Ennis Reports Earnings Loss In Q1

Top 40 supplier Ennis (asi/52493) announced it reached $90.4 million in net sales for its fiscal first quarter of 2016 that ended May 31. This is compared to $96.8 million in the same quarter last year, a decrease of 6.6%, and follows the completed sale of its apparel business to Gildan Activewear (asi/56842) on May 25 for $110.0 million.

“We are pleased that we were able to close the sale of the apparel business within the first quarter,” said Keith Walters, chairman, CEO and president, in an official statement. “The completion of this transaction will allow us to focus on our core print business, including pursuing acquisitions that fit our corporate strategy.” The company announced in May that Gildan had agreed to purchase a 100% equity stake of Alstyle Apparel (asi/34817), Ennis’s apparel division.

Ennis reports that gross profit margin for continuing operations in the first quarter was $26.7 million, or 29.5%, compared to 27.7% for the sequential quarter and 31.0% for the same quarter in 2015. Meanwhile, diluted earnings per share from continuing operations were $0.26, compared to $0.34 for the first quarter in 2015. The combined results for continued and discontinued operations were $0.36 per diluted share for both the first quarter of 2016 and the first quarter of 2015.

The quarterly net loss from the sale of the apparel business, net of tax, was $26.0 million, or $1.01 per share, resulting in a net loss of $16.9 million, or $0.65 per diluted share. In the same quarter in 2015, net earnings were $9.2 million or $0.36 per diluted share. The company generated adjusted EBITDA from continuing operations of $13.8 million compared to $16.9 million in the first quarter of 2015.

Walters went on to say that the performance of the company’s print division did not meet expectations for the quarter, which he said was affected by the recent relocation of its Folder Express operations from Omaha, NE, to Columbus, KS. “The startup 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,” he said. “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.”

Ennis’s annual shareholders’ meeting is scheduled for Thursday, July 21. According to Counselor’s upcoming State of the Industry data, Ennis generated $253 million in North American promotional product revenue in 2015, a 1.6% decline from the previous year.