Ennis, Inc. (NYSE: EBF) on Monday reported financial results for the first quarter ended May 31, 2014.
The Company's consolidated net sales for the quarter were $141.2 million, an increase of $2.7 million or 1.9%, from $138.5 million for the same quarter last year. At the segment level, print sales were up $7.0 million, or 8.6%, while apparel sales declined $4.2 million or 7.4% in comparison to the same quarter last year. Consolidated gross profit margin ("margin") decreased from 25.9% for the same quarter last year to 25.1% for this year's quarter. At the segment level, print margin increased 80 basis points, from 29.7% to 30.5%, due to improved operational efficiencies, while apparel margin decreased 430 basis points, from 20.3% to 16.0%, due to lower selling prices and slightly higher input costs. As a result, net earnings decreased slightly from $8.5 million, or 6.1% of net sales, for the previous year's quarter to $8.0 million, or 5.7% of net sales, for this year's quarter. Diluted earnings per share decreased from $0.33 for the 2013 quarter to $0.31 for the 2014 quarter.
The Company believes the non-GAAP financial measure 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 quarter, the Company generated $17.3 million in EBITDA compared to $17.0 million for the comparable quarter last year.
The following table reconciles EBITDA, a non-GAAP financial measure, to the most comparable GAAP measure, net earnings (dollars in thousands):
Three months ended May 31,
|Net earnings||$ 8,032||$ 8,506|
|EBITDA (non-GAAP)||$ 17,287||$ 16,973|
Keith Walters, Chairman, Chief Executive Officer and President, commented by stating, "Overall we are pleased with our results for the quarter. Our print margins improved during the quarter as we continued to make operational improvements at our recent acquisitions. The apparel market, as noted previously, continues to be very challenging. The unusually cold winter seemed to have further stressed the retail market. While the market had some improvement as the quarter progressed, pricing continued to be extremely competitive, especially given the recent increases in raw material and other input costs. Based on the previous quarter, we planned for some of the market dynamics experienced; but what was not anticipated was the extent of the negative retail environment, which impacted our ability to achieve projected contributions from our apparel operations. However, we did see some improvement in the retail market as our quarter progressed. Whether this will continue is unknown. In addition, whether the discounted pricing prevalent in the marketplace will continue throughout the year is also unknown. We believe we are well positioned to make positive strides forward during the remainder of the year. On the print front, we continue to be pleased with the progression of our most recent print acquisitions and look forward to the integration and contribution of our recent acquisition of Sovereign Business Forms and related entities. Overall, while the market continues to be challenging on the apparel side, we remain optimistic about the remainder of the fiscal year."