliver revenue and operational results as expected. We feel good about our two print acquisitions this past year, and expect these acquisitions to add at least $80 million in sales and $.25 in diluted earnings. Our apparel results, as we have discussed previously, were impacted by the higher raw material costs now flowing out of our finished goods into our cost of sales. While the spot price of cotton has dropped significantly over the last half of our fiscal year, this unfortunately does not represent the cost of cotton in our finished good inventory or most large apparel manufacturers’ finished goods inventory. Most large manufacturers locked in cotton contracts in order to guarantee an uninterrupted supply of cotton and price stability. Unfortunately, these locked in prices are significantly higher than the current spot price.  As such, large manufacturers, such as Alstyle, have had to navigate through this issue over the past quarter or so. We expect this to continue until the current lower priced cotton makes its way through our finished goods inventory. In addition, pricing in the marketplace has not been consistent with these higher costs, thus putting additional pressures on apparel margins. Products are being sold in the marketplace at prices, in certain circumstances, less than the associated raw material costs. Our philosophy has always been to try to at least cover our costs in our pricing. Consequently, we feel this has and will impact our apparel sales in the short-term. Therefore, while fiscal year 2012 was challenging, we view fiscal year 2013 to be equally challenging, due to the high priced cotton overhang in inventories and current market pricing on the sell side. We do feel that our new manufacturing facility in Agua Prieta, Mexico, coupled with our strong balance sheet and our print operations, places us in a better position than most to weather the storm. While the short-term landscape for apparel appears somewhat challenged, the two Print acquisitions will help offset those challenges from an earnings and sales perspective in the next year. We feel good about the long-term prospects of both sectors and as such our Board approved an increase in our share buy-back program and recently announced a 13% increase in our quarterly dividend amount. No matter what directions fiscal year 2013 takes, you can be assured that we will remain vigilant to the task at hand.”

 

 

 

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