Ennis Releases Q1 Results: Apparel Segment Continues Positive Movement
Midlothian, Texas-based Ennis Inc. has reported financial results for the first quarter ended May 31, 2013. The company's consolidated net sales for the quarter were $138.5 million compared to $142.5 million for the same quarter last year and $123.6 million for the sequential quarter. Print sales were down 6.8 percent on a comparable quarter basis, from $87.3 million to $81.4 million, but were up 2.0 percent on a sequential quarter basis from $79.8 million. Apparel sales increased 3.3 percent for the comparable quarter, from $55.2 million to $57.0 million, with a 10.6 percent increase in volume offset by a pricing decline of 7.3 percent, and increased 29.8 percent on a sequential quarter basis from $43.9 million. Consolidated gross profit margin ("margin") for the quarter increased 610 basis points from 19.8 percent, for the same quarter last year, to 25.9 percent.
For a quarter comparison basis, print margin increased from 27.9 percent to 29.7 percent, and apparel margin increased from 7.0 percent to 20.3 percent. The company’s apparel margin continues to increase on both a comparable and sequential quarter basis, as lower priced cotton is starting to favorably impact apparel's margin. Ennis expects its margins will continue to improve as average finished goods costs continue to decline and sales volume increases. Print margins improved from the continued elimination of duplicative costs by the further integration of recent acquisitions. As a result, net earnings increased from $3.9 million, or 2.7 percent of net sales, for the quarter ended May 31, 2012 to $8.5 million, or 6.1 percent of net sales, for the quarter ended May 31, 2013. Diluted earnings per share increased from $0.15 for the same quarter last year to $0.33 for the quarter.
During the quarter, the company generated $17.0 million in EBITDA (a non-GAAP financial measure calculated as net earnings before interest, taxes, depreciation, and amortization) compared to $10.0 million for the comparable quarter last year.
The company believes the non-GAAP financial measure of EBITDA 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.
Keith Walters, chairman, CEO and president, commented by stating, "Overall we are pleased with our results for the quarter. Our apparel results continued to improve on both a sequential and comparative basis, as lower priced cotton, which has been flowing into our finished goods inventory, is starting to impact our operational results. We realized a 240 basis point sequential margin improvement last quarter and a 270 basis point sequential margin improvement this quarter. We would expect our apparel margin to continue to improve as the average carrying value of our finished goods inventory declines and as our operational efficiencies improve as production levels increase. While the overall apparel market continues to be challenged, both from a pricing and volume perspective, we have seen some pricing stability. Our print margin remained healthy improving 180 basis points over last years' comparable quarter, as we continue to eliminate duplicate costs associated with our recent acquisitions. Overall we feel positive about the quarter and the remainder of the year."
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